Responses to the Audit
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- California Department of Health Care Services
- Mental Health Services Oversight and Accountability Commission
- Alameda County
California Department of Health Care Services
Ms. Elaine M. Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle,
The California Department of Health Care Services (DHCS) hereby responds to the draft findings of the California State Auditor’s (CSA) report entitled, Mental Health Services Act: The State Could Better Ensure the Effective Use of Mental Health Services Act Funding. The CSA conducted this audit and issued seven findings and seven recommendations.
DHCS disagrees with the CSA recommendation 6. DHCS agrees on all other recommendations and has prepared corrective action plans to implement them. Additionally, DHCS has feedback on other components of the draft audit report. DHCS requests CSA publish DHCS’ comments in addition to the responses to the audit findings in the final published report. DHCS appreciates the work performed by the CSA and the opportunity to respond to the findings. If you have any questions, please contact Ms. Sarah Hollister, External Audit Manager, at (916) 650-0272.
Sincerely,
Jennifer Kent
Director
Enclosure
| cc: | Brenda Grealish Dina Kokkos-Gonzales Sarah Hollister |
Department of Health Care Services’ (DHCS) Response to the California State Audit report entitled Mental Health Services Act: The State Could Better Ensure the Effective Use of Mental Health Services Act Funding
2017-117
| DHCS has not developed a process to recover unspent funds from Local Mental Health Agencies. | |
| Finding #1: | DHCS has not developed a process to recover unspent funds from Local Mental Health Agencies (LMHA). As a result, LMHA’s have had less incentive to spend Mental Health Services Act (MHSA) funds on mental health programs in a timely manner and amassed unspent funds of $231 million as of the end of fiscal year 2015-16 that DHCS might have been able to reallocate to other LMHA’s. |
| Recommendation 1: | DHCS should develop a MHSA fiscal reversion process to ensure that they can reallocate MHSA funds that LMHA’s do not spend within the statutory reversion time frames to other LMHA’s that are better positioned to use the funds to meet MHSA’s intent. |
| Response: | DHCS agrees with the recommendation. DHCS agrees that a MHSA fiscal reversion process is necessary to reallocate MHSA funds that are not spent within the statutory time frame. DHCS is currently working with the State Controller's Office and the Department of Finance to develop the mechanism necessary to collect and redistribute funds subject to reversion. DHCS expects to have the mechanics developed by July 2018. In addition, in Fiscal Year 2015-16, DHCS began collaborating with the Mental Health Services Oversight and Accountability Commission and the County Behavioral Health Directors Association of California to develop draft fiscal regulations, which also address reversion, among other relevant topics such as prudent reserve and accounting practices. By January 2019, DHCS intends 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. Furthermore, in accordance with Assembly Bill (AB) 114 (Chapter 38, Statutes of 2017), DHCS developed a fiscal reversion process for funds subject to reversion as of July 1, 2017. This includes all funds subject to reversion from Fiscal Year 2005-06 through Fiscal Year 2014-15. DHCS communicated the process to counties on December 28, 2017, in MHSUDS Information Notice No. 17-059. DHCS also developed an interim appeal process available to a county regarding the determination of unspent funds. The process for determining unspent funds and the appeal process are included in the draft fiscal regulations. |
| Finding #2: | In the absence of DHCS’ guidance, LMHA’s have not consistently spent the interest they have earned on MHSA funds. As a result, they had accumulated an additional $81 million in unspent MHSA interest as of the end of fiscal year 2015-16. |
| Recommendation 2: | DHCS should clarify that the interest the LMHA’s earn on unspent MHSA funds is subject to the same reversion requirements as the MHSA funds they receive. |
| Response: | DHCS agrees with the recommendation. DHCS agrees that clarification should be provided to specify that interest earned on unspent MHSA funds is subject to the same reversion requirements as the MHSA funds they receive. The draft fiscal regulations that were developed in collaboration with the Mental Health Services Oversight and Accountability Commission and the County Behavioral Health Directors Association of California will provide the necessary clarification. By January 2019, DHCS intends to submit the public notice that announces these proposed fiscal regulations and initiate the 45-day public comment period to the Office of Administrative Law for publication in the California Regulatory Notice Register. To meet the requirements of Assembly Bill (AB) 114 (Chapter 38, Statutes of 2017), DHCS recently applied the principles regarding interest that are in the draft fiscal regulations