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Mental Health Services Act
The State Could Better Ensure the Effective Use of Mental Health Services Act Funding

Report Number: 2017-117

February 27, 2018 2017-117

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the funding and oversight of the Mental Health Services Act (MHSA). This report concludes that the Department of Health Care Services (Health Care Services) and the Mental Health Services Oversight and Accountability Commission (Oversight Commission) could better ensure that the 59 county and local mental health agencies (local mental health agencies) effectively use the MHSA funds they receive.

Despite having significant responsibility for the MHSA program since 2012, Health Care Services has allowed local mental health agencies to amass hundreds of millions in unspent MHSA funds. This occurred because Health Care Services has not developed a process to recover unspent MHSA funds that under state law must be reallocated to other local mental health agencies. Further, absent Health Care Services’ guidance, the local mental health agencies accumulated $81 million in unspent interest and set aside between $157 million and $274 million in excessive reserves that they could better use to provide additional mental health services. Moreover, until our inquiry, Health Care Services had not analyzed whether a $225 million fund balance in the Mental Health Services Fund, which had existed since at least 2012, is potentially available to local mental health agencies to expand mental health services or is a long-standing accounting error. Finally, Health Care Services’ oversight of local mental health agencies is minimal: it does not enforce annual revenue and expenditure reporting nor has it performed fiscal or program audits to ensure local mental health agencies comply with fiscal and program requirements contained in state laws and regulations. Health Care Services’ poor oversight of the MHSA program is troubling given the importance of providing mental health services to Californians.

The Oversight Commission, which also oversees the MHSA, is implementing processes to evaluate the effectiveness of MHSA-funded programs. In addition, the Oversight Commission is helping local mental health agencies to understand how to develop innovative projects that meet MHSA requirements and provide mental health services, which should assist them in spending MHSA funds appropriately. However, the Oversight Commission has not developed statewide metrics to assess the effectiveness of MHSA-funded crisis intervention grants, which provided $32 million in fiscal year 2015–16 to increase staffing of mental health personnel at locations such as emergency rooms and jails. Finally, our review of three local mental health agencies—Alameda, Riverside, and San Diego counties—determined that they allocate their MHSA funds appropriately and they generally monitored their MHSA-funded projects effectively.

Respectfully submitted,

State Auditor

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