The Child Support Agency's failure to enforce some child maintenance agreements has prompted an increase in complaints, a report has said.
The CSA's failures have repeatedly come under fire
Independent Case Examiner Jodi Berg said complaints referred to her office rose by nearly 5% to 3,117 in 2005/6.
She said there were problems with IT and administration, but said reforms already under way could improve things.
Parents frequently complained that with the CSA "one hand did not know what the other was doing", she said.
The CSA was overhauled in 2003 but even parents falling under the new legislative regime had faced difficulties, she said.
She told the BBC News website: "It would be difficult for an agency that was good at administration to deal with its current challenges and this agency has not proved up to the task."
The Independent Case Examiner's job is to probe complaints which have not been resolved internally.
Of the 3117 complaints, 1,348 were investigated - up 7% from 2004/5.
Work and Pensions Secretary Mr Hutton has appointed Sir David Henshaw to review child support arrangements and report back before the summer parliamentary recess.
Minister Lord Hunt meanwhile responded to Ms Berg's report saying the government was aware the CSA was "not fit for purpose".
He said: "I am grateful for the work of the Independent Case Examiner, the issues that have been highlighted are real, and we fully acknowledge that the CSA is not fit for purpose.
COMPLAINT CASE STUDY
Sept 1994 Mrs C applies for child maintenance
In Sept 1997 an interim maintenance order was imposed but when the non-resident parent contacted the CSA it failed to ask him information to enable assessments from 1994
Mrs C complained to ICE which asked the CSA to complete the initial maintenance assessment
Further delays caused by "a number of errors" and a computer problem
Initial assessment completed April 2005, more than 10 years after initial application
"Sir David Henshaw is currently developing proposals for the redesign of child support, in the meantime we have already invested £120m in the Operational Improvement Plan which aims to improve customer service and the agency's performance.
"I am confident these steps will ensure we are as effective as possible in getting more money to more children in the UK."
Conservative work and pensions spokesman Philip Hammond said Tuesday's report was "more damning evidence of Labour's appalling mismanagement of the CSA".
"Basic administrative failures and lack of effective enforcement have caused thousands of families to suffer and the government has completely failed to demonstrate the political leadership necessary to drive improvements," he said.
"Sir David Henshaw's review is now more critical than ever. The Government must not be allowed to kick this issue into the long grass again."
Lib Dem spokesman David Laws said the latest report was a reminder that the CSA was a "shambolic mess which has never worked".
"A CSA that is unable to enforce payments, has no solution to its IT problems and does not put the best interests of the child first, is a CSA failing those people it was meant to help," he added.
"The government must publish the results of Sir David Henshaw's review if we are to make any progress towards ending this bureaucratic nightmare."
In February the CSA was in the headlines over a new computer system that was supposed to be up and running by 2003 - Mr Hutton said then it would not work fully for two years.