Reforms costing £540m have failed to improve the Child Support Agency and have made some aspects of its performance worse, says a key watchdog.
There are calls for the CSA to be scrapped
The National Audit Office says the CSA spends 70p collecting every £1 of child maintenance from absent parents.
The verdict comes ahead of the findings of a review on the CSA, and opposition MPs called for it to be scrapped.
But minister Lord Hunt said he was confident the hard work of staff would deliver more money to more children.
The CSA was set up in 1993 to ensure parents who do not live with their children continue to pay for their upkeep.
The National Audit Office (NAO) says reforms started in 2003 were an honest attempt to improve the troubled agency.
Spends 70p to collect every pound of child support
£3.5bn in payments not collected since 1993
Reforms cost £539m but scheme worked no better than predecessor
But, in what its authors describe as one of the watchdog's most hard-hitting reports, they say the reforms have failed to produce value for money for taxpayers.
The reforms have cost £539m and by 2010 the total cost of trying to turn around the CSA will have topped £1.1bn.
NAO director Paul Cannon said: "[The CSA] has a new scheme which has performed no better than its predecessors and in some aspects is performing worse."
One in four of all new applications received since March 2003 are still waiting to be cleared and there is a one-in-five chance that payments are inaccurate.
A third of non-resident parents are paying nothing at all despite their maintenance being assessed.
Signs of improvement?
And many of the poorest families may be losing up to £520 a year from the child maintenance premium, which is meant to help parents on benefit care for children.
In total, the agency has failed to collect £3.5bn in payments since it began work - 60% of the money was now probably unrecoverable, said Mr Cannon.
The NAO also points to problems with the design, delivery and operation of the new IT system used to implement the reforms and run by private contractors EDS.
But the report says there are recent signs of improvement and the government's plan for improving the agency was a significant step forward.
Sir David Henshaw is due to deliver his review of the agency and its future to ministers before Parliament begins its summer break.
Some press reports have suggested the CSA could be scrapped but Mr Cannon said he would be surprised if that happened.
Edward Leigh, chairman of the Commons public accounts committee, said the CSA "ranks amongst the worst public administration scandals in modern times".
The Department for Work and Pensions, the CSA and EDS had ignored warnings and introduced a complex IT system at the same time as restructuring the agency, he said.
Work and Pensions Minister Lord Hunt said the report showed the government was right to review both the policy and delivery of child support.
"Staff within the agency have been working extremely hard under difficult circumstances but I am confident that with their ongoing hard work we will get more money to more children in the UK," he said.
Lord Hunt said he was pleased the NAO had recognised that positive steps had been taken.
Liberal Democrat spokesman David Laws called for the agency to be scrapped.
"The CSA has reached a dead end, and no amount of tinkering will get it working properly," he said.
Shadow pensions secretary Philip Hammond said: "The government has completely failed to demonstrate the political leadership needed to drive the improvements which are desperately needed by so many single parent families."
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