Chapter 1
Contract Monitoring  TOP

Introduction

Contract monitoring includes both program monitoring (i.e., assessing the quality and quantity of services provided) and fiscal monitoring (assessing how efficiently and appropriately funds are used). Contract monitoring processes should be based on obligations as outlined in a written contract and responsibilities as outlined in a Memorandum of Understanding (MOU) or Memorandum of Agreement (MOA). Under Title II, contract monitoring is the responsibility of the State grantee. In some cases, this is delegated to a consortium lead agency.

In cases where consortia are responsible for dispersing Title II funds, a grantee may delegate some of its authority to monitor subcontracts to a lead agency within a consortium. Such arrangements require a MOU/MOA or a specific contract requirement that specifies methods, sets deadlines, and assigns responsibility for the monitoring activities. Grantees must be careful to avoid conflicts of interest when assigning tasks related to program and fiscal monitoring, including the involvement of lead agencies that are also contracted service providers. Contracted providers have an inherent conflict of interest when they are involved in monitoring their own contracts.

Just as Title II programs vary, so do their contractors. Some contractors are large and well established while others are new and inexperienced. While there is no one, right way to monitor Title II contracts, a strong monitoring program includes a core of basic components that can be tailored to specific situations. Creating and operating a contract monitoring program requires understanding of the following:

• Program and fiscal monitoring activities and how they differ from evaluation
• What to have in place before a monitoring program begins
• Key actors and their roles
• Kinds of administrative tools that should be developed for contract monitoring, and
• Corrective measures to use when providers fail to meet minimum expectations.

Legislative Background  TOP

Contract monitoring can serve as a primary mechanism for documenting grantee compliance with multiple CARE Act requirements, including the following:

• Priority for women, infants, children and youth, Section 2611(b)
• Administrative caps for first-line entities, Section 2618(b)(4)
• HIV disease status, Section 2616b
• Imposition of charges for services, Section 2617(c)
• Payer of last resort, Section 2617(b)(6)(F)
• Provision of outreach to low income individuals, Section 2617(b)(6)(B)
• Maintaining appropriate relationships with points of access, Section 2617(b)(6)(G)

Program and Fiscal Monitoring  TOP

Contract monitoring includes interdependent areas: program monitoring and fiscal monitoring.

Program monitoring means assessing the quality and quantity of the services being provided by a particular contractor. For the Title II staff, program monitoring should include reviewing program reports, conducting site visits, and reviewing client records or charts. Staff responsible for monitoring contracts generally require providers to report the number of clients served, the types of services offered, and any barriers or problems associated with delivering services.

Fiscal monitoring means assessing how efficiently a contractor uses the CARE Act funding it receives and whether funds are used for approved purposes. With effective fiscal monitoring, States track the timely expenditure of Title II funds. This type of monitoring includes regular review and assessment of contractors' expenditure patterns and processes to ensure adherence to Federal, State, and local rules and guidelines on the use of CARE Act funds.

Examples of how program monitoring and fiscal monitoring may be linked are as follows:

• Many States or lead agencies require program reports to accompany reimbursement invoices in order for payments to be processed
• Title II grantees require both fiscal and program information to reimburse providers on a unit cost basis
• Site visits to funded providers commonly include a program audit and a fiscal audit.

Program and Fiscal Monitoring  TOP

Contract monitoring includes interdependent areas: program monitoring and fiscal monitoring.

Program monitoring means assessing the quality and quantity of the services being provided by a particular contractor. For the Title II staff, program monitoring should include reviewing program reports, conducting site visits, and reviewing client records or charts. Staff responsible for monitoring contracts generally require providers to report the number of clients served, the types of services offered, and any barriers or problems associated with delivering services.

Fiscal monitoring means assessing how efficiently a contractor uses the CARE Act funding it receives and whether funds are used for approved purposes. With effective fiscal monitoring, States track the timely expenditure of Title II funds. This type of monitoring includes regular review and assessment of contractors' expenditure patterns and processes to ensure adherence to Federal, State, and local rules and guidelines on the use of CARE Act funds.

Examples of how program monitoring and fiscal monitoring may be linked are as follows:

• Many States or lead agencies require program reports to accompany reimbursement invoices in order for payments to be processed
• Title II grantees require both fiscal and program information to reimburse providers on a unit cost basis
• Site visits to funded providers commonly include a program audit and a fiscal audit.

