The Arizona Department of Economic Security's Division of Child Support Enforcement has known about costly flaws in its collection system at least since 2007 but did nothing about it for years, according to an Arizona Department of Economic Security internal affairs report obtained by the ABC15 Investigators.
According to the 2012 investigation conducted by investigator Frank Mendoza, evidence proves from "…through 2012, the Division of Child Support Enforcement (DCSE) overpaid vendors for collection of overdue child support payments."
The state hired various vendors – or outside agencies – to assist with the collection of delinquent child support payments. Those agencies would receive fees from the state based on the funds they were able to collect.
Mendoza's investigation and an internal audit conducted by DES's Office of Accountability has revealed flaws in the contracts those agencies held with the state. Those flaws contributed to overpayments made by the state for more than a decade.
While the state says it terminated its contract with the collection agencies in July 2012, DCSE told ABC15 it is "committed to strengthening contract language and contract monitoring processes."
Meanwhile, between September 2012 and January 2013, at least seven employees connected to the investigation are no longer working for DCSE, including the former Assistant Director of DCSE, Veronica Ragland, and a contract specialist, Rich Brydle, who is now suing the State of Arizona.
In December 2012, DES's Office of Accountability completed an audit based on "management concerns that vendors may have been overpaid," according to the audit report.
In the report, Chief Auditor, Elizabeth Shoemaker, reported that "contract weaknesses" and "flawed invoice review processes" contributed to "improper" payments made to outside agencies that were paid to provide collection services to the state.
According to Mendoza's report, many areas of concern had been known for years, "but no substantive corrective action was taken by the division."
However, he reported DCSE "acknowledged that a serious problem with overpayments existed," in 2011.
Mendoza interviewed various DCSE personnel during his investigation, including several managers and supervisors.
"Those interviewed indicated the overpayment problem was known, but resolving or mitigating its impact was not a priority," Mendoza wrote in the report.
"Issues and concerns of overpayments were elevated and meetings were held….Although no one person was singled out as responsible, it was concluded that poor and ineffective supervision, along with DCSE management's lack of involvement…contributed to overpayments," he indicated.
HOW MUCH WAS OVERPAID
At the time of the 2012 Office of Accountability audit conducted by Elizabeth Shoemaker, DCSE was in the final year of a four year contract with six vendors "to assist in the collection of child support obligations for cases that are in arrears."
However, a contract with just three vendors, she wrote, preceded that contract.
According to her audit, which only reviewed vendor payments for the month of August 2011, invoices revealed "a potential overpayment of $105,597.04," during that month alone.
She documented overpayment rates for each company between forty-nine and sixty-seven percent.
However, the state provided the following statement after reviewing the information:
It was intended at the time of the report to illustrate an issue that needed to be further investigated and assessed. DCSE conducted a further assessment and, based on the methodology used, determined the amount of actual overpayment for the four years of the contract for all the vendors totaled $339,995.08.
Meanwhile, a former DES contract specialist, Rich Brydle, claims the overpayments may total between $8 million to $10 million over a span of the past thirteen years.
Brydle claims he helped bring the financial issues to light when he was assigned to conduct a review of the contracts in 2011. However, he claims he suffered retaliation and lost his job as a result of his discovery.
In February, Brydle filed a lawsuit against the state, claiming he was "ridiculed and chastised during meetings in front of peers and supervisors relative to the handling of the contracts."
The Director of DES, Clarence Carter, told ABC15 he did not have any reaction to the lawsuit.
According to DES, as of March 31, 2013, there are more than 142,000 cases involving unpaid child support in Arizona. The total amount of arrearage for those cases is more than $1.7 billion.