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HomeMy WebLinkAboutMINUTES - 06271989 - IO.5 IO 5 TO:• Board of Supervisors •,. FROM: INTERNAL OPERATIONS COMMITTEE DATE: June 19, 1989 �Osr'4 COUr1't't SUBJECT: MONITORING OF CONTRACTS WITH PRIVATE NON-PROFIT AGENCIES Specific Request(s) or Recommendations(s) & Background & Justification RECOMMENDATIONS: 1. Request the County Administrator to continue to refine a system for tracking contracts using the new Accounts Payable system, without making any commitment for the expenditure of additional funds at this time, and make a further status report to our Committee on September I11 1989 at 9:00 A.M. on the proposed reporting and recordkeeping system and alternatives which are available to pay for the system. 2. Request the County Administrator and County Counsel to meet as soon as possible with a representative group of contract agencies in an effort to design contract language which will maximize the requirement that the Board of Directors of a contract agency operate publicly, provide adequate advance public notice of its meetings and otherwise insure that the public is aware of and has an opportunity to participate in the meetings of the Board of Directors and request the County Administrator to report to our Committee on the results of such meetings on September 11, 1989 at 9:00 A.M. 3. Request the County Administrator to contact all contractors who contract with the Community Services Department and determine their interest in a meeting to identify and resolve problems which may be identified by the contractors,similar to the series of meeting which have been held with contractors for the Health Services Department's A/DA/MH Division and the Social Services Department and provide a report to our Committee on the result of these meetings on September 11, 1989 at 9:00 A.M. Continued on attachment: YES Signature: Recomm ndation of-County Administrator Recommendation of Board Committee �a�`e Other: Signature(s): M PO s UNNE WRIGHT MC PEAKC�% Action of Board n: June 27, 1989 Approved as Recommended x Other Vote of Supervisors I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN X Unanimous (Absent III ) AND ENTERED ON THE MINUTES OF THE Ayes: Noes: BOARD OF SUPERVISORS ON DATE SHOWN. Absent: Abstain: Attested cd'1 /9 9 cc: County Administrator Phil Batc elor, Clerk of the Board County Counsel Auditor-Controller of Supervisors and County Administrator Appropriate department heads and contractors(Via CAO) By 0L , Deputy Clerk -- 4. Authorize the County Administrator to waive the requirement that warrants comprising all or any part of the "vendor payroll" be exempted from the requirement that all first class mail be pre- sorted by ZIP Code prior to mailing in order to speed the delivery of warrants to contractors. 5. Authorize contract provisions which permit the Health Services Director, with the approval of the Auditor-Controller, to advance up to 25% of a contractor's payment limit when in their judgment such an advance is necessary to prevent a severe cash flow problem and when such an advance is, in their judgment, clearly fiscally prudent. 6. Requestthe County Administrator to advise all department heads having contracts withnonprofit agencies for the delivery of human services that it is the policy of the Board of Supervisors that such contracts be for a two-year term and have a 30-day cancellation clause on the part of either party and that the Board expects that all such contracts will adhere to this policy unless the department head advises the Board of the reason for a shorter term at the time the contract is submitted to the Board for approval. 7. Authorize the Health Services Director and County Counsel to develop language which will authorize the payment of a cost-of-living increase retroactive to July 1, 1989 for contractors whose contracts are monitored by the A/DA/MH Division of the Health Services Department and forward that language to the Finance Committee. Refer to the Finance Committee the whole question of cost-of-living increases for human services contractors and request that they return recommendations to the Board for its consideration before A/DA/MH contracts are ready to be executed by the Board so the Board can determine whether such cost-of-living language should be included in those contracts. 8. Approve the attached statement of policy regarding the need for all departments to use the least cumbersome and most appropriate type of contract for each agency and request the County Administrator to forward this policy statement to each department having contracts for human services programs with private non-profit agencies. 9. Request the County Administrator to meet with a representative group of nonprofit contractors in an effort to develop language for the release of Requests for Proposals (RFP's) which will be as standardized and as complete as possible and report his conclusions and recommendations to our Committee on September 11, 1989. IO.Request the County Administrator to advise all department heads having responsibility for human services contracts with private non-profit agencies to attempt to draft service plans which provide as explicit as possible outcomes so that it is clear exactly what service is being purchased. 