Establishing a Contract Monitoring System  TOP

Grantees should ensure, up front, that contractors understand how the grantee plans to monitor contracts. The grantee may want to outline the contract monitoring process before contracts are signed. In some cases, grantees may prefer to develop a process jointly with contractors after contracts are up and running. For example, implementing a peer review process for contractor staff would require joint planning.

A complete contract monitoring system includes these key elements, each of which should be in place before a contract monitoring program begins:

• Roles of funders and contractors clearly specified
• Written contract
• Memorandum of Understanding or Memorandum of Agreement (MOU/MOA)
• Approaches for effective contract monitoring, and
• Plans for corrective actions and/or remedial steps.

Each of these is described below.

Roles of Funders and Contractors  TOP

The CARE Act links funders and contractors in a collaborative effort to ensure the quality, quantity, effectiveness, and appropriateness of services for people living with HIV disease (PLWH). Clear expectations and conditions help facilitate cooperative solutions to problems. Therefore, contract monitoring roles for funders and contractors should be clearly specified.

The Grantee

The grantee retains ultimate accountability to HRSA for all contracts awarded through its Title II program. The grantee determines the personnel on the monitoring team and the nature and extent of each person's involvement.

The grantee will designate a person or team to review fiscal and program reports, conduct site visits, interact on an ongoing basis with contracted providers, and implement remedial steps or corrective action if necessary. A grantee may distribute monitoring functions across its organization. For example, fiscal monitoring activities are frequently handled by a different person, team, or even division within a health department than program monitoring activities.

Lead Agencies

A grantee may decide to share some of its monitoring responsibilities with a local lead agency in a regional consortium. This decision belongs only to the grantee and may depend on the ability of a lead agency to fulfill the monitoring requirements.

Some grantees require lead agencies to collect and consolidate program reports from all the subcontractors within their jurisdiction. Fiscal monitoring processes may also be conducted at the lead agency level. Any arrangement where lead agencies take on some aspect of the contract monitoring process should be spelled out clearly in a MOU/MOA (see below).

Providers

The primary role of providers in a contract monitoring process is to submit program and fiscal reports to the monitoring agent (usually the grantee or lead agency) in a timely manner. Again, a strong contract monitoring process should be viewed as a collaborative effort in which the monitoring agent and contracted provider cooperate to assure the highest quality of services funded by Title II.

A second role of providers may be to ensure that their staff members participate in a peer review process at the request of the grantee (see below, "Approaches for Effective Contract Monitoring").

The Written Contract  TOP

A written contract describes the obligations of both the funder and the contractor in providing services to PLWH. It is sometimes incorrectly assumed that local application guidance, standards of care, written responses to Requests for Proposals (RFPs), and other such documents provide sufficient expectations against which a provider can be assessed. The missing piece in this approach-the written and signed contract-brings together the many expectations outlined in a range of sources and makes them contractual.

The grantee must be careful to obligate funding only through signed, written contracts. Following are examples of items that might appear in a signed, written contract.

Administrative Provisions. Administrative provisions are processes and parameters tied to a contract. Such provisions may specify a budget modification process; procedures for changing the scope of work, mid-contract; method of payment; and duration of the contract.

Special administrative provisions may be needed in contracts between a lead agency and its subcontractors, such as a time-line for service delivery or a condition of approval from the Title II grantee. Additionally, a lead agency may, in the written contract with the grantee, identify and retain its authority to reallocate unexpended funds.

Operating Budget. The written contract should include a budget that establishes the financial obligation of the funder. A budget can set the funder's maximum obligation, even when the provider draws funds down from a pool, based on fee-for-service or unit cost accounting systems.

If the provider is using multiple funding streams to support a particular service, the budget should clearly indicate the other funding sources and specify within the contract which line items are supported by each funding source.

Fiscal Assurances. Fiscal assurances include policies, limits, or requirements regarding financial controls; independent audits; allowable expenditures; funding of last-resort requirements; administrative costs; liability/risk insurance; collections from third party payers; and other fiscal matters. In a written contract, fiscal assurances should be spelled out in a manner that ensures each party's ability to satisfy Federal, State, and local regulations.

Program Assurances. The funder may require contractors to follow policies on record maintenance, client confidentiality, standards of care, or client eligibility restrictions and protections. Also, a written contract should include a commitment to follow HRSA and State program policies.