to calculate the amount of unspent funds subject to reversion. To perform these calculations, DHCS used the interest earned that was reported by counties on their Annual MHSA Revenue and Expenditure Report. This process was detailed in MHSUDS Information Notice No. 17-059, which communicated that counties must spend funds allocated to Community Services and Supports, Prevention and Early Intervention, and Innovation components, plus interest earned on the MHSA funds, within three fiscal years, including the fiscal year when the funding was made available. In addition, it stated that counties must spend funds allocated to Capital Facilities and Technological needs and Workforce Education and Training components, plus interest earned, within ten fiscal years, including the fiscal year when the funding was made available. |
| Finding #3: | DHCS has neither established a formal process to maintain oversight of local MHSA reserves—which totaled $535 million as of the end of fiscal year 2015-16—nor required the LMHA’s to adhere to a standard reserve level. The California State Auditor estimates that LMHA’s held between $157 million and $274 million in excessive reserves as of the end of fiscal year 2015-16. |
| Recommendation 3: | DHCS should establish and enforce a MHSA reserve level that will allow LMHA’s to maintain sufficient funds to continue providing crucial mental health services in time of economic hardship but will not result in them holding reserves that are excessive. DHCS should also establish controls over LMHA’s deposits and withdrawals to their reserves. |
| Response: | DHCS agrees with the recommendation. The fiscal regulations that DHCS has drafted in collaboration with the Mental Health Services Oversight and Accountability Commission and the County Behavioral Health Directors Association of California address prudent reserve, including the minimum levels of funding a county would be required to maintain, as well as a maximum level of funding a county would be permitted to maintain. The draft regulations clarify the requirements that must be met in order for a county to access their prudent reserve, and also specifies the process for counties to fund their prudent reserve using Community Services and Supports funding. By January 2019, DHCS intends to submit the public notice that announces these proposed regulations and initiates the 45-day public comment period to Office of Administrative Law for publication in the California Regulatory Notice Register. While DHCS agrees with this recommendation, we do not agree with the calculation methodology that the California State Auditor used to develop the finding. During the development of the draft fiscal regulations, DHCS contracted with a fiscal consultant to produce an estimate of the maximum prudent reserve level. This estimate factored in declines in revenue, proposed expenditures, and inflation, and recommended between 64% and 82% for prudent reserve maximum level. The California State Auditor measured declines in funding over a ten-year period, but did not take into consideration expenditures or inflation. |
| Finding #4: | Until the CSA’s inquiry, DHCS had not analyzed whether an additional $225 million in unspent MHSA funds that existed since at least 2012 are potentially available to LMHA’s to expand mental health services. |
| Recommendation 4: | Health Care Services should complete its analysis of the $225 million fund balance in the MHS Fund by May 1, 2018, to determine why this balance existed and, if there is any impact on funding to the local mental health agencies, distribute those funds accordingly. Further, it should establish a process to regularly scrutinize the MHS Fund to determine the reasons for any excess fund balances. |
| Response: | DHCS partially agrees with the recommendation. The $225 million identified by the CSA is the beginning and ending 2004 appropriation balance. By definition, an appropriation is "an authorization from a specific fund to a specific agency to make expenditures/incur obligations for a specified purpose and period of time" (also known as expenditure authority). During the Fiscal Year 2012-2013 transition of the former Department of Mental Health to the Department of Health Care Services, the State Controller's Office transferred the 2004 appropriation to DHCS, and also established a separate 2012 appropriation. On February 2, 2018, the State Controller's Office eliminated the 2004 appropriation balance of $225 million. DHCS does not believe that any funds in this appropriation remain. DHCS will work with SCO and DOF to confirm this information and DHCS will revise its monthly reconciliation process to review all available appropriation and cross-check against available cash. |
| DHCS has provided only minimal oversight of the MHSA funds that local LMHA’s receive. | |
| Finding #5: | DHCS has made minimal efforts to ensure that LMHA’s submit their annual reports on time. As a result, some LMHA’s have not submitted timely annual reports for years, hampering DHCS’ ability to calculate MHSA reversion amounts and to properly oversee MHSA spending. |
