Section 6 - BHT Fiscal Policies [DRAFT for Public Comment]

B. Behavioral Health Services Act Fiscal Policies

B.6 Reversion Policy

B.6.6 Methodology for Calculating Reversion

DHCS will calculate reversion amounts using the first-in-first-out methodology for components with revenue distributed to the county. The first-in first-out methodology assumes that the first dollar received is the first dollar spent. Reversion will be calculated by component. For components with suballocation requirements, counties will be expected to apply the reversion equally across the suballocations. DHCS will subtract BHSA expenditures reported in the BHOATR for each component from the remaining balance of funding in the oldest fiscal year within the reversion period for the county and component. If the expenditures minus the remaining balance of funding are greater than zero, DHCS will subtract the remaining balance of expenditures from the remaining balance of funding in the next fiscal year. DHCS will repeat this process until the balance of expenditures subtracted from the balance of funding is less than or equal to zero. DHCS will revert the balance of funding for a county and component that is greater than zero at the end of the reversion period. DHCS will continue to provide technical assistance to counties regarding reversion calculations.

For purposes of calculating reversion, a county’s BHSA revenue is equal to the amount the SCO distributed to the county, including funds withheld, from July through June of the fiscal year, plus any interest earned. DHCS will use the amount of BHSA funds distributed to a county published on the SCO website and the amount of interest the county reported on its BHOATR.

B.6.8 Offsetting Reverted Behavioral Health Services Act Funds Against Future Behavioral Health Services Act Allocations

If a county has not spent all their BHSA funds within the required time period, DHCS will revert unspent BHSA funds from a county and deposit the reverted funds into the State’s Reversion Account. DHCS will instruct the State Controller’s Office (SCO) to redistribute reverted funds back to all other counties for future use as BHSA funds consistent with the requirements set forth in this manual. Counties are required to spend BHSA funds within three or five years (WIC section 5892, subdivision (h)(1) and subdivision (h)(2)(A)) depending on county size. Counties have ten fiscal years to spend BHSS funds specified for Workforce Education and Training (WET) and Capital Facilities and Technological Needs (CFTN) projects.

If DHCS has determined that a county has BHSA funds that are subject to reversion, DHCS will instruct the SCO to offset the amount of reverted funds from the county’s future monthly BHSA distribution and transfer the funds into the state’s Reversion Account (WIC section 5892, subdivision (i)(1)).

The SCO will continue to offset the monthly distribution until the county has remitted all reverted funds. The offsetting of funds may extend over multiple months until the full amount the county owes to DHCS is offset. The SCO will transfer the funds into the state’s Reversion Account. Previously, counties were required to remit a check to DHCS with the amount of funds that were subject to reversion within 60 days of receiving the final reversion notice. Offsetting funds from county’s monthly distributions is a more efficient process than requiring counties to remit checks for reverted funds to DHCS, allowing DHCS to reallocate the reverted funds to counties more quickly. This process is also less administratively burdensome on counties. DHCS will instruct the SCO to begin offsetting a county’s monthly BHSA distribution 60 days after the reversion notice is sent to the county (e.g., if a county receives a reversion notice in April, funds will be offset beginning with June’s monthly distribution payment). DHCS will notify the counties after the reversion timeframe to appeal has ended to let them know when the SCO will begin offsetting the monthly distribution.

If a county has BHSA funds that are subject to adjustment due to a fiscal audit or other reasons, as determined by DHCS, the amount that is owed to the county will be transferred from the Reversion Account. If the balance of the Reversion Account is insufficient, the funds that are owed to the county will be offset from the monthly distributions from other counties based on DHCS Allocation Methodology (WIC section 5892, subdivision (i)(2)(B)).

DHCS will prioritize offsetting reversion funds before implementing withholds (e.g., due to a late BHOATR) (WIC section 5892, subdivision (i)(2)(C)). If DHCS is actively withholding a county’s monthly BHSA distribution due to not meeting statutory requirements, any funds that are subject to reversion will be offset first. If there are any remaining monthly distribution funds, DHCS will calculate the withhold amounts based on the remaining balance (WIC section 5892, subdivision (i)(2)(A)).

