Paying landowners to conserve forests is a promising new strategy to protect biodiversity and ecosystem services. However to succeed with this approach, programme managers need reliable monitoring data to make informed payment decisions. This includes withholding payment from landowners who do not meet conservation objectives. The monitoring method used for the Monarch Butterfly Conservation Fund compared aerial photographs and conducted field sampling to identify forest changes. The comparison of aerial photographs showed that 161 hectares of forest were degraded in the central core zone of the Monarch Butterfly Biosphere Reserve in Mexico between 2001 and 2003. As a result, payment was withheld from one of 13 landowners. Analysis of high resolution (0.6 m) digital aerial photographs did not detect finer scale changes, despite obtaining an average pixel resolution 1000 times greater than Landsat satellite imagery. This suggests that current payment for ecosystem services programmes are underestimating environmental change and overpaying non-compliant participants. In addition, selecting a decision rule to enforce payment conditionality raised new questions about how much ecosystem degradation should be permitted before withholding payment. Sound decisions about withholding payment cannot be developed until the marginal value of ecosystem services is better understood. Until then, payment thresholds can be based on specific policy objectives.