| Recommendation 5: | To ensure DHCS provides effective oversight of LMHA’s reporting and spending of MHSA funds, DHCS should publish its proposed regulations in the California Regulatory Notice Register by June 2018. DHCS should then subsequently implement a process that will enable it to withhold MHSA funds from LMHA’s that fail to submit their annual reports on time. |
| Response: | DHCS partially agrees with the recommendation. DHCS agrees that the MHSA fiscal regulations need to be published in the California Regulatory Notice Register; therefore, the regulations package is currently under active development. DHCS has several complex regulation packages currently under internal legal review and development. Due to the other regulatory workload, the Department estimates the regulations will be submitted to the Office of Administrative Law no later than January 2019, thereby initiating the 45-day comment period. To address the issue of untimely submission of the Annual MHSA Revenue and Expenditure Reports, DHCS is developing a process for withholding funds, which is expected to include an appeal process, from counties that fail to submit the Annual MHSA Revenue and Expenditure Report by the required submission date. DHCS will work with the State Controller's Office and the Department of Finance regarding the mechanism necessary to withhold funds from counties. DHCS expects to have the mechanics for withholding funds in place by July 2018. |
| Finding #6: | DHCS has been slow to implement oversight of LMHA’s MHSA spending and programs. Although DHCS developed a MHSA fiscal audit process in 2014, it has limited the audits’ usefulness because it focused its reviews on data and processes at least seven years old. |
| Recommendation 6: | To ensure that LMHA’s appropriately report and spend MHSA funds, DHCS should publish its proposed regulations in the California Regulatory Notice Register by September 2018. DHCS should then develop and implement a MHSA fiscal audit process, independent of the Medi-Cal reviews, to review revenues and expenditures for the most recent fiscal year. |
| Response: | DHCS disagrees with the recommendation. DHCS does not agree that an MHSA fiscal audit process should be developed and implemented independent of the Short Doyle Medi-Cal cost report audits (referred to above as the Medi-Cal reviews), nor do we agree that revenues and expenditures should be reviewed for the most recent fiscal year. Conducting fiscal audits of MHSA funding separate from the cost report audits is problematic because the federal financial participation (FFP) has not yet been finalized. As such, it is impossible to determine final MHSA expenditures if the FFP has not been finalized by an audit. Any action taken as a result of an MHSA audit completed prior to the Short Doyle Medi-Cal cost report audit, which will extend beyond the most recent fiscal year, would be preliminary and subject to change. That said, DHCS does agree that fiscal audits of county MHSA funds are necessary. Accordingy, DHCS intends to draft an audit and appeal regulations package for the provision of fiscal audits and program oversight. 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 by Spring 2019. |
| Finding #7: | DHCS has not developed regulations to establish an appeals process for LMHA’s to challenge findings. In addition, DHCS has not implemented a program review process to evaluate the effectiveness of the MHSA projects that LMHA’s operate. |
| Recommendation 7: | To ensure that LMHA’s comply with their performance contracts and MHSA requirements, DHCS should establish a process for conducting comprehensive program reviews and begin conducting those reviews by July 2018. |
| Response: | DHCS agrees with the recommendation. DHCS has drafted a protocol and process for conducting program reviews of county performance contracts and MHSA requirements. DHCS has hired four staff to conduct onsite program reviews, who were deployed in January 2018. It is expected that these staff will pilot the review protocol and process in four to six more counties before fully operationalizing the program reviews. DHCS expects to fully implement this recommendation in September 2018. |
DHCS Response to CSA Audit Report Text
Report 2017-117
| PAGE | TEXT | COMMENT | PROPOSED AMENDED LANGUAGE | |
| 3, 14 | Finally, until our inquiry, Health Care Services has not analyzed whether an additional $225 million in unspent MHSA funds, which have existed since at least 2012, are potentially available to local mental health agencies to expand mental health services. | The CSA identified a $225 million appropriation balance that the State Controller’s Office (SCO) transferred from the former Department of Mental Health (DMH) to DHCS in 2012. This statement is internally inconsistent. It first references $225 million in unspent funds. This indicates that the CSA identified $225 million in the MHSF that is unspent. That is not a true statement. An appropriation of funds is not the same as having the cash available to spend. An appropriation provides the Department with the authority to spend funds. This sentence then goes on to say that those funds are potentially available to local mental health agencies. This part of the sentence seems to back off of the idea that the funds are available to spend by saying that the funds are potentially available to local mental health agencies to expand local mental health services. | Finally, until our inquiry, Health Care Services had not analyzed whether a $225 million appropriation balance from the Mental Health Services Fund is available to distribute to local mental health agencies to expand mental health services. | |