11.Request the County Administrator, in discussing the subject of Requests for Proposals with departments and contractors,to incorporate the policy that when a department's priorities change in terms of the services for which the department wishes to contract that existing contractors who are performing satisfactorily should be given the right of first refusal to receive a contract for the new or amended priority program in order to maintain the stability of existing contractors. 12.Request County Counsel to prepare language which can be shared with contract agencies indicating the form in which an agency's Board of Director should approve delegating execution of contracts in order to resolve the problem with trying to obtain signatures from two members of the Board of Directors on short notice. 13.Leave this item on referral to our Committee at least until after we receive the additional reports we have requested on September 11, 1989. - 2 - BACKGROUND: The issue of monitoring contracts with private non-profit agencies which provide human services is one which has received a good deal of attention over the past year. On November 14, 1988 the County Administrator's Office filed a report dated November 9, 1988 with the 1988 Internal Operations Committee. This report summarizes the outcome of a meeting held October 31, 1988 in response to the Board's August 16, 1988 order. As a result of reviewing this report at the Committee's meeting of November 14, 1988 the Committee filed a report with the Board of Supervisors on November 29, 1988. It is the recommendations contained in this report to which we are responding at this time. Attached is a report with the County Administrator's Office filed with our Committee on June 19, 1989 which provides detailed background on this subject and which is incorporated herein by reference. We are not prepared to spend money at this time on a centralized recordkeeping system until we have a further status report on exactly how the system will operate, what the costs will be and how the costs can be paid for. We are also concerned about the entire subject of cost-of-living increases and the timing of such increases for contractors. We have, therefore, asked the Finance Committee to review this matter with the affected departments and contractors and return their recommendations to the Board of Supervisors. Otherwise, we are pleased with the progress that is being made in resolving some of the problems which contractors have brought to our attention in the past and wish to simply encourage all parties to continue working with each other in a cooperative manner in an effort to resolve the remaining issues. - 3 - 4 PROPOSED BOARD OF SUPERVISORS' POLICY REGARDING CONTRACTS There area numberof different forms which contracts with non-profit agencies which provide human services for the County can take. These include fee for service contracts, cost reimbursement contracts, net negotiated amount contracts and net negotiated rate contracts. A fee for service contract provides an agreed upon fee for each unit of service which is provided,not to exceed a specified total number of units of service and total payment limit. The contractor is at risk if they find they are unable to provide the required services at the specified fee for each unit of service. The County is less concerned about the exact cost of providing the services or how the money is spent,as long as the County can verify that it is receiving the number of units of service contracted for and that the services are of the quality specified in the contract. This type of contract should generally not be used with a contractor whose finances are marginal since a miscalculation on the cost of the required services could destroy the agency. Such a contract is appropriate where the cost of providing the services is fairly stable, easily defined and where the agency is strong enough financially to withstand some error in calculating costs. A cost reimbursement contract typically specifies the nature and amount of service which the County is purchasing and the contractor is reimbursed for the actual cost of providing those services,within an agreed-upon payment limit. Within the contract payment limit, the contractor is not generally responsible for cost overruns,providing the expenditures have all been approved by the County. The contractor is also typically reimbursed for its costs even if the total units of service are not actually provided, as long as all actual costs have been approved by the County. This type of contract is typically used with agencies who cannot afford to be at risk for cost overruns,where the actual cost of providing the services is difficult to calculate,where defining a service is difficult to agree on or where the service is to be available to the community without either the contractor or the-County necessarily being able to control the demand for the service. Net negotiated rate and net negotiated amounts contracts are similar to a fee for service contract. The County does not now use this type of contract,which requires approval by the State. However,the County is willing to explore the use of this type of contract on at least a pilot basis for the 1990-91 fiscal year. It is the policy of the Board of Supervisors that all County Departments should