Staffing Patterns. When a service provider is newly established, staffing patterns can determine a program's success. Particularly where funders wish to build new capacity in a service category, a written contract may require that specific staff positions be filled by qualified individuals and by a stated deadline.

Scope of Work. The activities to be performed by the contractor, the scope of work, must be outlined in the contract. The scope of work can be written in a number of ways, including sub-sections on goals, objectives, workplan, time-lines, and deliverables.

The scope of work must include clear expectations for the provider as to how the work will be assessed. Funders must clearly describe what they will consider a successful or unsuccessful implementation of a program to ensure that contractors document the program with the appropriate and necessary information.

Reporting Requirements. Every Title II contract, whether administered by a State grantee or a regional lead agency, must include expectations about using the CARE Act Data Report (CADR) or client-level data collection to report demographic and utilization figures in each of the service categories being funded. Without this obligation contractually in place, the State may be unable to meet its requirement to complete the HRSA CADR. (More information about CADR is included in this Manual.)

Contracts should spell out how often and on what dates reports are due. In addition to the reports for CADR or client-level reporting, contracts should require monthly or quarterly expenditure reports to ensure that funds are being spent in the community in an efficient manner. Regular expenditure reports will help funders anticipate need for reallocation of funds, such as in cases where a contractor is spending erratically. Finally, local and State guidelines for HIV/AIDS surveillance may present additional reporting obligations for providers; these may be included in the written contract.

Corrective Actions. Funders may include a description of corrective actions that may be taken if contractual obligations are not met. Corrective actions stated in a written contract should leave considerable room for informal intervention long before the contract gets to the worst-case scenario. (For more information on the range of corrective actions that can be taken, see below, "Plans for Corrective Actions and/or Remedial Steps.")

Appeal. The contract should describe a method that will be followed by the lead agency or the grantee if a provider wishes to appeal any corrective action that has been taken.

Memorandum of Understanding or Memorandum of Agreement  TOP

A Memorandum of Understanding or Memorandum of Agreement (MOU/MOA) typically addresses more than the contract monitoring process. It is usually developed among the parties that are involved in any stage of planning, oversight, contract monitoring, evaluation, or administration of services. In Title II programs, these parties may include the grantee, a lead agency, a consortium, and any others that have an official role relating to Title II service contracts.

The MOU/MOA clarifies local duties in all areas related to the contracts in question. The document spells out how the relationships between decision makers will be governed. Again, because of the enormous diversity across Title II programs, what works in one region may not work in another.

The MOU/MOA should provide detailed descriptions of the following:

Parties. The MOU/MOA should name the individuals or organizations entering into the agreement.

Contracts. The MOU/MOA should stipulate the number and type of contracts covered by the agreement.

Scope. The scope and purpose of each contract covered by the agreement should be described. If the agreement covers contracts and activities beyond Title II, such as CDC, HOPWA, Medicaid, or other programs, the MOU/MOA should identify specifically which provisions apply to Title II and which do not.

Duration. The MOU/MOA should specify how long the agreement will be in place.

Roles. The MOU/MOA should identify those responsible for specific activities and provide a time-line for delivery of services or obligations. The MOU/MOA should specify responsibilities for any activities that require extensive collaboration among a number of parties, such as the Statewide Coordinated Statement of Need (SCSN). (See the SCSN chapter in this Manual for more detail.)

Costs. If any costs are to be accrued, the MOU/MOA should describe how they are allocated and the means of paying them.

Approaches for Effective Contract Monitoring  TOP

Grantees should use the monitoring process to reinforce and underscore mutual obligations between funder and provider. Effective contract monitoring involves the contractor in a constructive, interactive process of feedback on how the contract obligations are being met. A rigid, one-way process that looks only for flaws in provider performance runs the risk of undermining trust and communication between funder and contractor. Clarity and courtesy should guide the funder's approach to contract monitoring. For example, funders should give advance notice before site visits are made and supply the provider with a checklist of items to be reviewed during the visit. The items to be reviewed should follow directly from the obligations outlined in the provider's original contract.

Ongoing program expenditures and staffing requirements may be assessed soon after a contract begins. However, monitoring of program performance should be delayed until programs have become established enough to provide sufficient data.