| 4 and 27 | In addition, Health Care Services has not implemented a program review process to evaluate the effectiveness of the MHSA projects that local mental health agencies operate. | DHCS is not responsible for evaluating the effectiveness of MHSA programs. Effectiveness refers to whether or not a particular intervention produces the desired results. DHCS would need to engage a researcher to design a study to evaluate whether or not a particular intervention produced the desired result. In 2016, DHCS became responsible to ensure that local mental health agencies comply with the MHSA program requirements contained in statute, regulation, and the performance contract. | In addition, Health Care Services has not implemented a program review process to ensure MHSA projects that local agencies operate comply with program requirements contained in statute and regulation. | |
| 8 | Health Care Services explained that to incentivize local mental health agencies to make full use of their MHSA funding allocations, state law requires that any funds left unspent within statutory time frames must be returned – or reverted – to the State for reallocation to the local mental health agencies. | DHCS did not write the Proposition and is not in a position to say that the reversion clause in state law was intended to incentivize local mental health agencies to make full use of their MHSA funding allocations. Implementation of the reversion process alone may not solve the problem of counties having large amounts of unspent PEI and INN component funds. Unless action is taken to better understand and address the issues associated with the lack of county spending for the PEI and INN components, a large portion of these funds will continue to indefinitely cycle through the reversion process because reverted funds are mandated to be reallocated to the component from which they originated, as per Assembly Bill 114 (Chapter 38, Statutes of 2017). |
Health Care Services explained that it believes the requirement in state law that any funds left unspent within statutory time frames must be returned – or reverted – to the State for reallocation to the local mental health agencies provides local mental health agencies with an incentive to make full use of their MHSA funding allocations. | |
| 10 | For example, state law requires Health Care Services to calculate the MHSA fund allocations for each local mental health agency using a formula based on several factors… | This sentence implies that the law prescribes the factors DHCS uses to calculate the fund allocations, which is not accurate. The statute only requires DHCS to provide the SCO an allocation schedule. It does not prescribe factors to include in developing that allocation schedule. | For example, state law requires Health Care Services to provide the SCO an allocation schedule that the State Controller uses to calculate fund allocations. | |
| 11-12 | Since fiscal year 2012-13, Health Care Services has annually spent between $7.9 million and $8.6 million to implement its oversight responsibility. Specifically, in fiscal year 2015-16, Health Care Services spent $7.9 million for staff salaries, contracts, and operating expenses. | This statement is misleading. During FY 2015-16, DHCS expended $8.4 million in MHSA administrative funds. Of these funds, $4.1 million was used to support training and technical assistance provided by a contractor; $800,000 was used to collect mental health questions included as part of the California Health Information Survey. The balance of funding was used to support staffing and operating expenses for the Department and the California Mental Health Planning Council. | Since fiscal year 2012-13, Health Care Services has annually spent between $7.9 million and $8.6 million to administer the MHSA. Specifically, in fiscal year 2015-16, Health Care Services spent $8.4 million in administrative funds. $4.1 million was used to administer training and technical assistance to county mental health departments and community mental health providers; $800,000 was used to support the collection of mental health data as part of the California Health Information Survey. Remaining funds were used to support staffing and operating expenses for the Department and the California Mental Health Planning Council. | |