determine,in con junction with prospective contractors,what type of contract is most appropriate for a given service and type of contract agency. Subject to the County's standard contract forms the resulting contract should represent the least cumbersome and most anprouriate mechanism for providing the specific services which is consistent with applicable federal and state laws and regulations and the financial responsibility the Board of Supervisors has to make the most apgropriate use of the funds which are under its control. OFFICE OF THE COUNTY ADMINISTRATOR CONTRA COSTA COUNTY Administration Building 651 Pine Street, 11th Floor Martinez, California DATE: June 12, 1989 TO: Supervisor Tom Powers Supervisor Sunne W. McPeak INTERNAL OPERATION COMMITTEE FROM: Claude L. Van Martssistant County Administrator SUBJECT: MONITORING CONTRACTS WITH NONPROFIT-PROFIT AGENCIES INTRODUCTION Over the past year there have been a number of related, interlocking and sometimes overlapping referrals to this Office and your Committee dealing in one way or the other with the County's relationship with its private,nonprofit contract agencies. There have also been a number of meetings held with various groups of contractors. In an effort to consolidate in one place all of these referrals we are providing this status report to your Committee. This report identifies all of the referrals we are aware of, provides some background on each of them and indicates the current status of each referral and what additional work remains to be done to resolve each of these referrals. Your Committee is requested to indicate to staff whether the current status of each referral is acceptable and whether any additional factors need to be added to the proposed workplan in order to adequately explore and resolve each of these referrals. BACKGROUND The following referrals have been made relating to one aspect or another of this issue: .Tune 21. 1988 referral initiated by Supervisor Torlakson referencing the Report of the Grand Jury entitled "County Service Contracts with Nonprofit Corporations". This referral asked your Committee to review the issue of accountability of contract agencies,the need to establish goals and objectives and annual evaluations of contract agencies. In addition, your Committee was asked to consider the feasibility of - 1 - establishing an analyst position to work with and monitor human service contract agencies. Finally, your Committee was asked to consider establishing a process for requiring Boards of Directors of contract agencies to evaluate program directors and file a copy of that report with the County. June 21, 1988 Report of the 1987-88 Grand Jury entitled"County Service Contracts with Nonprofit Corporations". The report made five recommendations: 1. That the Board of Supervisors allocate a portion of contract funds to those departments that receive no administrative funds to cover the costs of monitoring nonprofit contracts. 2. That contract forms be modified to explicitly require that the County and the Grand Jury have access, on demand,to all of a corporation's financial records, regardless of funding source. 3. That all nonprofit corporations soliciting funds from the County be required to provide a statement or budget showing all current sources of outside funding. 4. That the Board of Supervisors study the feasibility of consolidating the financial monitoring of nonprofit contracts into one department. 5. That the Board of Supervisors remind all department heads that the County has the ultimate fiduciary responsibility for all state and federal funds that are assigned to their departments. July 12, 1988 referral initiated by Supervisor Torlakson to consider requiring all County contract agencies to adopt the Brown Act notification, open meeting require- ments and the Board's conflict of interest policy and directing the County Administra- tor to send copies of these documents to all contract agencies. July 12, 1988 referral initiated by Supervisor Torlakson which referred to your Committee the following items: 1. Pursue the establishment of accountability of contract agencies.that do business with the County, including the establishment of goals and objectives and annual evaluations of contract agencies. - 2 - 2. Require all contract agencies to file annual reports including the following information: a list of current board members and their attendance record, minutes of meetings,copies of financial audits, an indication of how many vacancies were filled and how Board members were recruited and how they represent the community the agency serves. 3. Consider the feasibility of eventually establishing an Analyst position to work exclusively with human service contract agencies to monitor their program's performance and how well they are meeting their program's goals and objectives. 4. Pursue establishing a process for requiring Boards of Directors of contract agencies to evaluate program directors on a regular basis and file a copy of that report with the County. 5. Consider a one-time contract to help our contract agencies in setting goals and examining their procedures and in preparing annual reports. November 1. 