While grantees should use consistent contract monitoring methods for all funded providers, the methods should be flexible enough to address particular monitoring needs in different grantee/provider relationships. For example, while newly established programs may need more oversight of their fiscal accountability, program infrastructure, and staffing patterns, established programs may be monitored with more focus on performance and output.

Following is a discussion of the many approaches grantees can use as they monitor their contractors. While a successful monitoring effort will include a number of methods, funders should attempt to limit the time and resources required of contractors to meet their reporting obligations. Any single monitoring method is only as good as the accuracy of the information reported or collected. Mixing several types of monitoring activities into the process may help grantees and lead agencies verify the accuracy of information.

Disbursement of Funds and Budget Tracking

Grantees should tailor their disbursement strategy to the type of contract being funded and to State and local rules. Title II is a cost-reimbursement program.

Line item budgets can be tracked easily if contractors use a monthly disbursement method in which invoices, receipts, and up-to-date budget statements are submitted at one time. Unit cost contracts may require submission of monthly utilization statistics to provide justification for monthly disbursement.

Grantees should set up a system to track actual provider expenditures against contractual budgets to assess whether funds or any line items are being under- or over-spent at any point during the fiscal year. Problems with a contractor underspending its allocation may only appear over the course of several months. Problems typically occur at the beginning and the end of fiscal years.

Program Reports

Grantees may require contractors to submit monthly and/or quarterly utilization reports.

Monthly reports are recommended in unit cost contracts in which the level of monthly disbursement depends on the utilization rate of the service being provided. HAB/DSS requires States to submit an annual CADR to document clients served and the services provided through Title II funds. The CADR aggregates this information from contractors using the Uniform Reporting System (URS), a summary of client demographic and service utilization.

Reports typically include information on the location and demographics of clients served, number of completed service units, percentile of completed objectives, staffing and program changes, successes, failures, technical assistance needs, and plans for quality improvement. When reported service delivery drops below a prescribed level, grantees should negotiate some form of corrective action. Grantees can use URS data to help assess whether target communities are being reached adequately by contractors.

Quality Assurance

In the context of contract monitoring, quality assurance focuses on contractor compliance with a set of standards taken directly from the written contract and compiled in a quality assurance checklist.

A quality assurance checklist can be developed by contractors to use as a self-assessment tool or by grantee staff to use during periodic reviews or site visits. The checklist may ask for information on fiscal controls, independent audit requirements, standards of care, client confidentiality provisions, and staffing patterns.

Quality management reviews, based on a quality assurance checklist, underscore the importance of the provisions of the written contract and help the contractor identify areas for improvement. (See the quality management chapter in this Manual for more information.)

Agencies with enhanced computer capabilities can track the results of quality assurance reviews as part of their everyday data collection process.

Site Visits

Provider site visits are another way that grantees can monitor their contracts. If contractors are not asked to fill out a quality assurance checklist prior to the site visit, grantee staff may want to use such a tool during the visit to ensure that each contractual obligation is reviewed in sufficient detail. A site visit might include staff interviews, observation of services, a facility tour, and a review of documentation relating to the following aspects of contractor operations:

• Fiscal management system
• Staff licenses
• Insurance policies
• Client enrollment
• Client confidentiality protections
• Adherence to program and fiscal policies, and
• Data collection procedures.

In large programs with multiple staff positions, the site visit monitor may want to review time and attendance records, and interview staff at all levels including administrators, front-line staff, and support staff. A facility tour may address physical access issues. A review of documentation can include as wide a range of information as is needed to satisfy local, State, and Federal contracting regulations.

Peer Review

The peer review method involves peer colleagues in the contractor organization who engage in a structured review of the program being monitored. This method is best used to assess individual staff performance in case management and other programs that depend heavily on the quality of staff outputs.

Professional peer review offers benefits to both the reviewer and the entity being reviewed. In the preparation stage, the reviewer has an opportunity to renew her understanding of grantee expectations and performance standards. The reviewer then has an opportunity to learn how another program or individual responds to the same expectations and standards. The entity being reviewed may also learn about the practices of a well-informed and experienced reviewer. Following their involvement in a peer review process, both the reviewer and the entity being reviewed may decide to adopt successful strategies used by the other. A well-run peer review program can enhance collegiality and cooperation among contractors.

