The government's attempt to reform the Child Support Agency (CSA) was "one of the greatest public administration disasters" of recent years, MPs have said.
The Commons committee warned the government must keep an "iron grip" on its successor to avoid repeating its failures.
The Commons public accounts committee (PAC) found the CSA has consistently underperformed since it was launched in 1993.
By October last year, one in four applications were awaiting clearance, the backlog of cases had reached a quarter of a million and a further 36,000 were simply stuck in the system.
Although MPs warned of the hardship and distress of missed payments, they found the agency had made insufficient use of its enforcement powers.
Missed payments now total £3.5 billion, of which 60 per cent has been written off as uncollectible.
The report warned: "A significant consequence is that anyone considering not paying maintenance knows that they have a good chance of avoiding detection or serious penalty."
Former work and pensions secretary John Hutton conceded in 2006 that the CSA was failing to deliver and would be replaced. A new Child Maintenance and Enforcement Commission will be established in 2008.
PAC warned that the latest attempts to reform the CSA - the Child Support, Pensions and Social Security Act 2000 - ended in "disaster".
The committee noted the "reform programme was ambitious and its management showed a lack of realism in both planning and execution."
Edward Leigh, Conservative committee chairman, said: "The reform of the Child Support Agency has been one of the greatest public administration disasters of recent times.
"The facts speak for themselves. More than one in three non-resident parents fail to pay any of the money they owe.
"It took 13 years of failure for the department to reach the conclusion that the agency was not fit for purpose. During this time thousands of children suffered as thousands of absent parents have neglected their duties."
The Department for Work and Pensions conceded the CSA had been beset by problems but insisted it would improve following the latest shake-up.
Work and pensions secretary Peter Hain said: "We know that previous reforms have not worked, that is why we are replacing the CSA with a radically different child maintenance system.
"We have learnt lessons from the past. The new system will lift children out of poverty, give power and choice to parents, enforce responsibilities, and deliver value for taxpayers."