1988 referral initiated by Supervisor Torlakson asking your Committee to consider expanding the County's current policy requiring nonprofit contract agencies to follow the Brown Act and the Board's conflict of interest policy to include profit-making contract agencies. In response to these referrals, your Committee met on August 15, 1988 with the Auditor-Controller,the Mental Health Director, the Executive Director of the Private Industry Council, County Counsel and representatives from the Child Care Council, following which your Committee submitted a report to the Board of Supervisors on August 16, 1988 which made the following recommendations: 1. Request the County Administrator to convene an ad hoc group including county staff whose departments have a structured contract monitoring program, county staff.whose departments have few contracts to monitor and therefore do not have a highly structured contract monitoring program, staff from the Auditor- Controller's Office and staff from several contract agencies to review the Grand Jury Report,the current level of contract monitoring,the need to establish contract monitoring in those departments which do not do contract monitoring, the need to standardize contract monitoring county-wide, the feasibility of requiring that all contract agency's Boards of Directors reflect the community they serve and have sufficient financial expertise and the feasibility of requiring all contract agencies to undertake long-term goal-setting as a part of their corporate strategy. - 3 - 2. Request the County Administrator to report back to the Internal Operations Com- mittee on November 14, 1988. On November 14, 1988 the County Administrator's Office filed the attached report dated November 9, 1988 with your Committee. This report summarizes the outcome of a meeting held October 31, 1988 in response to the Board's August 16, 1988 order. As a result of reviewing this report at your meeting of November 14, 1988 your Committee filed the attached report with the Board of Supervisors on November 29, 1988. It is the recommendations contained in this report to which we are responding at this time. Among the recommendations approved by the Board of Supervisors on November 29 were the following: 1. Request the County Administrator to design a system to keep track centrally of all contracts the County has with nonprofit agencies and for-profit agencies which provide human services on behalf of the County. 2. Request the County Administrator and County Counsel to meet with a representative group of contract agencies in an effort to design contract language which will maximize the requirement that the Board of Directors of a contract agency operate publicly,provide adequate advance public notice of its meetings and otherwise insure that the public is aware of and has an opportunity to participate in the meetings of the Board of Directors. 3. Request the County Administrator to schedule a series of meetings between County departments and the agencies whose contracts that department is responsible to monitor to identify problems which exist between the department and its contract agencies and resolve those problems whenever possible, or bring the problem and proposed solution to the Board of Supervisors where Board action is required in order to effect a solution. 4. Request all County departments, in considering contracting for services,to utilize performance-based contracts whenever possible. 5. Request all County departments, in consultation with the Auditor-Controller and County Counsel, to review instances in which the department requires "pre- auditing" of a contract to determine whether the pre-audit requirement is still appropriate and necessary. - 4 - t 6. Request the County Administrator to report back to the 1989 Internal Operations Committee in May 1989 on actions which have been taken in response to the above recommendations and remove as referrals to the Committee the July 12 referral on this subject as well as the November 1 referral relating to the application of the "Brown Act" to for-profit agencies. ACTIONS TAKEN ON EACH OF THE ABOVE RECOMMENDATIONS 1. Centralized tracking of all contracts. John Gregory from the County Administrator's Office has done a great deal of research on this subject and has available a separate report on this subject which he is prepared to review with your Committee. 2. Meet with contract agencies to maximize open meetings of contract agencies. This meetings has not been held but will be set up early in July. The results of the meeting will be reported back to your Committee on September 11, 1989. I Schedule meeting of department staff and their contractors. Most of our time and attention has been devoted to this recommendation. Several meetings have been held with Health Services Department staff and the Alcohol, Drug and Mental Health Contractors. A number of problems have been identified. Several recommendations are being made for your Committee's consideration this morning in order to resolve these problems. Several meetings have also been held with staff of the Social Services Department and their contractors. Initially,the department indicated that it wished to put out an RFP following a needs assessment in order to insure that the contracts focused on those services which were identified as being the ones which were most needed in the community and that the department was receiving