| 16 | Absent an incentive to spend their MHSA funds in a timely manner, local mental health agencies had accumulated $2.5 billion in unspent MHSA funds as of fiscal year 2015-16. | This statement is misleading. It follows a discussion of reversion being the incentive to spend MHSA funds timely. This statement implies that the lack of a reversion process has produced $2.5 billion of unspent funds. The report goes on to state that local mental health agencies should have returned $231 million to the state because they did not spend it within required time frames. Reversion only impacts the $231 million and has no impact on the other portion of the $2.5 billion. | DHCS recommends deleting this sentence. | |
| 17 | According to Health Care Services, examples of competing priorities included administering MHSA revenue and expenditure reports, developing performance contracts with local mental health agencies, implementing a state-level suicide prevention program, and responding to external reviews. | DHCS did not implement a state-level suicide prevention program. DHCS staff responded to requests for information and participated in work groups that focused on suicide prevention, student mental health, and veteran’s mental health. DHCS was also responsible for developing the Suicide Hotline Report in 2016. | According to Health Care Services, examples of competing priorities included administering MHSA revenue and expenditure reports, developing performance contracts with local mental health agencies, serving as a subject matter expert for suicide prevention workgroups or activities, developing the Suicide Hotline Report, and responding to external reviews. | |
| 20 | Health Care Services’ delay in developing regulations regarding the interest on MHSA funds has allowed local mental health agencies to amass a growing balance of interest earnings that Health Care Services should have directed them to use to fund MHSA programs. | DHCS recommends that the CSA report clarify that interest earned on MHSA funds is included in the $231 million subject to reversion. This section implies that in addition to the $231 million subject to reversion, counties are amassing revenue earned from interest on MHSA funds. | ||
| 20 | Further, because their MHSA reserves are not subject to reversion requirements, local mental health agencies can currently direct any unspent MHSA funds at the end of a fiscal year into their reserves to shelter the funds from reversion. | This statement is not accurate. Statute clearly states that local mental health agencies may only transfer CSS funds into the prudent reserve. Therefore, local mental health agencies may not transfer PEI, INN, Workforce Education and Training component, or Capital Facilities and Technological Needs component funds into the prudent reserve to shelter them from reversion. | Further, because their MHSA reserves are not subject to reversion requirements, local mental health agencies can currently direct any unspent MHSA funds allocated to the Community Supports component into their reserves to shelter the funds from reversion. | |
| 23 | Health Care Services has not exercised appropriate oversight of the MHS fund balance under its authority, which totals $225 million, to determine the reason for this fund balance and whether any of this amount is due to local mental health agencies. | DHCS believes this statement is about the $225 million appropriation balance rather than the MHS fund balance. This statement is not accurate as written. | Health Care Services had not exercised appropriate oversight of the MHS appropriation balance under its authority. | |
| 23-25 | Health Care Services was Unaware of additional MHSA Funds of $225 million that are Potentially Available to Local Mental Health Agencies | This section of the report is misleading and should be rewritten. The heading should say that Health Care Services was unaware of a $225 million reserve for unencumbered balances of continuing appropriations. The report should explain what this accounting term means to the lay audience. The report should be careful to not mislead the reader to believe that the MHS Fund balance contains $225 million that can be distributed to local mental health agencies. | ||
| 30-31 | Health Care Services has been slow to begin conducting local MHSA fiscal audits and program reviews despite having had the authority and the funding to fulfill these responsibilities. | DHCS does not believe it had the funding to begin conducting program reviews until Fiscal Year 2016-17 with the No Place Like Home legislation. | ||
| 32-33 | Although the law took effect in 2016, Health Care Services has yet to establish a schedule of program reviews and does not anticipate beginning the program reviews until July 2018 at the earliest. However, Health Care Services indicated that it needs to first develop the review process and hire and train staff. | This statement about hiring and training staff isn’t accurate. DHCS has hired staff. DHCS is finalizing the review protocol. |
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES
To provide clarity and perspective, we are commenting on the response to our audit from Health Care Services. The numbers below correspond to the numbers we have placed in the margin of Health Care Services’ response.