Client Chart Reviews

Client chart reviews can be conducted to assess a provider's performance with respect to standards of care and record-keeping requirements. The chart review typically involves on-site data collection by a monitoring team and is followed by data analysis. This kind of monitoring can be expensive, since it requires staff to spend considerable time designing an approach, collecting and analyzing data, and reporting on findings. It can be particularly worthwhile, however, when detailed and reliable client-level assessments are needed. Some States have developed chart review questionnaires to aid in the process.

Plans for Corrective Actions and/or Remedial Steps  TOP

When problems with a contractor become apparent, grantees must undertake some form of corrective action. Grantee staff and the provider generally meet first to discuss specific problems. Indicators for corrective action include the following:

• Under- or over-spending
• Improper invoicing
• Failure to meet program goals and objectives
• Repeated staff turnover and vacancies
• Missing or incomplete client records
• Failure to make reports in a timely manner
• Failure to appropriately serve an eligible client, and
• A variety of budget or workplan failures.

Grantees should have in place a graduated corrective action plan so that a number of informal mechanisms are available before formal approaches are necessary. The first priority is to assure that technical assistance (TA) is available to contractors. Grantee staff may prompt a request for TA by informing the contractor of problems verbally and then in writing if necessary. Written communications can be sent to a contractor in draft form, to avoid making the issue a matter of permanent record. If informal efforts fail and formal mechanisms are necessary, the graduated approach should continue to be used before termination of the contract is necessary.

The grantee should have grievance procedures in place to resolve such disputes as quickly as possible.

Technical Assistance

Technical assistance (TA) programs provide contractors with resources to aid in the development or compliance of their programs. On-site TA is typically provided by peer and other professional consultants with specific experience in assisting, training, or guiding contractors through Title II requirements. Local Title II programs may also develop TA documents. HAB/DSS provides Title II grantees with a number of such documents, such as this manual, which can also be used by consortia, lead agencies, and contractors.

TA is most effective when it has been requested by the contractor. At a minimum, TA should be acceptable to the contractor before any large-scale effort is undertaken. Significant time and money may be wasted if the intended recipient will not accept outside help.

Conditions of Award/Contract Remediation Plan

If a contractor does not accept TA, even while obligations are not being met, the grantee or lead agency can issue Conditions of Award. Issuing a condition of award is a way of repeating obligations set forth in the original contract. The conditions should include a clear statement of the obligations that are not being met and a timetable for making a correction. This approach may convince a contractor to accept TA that was resisted in the past. Conditions of award usually do not require acceptance of technical assistance; the contractor may continue to work without assistance. The conditions are, however, a warning sign to the contractor that funding may be suspended or terminated if action is not taken.

The contract remediation plan combines the "Conditions of Award" with a TA plan. The plan can be mandated by the grantee or mutually agreed upon by the grantee and the contractor. In any case, it is a signed, dated document specifying the steps and timetable by which the contractor must come into compliance.

Suspension, Reallocation or Termination of Funding

Any action with respect to funding must be preceded by extensive documentation of the contractor's compliance problems. Documentation should include the following:

• Full description of the problems
• Summary of the informal and formal steps that were taken to address the problems, and
• Relevant supporting documents such as memos, reports, and evaluations.

Funding can be suspended or reallocated without full termination of a contract. In cases where the contractor has been unable to spend its full award within the performance period, the grantee may reallocate the funding to another contractor. In some cases, the grantee may direct the consortium to reallocate funding according to identified service needs. If underserved populations with severe need will be put at greater risk through termination of a contract, the grantee may consider only partial reallocation as a way to retain infrastructure in the area. Efforts at building contractor compliance and accountability may extend over a number of years or contract periods.

All contractors should have the right to appeal decisions regarding suspension, reallocation,

or termination of funding. The initial phases of an appeal process should be handled at the lead agency level. Further appeals should ascend to the grantee office.

REFERENCES  TOP

Health Resources and Services Administration (HRSA), HIV/AIDS Bureau (HAB). Choosing & Using an External Evaluator. HIV/AIDS Evaluation Monograph Series. Rockville, MD: U.S. Department of Health and Human Services, 1997.

HRSA, HAB. Determining the Unit Cost of Services. Rockville, MD: U.S. Department of Health and Human Services, 1998.

HRSA, HAB, Grants Management Branch. Title II Conditions of Award.

HRSA, HAB. Program and Fiscal Monitoring at the Local Level. Ryan White CARE Act Title I Manual. Rockville, MD: U.S. Department of Health and Human Services, 2002.