the most amount of service for the money that is available. This proposal has raised a number of concerns in the minds of the current contract agencies. As a result it is our understanding that the department has decided to withdraw this proposal and perhaps rework it before making further recommendations in this area. - 5 - A survey was sent to all Private Industry Council contractors asking a number of questions about their relations with the PIC and asking whether a meeting was necessary. The contractors unanimously agreed that a meeting was not necessary. Most contractors believe that the PIC staff are doing an excellent job of working with them. The few suggestions we received are outlined in the attached memo to the Executive Director of the PIC. We have thus far avoided setting up a meeting with the contractors for the Community Services Department because of the departure of the Director and the fact that the Acting Director has been actively involved in reorganizing the department. Once a new director has been selected and is on board we will determine the value of setting up a meeting with them. 4. Urge departments to use performance-based contracts. This was accomplished by means of the attached December 23, 1988 memo to those department heads who have contracts which fall generally in the area of human services. 5. Request departments to review "pre-audit" procedures. This item was also covered in our December 23, 1988 memo to departments. SUMMARY OF PROBLEMS IDENTIFIED IN MEETINGS WITH CONTRACTORS 1. Contractors are only able to pick up a warrant at the Auditor's Office once a year. Contractors frequently face a cash flow problem because of the time it takes to process their demands in the department, forward the approved demands to the Auditor-Controller's Office for processing, prepare the warrant and mail it to the contractor. Contractors would like to be able to pickup their warrants at the Auditor- Controller's Office. The Auditor-Controller has pointed out that this is not possible because of space problems and the difficulty of determining exactly when a warrant will be available. However, part of the delay appears to be due to the fact that all first-class mail is now delayed at least one full day to have itpre-sorted by ZIP Code. While this reduces the County's mailing costs it also delays the delivery of warrants. - 6 - The Auditor-Controller has suggested exempting the vendor payroll warrants from the pre-sorting because they have also had numerous complaints from vendors doing business with the County. The General Services Department has no objection to this exception. The Executive Director of the PIC is concerned about the additional cost to his department. We are exploring this issue to determine whether vendor warrants can be exempted by department or whether they must either all be exempted or all included in the pre-sorting. In addition, the Health Services Department, which presently advances a portion of the contract payment limit to a contractor is willing to consider increasing this advance on a case-by-case basis where doing so is justified and will resolve the contractor's cash flow problems. 2. The possibility of having contracts run for two years. Several contractors noted their objections to having contracts run for only one year when,in many cases,the contract has few if any changes from one year to the next. Running contracts for two years would save enormous paper and time and energy. County Counsel has been consulted and has no problems with contracts running for two years as long as the contract has a thirty-day cancellation clause and as long as the department makes any changes to the service plan and payment limit in'a timely manner. 3. The possibility of having contract COLA's retroactively effective to July 1. Because of delays in getting final allocation figures from the State and the need to process a large number of contracts in a short period of time it is often November or December before new novation contracts are approved by the Board of Supervisors. The Health Services Department intends to speed up this processing this year,but may actually have contracts completed before decisions are made on the level of COLA which will be granted. Once the contract is signed it is not possible to go back and increase the payment limit to make the COLA effective July 1 with the current language we have in contracts. The department and this office have met with County Counsel and have worked out a procedure by which language will be added to the contract document to the effect that it is the Board's intent to grant a COLA at a future date but to have it effective July 1. The payment limit in the contract will actually be increased when the contract is signed to anticipate the level of COLA which may be granted. Once the level of COLA has been determined it will automatically be effective back to July 1 without further action being required by the Board of Supervisors. This procedure will be used. selectively on those contracts where the department anticipates granting a COLA at some time during the year. - 7 - 4. Procedures to amend contracts needs to be simplified. The Health Services Department has outlined a process which will streamline, simplify and speed up the processing of contract amendments. The changes which have been discussed with contractors appear to resolve this concern. 