State Disbursement Unit (SDU) 101 The History of State Disbursement Units Presented by: Alex Camacho Texas SDU Project Director

Topics ■How it started ■Changes along the way ■What the future holds

Early Years – ■Average Cost of new house $89, ■1 gallon of gas $1.09 ■Average Movie Ticket $2.75 ■Microsoft Corporation releases the first version of Windows, Windows 1.0. ■The Cosby show was the most popular TV show from 1985 to 1990

Early Years – ■“All Politics are Local” – Tip O’Neil -So was Child Support ■Most Child Support Payments Processed at the County Level ■Early Centralization Efforts Included -Virginia -Iowa -Some States were Already Centralized-Texas ■Limited Privatization with Banks

Characteristics ■Bank Lockbox - Process the Identified Payments - Send the rest to the Agency to Process or Research - Early Use of Coupon Books or Statements ■Early Issues - EFT - Employer Diversity – “No size fits all”.

Early Privatization – ■First Centralization RFP’s -LA County – Moved Processing from Court Trustee to Private Sector Vendor -Colorado- Created the Family Support Register -New York – Created Centralized Processing

Characteristics ■Paper Based Processing of Payments ■Outreach to Employers ■Experimentation with Electronic Transfer (EDI) & Funds Transfer (EFT) ■Centralized Printing of Checks and Notices ■Centralized IVR & Call Centers ■Experimentation with Imaging Begins

PRWORA – 1998 to 2002 ■Welfare Reform Creates the State Disbursement Unit (SDU) -Mandates Implementation by October 1999 ■-Many RFP’s Begin to Appear -WI, MI, FL, PA, NJ, ID, MN, OH, IL, TX -Introduce the Idea of Non IV-D Payments ■-Many More Competitors Emerge -AMS, Bank One; BDM; EDS; Fleet Bank; IBM; IKON; Lockheed Martin IMS; MAXIMUS; PSI; SDA (Tier); SMI; TRW; and others.

Characteristics ■High Value Contracts ■Image Based Processing ■Highly Differentiated Solutions ■Many Vendors Trying to Get Into the Game ■Hardware and Technology Driven Innovation ■Continued Consolidation of Functions – The Child Support “Back Room” -Payments, Disbursements, Call Center ■Customization Around Limitations of Statewide Child Support Systems -Example – Non IV-D FL; TX; KS  Some EFT Growth (10 – 15%)

Today And The Future ■Most States Have Opted for Outsourcing of the SDU Functions -20 State (territory) Operated SDUs 14% Of $$ $3.6 B Annually -34 Vendor Operated SDUs 86% of $$ $22.7B Annually

Current Characteristics ■Short Cycle on Solution Life (1 to 2 Years) ■Highly Automated ■Standardization on Equipment (OPEX) ■Smart Software Systems ■One Size Fits All (scaleable solutions) ■Electronic Deposits (Check21) ■Value –Added Services ■Movement to EFT (25-35%) -Several Notables Above 50% (IN, IL, PA)

Technology Standardization

Value Added Services ■Examples -Full Service Debit Card Services -Full Service Call Centers -UDC -Outbound Messaging -Employer Data Maintenance

The Future ■Electronic Payments will Dominate Overall Collections. Estimated Average to Exceed 75% in < 5 Years - More States will Make Employer EFT Mandatory ■Downward Pressure on Contract Value - Prices will Continue to Fall ■Possibility of Regionalization of Processing (Example: CA, AZ, OR, NV?) ■Remote Deposit Capture and Web-Based Solutions for Smaller States

State Disbursement Unit (SDU) 101 Office of Payment Management & Interstate Services (OPMIS) Presented by: Candace Gilmore - Assistant Director State of California State Disbursement Unit

State Disbursement Unit (SDU) Federal Law requires each state to have one centralized Disbursement Unit for the processing of child support payment collection and disbursement services which includes both IV-D and Non IV-D. That same federal law requires each state to disburse a minimum of 70% of all collections within 2 days of receipt. The SDU consists of the Service Provider (SP), which is responsible for the delivery of processing services and State of California staff that oversees the contract performance by the SP.

State Disbursement Unit (SDU) Since its November 1, 2005 inception, the SDU SP has processed more than 60.6 million collection transactions, totaling more than $11.2 billion, and more than 59.8 million disbursement transactions, totaling more than $9.16 billion as of July Through the SDU the State has been able to disburse 89.0% of IV-D and 94.6 % of Non IV-D collections within 2 days of receipt.

The Service Provider (SP)  Process and report to the State any payments received for Child Support.  Process and send disbursements as per instructions received from the State of California.  Provide initial research on suspended payments.  Non IV-D case initiation.  Provide electronic payment set up information. SP phone number for Electronic Funds Transfer (EFT), Direct Deposit (DD) or Electronic Pay Card (EPC) is (866)

State Staff The State Staff which oversees and assists the SP is comprised of two (2) units:  Operations Analysis Unit  Operations Support Unit

Operations Analysis Unit This unit is directly responsible to monitor the SDU operational and contractual performance of the SP. This includes review and acceptance of all SDU required Contract Deliverables (CDLs), as required under contract. Monitor Monthly expenditures and approve payments to the Service Provider.

Operations Analysis Unit Staff monitor the Service Provider’s performance, as specified in the contract, using several tools. These tools include:  Production validation review  Validation of daily collection and disbursement reports  Contract Deliverable Lists (CDLs)  Quality assurance reports

Operations Analysis Unit This unit is responsible for the:  Review of all SDU collection, disbursement and suspense processing procedures.  Monitoring, reporting, data analysis and quality assurance of all SDU collection, disbursement, and suspended payment information.  Special reports and projects.  Assist in the development of, monitor, report, and analyze all SP outreach activities.

Operations Analysis Unit This unit is also responsible for the:  Liaison duties for Collection Engine (CE), Disbursement Engine (DE), Electronic Payment Engine (EPE), and website issues.  Forwarding to appropriate jurisdictions all legal documents, Social Security Administration (SSA) letters, and all other correspondence.

Operations Support Unit This unit is responsible to perform work supporting the overall SDU operations.

Operations Support Unit Staff research and provide assistance regarding:  Collection agency restitution requests  Collections and disbursements processing  Employer refund request resolution  Non IV-D Stop Payment Affidavits  Coordinate fraud packet completion and tracking  CalPERS collections processing  Positive Pay rejected items  Rejected collections resolution  SP 2 nd level escalated calls.

Operations Support Unit Staff acts as a liaison with:  Law enforcement, merchants, and check cashing companies regarding fraud investigation, check verification, and request for restitution.  DCSS Accounting regarding resolution of over/under encoded collections, fraud reimbursements, and escalated/emergency related issues.  SP, LCSAs, other states, CPs, NCPs, employers, CFWDs, Social Security Administration, CalPERS, SCO, PIRT, EDD, and CCSAS BP to facilitate collection and disbursement resolution.

Fun Facts You cannot pay Child Support using Monopoly money or store coupons, although some people have tried. Annual collections – Nationwide $26.3 billion, California $2.5 billion (9/1/09-8/31/10) = 9.5% of nationwide total. In 2009 the State of California total dollar distributions were more than 18 other states combined.

State Disbursement Unit (SDU) 101 California SDU – Service Provider Role Presented by: Sabrina Clark - Program Director Bank of America

SDU – SP Responsibility Collection Processing Paper payments Electronic Payment Disbursement Processing Print and mail checks Process electronic disbursement Electronic Help Desk/Outreach Support electronic collection conversion Support electronic disbursement conversion Key data entry for Non IV-D forms

Day and Life of a Payment  Process each payment the same business day as received  Date of receipt = date of collection  Process correct payment amount  Identify payment source  Capture required additional data elements  If remitted with payment, based on payment source  Capture remitter contact information Collections Processing - SDU

Day and Life of a Payment  Identify (derive) the NCP Statewide participant ID  Using a minimum of two data elements  Pass all collections to the Child Support Enforcement (CSE) system  Deposit payments into the State of California bank accounts  DCSS is one of the sorting agencies using the CTS banks  Prepare deposits for 8 depository banks  Reconcile data and dollars daily prior to sending end of day files to the State.

Day and Life of a Disbursement  Process Disbursement Instructions as received by CSE  Issue disbursements on the same day per instructions received from CSE  To the payee as instructed by CSE  By the payment method as instructed by CSE (direct deposit, Electronic Payment Card or check)  Send daily disbursement status file to CSE

Electronic Help Desk/Outreach  Take incoming calls from Employers, Non-Custodial Parents, Custodial Parties and LCSAs  Provide technical support on how to:  Set up direct deposit  Enroll in Electronic Pay Card  Make a payment on line  Send payments using the ACH network  Restoring archive images and resetting system passwords  Outbound call campaigns to support Non IV-D form entry and electronic conversion of payments

SDU – SP Achievements  61.3% Electronic Collections in less than 5 years.  National averages fluctuate between 40 and 65% after 10 years in steady state production  81.26% Electronic Disbursement in less than 5 years.  National averages for mandated programs average between 80 and 90%

CA SDU –Suspense Processing Suspense Categories: ■SDU ■DCSS ■LCSA Who has ‘what’ – roles and responsibilities

Suspense Processing - SDU  Exceptions Research Associates:  Work in payment queues specific intra-day SDU collections processing functions, such as:  Remitter Profile (RP) Update - Queue 1  Insufficient Payment Data - Queue 4  Other Intra-day Processing Queues

Suspense Processing - SDU  Insufficient Payment Data - Queue 4  Identify NCPs by deriving statewide participant IDs if not completed during upstream data entry processing by:  Working off payment images for NCP data elements  Perform research using CSE, ARS and CASES systems and SDU transaction warehouse  Reviewing previous collections system (CE) payment history  Utilizing the Participant Match File received weekly from the CSE system

Suspense Processing - SDU  Insufficient Payment Data - Queue 4 (continued)  Validate Payment Source  Capture Additional Data Element(s) as required based on Payment Source  Captured by SDU if provided with remittance and is identifiable

Suspense processing - SDU  Aged Exceptions – Queue 10  Items not resolved in Data Entry or Intra-day Exceptions are returned to SDU from the CSE system in a Suspense Notification file  Associates perform extensive research utilizing:  CSE/CASES/ARS system  Transaction Warehouse  Collections Web Archive  Contact Remitter  Internet Search  If still not resolved, items are passed to DCSS for resolution

Suspense Processing - SDU Age Suspense Trending – last 18 months

Suspense Processing - SDU

SDU – SP Fun Facts  60,000 square feet facility  60.9M Payments processed for over $11.3B since go-live  152 payments in suspense totaling $56,737 as of 7/30/10  Converted $750,000 in 2009 to an electronic disbursement method  Biometric Vault Controls

State Disbursement Unit (SDU) 101 Q uestions & A nswers