We are disappointed that Health Care Services now states that it intends to submit its proposed regulations to the Office of Administrative Law to begin the process of establishing regulations by January 2019. As recently as January 2018 Health Care Services stated to us that it intended to submit its regulations for review by June 2018. Moreover, as we state here 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 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 to implement a reversion process.
Although Health Care Services agrees with our recommendation, its response confuses the issue by making reference to its December 2017 Information Notice No. 17‑059. Health Care Services acknowledges in its response that it only developed the fiscal reversion process in response to the 2017 change in state law and that it is an interim process that does not apply to MHSA funds subject to reversion after July 1, 2017.
We stand by our conclusion that Health Care Services’ consultant’s range of between 64 percent and 82 percent for prudent reserve maximum level is excessive when compared to the MHSA revenue trends. State law requires local mental health agencies to maintain a prudent reserve to ensure services are not reduced in years when revenues decline below the average of previous years. As we state here, over the past 10 fiscal years we identified 33 percent as the worst decline in this revenue to the local mental health agencies in any one fiscal year, while the average decline—for fiscal years in which declines occurred—was 23 percent. Even adjusting the MHSA decline in revenue for inflation during this time period resulted in nominal changes and far below the consultant’s proposed minimum of 64 percent. Specifically, adjusting for inflation over the past 10 years, we identified 33 percent as the worst decline in funding and 22 percent as the average decline. Our calculation did not include MHSA expenditures because, as indicated above, state law contemplated declines only in MHSA revenues when establishing a prudent reserve.
Health Care Services’ response does not clarify the key issues related to the $225 million MHS Fund balance that has existed since at least 2012. As we state here, there is uncertainty as to whether the fund balance represents cash that it could distribute to local mental health agencies or a long‑standing accounting error that Health Care Services failed to identify and correct. Therefore, we stand by our recommendation that Health Care Services needs to complete its analysis of the fund balance by May 1, 2018, to determine why this balance existed and if there is any impact on funding to the local mental health agencies. Further, it should establish a process to regularly scrutinize the MHS Fund balance to determine the reasons for any excess fund balance.
We stand by our recommendation that Health Care Services should develop and implement a meaningful MHSA fiscal audit process, independent of the Medi‑Cal reviews, to review revenues and expenditures for the most recent fiscal year. Health Care Services made a decision regarding the focus of its fiscal audits that has significantly limited their value and relevance for assessing fiscal controls over the current operations of local mental health agencies. Specifically, as we state here, Health Care Services decided to conduct its MHSA fiscal audits in conjunction with its Medi‑Cal reviews. However, the backlog of overdue Medi‑Cal cost reports has resulted in Health Care Services focusing on significantly outdated data and processes. For example, its Medi‑Cal review of San Diego County (San Diego) focused on fiscal year 2008–09 MHSA funding. Thus, the audit’s findings and recommendations would be of limited value given the age of the information under review. Moreover, as we state here, Health Care Services acknowledged to us that performing fiscal audits on more recent fiscal years may be needed to ensure more relevant reviews and findings of controls over MHSA funds.
We are concerned that Health Care Services now intends to wait until Spring 2019 to submit its proposed regulations for fiscal audits. As recently as February 2018 Health Care Services stated to us that it intended to submit its regulations for review by September 2018. Moreover, as we state here, 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 statutory authority to develop necessary regulations for all of these years. 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 to implement a fiscal audit process.
During the publication process for the audit report, page numbers shifted. Therefore, the page numbers cited by Health Care Services in its response may not correspond to the page numbers in the final published audit report.
Health Care Services’ inclusion of suggested wording changes in its response to the audit is both surprising and disappointing. As we do in all audits, we provided Health Care Services a five‑day period to review and comment on a draft copy of the report, and we asked that if it had any concerns with the text to contact us. However, despite multiple contacts with Health Care Services during this period, including a phone conference to discuss the issue of the fund balance in the MHS Fund, Health Care Services failed to share with us its concerns on the draft report text. However, we carefully considered Health Care Services’ comments and suggested text changes, and made changes that we believed were appropriate based on the evidence we obtained during the audit. Further, for several changes that Health Care Services suggested that were related to the issue on the fund balance in the MHS Fund, we had already informed it during the phone conference that we would be making the changes based on information that we received from Health Care Services and the State Controller during the five‑day review period.
We had previously informed Health Care Services that we were changing the text related to the issue of the fund balance in the MHS Fund during the five-day review period.
We agree with Health Care Services’ proposal, and we changed the text as appropriate.
Although our sentence as originally written was based on testimonial evidence that Health Care Services provided during the audit, we revised the text as Health Care Services proposed because in its response it provided us with a different perspective.
We clarified our text to more precisely mirror state law. However, the text that Health Care Services proposes is incorrect as state law specifically states that Health Care Services must provide an allocation methodology to the State Controller, not an allocation schedule.
We do not believe that the additional detail Health Care Services proposes is necessary. Further, Health Care Services’ assertion that its expenditures were $8.4 million incorrectly includes $477,000 for the operations of the Mental Health Planning Council, which is a separate entity. Therefore, we stand by our statement that Health Care Services spent $7.9 million for its staff, salaries, contracts, and operating expenses in fiscal year 2015–16.
We disagree with Health Care Services’ proposed deletion of the sentence, and we do not believe our statement is misleading. Local mental health agencies would not have accumulated $2.5 billion in unspent MHSA funds if Health Care Services had ensured they returned the $231 million they failed to spend in the appropriate time frame and if it had established a reasonable reserve level for local mental health agencies to follow.
Although Health Care Services included some MHSA interest in its calculation of the $231 million that was subject to reversion as of fiscal year 2015–16, its response does not address our concern that it has not established guidance for the local mental agencies on the proper treatment of MHSA interest. As a result, local mental health agencies reported having accumulated $81 million in interest earned on MHSA funds through fiscal year 2015–16.
We edited the text to change “any” to “Community Support.”
We disagree with Health Care Services’ proposed change and its assertion that the issue is about “appropriation balance” rather than “fund balance.” According to the State Controller’s accounting records, the $225 million is included in fund balance of the MHS Fund. Because the $225 million remained in fund balance since Health Care Services assumed significant responsibility for the MHSA in 2012, the nature of this amount is unknown until Health Care Services performs the appropriate research to determine whether the amount represents funds available to local mental health agencies or a long‑standing accounting error.
Health Care Services did not identify the lack of funding as a reason for its delay in implementing a comprehensive MHSA program review process until submitting its response to this audit. In fact, as we indicate here, although a 2016 change in state law required Health Care Services to conduct these program reviews, it has not established a schedule of program reviews and does not anticipate beginning the program reviews until July 2018 at the earliest. Moreover, Health Care Services indicated to us during the audit that it first needs to develop the review process before it can perform the program reviews.
Although our sentence as originally written was based on testimonial evidence that Health Care Services provided during the audit, we revised the text as Health Care Services has proposed because in its response it provided us with a different perspective. Nevertheless, as indicated in our prior comment, although Health Care Services may have hired staff to conduct MHSA program reviews, it has not established a schedule of program reviews and it has not developed a review process.
