Report 2017-117 Recommendation 6 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 #6 To: Health Care Services, Department of

To ensure that local mental health agencies appropriately spend MHSA funds, Health Care Services should publish its proposed regulations in the California Regulatory Notice Register by September 2018. It should then develop and implement an MHSA fiscal audit process, independent of the Medi-Cal reviews, to review revenues and expenditures for the most recent fiscal year.

Annual Follow-Up Agency Response From October 2024

DHCS is currently revising the audit and appeals process to incorporate changes made to the statute with the passage of Proposition 1 (March 5, 2024). Proposition 1 makes significant changes to the Mental Health Services Act (MHSA), renaming it to the Behavioral Health Services Act (BHSA), including substance use disorder services/treatments, changing funding and expenditure requirements, and increasing transparency and accountability of behavioral health programs. Additionally, the initiative provides DHCS with the authority to "implement, interpret, or make specific the amendments made pursuant to this measure by means of plan or county letters, information notices, plan or provider bulletins, or other similar instructions without taking further regulatory action" (SB 326, Section 115). DHCS uses the authority to implement an audit and appeals process to address county MHSA and BHSA revenue and expenditures. DHCS anticipates issuing a policy manual containing the audit and appeals process by June 30, 2025.

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

Annual Follow-Up Agency Response From December 2023

DHCS continues to finalize the draft fiscal audit and appeal regulations. The appeal process underwent extensive changes, which necessitated significant edits to the statement of reasons. In addition, SB 326 (Eggman) was recently chaptered and made significant changes to the Mental Health Services Act (MHSA). DHCS is reviewing the statute to align the appeal process, where appropriate, to a Behavioral Health Services Act (BHSA) audit and appeal process or other behavioral health audit and appeal process. DHCS is seeking to cause minimal disruption or confusion to counties if additional changes to an audit and appeal process are necessary upon approval of the BHSA. Because of the recent changes, DHCS anticipates submitting by June 30, 2025, the public notice announcing the proposed MHSA audit and appeal regulations and the 45-day public comment period to California's Office of Administrative Law for publication in the California Regulatory Notice Register.

If the ballot initiative (March 5, 2024) does not receive voter approval, DHCS anticipates submittal to the Office of Administrative Law no later than December 31, 2024. This will allow time for the draft regulations to continue through the internal DHCS review and approval process.

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

Annual Follow-Up Agency Response From October 2021

DHCS continues to finalize the draft fiscal audit and appeal regulations. The Department will expedite, to the extent possible, the remaining reviews. DHCS anticipates submitting the public notice announcing the proposed MHSA audit and appeal regulations and the 45-day public comment period to OAL for publication in the California Regulatory Notice Register by December 2021.

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

Annual Follow-Up Agency Response From November 2020

DHCS concluded the rulemaking process for the MHSA fiscal regulations in May 2020 with the regulations becoming effective on July 1, 2020. Resources have transitioned to drafting the MHSA fiscal audit and appeal regulations. While a preliminary draft of the regulations has been completed, the draft still requires comprehensive internal reviews by DHCS Legal and Fiscal Divisions and external review by the California Health and Human Services Agency and the Department of Finance. DHCS will expedite, to the extent possible, the remaining reviews. Due to the COVID-19 pandemic, DHCS anticipates submitting the public notice announcing the proposed MHSA audit and appeal regulations, and initiating the 45-day public comment period, to OAL for publication in the California Regulatory Notice Register by December 2021.

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

Annual Follow-Up Agency Response From October 2019

DHCS is developing the draft 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 OAL for publication in the California Regulatory Notice Register by December 2019. Because DHCS required additional time and resources to update the draft fiscal regulations to include recent statutory changes, this package was delayed. DHCS has one year from the date when the Notice of Proposed Rulemaking is posted to promulgate the audit and appeal regulations.

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

Annual Follow-Up Agency Response From July 2019

DHCS is developing the draft 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 OAL for publication in the California Regulatory Notice Register by Fall 2019.

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

1-Year Agency Response

DHCS is developing the draft 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 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 develop the draft 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 OAL for publication in the California Regulatory Notice Register by spring 2019.

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

60-Day Agency Response

DHCS continues to develop the draft 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 lay for publication in the California Regulatory Notice Register by spring 2019.

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

We are concerned that Health Care Services now intends to wait until Spring 2019 to submit its proposed regulations for fiscal audits. 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. As recently as February 2018, Health Care Services stated to us that it intended to submit its regulations for review by September 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

Further, 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.

All Recommendations in 2017-117

Agency responses received are posted verbatim.