Report 2017-117 Recommendation 3 Responses

Report 2017-117: Mental Health Services Act: The State Could Better Ensure the Effective Use of Mental Health Services Act Funding (Release Date: February 2018)

Recommendation #3 To: Health Care Services, Department of

To effectively monitor MHSA spending and provide guidance to the local mental health agencies, Health Care Services should publish its proposed regulations in the California Regulatory Notice Register by June 2018 and subsequently establish and enforce an MHSA reserve level that will allow local mental health agencies to maintain sufficient funds to continue providing crucial mental health services in times of economic hardship, but that will not result in them holding reserves that are excessive. Health Care Services should also establish controls over local mental health agencies' deposits and withdrawals to their reserves.

1-Year Agency Response

The Legislature addressed this finding through Senate Bill

192. WIC Section 5892(b)(2) requires counties to calculate an amount it establishes as the prudent reserve for its Local Mental Health Services Fund, not to exceed 33 percent of the average community services and support revenue received for the fund in the preceding five years. DHCS will implement this provision through a MHSUDS IN. DHCS also incorporated this provision in its regulations and expects to submit the public notice that announces these proposed regulations and initiates the 45-day public comment period to OAL for publication in the California Regulatory Notice Register by Spring 2019.

  • Estimated Completion Date: Spring 2019
  • Response Date: February 2019

California State Auditor's Assessment of 1-Year Status: Pending


6-Month Agency Response

DHCS issued MHSUDS Information Notice No: 18-033 on August 1, 2018. The Information Notice implemented W&I Code, Sections 5892 (h) and 5899.1(a) through bulletin authority provided DHCS in W&I Code, Section 5899.1(b). This Information Notice informs counties of the maximum prudent reserve level. DHCS is currently drafting regulations that will specify the conditions a county must meet before it may deposit or withdraw funds from the local prudent reserve.

  • Estimated Completion Date: January 31, 2019
  • Response Date: September 2018

California State Auditor's Assessment of 6-Month Status: Pending


60-Day Agency Response

In light of the recent oversight hearing on this audit and the concerns from members of the Legislature regarding the level of reserves maintained by the counties, the Department has reconsidered its recommendation on the amount of reserve and will be adopting the CSA's prudent reserve recommendation in its pending draft fiscal regulations, which is to set the reserve level at 33 percent. The draft regulations will include this specification as a maximum level of funding a county would be permitted to maintain. By January 2019, DHCS expects to submit the public notice that announces these proposed regulations and initiates the 45-day public comment period to the Office of Administrative Law for publication in the California Regulatory Notice Register.

  • Estimated Completion Date: January 2019
  • Response Date: May 2018

California State Auditor's Assessment of 60-Day Status: Pending

We are pleased that Health Care Services will reconsider its previous position regarding the appropriate MHSA reserve level, and we look forward to reviewing its analysis to establish a more prudent reserve level. However, Health Care Services has not addressed our recommendation to establish controls over local mental health agencies' deposits and withdrawals to their reserves, and we look forward to reviewing its proposed controls when it submits the six-month response to our audit.

As noted in our audit, Health Care Services has not provided an explanation for the delay in submitting its proposed regulations to the Office of Administrative Law to begin the process of establishing regulations. In response to our audit, Health Care Services had once again delayed the submission of its proposed regulations to January 2019, when as recently as January 2018 Health Care Services had stated to us that it intended to submit its regulations for review by June 2018. As we state on page 13 of our audit, Health Care Services cannot claim either lack of funding or time as a cause for the delay: Health Care Services has spent from $7.9 million to $8.6 million annually over the past four fiscal years to administer the MHSA and it has had statutory authority to develop necessary regulations since 2012. However, it only began drafting these regulations in 2016. Given the funding it has received and the amount of time that has elapsed since it became responsible for developing these regulations, we believe Health Care Services should already have taken appropriate action. Moreover, we are concerned that Health Care Services has delayed finishing these regulations and while we are currently evaluating Health Care Services' response as pending, we look forward to seeing evidence of its progress when it submits the six-month response to our audit.


All Recommendations in 2017-117

Agency responses received are posted verbatim.