The frequency of offsetting and reallocating BHSA funds will be determined by DHCS. The SCO posts online the monthly BHSA distribution and will also reflect any offset and redistribution amounts.

Counties are required to spend BHSA funds within the applicable statutory expenditure period, including within three or five years depending on county size, pursuant to WIC section 5892, subdivision (i)(1) and subdivision (i)(2)(A). County funds not spent within the applicable expenditure period are subject to reversion. If DHCS determines that a county’s BHSA funds are subject to reversion, DHCS will instruct the State Controller’s Office (SCO) to offset the reverted amount from the county’s future monthly BHSA distribution.

DHCS will instruct the SCO to begin offsetting a county’s monthly BHSA distribution 60 days after the reversion notice is sent to the county (e.g., if a county receives a reversion notice in April, funds will be offset beginning with June’s monthly distribution payment). DHCS will notify the counties after the reversion timeframe to appeal has ended to let them know when the SCO will begin offsetting the monthly distribution. The SCO will continue to offset the monthly distribution until the full amount of reverted funds has been recovered. The offsetting of funds may extend over multiple months until the full amount the county owes to DHCS is offset. The SCO will transfer the funds into the state’s Reversion Account.

Previously, counties were required to remit a check to DHCS with the amount of funds that were subject to reversion within 60 days of receiving the final reversion notice. Offsetting funds from county’s monthly distributions is a more efficient process than requiring counties to remit checks for reverted funds to DHCS, allowing DHCS to reallocate the reverted funds to counties more quickly. This process is also less administratively burdensome on counties. The frequency of offsetting and reallocating BHSA funds will be determined by DHCS. The monthly BHSA distributions posted by the SCO will reflect offset and redistributed amounts.

B.6.9 Reversion Notice, Appeals, and Offsetting Timeline

~~DHCS reviews each county’s BHOATR to determine the amount of unspent funds subject to reversion.~~

~~DHCS will send each county a reversion notice indicating the amount of funds subject to reversion and indicate when funds will begin to be offset (60 calendar days from the notice).~~

If the county disagrees with the reversion amount, the county may submit an appeal to DHCS. The county must submit an appeal within 30 calendar days of receiving the initial reversion notice. If a county does not submit an appeal, DHCS will assume the county agrees with the amount of unspent funds subject to reversion.

DHCS will review and approve or deny the appeal within 45 calendar days of receiving the county’s appeal. After the appeal period has ended, DHCS will send the county a revised final notice of unspent funds subject to reversion and indicate when funds will begin to be offset (60 calendar days from the final notice).

DHCS will instruct SCO to begin offsetting the county’s funds from the monthly distribution until the full amount has been offset depending on the amount subject to reversion, the full monthly distribution amount and subsequent monthly distributions may be offset, if necessary.

~~DHCS will reallocate reverted funds to other counties.~~

B.6.9 County Expenditure of Reverted Funds Distributed to the County

Counties will treat reverted funds the SCO distributes (from the Reversion Account) as BHSF revenue and allocate it in accordance with the BHSA allocation requirements. (WIC section 5892, subdivision (a)). Counties must allocate reverted funds across the Housing Interventions (30 percent), FSP (35 percent), and BHSS (35 percent) components consistent with the current BHSA allocation methodology, unless the county receives an approved housing exemption or funding transfer from DHCS. Reallocated reverted funds are subject to all applicable BHSA expenditure, reporting, and accountability requirements contained in this policy manual.

B.6.10 Allocation Requirements for a County From Which Funds Are Reverted

Under the process described in section B. 6.8 reverted funds are collected by offsetting county distributions rather than through a direct county remittance. As a result, the county must make a corresponding local accounting adjustment to reduce the component balance, and any applicable suballocation balance, from which the reverted funds were calculated. The county must reclassify the locally retained amount from that component into the broader local BHSA fund or revenue allocation account and allocate those funds, together with the remaining monthly SCO distribution, in accordance with the required 30 percent Housing Interventions, 35 percent Full Service Partnership, and 35 percent Behavioral Health Services and Supports allocation percentages, unless the county has an approved exemption or funding transfer.

This ensures that reverted funds are no longer treated as available within the component that caused the reversion and that the county’s remaining BHSA funds continue to be tracked, allocated, reported, and expended pursuant to applicable BHSA requirements.