5. Possibility of using net negotiated rate contracts. This proposal has been discussed with the Health Services Department's contractors in the A/DA/MH Division. The department intends to undertake such a contract with Many Hands this year and will consider extending this procedure to other contractors in the future. The department is not, however, willing to consider the use of net negotiated amount contracts. 6. Board statement that departments should use the least cumbersome and most appropriate type of contract for each agency. Contractors have asked that the Board of Supervisors adopt a policy statement instructing departments to use the least cumbersome and most appropriate type of contract for each agency rather than assuming that one type of contract is best for all agencies. Language for such a policy statement has been drafted and reviewed by County Counsel. Their comments have been incorporated into the attached policy statement. 7. Requirement that two members of an agency's Board of Directors sign all contracts. Contractors have objected that it is cumbersome to require that two members of an agency's Board of Directors sign a contract,particularly when it must be signed in a very tight timeframe. However,County Counsel has indicated that this procedure is required by State law and would require a change to State law in order to allow some other procedure. 8. Need to develop some criteria forRequests for Proposals(RFP's)for contracts. We need to discuss with contractors and departments in additional detail exactly what is being requested in this regard. Concern has been expressed that different departments use different formats for RFD's which are often inconsistent or incomplete regarding exactly what the contractor is expected to bid on. We will convene additional meetings on this subject and will have recommendations for your Committee at a later date. - 8 - RECOMMENDATIONS Based on the meetings we have held with department staff and contractors and in response to the assignments made by the Board of Supervisors on November 29, 1988, we are making the following recommendations for your Committee's consideration: 1. Authorize the County Administrator to implement the system for tracking contracts outlined in his report which was presented to our Committee on June 19, 1989 and make a further status report to our Committee on September 11, 1989 on the status of the implementation of the system. 2. Request the County Administrator and County Counsel to meet as soon as possible with a representative group of contract agencies in an effort to design contract language which will maximize the requirement that the Board of Directors of a contract agency operate publicly, provide adequate advance public notice of its meetings and otherwise insure that the public is aware of and has an opportunity to participate in the meetings of the Board of Directors and request the County Administrator to report to our Committee on the results of such meetings on September 11, 1989. I Request the County Administrator to contact all contractors who contract with the Community Services Department and determine their interest in a meeting to identify and resolve problems which may be identified by the contractors, similar to the series of meeting which have been held with contractors for the Health Services Department's A/DA/MH Division and the Social Services Department. 4. Authorize the County Administrator to waive the requirement that warrants com- prising all or any part of the "vendor payroll" be exempted from the requirement that all first class mail be pre-sorted by ZIP Code prior to mailing in order to speed the delivery of warrants to contractors. 5. Authorize contract provisions which permit the Health Services Director, with the approval of the Auditor-Controller,to advance up to 25%of a contractor's payment limit when in their judgment such an advance is necessary to prevent a severe cash flow problem and when such an advance is, in their judgment, clearly fiscally prudent. - 9 - 6. Authorize all department heads having contracts with nonprofit agencies for the delivery of human services to make such contracts effective for a two-year period, plus a novation period of not to exceed six months, when they believe such a time period will be more efficient than a one-year contract period and on the condition that such a two-year contract must contain a 30-day cancellation clause on the part of either party. 7. Authorize the Health Services Director to include in contracts between his depart- ment and nonprofit agencies he designates language which will authorize the payment of a cost-of-living increase retroactive to July 1, 1989. 8. Approve the attached statement of policy regarding the need for all departments use the least cumbersome and most appropriate type of contract for each agency. 9. Request the County Administrator to meet with a rgpresentative group of nonprofit contractors in an effortto develop language for the release of Requests for Proposals (RFD's) which will be as standardized and as complete as possible and report his conclusions and recommendations to our Committee on September 11, 1989. .CLVM:eh contract