Mental Health Services Oversight and Accountability Commission
February 9, 2018
Elaine M. Howle, CPA, State Auditor
California State Auditor
621 Capital Mall, Suite 1200
Sacramento, CA 95814
Re: Response to State Audit Report 2017-117
Dear Ms. Howle,
The Mental Health Services Oversight and Accountability Commission respectfully submits the following response to the draft of the State Audit Report 2017-117. Please convey our appreciation to your audit team for its hard work and professionalism in preparing this report.
Overall Response
The Commission appreciates the fundamental finding that the Commission is implementing processes to evaluate the effectiveness of the Mental Health Services Act (MHSA) and acknowledges that more can be, and is being done, to improve our efforts.
Response to Specific CSA Recommendations
The first recommendation concerns the Commission’s continuing efforts to support local mental health agencies to develop, implement, evaluate, and disseminate learnings from robust Innovation projects. The Commission agrees that it is important for local agencies and the Commission to have a shared understanding of the goals of the Innovation component. We are committed to an ongoing process of engagement with county agencies and with stakeholders to improve awareness of Innovative project proposals, approvals, and evaluation results.
The second recommendation concerns the Commission’s ongoing efforts to work with county agencies to assess and improve investments in Prevention and Early Intervention (PEI) programming. The Commission agrees with the recommendation that the Commission continue to develop and strengthen its processes for reviewing and analyzing the impact of PEI services. Consistent with that recommendation, Commission staff are providing support to a statewide learning community among county agencies. The first meeting of this learning community, scheduled for March 1, 2018, will focus on policies, procedures, and strategies for counties to gather, report, and evaluate data collected to meet the PEI annual reporting requirements.
The Commission cautions that a July 2018 deadline for the Commission to “finalize” its internal processes in this area may not be feasible, recognizing that we anticipate delays in receiving county reports and that the Commission’s analyses of those reports likely will evolve over time.
The third recommendation relates to the statewide evaluation of triage grants. The Commission agrees with the recommendation that our evaluation strategy should include the development of statewide metrics. In January, the Commission authorized $10 million to contract with a third party to perform statewide evaluations of the triage grants.
The evaluator will work closely with grantees and Commission staff to devise evaluation strategies that will yield important statewide value while still serving the needs of local decision-makers. Recognizing the complexity of this charge, it may not be feasible to establish shared metrics for all triage grants by July 2018. The Commission does expect that a clear evaluation strategy will be in place for each grant prior to July 2019.
Thank you again for the opportunity to provide feedback on the draft report. The Commission is very appreciative of the thorough nature of your staff’s engagement in preparation of this work. Most importantly, we agree that state and local agencies can and should do better in service to the people of California.
Respectfully,
John Boyd, PsyD
Chair
Alameda County
February 9, 2018
Dear Ms. Elaine Howle, California State Auditor,
Enclosed is Alameda County’s response to the draft audit report, titled “Mental Health Services Act: The State Could Better Ensure the Effective Use of Mental Health Services Act Funding”.
If you have any questions please feel free to contact me.
Sincerely,
Tracy Hazelton, MPH
MHSA Division Director
Alameda County Behavioral Health Care Services Agency
510-639-1285 Tracy.Hazelton@acgov.org
| cc: | Colleen Chawla, HCSA Director Carol Burton, BHCS Interim Director James Wagner, BHCS Deputy Director |
Alameda County's Audit Response
Auditor's Recommendations:
To strengthen its monitoring of MHSA projects and ensure it spends MHSA funds appropriately, Alameda should develop and implement MHSA program monitoring guidelines to ensure staff appropriately perform and document their monitoring activities.
Alameda County's Response:
Alameda County agrees with the auditor’s comments. We will develop and implement MHSA program monitoring guidelines by having each MHSA program contract manager document the policies and procedures currently used to monitor their respective MHSA programs by June 30, 2018. We will then consolidate these documents into one user manual that will be available to all staff members via our website in FY 18/19. Revisions to the users’ manual will be made as needed to ensure the manual is current at all times. The staff will be advised of all revisions.