Report 2017-117 Recommendation 5 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 #5 To: Health Care Services, Department of

To ensure that it provides effective oversight of local mental health agencies' reporting of MHSA funds, Health Care Services should publish its proposed regulations in the California Regulatory Notice Register by June 2018. Health Care Services should then subsequently implement a process that will enable it to withhold MHSA funds from local mental health agencies that fail to submit their annual reports on time.

Annual Follow-Up Agency Response From November 2020

The MHSA fiscal regulations were approved by OAL in May 2020 and became effective on July 1, 2020. MHSA regulations regarding the withhold process may be found at CCR section 3510.005: Withhold for Failure to Timely Submit a Complete and Accurate Annual MHSA Revenue and Expenditure Report, found here: https://govt.westlaw.com/calregs/Document/IA6633456B7C64EA1B50A0214293C5D6A?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default).

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2019

DHCS continues to withhold funds from counties that do not submit their ARER by the December 31, due date. The monthly payment report on the State Controller's Office website reflects the 25 percent withhold amount and the return of 25 percent withhold amount, by county. DHCS submitted proposed fiscal regulations to OAL on March 8, 2019. The Notice of Proposed Rulemaking was posted on March 22, 2019. DHCS held the public hearing on May 7, 2019, and closed the 45-day comment period on May 17, 2019. DHCS has one year from the date when the Notice of Proposed Rulemaking was posted to promulgate the fiscal regulations.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From July 2019

DHCS continues to withhold funds from counties that do not submit their ARER by the December 31 due date. The monthly payment report on the State Controller's Office website reflects the 25 percent withhold amount and the return of 25 percent withhold amount, by county. DHCS submitted proposed fiscal regulations to OAL on March 8, 2019. The Notice of Proposed Rulemaking was posted on March 22, 2019. DHCS held the public hearing on May 7, 2019 and closed the 45-day comment period on May 17, 2019. DHCS has one-year from the date when the Notice of Proposed Rulemaking was posted to promulgate the fiscal regulations.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

DHCS has addressed this finding. DHCS implemented a process to withhold 25 percent of MHSA funds from each county that does not submit their ARER by the December 31 due date through MHSUDS IN No. 18-033. DHCS began withholding funds from counties that had not submitted all ARERs through FY 2016-17 in September of 2018. As of January 2019, only one county, had not submitted its FY 2016-17 ARER and 11 counties had not submitted their FY 2017-18 ARER. DHCS included the withhold process in the draft fiscal regulations. DHCS 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.

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

6-Month Agency Response

DHCS continues to draft MHSA fiscal regulations. By January 2019, DHCS 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.

DHCS also 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 that DHCS will begin withholding 25 percent of a county's monthly distribution from the Mental Health Services Fund if the county has not submitted a complete and accurate ARERs by the due date. On July 20, 2018, DHCS informed those counties that had not submitted complete and accurate ARERs through FY 2016-17 that DHCS would instruct SCO to withhold 25 percent of the county's September 2018 distribution if DHCS did not receive all late ARERs within 30 days. On August 27, 2018, DHCS sent a memo to SCO instructing it to withhold 25 percent of the September 2018 monthly distribution for four counties.

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

60-Day Agency Response

DHCS continues to update the draft fiscal regulations. The Initial Statement of Reasons is also being updated. 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.

DHCS continues to work with the Department of Finance (DOF) and the State Controller's Office (SCO) to develop the process and mechanics for withholding funds from counties late in submitting ARERs. DHCS expects to begin withholding funds in July/August 2018.

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

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.