Authority/Reference(s) Texas Human Resource Code, Title 2 § 40.058 (c); Texas Contract Management Guide, Ch. 7; 45 CFR 75.341-350
Revision Date April 1, 2016

Policy

Designated DFPS staff are required to monitor highest risk contracts as established by the annual statewide monitoring plan. The objective of contract monitoring is to ensure contractor compliance with:

  • Applicable state and federal regulations;

  • DFPS policies; and

  • Terms of the contract.

Significant or repeated noncompliance issues could result in failure to provide adequate services, possible harm to clients, or an indication of inappropriate use of resources.
When monitoring contracts, contract staff must:

  • Use a risk-based approach to monitor compliance with financial and performance requirements.

  • Identify which contracts require enhanced monitoring based on risk.

  • Verify the validity of claims.

  • Ensure all costs are allowable, reasonable, and necessary to achieve program objectives.

  • Ensure program objectives and performance measures are achieved.

DPFS requires a contractor to maintain records that adequately account for the use of funds and to provide reasonable evidence that the service delivery complies with contract provisions.

A resource for efficient contract monitoring is the Comptroller's State of Texas Contract Management Guide (specifically Chapter 2: Planning, and Chapter 7: Contract Administration).

Required monitoring of highest risk contracts is identified on the annual Statewide Monitoring Plan (SMP). Contract staff must determine the monitoring level, method, type, and the appropriate monitoring tool.

Program and contract staff are the subject matter experts for the contracts they manage and therefore are responsible for developing monitoring tools based on the type and complexity of the respective contracts.

Subrecipient Contract Monitoring

Subrecipient contracts require in-depth monitoring as detailed in the Uniform Grants Guidance (UGG). Therefore, subrecipient monitoring must be in compliance with UGG minimum standards, which include:

  • Review of internal controls and business processes.

  • Review of audit financial and performance reports.

  • Verify that a single audit was conducted if expenditures were $750,000 or more during the fiscal year and that repayment of disallowed costs, financial adjustments, or other necessary actions were taken.

  • Ensure timely and appropriate actions are taken on all deficiencies resulting from monitoring activities.

  • Any necessary actions including implementation of remedies for non-compliance.

PROCEDURES

Monitoring Levels

The SMP specifies the level of monitoring required, as detailed below.
Full level monitoring requires:

  • Programmatic, fiscal, and administrative review

  • Testing three months of a sample of transactions and the contractor's associated documentation

Targeted level monitoring requires: (RCC contract staff see RCC Targeted Monitoring Review.)

  • Either programmatic or fiscal and an administrative review

  • Testing two months of a sample of transactions and the contractor's associated documentation

Both levels of monitoring must incorporate:

  • Results of the review of the Internal Control Structure Questionnaire (ICSQ);

  • Compliance with performance measures;

  • When applicable, adherence to their subcontracting policies and procedures; and,

  • Any other pertinent factors.

Enhanced Monitoring

Enhanced Monitoring is an increased level of monitoring that applies to all contracts with a value of $10 million or more, including those that reach the $10 million threshold during the life of the contract; and all contracts with a children's residential component. In addition to the requirements of full and targeted monitoring, Enhanced Monitoring may include the following:

  • Analysis of financial reports;
  • Additional monitoring visits resulting in a formal report;
  • Additional reporting requirements; and
  • Other risk assessment and management activities.

Monitoring Methods

Once the level of monitoring is determined, monitoring may be conducted by an on-site visit, desk review, or a billing review.

On-Site Visit

Desk Review

Billing Review

Definition:

A review of a contractor's financial, personnel, service and client records, which may include observation of program activities at a non-DFPS site such as a contractor's administrative or service delivery site.

A documentation review of a contractor's financial, personnel, service and client records in a DFPS site and away from the contractor's administrative or service delivery sites.

A review of DFPS and contractor documents that support service delivery and validity of claims that takes place in a DFPS site as billings are received.

Details:

  • May include observation of service delivery.
  • May be used for both full and targeted level monitoring.
  • Documents reviewed are the same as for an on-site visit and submitted by the contractor at the request of the contract manager.
  • The monitoring tools are the same as those used for an on-site visit.
  • May only be used for targeted level monitoring (see exceptions below) and the time frames for monitoring requirements must mirror those for on-site visit.
  • Exceptions: A contract with an SMP level of full may be monitored using the desk review monitoring process if one of the following conditions exists:
    • Contractor is out of state
    • Contractor does not maintain an office or an office with adequate space
  • Contract management staff must document one of the exception conditions on the monitoring tools when conducting a desk review for a full monitoring.
  • Allowed for those services listed in Billing Review or otherwise approved by COS.
  • May be used for targeted or full level monitoring.

Monitoring Types

Once the monitoring method has been selected, contract staff must determine the appropriate type of monitoring. There are three types of contract monitoring conducted in the DFPS monitoring process: fiscal, programmatic, and administrative.

Fiscal Monitoring

Programmatic Monitoring

Administrative Monitoring

Definition:

A review of a contractor's financial operations, which may include a review of internal controls for program funds in accordance with state and federal requirements, an examination of principles, laws and regulations, and a determination of whether costs are reasonable and necessary to achieve program objectives. This activity involves an assessment of financial statements, records, and procedures. It is similar to an audit, but has a lesser degree of detail and depth and, usually, a higher degree of frequency.

A review of a contractor's service delivery system to determine if it is consistent with contract requirements including outputs, outcomes, quality, and effectiveness of programs. In programmatic monitoring, service-related information is reviewed for compliance with process and outcome expectations as identified in standards, rules, and contracts. This activity assesses the degree to which the identified need is being met and the quality of the service being provided, based on established objectives and performance measures.

A review of a contractor’s internal controls and operating processes. An administrative review must be conducted in conjunction with either a fiscal or programmatic monitoring review. This is accomplished through the completion of the appropriate administrative tool.

Details:

Fiscal monitoring includes, but is not limited to:

  • Reviewing the contractor's bills when they are received to determine if appropriate units of measure are reported and that costs (units x rate) are correct
  • Comparing budgets or budget limits to actual costs to determine if the contractor's expenditures are likely to be more or less than budgeted
  • Obtaining documentation that services billed were actually delivered according to the contract
  • Comparing bills with supporting documentation to determine that costs were allowable, necessary, and allocable.

Program monitoring may include any or all of the following:

  • Reviewing the service provisions of the contract to determine program required objectives, outcomes, and performance measures
  • Reviewing the contractor's reports and other materials to determine if services are being provided
  • Interviewing direct delivery staff and others to determine if the services are being performed according to contract requirements.

Administrative monitoring may include any or all of the following: