oversight

Community Mental Health Centers Program--Improvements Needed in Management

Published by the Government Accountability Office on 1971-07-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 COMPTROLLER~~~NER+L                 OF      THE       UNITED   STATES
                                       WASHINGTON.    D.C.         20548




B-164031(2)




To the President  of the Senate and the
Speaker of the House of Representatives

         This is our report      entitled “The Community       Mental Health
Centers     Program     --Improvements      Needed in Management.       ‘I The
program      is administered      by the Health Services   and Mental Health
Administration      of the Department      of Health,  Education,    and
Welfare.

       Our review  was made pursuant   to the Budget and Account-
ing Act, 1921 (31 U.S.C. 53), and the Accounting   and Auditing Act
of 1950 (31 U.S.C. 67).

       Copies of this report                 are being sent to the Director,                    Office
of Management      and Budget,               and to the Secretary  of Health,                   Educa-
tion, and Welfare.




                                                                       C ompt rolle r General
                                                                       of the United States
CO/.lPTROLLER GENER4L'S                        THE COMMUNITY MENTAL HEALTH CENTERS
REPORT TO THE CONGRESS                         PROGRAM--IMPROVEMENTSNEEDED IN
                                               MANAGEMENT
                                               Health Services and Mental
                                               Health Administration
                                               Department of Health,      Education,
                                               and We'lfare   B-164031(2)


DIGEST
_-----

WHY THE REVIEW WAS Ikl4DE

       About $447 million was appropriated    for fiscal     years 1965 through 1970
       for the Community Mental Health Centers Program.          The goal of the pro-
       gram is to improve mental health services       through Federal grant assis-
       tance for building and staffing    the centers.

       The program was authorized  by the Mental Retardation   Facilities                  and
       Community Mental Health Centers Construction   Act of 1963.       It              is ad-
       ministered  by the National Institute of Mental Health.

       Because the program is relatively     new and expenditures are sizable,
       the General Accounting Office     (GAO) examined into the management of
       the program.


FINDINGS AND CONCLUSIONS

       Of the 1965-70 appropriations,    $230 million was for               construction and
       $217 million  for staffing.    As of June 1970, grants               had been made to
       420 centers;  245 were in operation.

       Each center is required     to provide inpatient       services,     outpatient
       care, emergency services,     partial  hospitalization        (such as day care),
       and consultation  and educational     services.       GAO's review covered grants
       of about $12.6 million    to 16 centers     in California,       Florida,    and
       Pennsylvania.

       The review          showed that

             --in their    planning some States      used areas   with    larger   populations
                 than specified    by regulations;

             --the      Institute   did not have a national   goal for     the number of cen-
                 ters    needed;


Tear Sheet




                                                                         JULY 8J.979
        some construction   grants   s(.emed larger   than warranted;

   --information      furnished by grant applicants   was insufficient       for
       evaluation   of the proposed size of inpatient    facilities,      and no
       criteria   were given centers   to determine whether their      inpatient
       units would serve their    areas adequately;

   --there   was a need for a realistic       appraisal      of an applicant's    abil-
       ity to obtain sufficient     non-Federal     funds for a center's       operation
      and for monitoring     a center's   financial     status after     an award is made;
      and

  --staffing  grant money was used for          unauthorized   or questionable     pur-
     poses at several centers.

Areas     served

Regulations    require    that each center serve an area having a population
between 75,000 and 200,000.        Some States used areas with larger  popu-
lations   in their    planning.

The Institute     estimated   originally     that about 2,000 centers would be
needed nationwide.        It was not using that goal in its planning,           how-
ever, and had not established          another goal.    The Institute    estimates
that--when    all States have been divided        into the specified     population
areas--from    1,700 to 1,800 centers        will be required.      (See p. 12.)

GAO believes    that,   in the interest     of orderly   implementation    of the
program, the Institute        should promptly    obtain from all States their
latest  plans setting     forth    the number of centers     needed,    On the basis
of such plans,     the Health Services      and Mental Health Administration
should establish      a national     goal of centers   to be constructed     and funded
and establish     annual funding goals.       (See p. 17.)

Construction       grants

When a center is built  as part of a medical facility (such as a hospital),
Federal funds may be used to help pay a share of the construction  costs
of building  areas that serve patients from both the center and a hos-
pital.

GAO questioned    the rates used to allocate    the costs of common service
areas at two centers     built  as part of hospital    units.   GAO believes
that the rates were not determined       on the basis of sound allocation    pro-
cedures and that,    as a result,   grants awarded of about $1.1 million
were about $168,000 larger      than warranted.     (See p. 18.)

Recipients  of grants were not required   to justify the number of beds
proposed for a center.    GAO's review of seven construction  projects
showed no documentary  support  for the size of any inpatient  unit.
    Also, the Institute   had not established                       criteria  for determining
    whether a center's  inpatient  unit would                       serve its area adequately.
    Indications are that units

       --may be too large,            resulting      in unnecessary         costs    to Federal,    State
          or local agencies;            or

       --may be too small, with              adverse       effect     on the quality      of care   pro-
          vided.  (See p. 22.)

    Grants      for     staffing    of centers

    Federal grants are provided       for a major share of the staffing      costs of
    a center.    A center,    however, must obtain sufficient    additional    funds to
    pay the balance of staffing       costs and all other operating     expenses.
    The size of the Federal grants declines        from year to year and grants end
    in a specified    period.

    Thus a realistic   appraisal    is needed of the adequacy of funds avail-
    able to an applicant     from sources other than Federal.       (See pn 27.)
    Also GAO believes    that a center's     financial  status should be reviewed
    by the Institute   periodically    after    a grant has been awarded.

     One grantee,      for example, used grant funds of about $220,000 for un-
     authorized     purposes during its first        2 years of operation         because its
     non-Federal     funds were inadequate to operate the center.                 The Insti-
     tute had not made a realistic         appraisal    of this grantee's         financial
     ability    before awarding the grant and did not monitor               its financial
     status after      the award.    (See p. 30.)      The Institut;shasppr;!o;ed            to
     take actions      to strengthen   its review procedures.             ee .         .

     Examples         of staffing    grant   funds     used for       unauthorized      or questionable
     purposes         included:

       --Three   centers used about               $278,000 for purposes not authorized                in
          the law, such as building                renovation  and operating expenses.
          (See p. 36.)

       --One center used about $265,000 for staffing     costs in excess                            of the
          maximum Federal cost-sharing rate as specified     in the law.
          (See p. 37.)

       --Two centers  used about $89,000 for expenses                        which     should   have been
          paid from non-Federal  funds.  (See p. 38.)

     Officials   of the Institute     agreed to review questionable    expenditures
     found by GAOand to seek recovery          of any misspent grant funds.     They
     reported  that new procedures      were being developed to tighten     the review
     of the operations    of staffing     grant recipients.    (See p. 33.)

Tear Sheet



                                                       3
RE’c’tQVMENDA9rONS OR -._
                      ,SUY!:6;5”1’1
                            -.---- ONS

      The Secretary  of the Department of Health,   Education,              and Welfare
      should require   the Health Services and Mental Health               Administration,
      which oversees the work of the Institute,   to

        --establish    a national goal for the number of centers to be built
           and supported by Federal funds and a time-phased     program for meet-
           ing the goal (see p. 17);

        --issue      guidelines  for allocating        construction costs of service
            areas used jointly      by a center       and other components of a medical
            facility     (see p. 24);

        --require      an applicant for a construction         grant to adequately           jus-
           tify   the proposed size of inpatient       facilities      and establish           cri-
           teria    for determining   the desirable    size (see p. 24);

        --put into     effect  the plan of the Institute   to obtain adequate                 in-
           formation    on the financial  needs and resources   of recipients                 of
           staffing    grants;

        --improve     the administration     of the staffing grant program through
           more comprehensive      and timely onsite evaluations   of newly estab-
           lished centers,     adequate guidance to centers and review staffs      on
           accountability    for grant funds, and other means (see p. 34 and
           pp. 43 to 45); and

        --obtain  settlements      of overpayments        made under   staffing    grants
           (see p. 46).


AGENCYACTIONSAND UNRESOLVED
                          ISSUES
     HEW concurred with GAO's recommendations              on program goals, review pro-
     cedures relating     to financial       needs and resources,        improvement of ad-
     ministration    of staffing     grants,     and obtainment     of settlements     of
     overpayments.     HEW   reported    that    a  number  of  corrective     actions  had
     been or would be taken.          (See   pp.   17, 35,  and  46.)

     HEW said that in      1968 a formula had been developed for              allocating     costs
     of centers built      as part of a larger medical facility.                GAO believes
     that the formula      does not take into sufficient  account             the wide variety
     of conditions    at   different  centers. (See p* 24.)

     HEW said that it would not be prudent to establish                 criteria   for the size
     of inpatient      facilities     to be provided because many factors          were in-
     volved and flexibility          was important.     All applicants       must describe
     their  facilities        and the rationale     supporting     each facility,    HEW said.
     GAO believes      that the variety      of factors     involved   and the desire for



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I                          flexibility  emphasize the need for criteria and for        adequate   Qustifi-
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                           cation by grant applicants.   (See pp. 25 and 26.)
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 I                   MAT!!ERS FOR CONSIDERATION
                                           -    BY THE CONGRESS
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 I                         This report   on shortcomings       in the administration  of the Community
 I                         Mental Health Centers Program and HEW's corrective          actions  and plans
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                           may be of assistance      to the Congress,    particularly   in view of changes
 I                         in the level and duration         of Federal support made by 1970 amendments
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                           to the authorizing     legislation.
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                        Contents
                        -.--
                                                                 -Pa=
DIGEST                                                             1

CHAPTER

  1       INTRODUCTION                                             6

  2       STATUS OF THE PROGRAM                                   12
              Need for establishing  an overall program
                goal                                              12
              Centers not being constructed    in areas
                with greatest need                                15
              Conclusion                                          17
              Recommendation to the Secretary of HEW              17

  3       ADMINISTRATION OF CONSTRUCTIONGRANTS                    18
              Need for guidelines       on allocations   of
                construction   costs                              18
              Need for requiring      justification    of size
                of inpatient   facilities                         22
              Recommendations to the Secretary of H.RW            24
              HEWcomments and our evaluation                      24

  4       DETERMINATIONOF APPLICANTS' FINANCIAL
          ABILITY TO OPERATECENTERS                               27
               Insufficient   non-Federal financial     sup-
                  port of certain centers                         27
               Inadequate review of grantee's      financial
                  status                                           30
               Need for improved review procedures                 33
               Recommendation to the Secretary of HEW              34

   5      ADMINISTRATION OF STAFFING GRANTS                        36
              Unauthorized  or questionable    grant ex-
                penditures                                         36
              Improved procedures needed to strengthen
                management of staffing    grant program            43
              Recommendations to the Secretary of HEW              45

   6      SCOPEOF REVIEW                                           48
APPENDIX                                                                   Page
       I   Dist-ribution of community mental health
             center grants by State as of June 30, 1970                     51

  II       Letter dated December 29, 1970, from the As-
             sistant  Secretary,  Comptroller,  Department
             of Health, Education,   and Welfare, to the
             General Accounting Office                                      52

 III       Letter dated October 28, 1970, from the
              State of California Department of Mental
             Hygiene                                                        58

   IV      Letter dated October 26, 1970, from the
              State of California Department of Public
             Health                                                         61

       V   Letter dated October 22, 1970, from the
             County of Los Angeles Department of Mental
             Health                                                         63

  VI       Principal  officials         of the Department of
              Health, Education,         and Welfare responsible
              for the activities         discussed in this re-
              port                                                          66

                                 ABBREVIATIONS

GAO        General Accounting          Office

HEW        Department     of Health,      Education,    and Welfare

HSMHA      Health     Services      and Mental Health     Administration

NIMH       National     Institute      of Mental Health
                                           THE COMMUNITY MENTAL HEALTH CENTERS
                                           PROGRAM--IMPROVEMENTSNEEDED IN
                                           MANAGEMENT
                                           Health Services     and Mental
                                           Health Administration
                                           Department of Health,      Education,
                                           and Welfare    B-164031(2)


DIGEST
_-----


WHY THE REVIEW WAS fd4D.E

     About $447 million was appropriated     for fiscal     years 1965 through  1970
     for the Community Mental Health Centers Program.           The goal of the pro-
     gram is to improve mental health services        through Federal grant assis-
     tance for building and staffing     the centers.

     The program was authorized  by the Mental Retardation   Facilities                 and
     Community Mental Health Centers Construction   Act of 1963.       It             is ad-
     ministered  by the National Institute of Mental Health.

     Because the program is relatively     new and expenditures are sizable,
     the General Accounting Office     (GAO) examined into the management of
     the program.


FINDINGS AND CONCLUSIONS

     Of the 1965-70 appropriations,    $230 million was for              construction and
     $217 million  for staffing.    As of June 1970, grants              had been made to
     420 centers;  245 were in operation.

     Each center is required     to provide    inpatient     services,     outpatient
     care, emergency services,     partial   hospitalization        (such as day care),
     and consultation  and educational      services.       GAO's review covered grants
     of about $12.6 million    to 16 centers      in California,       Florida,    and
     Pennsylvania.

     The review      showed that

         --in    their planning   some States    used areas   with     larger   populations
             than specified    by regulations;

         --the    Institute   did   not have a national   goal   for    the number of cen-
             ters needed;




                                                                     JULY       8J9-71
            -59!11econstrucizion   grants sc:lmed larger     than warranted;
          --information     furnished by grant applicants   was insufficient       for
             evaluation   of the proposed size of inpatient    facilities,      and no
             criteria   were given centers   to determine whether their      inpatient
             units would serve their    areas adequately;

          --there   was a need for a realistic         appraisal     of an applicant's     abil-
              ity to obtain   sufficient     non-Federal     funds for a center's      operation
             and for monitoring       a center's   financial     status after    an award is made;
             and

          --staffing  grant money was used for        unauthorized    or questionable     pur-
             poses at several centers.

       Areas   served

       Regulations    require     that each center serve an area having a population
       between 75,000 and 200,000.         Some States used areas with larger  popu-
       lations   in their     planning.

       The Institute    estimated originally     that about 2,000 centers would be
       needed nationwide.      It was not using that goal in its planning,           how-
       ever, and had not established       another goal.    The Institute     estimates
       that--when   all States have been divided      into the specified      population
       areas--from   1,700 to 1,800 centers will      be required.       (See p. 12.)

 -I
       GAO believes    that,    in the interest     of orderly   implementation    of the
““I    program,    the Institute     should promptly    obtain from all States their
       latest   plans setting     forth   the number of centers      needed.    On the basis
       of such plans,     the Health Services and Mental Health Administration
       should establish      a national     goal of centers    to be constructed     and funded
       and establish    annual funding       goals.   (See p. 17.)

 .II   Construction     grants

  1    When a center is built  as part of a medical facility (such as a hospital),
 .#
       Federal funds may be used to help pay a share of the construction  costs
       of building  areas that serve patients from both the center and a hos-
       pi tal .

       GAO questioned    the rates used to allocate    the costs of common service
       areas at two centers     built  as part of hospital    units.    GAO believes
       that the rates were not determined on the basis of sound allocation           pro-
       cedures and that,    as a result,   grants awarded of about $1.1 million
       were about $168,000 larger      than warranted.     (See p. 18.)

       Recipients  of grants were not required   to justify the number of beds
       proposed for a center.    GAO's review of seven construction  projects
       showed no documentary  support  for the size of any inpatient  unit.
Also, the Institute    had not established                   criteria  for determining
whether a center's   inpatient  unit would                   serve its area adequately.
Indications  are that units

  --may be too large,          resulting      in unnecessary         costs    to Federal,    State
     or local agencies;          or

  --may be too small, with            adverse       effect     on the quality      of care   pro-
     vided.  (See p. 22.)

Grants   for     staffing    of centers

Federal grants are provided       for a major share of the staffing      costs of
a center.    A center,    however, must obtain sufficient    additional    funds to
pay the balance of staffing       costs and all other operating     expenses.
The size of the Federal grants declines        from year to year and grants end
in a specified    period.

Thus a realistic   appraisal    is needed of the adequacy of funds avail-
able to an applicant     from sources other than Federal.       (See p. 27.)
Also GAO believes    that a center's     financial  status should be reviewed
by the Institute   periodically    after    a grant has been awarded.

One grantee,       for example, used grant funds of about $220,000 for un-
authorized      purposes during its first        2 years of operation   because its
non-Federal      funds were inadequate      to operate the center.      The Insti-
tute had not made a realistic          appraisal    of this grantee's   financial
ability    before awarding the grant and did not monitor            its financial
status    after    the award.    (See p. 30.)      The Institute   has proposed to
take actions       to strengthen   its review procedures.        (See p. 33.)

Examples       of staffing    grant   funds     used for       unauthorized      or questionable
purposes       included:

  --Three   centers used about             $278,000 for purposes not authorized                in
     the law, such as building              renovation  and operating expenses.
     (See p. 36.)

   --One center used about $265,000 for staffing     costs in excess                         of the
      maximum Federal cost-sharing rate as specified     in the law.
      (See p. 37.)

   --Two centers  used about $89,000 for expenses                     which     should   have been
      paid from non-Federal  funds.  (See p. 38.)

Officials   of the Institute    agreed to review questionable     expenditures
found by GAO and to seek recovery        of any misspent  grant funds.     They
reported  that new procedures     were being developed to tighten      the review
of the operations   of staffing     grant recipients.    (See p. 33.)




                                                3
         The Secretary  of the Department of Health,    Education,           and Welfare
         should require  the Health Services   and Mental Health            Administration,
         which oversees the work of the Institute,    to

           --establish    a national goal for the number of centers    to be built
              and supported   by Federal funds and a time-phased   program for meet-
              ing the goal (see p. 17);

           --issue      guidelines  for allocating     construction costs of service
               areas used jointly      by a center    and other components of a medical
               facility     (see p. 24);

d
           --require      an applicant for a construction         grant to adequately         jus-
              tify   the proposed size of inpatient       facilities      and establish         cri-
              teria    for determining   the desirable    size (see p. 24);

           --put     into   effect  the plan    of the Institute  to obtain adequate           in-
              formation      on the financial     needs and resources  of recipients           of
              staffing      grants;

           --improve     the administration     of the staffing   grant program through
              more comprehensive      and timely   onsite evaluations    of newly estab-
              lished centers,     adequate guidance to centers       and review staffs   on
              accountability    for grant funds, and other means (see p. 34 and
              pp. 43 to 45); and

           --obtain  settlements       of overpayments    made under    staffing    grants
              (see p. 46).


    AGENCY ACTIONS AND UNRESOLVEDISSUES

        HEW concurred    with GAO's recommendations         on program goals,      review pro-
        cedures relating     to financial      needs and resources,    improvement      of ad-
        ministration    of staffing    grants,    and obtainment    of settlements      of
        overpayments.     HEW reported     that a number of corrective        actions    had
        been or would be taken.         (See pp. 17, 35, and 46.)

        HEW said that in         1968 a formula had been developed for         allocating     costs
        of centers    built      as part of a larger medical facility.           GAO believes
        that the formula         does net take into sufficient  account        the wide variety
        of conditions       at   different  centers. (See p. 24.)

        HEW said that it would not be prudent to establish                 criteria   for the size
        of inpatient      facilities     to be provided because many factors          were in-
        volved and flexibility          was important.     All applicants       must describe
        their  facilities        and the rationale     supporting     each facility,    HEW said.
        GAO believes      that the variety      of factors     involved   and the desire for
     flexibility       emphasize the need for criteria and for   adequate   justifi-
     cation      by grant applicants.   (See pp. 25 and 26.)


MATTERS FOR CONSIDERATIOiV BY THE CONGRESS

     This report on shortcomings       in the administration  of the Community
     Mental Health Centers Program and HEW's corrective        actions  and plans
     may be of assistance    to the Congress,    particularly   in view of changes
     in the level and duration       of Federal support made by 1970 amendments
     to the authorizing   legislation.




                                           5
                                   INTRODUCTION
                                    - -- ._- .. -_ --
            The Community Mental Health Centers Program is adminis-
     tered by the National Institute       of Mental Health (NIMH), a
     constituent    bureau of the Health Services and Mental Health
     Administration     (HSMHA), Department of Health, Education,    and
     Welfare (HEW). The purpose of the program is to make the
     most effective    mental health care available     to all the peo-
     ple of the Nation.      This is to be done through establishing
     a basic network of mental health services at the community
     level with the assistance      of a Federal program under which
     grant funds are made available      for specified   percentages of
     the cost of constructing     and staffing   mental health centers.
           The program was initiated     in 1963 by the enactment of
     the Mental Retardation   Facilities    and Community Mental
     Health Centers Construction      Act of 1963 (42 U.S.C. 2681).
     It was extended and broadened by amendments to the act in
     1965, 1967, and 1970 (Public Laws 89-105, 90-31, and
     91-211).

            Public Health Service regulations         state that, to qual-
      ify for Federal construction     and/or staffing        grants, an ap-
     plicant,    which by law must be a public or private nonprofit
     agency, must present a plan for a coordinated              program of at
     least five essential    mental health services:            inpatient   ser-
     vices, emergency services,      partial    hospitalization        (such as
     day care), outpatient    care, and consultation          and educational
     services.     The Community Mental Health Centers Amendments
     of 1970 (Public Law 91-211) state that, with respect to
     centers which will serve an area designated by the Secre-
     tary of HEW as an urban or rural         poverty     area, the require-
     ment to provide the prescribed        essential    services shall not
     apply under certain    conditions     for the first      18-month pe-
     riod of center operations,
.*         The regulations also provide that each community men-
     tal health center receiving   Federal financial    assistance
     must serve a specific  geographical   area (referred    to as a
     catchment area) with a population    of between 75,000 and
     200,000 persons.

                                         6
      Construction    grants are made to help meet the cost of
construction,    acquisition,     or remodeling of facilities       for
an approved program.         (See pictures    provided by NIMH of
centers built with Federal assistance            on pp. 8 and 9.)
Construction    funds are allocated        by HEWto the States under
a formula providing       for one third of the funds to be allo-
cated on the basis of the relationship            of the total popula-
tion in each State to the total population            of the United
States and two thirds of the funds to be allocated             on the
basis of financial     need as reflected       by relative   per capita
income.

       To participate   in the program, a State is required to
designate a single State agency to administer           the program
and to submit a State plan which sets forth,           among other
things,    an orderly program for the construction         of centers
on the basis of a statewide inventory        of existing     facilities
and a survey of need.      The State agency is required to re-
view the plan at least annually and to submit any required
modifications      to HEW. The rate of Federal participation            in
the cost of a construction      project   is established     by the
State agency each fiscal      year.    The law provides that it
may not be more than 66-Z/3 percent of construction             costs.
Public Law 91-211 provides that, effective          with projects
approved after June 30, 1970, the Federal share of construc-
tion costs for centers serving areas designated            as urban or
rural poverty areas may be as much as 90 percent.

       Staffing   grant funds may be used during the periods
specified     in the law for the cost of compensating eligible
professional     and technical     mental health personnel for the
operation     of new centers or for new services in existing
centers.      Compensation includes salaries,        fringe benefits,
and such other benefits        found to be reasonably necessary to
secure the services of qualified          personnel.

       Federal grant funds are to be so used as to supplement
and, to the extent practicable,     increase the level of State,
local, and other non-Federal    funds otherwise available      for
the program but, in no event, are to supplant such non-
Federal funds.     Until June 30, 1970, staffing    grants were
authorized    for a period of 4 years and 3 months and could
not exceed (1) 75 percent of eligible      costs for the first
15 months, (2) 60 percent for the first      year thereafter,

                                    7
8
9
 (3) 45 percent for the second year thereafter,     and (4) 30
percent for the third year thereafter.       Public Law 91-211
extended the grant period to 8 years and provided that
grant support not exceed (1) 7'5 percent of eligible     costs
for each of the first     2 years, (2) 60 percent for the third
year, (3) 45 percent for the fourth year, and (4) 30 percent
for each of the next 4 years.      In the case of centers serv-
ing areas designated as urban or rural poverty areas, Public
Law 91-211 provides that grant support not exceed (1) 90
percent of eligible     costs for each of the first  2 years,
(2) 80 percent for the third year, (3) 75 percent for the
fourth and fifth    years, and (4) 70 percent for each of the
next 3 years.

      Public Law 91-211 further  authorizes the Secretary of
HEW to make staffing   grants of up to 100 percent of the
costs, but not to exceed $50,000, of projects    to initiate
and develop community mental health services in rural or
urban poverty areas.

      The total amounts appropriated              for the construction
and staffing   grant programs through             fiscal year 1970 were
as follows:

        Fiscal     year   Construction          Staffing      Total

                                           (millions)

           1965              $ 35.0               $    -     $ 35.0
           1966                50.0                   19.5     69.5
           1967                50.0                   33.8     83.8
           1968                45.0                   51.1     96.1
           1969                15.0                   64.3     79.3
           1970                35.0                   48.3     83.3
           Total             $230.0              $217.0      $447.0
     Following is a description            of the procedures followed
in approving grant applications            through June 30, 1970.

        Applicants    for construction  grants submitted their ap-
plications      through the responsible    State agencies which:
determined whether the applications         were consistent  with the
State plans and which established        their priorities   for

                                      10
Federal assistance.     After the State agency approved an ap-
plication,  it was sent to the responsible        HEWregional  of-
fice where regional NIMH and other HEW staff members re-
viewed the application     and recommended approval or disap-
proval to NIMH headquarters.       The application   was also re-
viewed by the Community Mental Health Centers Program Re-
view Committee, composed of NIMH headquarters        and regional
personnel.    After NIMH approved and awarded a construction
grant, the States had the primary responsibility         for super-
vising the construction     and for ensuring that construction
progressed in accordance with approved plans and specifics-
tions.

      Applications        for staffing    grants were submitted to the
responsible      HEWregional      office   for review.    Regional NIMH
staff recommended approval or disapproval              to NIMH headquar-
ters.     Staffing     grant applications      were also reviewed by
the review committee mentioned in the preceding paragraph.
After award of a staffing           grant, the regional     office had re-
sponsibility       for monitoring      the center's  operation    and en-
suring that adequate services were provided by the center.

        Effective   July 1, 1970, the approval of grant applica-
tions was transferred        from NIMH headquarters   to the regional
health directors.        Also, Public Law 91-211 provided that
grant applications       be approved only upon recommendation of
the National Advisory Mental Health Council, which is com-
posed of 12 members, appointed by the Secretary of HEW, who
are leaders in the fields        of fundamental sciences, medical
sciences, or public affairs.          The Council also has three ex
officio     members --the Surgeon General, the Chief Medical Of-
ficer of the Veterans Administration,         and a medical officer
designated by the Secretary of Defense.




                                    11
                             CHAPTER2
                             -_- ._--.-


                      STATUS OF THE PROGRAM

NEED FOR ESTABLISHING
          --          AN OVERALL PRgC)RAM
                                        GOAL
      NIMH had originally     estimated that about 2,000 commu-
nity mental health centers would be required,       using the
catchment area concept, to adequately serve the needs of
the Nation's   population.      As of September 1970, some of the
States had not fully      adopted the catchment area concept in
their State plans submitted to NIMH, and NIMH was not using
a specific   goal of 2,000 centers in its planning.

       Some of the State plans submitted to NIMH had not
divided the States into catchment areas serving populations
of between 75,000 and 200,000 persons as specified            in HEM
regulations.     Information    available in then current State
plans showed that there was a total of about 1,300 catch-
ment areas nationwide      because several States used areas
with larger populations      than that specified    by HEW regula-
tions.    NIMH informed us that those States which exceeded
the specified   maximum catchment area population         were in the
process of revising     their plans and that, when all States
were divided into areas of the specified         population,    there
would be a total estimated requirement of between 1,700 and
1,800 centers nationwide.

       As of June 30, 1970, 420 centers had been awarded
staffing    and/or construction     grants by NIMH. Although the
total number of centers funded during fiscal         years 1965
through 1970 amounted to 21 percent of the original          goal of
2,000 centers, NIMH estimated that the catchment areas
served by these funded centers included 28 percent of the
total population      of the United States (including     Puerto
Rico).    As of June 30, 1970, NIGH had obligated        about
$176 million     for construction    grants and about $185 million
for staffing     grants.   The distribution   of these grants by
State is shown in appendix I.         Of the 420 centers which had
been funded at June 30, 1970, 245 were in operation          at that
date.



                                 12
        Our review  covered     centers   in three States--California,
Florida,     and Pennsylvania--     which had been provided        substan-
tial     amounts of grant funds under both the construction               and
staffing     grant programs.      The total    grants awarded as of
June 30, 1970, to centers         in these States were as follows:

                                         Construction                Staffing     Total

                                                            (000 omitted)

California                                 $16,053                   $22,758     $38,811
Florida                                      6,376                     6,363      12,739
Pennsylvania                                 11,011                   24,710      35,721

     Total                                 $33,440                   $53,831     $87,271
                                                                                  __-
Percent  of national      total
  of grants  awarded                            19.0                    29.1        24.1

       The progress of the program in the three States     and
nationwide,    in terms of the numbers of centers   funded and
in operation     in relation to the number of catchment   areas,
is shown in the following      table.

                                  Cali-                               Pennsyl-      Na-
                                  fornia        Florida                vania     tional

Total number of catch-
  ment areas                       148                 43                  59     1,700

Centers awarded grant
  funds at 6-30-70:
     Number                         40             12                     34         420
    Percent of total               27.0           27.9           ,       57.6       24.7

Centers in operation
  at 6-30-70:
    Number                          29               8                    17        245
    Percent of total               19.6           18.6                   28.8      14.4




                                           13
         Although     these States     have made progress      in getting
centers       into operation,     we   noted that,   in California      and
Florida,        many of the centers      were not being constructed          in
those areas where the need             was greatest.    This matter       is
discussed        in the following      section.




                                        14
CENTERSNOT BEING CONSTRUCTED
IN AREASWITH GREATESTNEED

      California's      State plan assigned priority    positions,
for the purpose of ranking areas by need, to the 148 catch-
ment areas within the State on the basis of socioeconomic
and demographic factors and existing         mental health re-
sources.     The socioeconomic and demographic factors consid-
ered included the percent of dependent population,            median
family income, admissions to State hospitals,         and alcoholism
rate.    The range of priority     positions   for the 23 construc-
tion projects      which had been approved as of April 22, 1969,
was as follows:

                Catchment area
             priority  positions        Number approved

                    1 to    25                   6
                   26 to    50                   1
                   51 to    75                   3
                   76 to   100
                  101 to   125                   4
                  126 to   148                  -9


       An official    of the California     State Department of Pub-
lic Health informed us that most of the high-priority             areas
were also the most depressed areas in the State and did not
have the community interest,        money, or technical    skills   nec-
essary to start a center.        He told us that most of the cen-
ters which received grants either were existing           organiza-
tions or were county-affiliated         centers which had no real
problems in supplying their matching share of the funds.               He
told us also that, whereas centers might not have been con-
structed    in areas with the highest need, the centers were
being constructed      in communities which wanted them and which
had sufficient     resources to build them.

        The State of Florida contains 43 catchment         areas which
were assigned priority      rankings on the basis of       such factors
as admissions to State mental hospitals,        suicide     rates,
ability    to purchase services     (relative economic     status),   ad-
missions to child training       schools, and number      of acceptable

                                   15
psychiatric    beds.  The 12 construction   projects   which had
been approved in the State as of April 30, 1969, were dis-
tributed    among the areas by priority   position   as follows:

             --Priority   positions        Number approved

                       lto     5                      1
                       6 to   10                      4
                      11 to   15                      2
                      16 to   20                      1
                      21 to   25                      2
                      26 to   30                      2
                      31 to   43                  -
                          Total                   12
                                                  -
       The reasons for this situation,     as explained to us by
Florida mental health officials,       were similar   to those cited
in the case of California.      The Florida officials      stated
that communities in the areas with the greatest need have
not applied for funds because of a lack of (1) available
matching funds, (2) leadership     ability   to organize a pro-
gram, (3) interest    within the community, and (4) coordina-
tion between counties where a catchment area includes more
than one county.    They also said that they were working with
the communities in an effort     to find solutions     to these
problems.

       NIMH officials    told us in 1969 that they tried to en-
courage high-priority       areas to submit applications      for con-
struction     grants but that they could not assist communities
which did not have the required matching funds.           They
pointed out that obtaining       matching funds for centers in
high-priority      areas was a function    of the States.     We were
also told that NIMH was trying to help local agencies devise
means of channeling non-Federal        funds into high-priority
areas, such as by working with local mental health associa-
tions in seeking funds from the States and looking into the
possibility     of expanding health insurance coverage to in-
clude mental illness.        The NIMH officials   also pointed out
that an amendment to the law was needed to increase the
amount of Federal participation        for the highest priority
areas.


                                      16
        The problems involved in constructing    centers in high-
priority    areas may be alleviated to some extent by Public
Law 91-211, which provides for increased Federal assistance
for centers serving rural and urban poverty areas.         Under
this law, the Federal share of construction       costs for cen-
ters serving such areas may be as much as 90 percent.         Also
the law increased the Federal share and extended the grant
period from 4 years and 3 months to 8 years for staffing
grants awarded after June 30, 1970.        (See pa 10.)

CONCLUSION

      We believe that, in the interest      of an orderly    imple-
mentation of the program, NIMH should promptly obtain from
all States their latest plans setting       forth the number of
centers needed in accordance with HEWcriteria.            On the ba-
sis of such plans, HSMHAshould establish          an adjusted na-
tional goal of centers to be constructed         and funded and, in
cooperation   with State and local agencies, establish        annual
funding goals, considering   the availability       of Federal and
non-Federal    funds.

     A    time-phased plan of implementation,     even though sub-
ject to     adjustment, would be of assistance    to the executive
branch    and to the Congress in evaluating    the funding needs
of the    program from year to year and the impact of any
changes     that may be required because of budgetary reasons.

RECOMMENDATION
             TO THE SECRETARYOF HEW

       We recommend that HSMKAestablish,  on the basis of the
latest   State plans, a national goal of centers to be con-
structed and funded by grants and a time-phased program for
meeting the national    goal.

       In its comments dated December 29, 1970 (see app. II),
on a draft of this report,      HEW stated that it concurred with
our recommendation.      HEWalso stated that updated State
plans 3 which delineated     the catchment areas, were due in the
regional    offices  by September 30, 1970, and that the total
number of catchment areas for the immediate future was being
updated.     HEM further  informed us that its planning goal for
fiscal   year 1971 was an addition     of 34 community mental
health centers.

                                 17
                                          CHAPTER
                                          _-- ---- ---- 3

                      ADMINISTRATION
                     l_l..._-I----          OF CONSTRUCTION
                                             ____
                                               ------.--           GRANTS
                                                         ..-.-.- -.--

           Our review     of selected     grants    totaling   about $3.9 mil-
     lion  that were awarded for the construction              of 10 centers
     in the States     of California,      Florida,      and Pennsylvania
     showed opportunities       for NIMHVto strengthen         the administra-
     tion of the construction         grant program in two respects.

            1. By providing        adequate guidance       to grantees    and NIMH
     regional     program staff      for the allocation        of the cost of
     constructing       a medical    facility      to a center     that is to be
     included     in the facility.           Our review   showed that grants
     for two centers       were about $168,000 larger            than warranted
     because they were based on construction                 costs which,    in our
     opinion,     were not allocated          on the basis of sound procedures.

             2. By requiring         grantees     to justify      in their     applica-
     tions    for construction          grants    the size of a proposed           cen-
‘I   ter's    inpatient     facilities        and by establishing         criteria      for
     determining        the adequacy of such facilities               to serve the
 u
     needs of the population             of the catchment         area,    Our review
‘I   of construction        grant files        showed that they did not contain
     any documentation         in support       of the size of inpatient             facil-
     ities    being constructed          or sufficient       information       for an
     evaluation       as to whether        the facilities       would be adequate
     to serve the population             of the catchment         area.

     NEED FOR GUIDELINES ON ALLOCATIONS
     OF CONSTRUCTION COSTS

             When a center      is constructed      as part of a medical       fa-
     cility,    NIMH will     participate      in the cost of constructing
     the center      and in a share of the cost of constructing               build-
     ing areas which serve both center              and other hospital      pa-
     tients.     Although     the considerations       to be taken into ac-
     count in allocating          construction    costs for common service
     areas can be quite         complex and different       methods of alloca-
     tion can be used, NIMH had not issued adequate                guidelines
     for allocating       such costs.

            Our review    of the computation             of grants   totaling       about
     $1.1   million   for the construction              of two centers      that    had
                                                18
been built as part of hospital     units showed that, for both
grants,   the rates used to allocate    the costs of common ser-
vice areas were not determined on the basis of sound alloca-
tion procedures and that, as a result,      the grants were
about $168,000 larger than warranted.

       The total estimated construction      cost of grantee A's
center was about $1.1 million,       of which $654,000 was covered
by an NIMH grant.     We believe that the use of inappropriate
cost-allocation   procedures resulted      in an increase in the
grant of about $90,000, of which $33,000 was attributable
to improper allocation     of the costs of common service areas
such as the hospital's     business office    and the automatic
data processing   room,   and  $57,000  was  attributable         to im-
proper allocation    of the cost of recreational         facilities.

        The HEW regional     program staff determined that, of the
total cost of constructing         the common service areas in
grantee A's new hospital         addition,   12 percent was chargeable
to the center, but no support for this rate was contained
in the regional     grant project files.        Considering    the rela-
tive benefits    obtained by general hospital         patients    and by
center patients     from the several service facilities           being
constructed,    we believe that different        allocation    rates
should have been used.          Some of the common service areas in
the new hospital      addition,    such as the areas for mechanical
equipment, were of benefit         only to patients     in the new ad-
dition.     Other common service areas, however, such as the
data processing     area, were of benefit       to patients    in the en-
tire hospital.      We computed cost-allocation         rates for each
of the areas by using the ratio of center beds to beds in
the new hospital      addition    and of center beds to total hos-
pital beds as appropriate         and arrived at a composite
weighted allocation      rate of 5.6 percent.

      Use of the 5.6-percent  rate in lieu of the 12-percent
rate would have reduced the cost of the common service ar-
eas allocated   to the center by about $55,000 and would have
reduced the Federal share of the costs (60 percent) by about
$33,000.

       The new hospital   unit constructed  by grantee A also         in-
cluded recreational     facilities  and a corridor   leading
thereto.    The total cost of constructing      these facilities

                                   19
of about $101,000 was allocated          to the center      even though
the grant appl.ication      showed that the facilities          would be
available    for use by other patients        of the hospital.        There-
fore we believe     that it would have been more appropriate              to
allocate   the cost of constructing        these facilities       on the
basis of the ratio       of center   beds to total     hospital     beds
(5.3 percent)    instead    of charging    all costs to the center,
Use of this allocation       rate would have reduced the costs
charged to the center       by about $96,000 and would have re-
duced the Federal      share of the costs       (60 percent)     by about
$57,000.

        In the case of the grant of $479,000           to grantee  B for
the construction    of a center,       we do not believe      that the
use of patient-bed      ratios     to allocate    the costs of the hos-
pital's    common service      areas to the center was appropriate
because of the special         nature  of several    of these areas,

       The cost of constructing        most common service           areas,
considered    by NIMH to benefit       both the center        and the hos-
pital,   was allocated     to the center       on the basis of the ratio
of patient    beds in the center       to total     patient     beds in the
hospital   and resulted      in the allocation       of 7 percent         of the
costs to the center.         Our review,     however,     showed that sev-
eral of these service       areas,    such as the operating            room
and the inhalation      therapy    room, would be used very little,
or not at all,     by mental health       patients.       Since these areas
would be of benefit       mostly   to other hospital         patients,      the
costs allocated      to the center     appeared to be overstated.

       During our visit        to grantee   B's hospital,    we obtained
information       prepared   by the hospital     which indicated     that
center    patients     accounted    for less than 1 percent       of the
total    use of these areas.          On the basis of such use, we es-
timated     that the costs allocated        to the center would have
been about $1,000 instead           of the $121,000 that was allocated
and that the Federal          share of the costs     (65 percent)    would
have been reduced from about $79,000 to less than $1,000.

        Officials   at NIMH headquarters       and at     the HEW regional
office,      which had processed  the grants       for    the two centers,
agreed that HEW might have participated              in   construction
costs that were not properly        applicable       to   the centers    and
that there was a need for issuing          guidelines        to grantees   on

                                       20
the allocation      of construction costs of common service areas.
A regional    official   also agreed that the expected use of
common service areas by center as well as by hospital        pa-
tients was a factor necessary for consideration       in allocat-
ing the costs of such areas.




                                21
NEED FOR -- REQU_IPINGJUSTIFICATION
      .I__-OF IW~ti%!ILITIES
ZF SIZE                -------
        NIMJ3 has not required grantees to j,ustify               the number of
inpatient     beds to be provided in a proposed center and has
not established         criteria      for determining      whether the center
would adequately serve the needs of the center's                     catchment
area.      We reviewed data on inpatient            facilities      for all ap-
proved construction            projects   in three States under the ju-
risdiction      of one HEW regional         office and compared the num-
ber of inpatient         beds approved--including            beds approved un-
der construction         grants and psychiatric         beds available      in
existing     facilities      --with the total population          served by the
catchment areas.

        For the three States, we found that there were wide
variations     among the different    catchment areas in the number
of inpatient     beds being planned per 10,000 persons,     This is
illustrated     by the following   table.

                          Number of inpatient       beds
    Estimated         Approved    Existing           Total        Total per
 population   in        for     psychiatric         planned        10,000
catchment area         center        beds            beds          persons

     229,100              70            41             111           4.8
     157,000              12                            12           0.8
     219,200              22            22              44           2.0
     199,474              54            85             139           7.0
      80,103              26                            26           3.2
     164,600              27                            27           1.6
      Although we recognize that the size of a center to be
built may be affected         by several factors,  such as the qual-
ity of existing    facilities      and the methods of treatment to
be used at the center, we believe that wide variations           among
centers in the number of beds being provided for each person
may be an indication        that the size of inpatient   units in
some areas (1) may be excessive with resultant          unnecessary
costs being borne by the Federal Government and State or lo-
cal agencies, or (2) inadequate for the needs of the area
with adverse effect on the quality         of care provided to per-
sons in need of treatment.


                                      22
           Our review of the project       files   for seven construction
    projects    in five States under the jurisdiction         of an HEW
    regional    office    showed that they did not contain any docu-
    mentary support for the size of the inpatient            units re-
    quested by the applicants,          One applicant,    for example,    orig-
    inally   requested an 80-bed inpatient         unit which was approved
    by NIMH. The applicant         later submitted a revised applica-
    tion for a 58-bed unit.          The applicant    did not furnish    and
    NIMH made no request for the factors which had been consid-
    ered in determining       the size of the unit requested in either
    the original       or the revised application.

           Another applicant    requested a grant for the construc-
    tion of a 50-bed inpatient       unit which was awarded by NIMH.
    Information    compiled by the grantee after the first       7 months
    of operation    showed that the average daily bed occupancy was
    only 25, Subsequent to the start of construction          of an
    eight-story    addition   to its hospital,   the grantee decided
I   to convert two floors of the addition        into a community men-
    tal health center.       The administrator   of the grantee hospi-
    tal told US that the size of the inpatient         unit in the cen-
    ter was determined primarily       by the size of the space to be
    converted into the center.

            The grant applications          we reviewed did not contain suf-
    ficient     information     to permit an adequate evaluation           of the
    need for, or adequacy of, the proposed size of inpatient
    units.      In our opinion,        applicants   should be required to
    fully justify      the number of inpatient         beds requested and to
    fully    disclose all factors which were considered                in deter-
    mining the number of beds requested.               We also believe that
    it would be desirable           for HSMHAto establish       criteria    relat-
    ing to size of inpatient            units to provide guidance to appli-
    cants in determining          the size of inpatient      units to be re-
    quested.       Such criteria       would also be useful to HEW regional
    reviewers in evaluating            the size of inpatient     units requested.

            Regional program officials  stated that they relied upon
    an applicant's     medical staff when reviewing the size of an
    inpatient     unit requested by the applicant  because of the
    staff's    knowledge about the needs of the catchment area and
    the treatment methods to be followed at the proposed center.



                                          23
           RECOMMKNDATIONS     TO THE
               .I_ --.._---.-_-__-- - . S'ECJXTARY
                                         .._ _.- .--_OF  HEW
                                                     .----"--
                                                           -
                 To strengthen the management of the construction             grant
           program, we recommend that HSMHA

                 --issue guidelines     for the allocation of the csst of
                     constructing common service areas of a facility   to
                    a community mental health center that is to be in-
                     cluded in the facility;

                 --require     applicants   for grants to j,ustify,      in their
      .E            applications,      the size of inpatient   facilities      to be
                    constructed      in a center; and

                 --establish     criteria    for determining  the size of inpa-
     -I             tient facilities      that will adequately serve the needs
                    of the population       of the catchment area.
.4         HEW COMMENTS
                      AND OUR EVALUATION
 .?




                 In its comments (see app. II>, HEW stated that a for-
           mula for prorating    the costs of centers which are part of
           a larger medical facility     was developed and distributed to
           the regional  offices    in June 1968. HEW stated also that
           this formula and its utilization     would merit additional
           study unless the problems noted by us arose prior to the
           development of the formula.

                  Although the construction     grants to grantees A and B
           were awarded prior to development of the formula, we still
           believe that there is a need for HSMHAto issue adequate
           guidelines    on the allocation    of construction    costs of com-
           mon service areas.      Although the June 1968 formula might be
           of some help in determining      the costs properly      allocable     to
           a center, we do not believe that the formula in itself              pro-
           vides sufficient    guidance.    The formula contains no instruc-
           tions as to how it should be applied or as to what should
           be done in the case of conditions       which are not provided for
           in the formula.     The formula is based on average use rates
           for a number of common service areas and does not give ade-
           quate consideration     to the wide variety      of conditions     which
           may exist at a center.



                                              24
      For example, at grantee A's new hospital    unit the cost
of constructing    common service areas should have been allo-
cated to the center on the ratio of the number of beds in
the center (1) to the number of beds in the entire hospital
in some cases and (2) to the number of beds in the new unit
in other cases.     The formula does not provide for such vari-
able ratios.    Also the formula does not cover certain types
of areas, such as the recreational     facilities included in
grantee A's new hospital    unit.

        With respect to our recommendation relating                   to the
size of inpatient         facilities,        HEW stated that it believed
that it would not be prudent to attempt to establish                       national
criteria     for the number of inpatient             beds to be provided.
HEWnoted that the sizes of inpatient                  facilities      would vary
depending on such factors               as the cultural      patterns    of the
persons served, the treatment goals and methods of the cen-
ter and its professional              staff,   geographic factors,        and
available      facilities      in the community.         HEW stated that the
essential      issue was flexibility           and that center facilities
should be so constructed              that the areas within the center
could be changed to meet changing program needs.                        HEW stated
also that applicants           were required to describe all facili-
ties to be utilized          in the program and to describe the ra-
tionale     behind the arrangement and designation                  of space for
particular       uses.

        AS stated earlier       in this chapter, we found that, at a
selected regional       office,    project  files did not contain
documentary support for the sizes of inpatient             units re-
quested by applicants         and did not contain sufficient     infor-
mation to permit an adequate evaluation            of the proposed size
of inpatient     units,      We believe that the need for adequate
justifications     by applicants       for grants is emphasized by
the fact that the factors          to be considered do vary from cen-
 ter to center and that such justification           should be included
 in each grant application.
     Because there are many variable          factors    to be considered
in determining    the size of inpatient       units to be included in
a center, a certain     degree of flexibility        may be desirable.
We believe,    however, that criteria     relating     to the size of



                                         25
inpatient     units    should be established    to provide   guidance
to applicants       for determining    the size of inpatient     units
and to HEW regional         reviewers  for evaluating    the size of
the ,units requested.
                              CHAPTER4

       DETERMINATIONOF APPLICANTS' FINANCIAL ABILITY

                        TO OPERATECENTERS

       Under the Federal grant assistance      program for the
operation   of community mental health centers,        grants are
awarded for a major part of the staffing        costs and the
grantees are required to obtain sufficient         non-Federal
funds to finance the remaining staffing        costs and all other
operating   expenses, such as rent, utilities,       supplies,   and
equipment.     The Federal grant assistance     is provided for a
center on a declining     basis for a specified     period of years,
and, at the end of the specified     period, the center is ex-
pected to operate without Federal aid.         (See p. 7.1

       Our review of two centers which were not receiving
State or local support showed that these centers used grant
funds for unauthorized     purposes.     One center,   for example,
claimed that its non-Federal       sources of funds were inade-
quate.    NIMH had not made a realistic      appraisal    of this cen-
ter's financial   ability    before awarding a grant and did not
monitor its financial     status after award.

       We believe that NIMH, before awarding a staffing           grant,
should make a realistic        appraisal   of an applicant's    ability
to obtain sufficient        non-Federal  funds to initially     operate
a center and to finance its operations          after the level of
Federal support is reduced and eventually           terminated.      We
believe also that NIMH should periodically           review a cen-
ter's    financial    status after a grant has been awarded to
determine the use made of grant funds and the adequacy and
availability       of funds from other sources.

INSUFFICIENT NON-FEDERALFINANCIAL
SUPPORTOF CERTAIN CENTERS

       The problems encountered by centers which are awarded
staffing   grants without adequate assurances that non-
Federal funding sources will be available     are demonstrated,
in our opinion,    by our finding with respect to two centers
located in Los Angeles County, California.     These centers


                                  27
                  The State of California  reimburses approved local men-
           tal health programs for a portion of their operating      costs
           not covered by Federal grants and funds from private      sources,
           Up to July 1, 1968, the State's share of local program costs
           was 50 percent for existing    services and 75 percent for new
           services.    The State's share was increased to 75 percent of
           costs for all services effective      July 1, 1968, and to 90
           percent effective    July 1, 1969.
      .w          In Los Angeles County, California,         11 centers were
           awarded NIMH staffing       and/or construction       grants of about
           $16.4 million     at the time of our field review.            The county,
           however, which determines a center's           inclusion    in the
           State's assistance      program,   was   opposed   to  NIMH's   plan of
           establishing    these centers in the Los Angeles area.              hlY
           three of the 11 federally        assisted centers were included in
           the program administered       by the county and were eligible          to
           receive State funds.        The other eight centers were not in-
           cluded in the county program and did not receive State as-
.,I
           sistance.     County officials     told us in September 1970 that
      Y
           these eig'ht centers would receive some State and local sup-
           port for a variety      of services provided under contracts
           with the county but that their costs would not be covered
           in full under the State's program of assistance.

                   The county's major criticism    of the Federal program,
           as expressed in a letter      by the County Department of Mental
           Health to the State Department of Mental Hygiene, related
           to the rigidity     of the program and the regulations      which
           require a specified      size of catchment area to be served by
           each center.      The county took the position   that these reg-
           ulations    were appropriate   for the average community in the
           average state in 1965 (when the legislation       authorizing
           staffing    grants was enacted) but not for those communities
           which had developed their own mental health program.

                 The county's opposition   to NIMH"s catchment area con-
           cept was based on the following    beliefs:   (1) Los Angeles
           County is too large for the catchment area concept since
           the Federal program would require 53 catchent      areas in the
           county compared with 11 mental health regions projected      in

                                               28
the county's      planning; (2) the Federal program 'has ignored
the advance planning carried out by the county, under which
the county seeks to develop its services on a step-by-step
basis from small beginnings       to larger programs as needed;
and (3) the catchment area concept will result        in the cre-
ation of segregated mental health service areas.         Los
Angeles County"s Department of Mental Health estimated that
the proposed Federal program would require local funds of
$18 million     in 1970 as compared with $4.6 million    under the
county's    program.

      In September 1966 the Director   of Los Angeles County's
Department of Mental Health notified    the Director  of NIMH
that he was opposed to the method of awarding Federal staff-
ing grants for centers in the county and that the county
could not be held responsible   for providing   funds for the
local share of the centers'   costs or for subsequent finan-
cial support after Federal grants are discontinued,

        As an example of problems which can arise when local
support is lacking,    the actions taken by NIMH in awarding
a grant for grantee C, notwithstanding    the objections     raised
by Los Angeles County, and the financial     difficulties    expe-
rienced by this grantee are described below.         Similar dif-
ficulties    were encountered by grantee D.




                                29
INADEQUATE  REVIEW
 ____ ~ __.._..
           -_-     _I~OF GR/OJTF:EsS
                ..__..   _-.-___-
                               ___... F'INANCTAL
                                  .~~.-                 STATUS
                                       - . _.-..---. ..--...._
                                                            __
       Grantee C was conditiol!ally    awarded a staffing   grant
for its center in June 1966 subject to three programmatic
and financiai    conditions.    The grantee was awarded a Federal
grant of about $486,000 for the first       2 years of the cen-
ter's operations     which ended in January 1969, We found that
a substantial    amount of the grant funds was expended for
purposes not authorized      by law9 such as operating    costs
other than staff compensation and the cost of building          ren-
ovations,     The director   of grantee C's center told us that
Federal funds had been used for these expenditures         because
non-Federal    sources of funds were inadequate and the center
could not have operated without using Federal funds in this
manner.

       We notified    HEWregional    officiais    of this situation,
andp as a result,       NIGH made a review of the center's       use of
grant funds.       NIGH determined that, of the total grant funds
of about $486,000 provided for the centerIs            first 2 years
of operation,      February 1, 1967, through January 31, 1969,
the center had used about $220,000 for unauthorized            pur-
poses.    NIMH and the center agreed on a repayment plan under
which the center would repay the $220,000, with interest,
over a 3-year period, starting        September 1, 1969, Under
the agreement, $50,000 was to be repaid the first            year,
$100,000 the second year, and the balance the third year.
The center made an initial       repayment of $5,000 in September
1969 but had not made any further          repayments as of Decem-
ber 29, 1970.

       Our inquires     at the HEWregional       office   responsible
for the review of the grant application             and for recommending
approval or disapprovai         by NIGH headquarters      showed that re-
gional program officials         had questioned grantee C"s ability
to obtain necessary non-Federal          funds for either the period
of Federal assistance         or after termination      of that assis-
tance.     They commented,in a memorandum to NIMH headquarters,
on the centerIs      location    in a catchment area with a highly
indigent    population     and questioned the advisability        of es-
tablishing    the center because it could not count on any
solid local support to supplement an NIGH grant,



                                    30
        In vf cw of the ql2est9ons          raised       by the regional            office,
NIMH made its grant          subject      to three conditions                 to be met
by the grantee.         Two of the condi.tions                 required       service
agreements      with orher     medical        facilities          in the same area.
One agreement       was to be entered            into with a local                hospital
to provide      needed psychiatric            treatment          services       for pa-
tients     of the center,        The other          agreement        was to be entered
into with a nearby county-operated                      clinic      delineating         the
respective      service    responsibilities               of the center           and the
clinic.

       The third         condition      required       the grantee     to present      ac-
ceptable       financial       information         showing how the operating
expenses of the center               would be met.           The grantee    was to
show that its income would be sufficient                        to meet not only
its share of the center's                  professional       and technical      staff
costs but also all other costs9                     such as rent9 renovation,
and maintenance           of the building;           salaries     of personnel      not
funded by the Federal               grant;     medical     and office     supplies;
and utilities.

        After    the grantee      submitted     information         for the pur-
pose of clearing         these conditions,         the NIMH regional              staff
decided      in January     1967 to lift      the conditions,            and the award
was made final        in February      1967,      The information             submitted
by the grantee        regarding     the proposed       financing         of the cen-
ter's    operations      consisted     of a statement          that the grantee's
share of expense would be met from patient                       fees,      insurance
payments,      and reimbursements         for patient        services         from State
and local      agencies,       The information,        however,         did not in-
clude any firm budget data,               Therefore      NITti's      regional       staff
stipulated       that it would make quarterly              fiscal       and program
reviews      of the center's       operations       and expected          in this way
to keep informed         of any problems        that might be encountered.

        We found that the MIMi regional                staff     did not make the
stipulated     reviews      of the centerOs         operations        and had not
kept informed       of the center's         financial        condition.       Regional
program officials          and representatives          of the HEW Audit
Agency visited       the center       in Hay 1967 to evaluate              the ade-
quacy of the center's            accounting      system for determining
costs chargeable         to the Federal         grant.       MEW officials      found
the accounting        system to be satisfactory               for this purpose
but did not make a review             of the center's           costs incurred
because it was still           in an initial        stage of operation.
Regional office  personnel made no review           of the center's     fi-
nances during the next 17 months.

      NIMH officials       were not aware that the center was using
Federal grant funds for other than authorized            purposes until
we notified   them. NIMH regional       officials   told us that re-
gional personnel had made a number of visits           to the center
but that they did not review the center's         financial     records
or expenditures      and had not been informed by center officials
of any financial      difficulties.

       Our discussions     with NIGH headquarters       and regional    of-
fice personnel indicated        that their respective      responsibil-
ities for review of operations           at a grantee's   center had
not been clearly      defined and that this factor might have
contributed    to the failure      to make the quarterly     reviews of
the center's     operations    stipulated    at the time of lifting
the conditions     that had been imposed on the award of the
grant.




                                    32
NEED FOR
     -- _---IMPROVED REVIEW-- PROCEDURES
         In view of the problems       at grantee     C's center  and simi-
lar problems       at one other center      in Los Angeles County,       we
inquired      of the Director    of NIMH as to the adequacy of pro-
cedures used in determining          whether    grantees   are able to
raise      the requisite   non-Federal    funds and whether      NIMH
staffing      grant funds are used only for authorized           purposes,

       The Director      informed      us that NIMH had followed             its
standard    procedures       in reviewing        the grant applications          for
support    of the centers       in Los Angeles County.              He stated
that the centers       provided      fiscalprojectionswhich              seemed
reasonable     enough for NIMH's staff              to make favorable       judg-
me.ntal determinations         but that NIMH could not obtain               abso-
lute assurances       of continuing         fiscal    viability.       He pointed
out that NIMH had recognized              that grantee         C's center   might
encounter      some financial        difficulties,        but,   unfortunately,
NIMH had not made the quarterly   fiscal                  reviews     stipulated
at the time the grant was awarded.

       The Director       informed      us that      NIMH was taking           or plan-
ning   to take the      following       actions      to strengthen       its     review
procedures.

       "In    view   of bowledge        obtained      recently      on the
       nature of fiscal      and management problems in the
       staffing    grant program, we have assigned responsi-
       bility   to the grants management staff of the In-
       stitute    for active involvement      in the review of
       grant applications      prior to award and for provid-
       ing a continuing      review and evaluation       of manage-
       ment aspects of active grants,           A concerted ef-
       fort is now being made to develop more comprehen-
       sive review procedures       to focus particular      empha-
       sis on the management and fiscal          plans in the case
       of active grants.        In addition   we are considering
       the need for a more detailed         and/or more frequent
       report of expenditure.         The grants management
       staff will participate       in periodic     center grant
       review visits,      and will employ an expanded format
       for these reviews designed to gather information
       on the actual use of grant funds and the adequacy
       and availability      of funds from other sources.


                                            33
       These revised management efforts                  will    be imple-
       mented in the immediate  future."

         The Director   emphasized    the innovative       approach     of the
staffing     grant program,     which provided     seed money for one
of the most expensive        aspects    of initial     center    operating
costs and seeks to stimulate          additional     funding     sources   to
help support       these specialized     community     services.

          The actions       being taken by NIMH, if fully                implemented,
should serve to keep NIMH informed                  of the financial            plans
of grant applicants              and to monitor     the use of Federal             grant
funds awarded.            We believe,      however,      that it would also be
desirable         for NIMH to (1) provide          specific       guidelines       to
grant      applicants       on the information         to be furnished           on the
financial         resources      and needs of proposed           centers     and (2)
instruct        its review       staff   on the extent        of the verification
to be made of such information.                  The respective           functions
of NIMH headquarters               and regional    office      staffs     should be
clearly      delineated        to remove uncertainties--indicated                  at
the time of our fieldwork--about                 their      respective       responsi-
bilities.

        In June 1970 we inquired             at the cognizant        HEW regional
office    regarding         the financial     status      of the centers     in
Los Angeles County.              The regional      office    informed    us that
it had no financial            information      relating     to the centers.
We also asked an official               at NIMH headquarters         whether    re-
views had been made to determine                 whether     the six Los Angeles
County centers          not included       in the county program,         other
than the two discussed              in this chapter,        were encountering
financial     difficulties.           He told us that such a review had
been made at only one of the six centers.

RECOMMENDATION TO THE SECRETARY OF HEW

        We recommend that NIMH implement             its proposed      review
procedures,       whichshould   include     the issuance      of adequate
guidelines       to grant applicants    and for use of the HEW review
staff    in making reviews,       that will     provide    information       on
the financial       needs and resources        of recipients      of staffing
grants     before    an award is made as well as after            an award is
made.


                                            34
        In its comments (see app, II>, HEW stated that it con-
curred with our recommendation.               HEW stated also that NIMH
had issued a policy statement in October 1969 which covered
such areas as grant applications              and awards, funding of
grants, grantee responsibilities,                accounting,    records, and
audit.     HEWnoted that amending legislation                had been enacted
since the issuance of the policy statement and that NIMH had
developed an updated policy manual which was expected to be
issued in January 1971.             (An official     of NIMH informed us on
February 25, 1971, that the manual had not been issued.)
According to HEW, this manual will provide applicants,                      grant-
ees, and review staffs with extensive guidance on the staff-
ing grant program, covering such areas as programming for
centers,     eligibility     requirements        for applicants,      the appli-
cation process, financing,            accounting,      records,    and audit,
HEW stated that the manual would define the responsibilities
of applicants         in the fiscal    area, would clearly         identify
eligible     grant costs, and would contain a special section on
the financing        of center programs.

       HEW also noted that the administration         of the Community
Mental Health Centers Program had been decentralized            effec-
tive July 1, 1970, and that extensive         effort   had been de-
voted by the NIMH regional      and central     office staffs   to the
development of modified review and approval procedures and
policies  which have been incorporated        into an operating
handbook.     HEW stated that the section of the handbook on
grant application     review and approval procedures had been
issued in July 1970 and had been discussed in a training
program conducted for all regional       office program and grants
management staff.      HEW stated also that the procedures and
policies   had been applied in each region and that they ap-
peared to be effective      on the basis of the limited       experi-
ence to date.

       Although we recognize   that NIMH has begun to take cor-
rective    action in this area, we believe that emphasis should
be placed on the issuance and implementation     of the updated
policy manual to provide for adequate review procedures.




                                         35
                                     -CI?A?TER
                                       ---- - -- 5

                      ADMINISTRATION
                      -_--             OF
                                 -_- ..--  STAFFING GRANTS
                                        &--_----..---- -. --
               We believe that NIMH management controls        over the staff-
       ing grant program need to be strengthened           to help ensure
       that Federal grant funds are used in accordance with the
       terms of the grants.          Our review of grants awarded for the
       initial    operations    of 14 selected centers showed that three
       of these centers used grant funds for purposes not authorized
       in the law and that five centers used grant funds for ques-
       tionable    purposes.     NIMH was not aware of these unauthorized
       or questionable       expenditures    until we brought them to the
       attention    of its program officials.

,-I           Improvements in administrative   procedures which we be-
  .I
       lieve are needed include (1) additional      guidelines     to grant-
“.”    ees and HEWreview staffs regarding      the accountability      for
“1     grant funds, (2) more informative     expenditure    reports by
.I     grantees to assist NIMH in determining      how grantees are us-
.a     ing grant funds, and (3) more extensive and timely onsite
!1     reviews by the NIMH staff of newly established        center opera-
       tions.
       UNAUTHORIZEDOR QUESTIONABLE
       GRANTEXPENDITURES

              Our review revealed the following       unauthorized   or ques-
       tionable   expenditures  of grant funds,

       Grant funds used for unauthorized         purposes

              The Community Mental Health Centers Act authorizes           the
       use of Federal grant funds for a specified      portion of      a com-
       munity   mental health center's    cost of compensation of      its
       professional   and technical   personnel but for no other       operat-
       ing expenses.    Three centers had used grant funds for         other
       than staffing   costs as follows:




                                          36
      Grantee
      WI_-           Amount
                     --                      Expenditure
                                             ---
          c         $220,000           Building renovation    and
                                          operating  expenses
          D           53,000           Utilities,   rent, and of-
                                          fice supplies
          E            5,000
                           -           Contract services

       Total        $278,000
        The director   of grantee C's center told us that the
center had used Federal funds for other than staffing           costs
because it was not able to obtain sufficient        non-Federal
funds for the operation       of the center,  The financial     dif-
ficulties     of this center and steps taken by NIMH to recover
the unauthorized      payments are described  in ch:?pter 4. A
similar    situation   existed with respect to grantee D.
Grant funds used in excess of authorized
Federal percentage of staffing costs
        The Community Mental Health Centers Act limited        staff-
ing grant support through June 30, 1970, to 75 percent of
eligible    salary costs during the initial      grant period.
Grantee E expected to meet its share of costs from a State
grant whieh was not received during the first          grant year.
An official     of grantee E told us that, in order to alleviate
a shortage of funds, grantee E obtained oral permission            from
NIGH to use NIMH staffing       grant funds for payment of 100 per-
cent of all center salaries.         About 4 months after the first
grant year ended, grantee E received its State grant, at
which time it had used Federal grant funds totaling           about
$265,000 in excess of the authorized        75 percent Federal share
of salary costs.       A grantee official   informed us that ar-
rangements would be made with NIGH to repay this money. We
informed N1ML-lofficials      of what we had found.

      NIMH has followed the practice   of permitting  other
grantees to use grant funds for payment of salaries      and other
expenses in excess of the authorized    Federal share of eli-
gible costs to tide them over periods of temporary shortage
of non-Federal   funds. NIMH generally   has concerned itself
with whether the Federal share of eligible     costs was re-
duced to the authorized   level by the end of a grant year.

                                  37
            Tn our opinion,  t5t2  NT.MHpractice   of allowing grantees
     to use Federal grant fllnds in the manner described is not a
     good administrative    practice    because it results    in larger
     advances of Federal funds to grantees than otherwise would
     be necessary and in increased interest        costs to the Govern-
     ment. Under this practice,       there is also a risk that a
     grantee may not be able later to obtain sufficient          non-
     Federal funds to reduce the Federal share of costs to the
     authorized   level.

     Grant funds used in lieu
     of non-Federal  funds

            The Community Mental Health Centers Act provides that
     Federal funds made available      under staffing    grants be used
     to supplement and, to the extent practical,         increase the
     level of funds available     for the centers'    programs.      To com-
     ply with this "maintenance of efforl?' provision,         staffing
     grant applicants    are required to show in their applications
     and provide satisfactory     assurance that the staffing        costs
     for which they requested Federal assistance         represent    in-
     creased expenditures     over the average total cost of community
     health services for the preceding 2 years,         According to in-
.I   structions   issued to grantees,    the maximum amount of a Fed-
     eral grant is to be based on the lesser of (1) the proposed
     estimated increase in the total cost of the center's            mental
     health program or (2) the total estimated salaries          and re-
     lated costs of professional     and technical    personnel for fur-
     nishing the new services.
           In the case of the two centers    operated by grantees F
     and G, we found that NIMH had not reduced the amounts of the
     Federal grants to amounts based on the increases in total
     center costs which were less than the costs for new services.
     Federal grant funds totaling   $89,000 were used, as a re-
     sult, for expenditures   which we believe should have been
     borne by non-Federal   funds.

           For example, during the first    grant year, grantee F
     expended grant funds of about $323,000, representing       75 per-
     cent of the staffing    costs for new services.     In our opin-
     ion, however, application     of the maintenance of effort   re-
     quirement would have limited     the amount of grant funds allow-
     able to about $246,000, representing      75 percent of the

                                      38
actual increase in total program costs.   Therefore we be-
li,eve that the grantee used grant funds of about $77,000
more than allowable under the grant.

      To determine whether Federal funds have been used to
supplant non-Federal   support, we believe that NIMH should
consider the grantees'   prior levels of expenditures when re-
viewing their annual expenditure     reports.
        After we brought this matter to the attention   of NIMH
officials,    they informed us that NIMH had adopted procedures
for determining    levels of expenditures  before and during a
grant year in compliance with the maintenance-of-effort      re-
quirement.

Center employees' salaries  not
adequately supported by time records

        Three centers did not maintain adequate time and atten-
dance records for their nonprofessional     employees and, as a
result,    charged their salaries  on the basis of estimates
rathes than on the basis of a record of time worked.        The
Federal share of these costs amounted to about $46,000,         We
were not able to determine whether this amount was properly
chargeable to the Federal grants.

      According to NIMH procedures,    a staffing   grant applica-
tion must show the portion    of a center employee's salary
that is expected to be reimbursed under a Federal grant.
For employees performing    both center work and noncenter world,
the applicant   must show the expected percentage of time that
the employees will be assigned to functions       which are eli-
gible for grant reimbursement and those which are not.          Al-
though the application   is the basis for the award of a
grant a actual reimbursements under the grant should be based
on documented expenditures    made by the center during the
grant period.

        The HEW Grants Administration  Manual requires     that di-
rect charges for salaries     and wages of nonprofessional       em-
ployees be supported by time and attendance and payroll           dis-
tribution    records.  NIMH had not issued instructions       to
grantees about the maintenance of time and attendance rec-
ords.     We found that these three centers did not maintain

                                  39
such records but based their reimbursement claims for par-
tially    reimbursable     salaries  on the estimates in the grant
application     rather than on time worked and that NIMH was not
in a position      to verify    the propriety of the claimed costs.

      We believe that NIMJ!I should issue guidelines   to grant-
ees for maintaining   time and attendance records to support
claimed costs of nonprofessional    personnel as required by
HEX policy.

Use of grant funds to pay          employees
not qualifying  as technical         personnel

       Under the Community Mental Health Centers Act, Federal
staffing    grants are made to meet a portion            of the compensa-
tion of eligible       professional     and technical     personnel,      but
the act, prior to the 1970 amendments, did not define the
positions    eligible     for grant support.        According to HEW
guidelines,     the technical     personnel category includes mental
health aides, pharmacist's          assistants,     and a variety       of other
subprofessionals.        The guidelines      provided that the salaries
of these personnel would be eligible             for payment under a
staffing    grant if they had previous mental            health training
or experience      or if they were receiving         appropriately       super-
vised training      during the grant period.           NIMH, however, had
made a broad interpretation          of the category of subprofes-
sionals and, as a result,         had included gardeners,          janitors,
maids, porters,       or any individual      providing    a therapeutic
patient relationship.
       We found that three centers had used grant funds of
about $37,000 for payment of salaries   of subprofessional em-
ployees who were not performing duties or were not being
trained   in accordance with the HEWand NIMH criteria.

       For example, grantee F's center used grant funds for
the salaries   of employees in seven clerical   and janitorial
positions   who did not work with center patients.     The center
used grant funds of about $16,000 for these positions        during
the period September 1, 1967, through August 31, 1968.

     NIMH regional  officials    told us that, during their on-
site visits  to the three centers,    they had not inquired into
the mental health training    given to, or the work performed

                                      40
by, the subprofessional     personnel because they were not suf-
ficiently familiar   with   all aspects of this new program.

      The Community Mental Health Centers Amendments of 1970
added section 265 to the act which provides a definition  of
technical  personnel eligible for staffing grant support.
     "*** the term Otechnical personnel'         includes ac-
     countants,   financial    counselors,   medical tran-
     scribers,  allied    health professions     personnel,
     dietary and culinary      personnel,  and any other per-
     sonnel whose background and education would indi-
     cate that they are to perform technical          functions
     in the operation     of centers or facilities       for
     which assistance      is provided ***; but such term
     does not include minor clerical       personnel or main-
     tenance or housekeeping personnel,"

      The subprofessional     employees supported under the Fed-
eral grants at the three centers would not qualify         for grant
support under the provisions       of the 1970 amendments and did
not meet the criteria     for positions   eligible  for grant sup-
port as previously    established    by HEW. We believe that NIMH
in its future reviews of grant applications        and onsite vis-
its to newly established      centers should assure itself     that
all positions   to be funded by grants are eligible      for such
support.

Revenue generated by grant-
supported activities made available
for nonmental health activities

      Community mental health centers receive,          in addition to
NIMH staffing  grants,    revenues    from  non-Federal   sources,
such as donations;    patients'    fees; and State, city,      or
county funds.   We noted that two centers had combined rev-
enues from Federal and non-Federal         sources that exceeded
operating expenses during their first         grant years by about
$283,000.

       The grantees,  which operated general hospitals,      in ad-
dition   to the mental health centers,  deposited the surplus
funds into the hospitals'    general operating     accounts that
were available    for nonmental health activities.       NIGH had

                                 41
      not issued instructions  to its grantees on the use of rev-
      enues generated from grant-supported   activities  and had not
      implemented HEW's March 1969 policy on disposition    of such
      revenues.

             In March 1969 HEW issued guidelines     in its Grants Ad-
      ministration     Manual for the disposition   of income generated
      by grant-related     activities.   HEW's general policy provides
      that:
           "The grantee is accountable       to the awarding agency
           for the Federal share of any grant related        income.
           *** that accountability       may be satisfied  by dis-
           position   in accordance with one or a combination
           of the following    alternatives:

           "1.   Returning the funds to the Federal Government
                 by (a> reducing the level of expenditures         from
                 grant funds by an amount equal to the Federal
                 share of the grant related      income (b) treating
                 the funds as a partial    payment to the award of
                 a succeeding (continuation)       grant, or (c) pay-
                 ment to miscellaneous    receipts     of the Treasury.

           "2.   Using the funds to further  the purposes of the
                 grant program from which the award was made.

           "Although grant related      income may be used to re-
,II
.Y
           imburse costs which have previously      been treated
 :’        as non-reimbursable,     it may not be used to reim-
           burse unallowable    costs."

      NIMH informed us at the time of our review in October 1969
      that neither HSMHAnor NIMH had issued instructions   for im-
      plementing this policy.




                                       42
IMPROVED
       ---PROCFDURES
                   NEEDEDTO
STRENGTHEN  MANAGEMENT
                     OF
STAFFING GRANTPROGRAM

        We believe that the findings       discussed in this chapter
demonstrate a need for NIMH to strengthen             its management of
the staffing      grant program, particularly       by (1) obtaining
more informative       grantee expenditure     reports,     (2) making
more extensive and timely onsite evaluations              of newly estab-
lished center operations,       and (3) issuing additional         guide-
lines to grantees and the HEW review staff on the account-
ability    for grant funds.

Grantee expenditure      reDorts

       Applicants    for staffing    grants are required to submit
detailed    budgets of center operations        including   proposed
staff positions      and salary rates for which Federal support
is sought.      After the award of a grant, the grantee is not
required to report any details         of expenditures     corresponding
to the budgets submitted;         the reporting    requirements   are
limited   to brief summary fiscal        status reports,

       Federal grant funds are advanced to grantees on the
basis of monthly reports of total anticipated         expenditures.
Grantees are required to submit quarterly        summary reports
of expenditures    and reconciliations    of grant funds received
and remaining on hand, Within a specified         period after the
end of the grant year9 an annual expenditure        report is re-
quired to be submitted to NIMH showing the status of the
Federal grant funds and the grantee's       matching expenditures.
HEW's general policy is to require grantees to submit only
brief summary expenditure      reports and to maintain supporting
detailed   data subject to HEWexamination       and audit.     HEW's
policy does not require detailed       or supplementary    data ex-
cept when a specific     demonstrable need exists.

      The several instances of unauthorized       or questionable
expenditures   by centers of grant funds noted in our review,
which had not come to the attention       of NIMH, suggest the
need for more informative     program expenditure     reporting   by
grantees.    Pertinent  information    in such reports on a center
should include details     on its personnel,   their functions     and
compensation,    and on other operating    expenses and on the
sources of their funding.       We believe that the circumstances
                                   43
found by us at newly established        centers, where adequate ac-
countability       procedures for grant funds have not been estab-
lished,    justify     an exception to HEW's general policy of min-
imizing reporting        by grantees.

Onsite   visits

      NIPlH procedures require its regional   staffs to make on-
site evaluations     of a center's operations as soon as possi-
ble after it has been active for 90 days.      At the time of
our fieldwork,    these required evaluations  had not been made
at several centers.

       For example, the eight centers in operation        in the Com-
monwealth of Pennsylvania       for more than 90 days at June 30,
1968, were not visited       by NIMH regional   personnel until     7
to 23 months after the centers officially          began operating.
The evaluations    made during the visits      covered the centers'
mental health service programs but did not include an eval-
uation of the adequacy of the financial         records and proce-
dures.    Regional officials      told us that the scope and timing
of their visits    were limited by the lack of available         per-
sonnel.

       In the State of Florida,     one of the centers that was
awarded a Federal staffing      grant was visited   by NIMH re-
gional personnel in the first      month of its operations.     This
visit,   however, was premature because the program was not
fully under way. Also there was no record that a follow-up
visit   had been made, even though NIMH regional      personnel had
planned such a visit.

        We were informed by NIMH that regional     staff respon-
sible for center operations       in the State of California   had
visited    selected centers needing attention     but that reports
on these visits     had not been prepared.     We were also told
that the regional     office  staff did not have the competency
to review the financial      operations  of the centers.
       We believe that prompt onsite evaluations    of newly es-
tablished   centers should be carried out as required by NIMH
procedures and that such evaluations   should be expanded to
cover not only the adequacy of the centers'      mental health
services programs but also the adequacy of their financial
records and procedures.
                                44
      We discussed with a representative  of the HEWAudit
Agency the extent of the agency's audits of community men-
tal health centers.    We were told that HEWaudits of the
centers had not been made at the time of our review and that,
because of the agency's work load and staff limitations,    the
audits had been deferred,    We were also advised that the Au-
dit Agency had started to make audits in fiscal   year 1970
and that by June 1970 audits had been made of 27 centers.

Guidelines   to grantees   and review    staff

       We believe that NIMH should review the adequacy of its
guidelines    issued to recipients        of Federal staffing    grants
and for use of its own review staff so that an accurate and
timely accounting      for the use of grant funds can be obtained.
As previously     discussed,     additional    guidelines  are needed
regarding grantees'         (1) compliance with the maintenance of
effort   requirement     of the law, (2) maintenance of adequate
time and attendance reports for nonprofessional             center em-
ployees, and (3) disposition           of income generated by Federal
grant-supported      activities,     such as revenues from patients,
so that the Federal share of such revenues can be either
paid to the Federal Government or otherwise used only for
the purposes of the grant program.



        NIMH officials   expressed general agreement with our
suggestions     for strengthening    the administration      of the
staffing    grant program.      They informed us that they were con-
sidering    the need for centers to submit more detailed           ex-
penditure     reports and the possibility      of requiring    the cen-
ters to submit annual financial         statements certified      by
certified     public accountants.

      Also NIMH officials,     to whom we referred    the unautho-
rized or questionable      expenditures   of grant funds, agreed
to examine into the circumstances       in each case and seek re-
covery of any grant funds that were not used strictly          in
accordance with the terms of the grants,

RECOMMEmATIONSTO THE SECRETARYOF HEW

      We recommend that    HSMHAstrengthen  the administration
of the Federal staffing     grant program by such means as
                                   45
      .--requiring   grantees    to   submit   more informative       reports
         on center   expenditures,

      --expanding  the scope of and making more timely                evalu-
         ations at newly established centers,

      --providing   adequate guidance to grantees and NIMH re-
         view staffs on the accountability   for grant funds,
         and

      --obtaining     settlements     of all   overpayments       or improper
         expenditures     of grant    funds.

      In its comments (see app. II>, HEW stated that it con-
curred with our recommendations and would direct NM-I to
carry them out.  HEWadvised us that

      --the expenditure  report form was being reviewed to
         determine the changes that would make it more useful;

      --the HEWAudit Agency in fiscal  year 1970 initiated
         an audit program of the Community Mental Health Cen-
         ters Program;

      --a community mental health center operating handbook
         would be issued to grantees and regional office staff
         and
      --full   settlement  would be made with each of the grant-
         ees for the unauthorized    use of grant funds, as noted
         in our report,   consistent  with the public interest.
        Although we recognize that NIMH has begun to take cor-
rective     action in this area, we believe that continued em-
phasis should be placed on the timely issuance and imple-
mentation of adequate guidance to grantees and HEWreview
staffs.      We recognize also that some settlements      have been
made of the overpayments or questionable          payments from grant
funds, as discussed in this report;         however, we believe that
timely settlements       should be made of all such overpayments,
including     any disclosed    as a result of the implementation
of the improved reporting        and review procedures.    In our
opinion,     settlements   of overpayments and questionable    pay-
ments would result in determinations         that Federal funds have
been properly  expended and that collections      have been made
of amounts which represent  unauthorized     expenditures  of
grant funds.




                                47
APPENDIXES




49
                                                                                       APPENDIX            I

                     DISTRIBUTION OF COMMUNITYMENTAL HEALTH CENTER
                            GRANTS BY STATE AS OF JUNE 30, 1970
                                    Number of centers
                                                 Con-
                           Con-                struc-                             Amounts obligated
                          struc-                 tion                     Con-
                            tion    Staffing       and                   struc-
            State          only       only    staffing      Total
                                                            --            tion        Staffing          Total
                                                                     -(000                omittedh------
Alabama                        6         1                      7    $     3,244      $       267   $    3,511
Alaska                                                          2                             181           181
Arizona                        1         ;           -2                    1,817           2,850         4,667
Arkansas                                              3        75          2,443           2,998         5,441
California                    1:        1:           16       40          16,053          22,758        38,811
Colorado                                              5        9           2,271           6,806         9,077
Connecticut                   -2         4                     4           2,314           1,941         4,255
Delaware                                             -1        2              507             741        1,248
District    of Columbia                  ;            1        3              327          4,841         5,168,
Florida                       -3                      9       12           6,376           6,363        12,739
Georgia                        9         2                    11           5,249              798        6,047
Hawaii                         1         1                                    677             353        1,030
Idaho                                    2             ;       2              602          1,011         1,613
Illinois                      -6         3             1      10           8,073           7,256        15,329
Indiana                                                        8           4,983           1,168         6,151
Iowa                           :                       i                   3,368             434         3,802
Kansas                         2        -1                     63          1,606           1,501         3,107
Kentucky                                13             93     22           3,279          11,519        14,798
Louisiana                     -9         1             2      12           4,445           2,972         7,417
Maine                                    2             2                      613          1,668         2,281
Maryland                       z         1             2       75          3,251           1,813         5,064
Massachusetts                  4                       3      12           4,688           6,078        10,766
Michigan                       4         2             3      13           6,378           4,720        11,098
Minnesota                                              5                   2,571           2,286         4,857
Mississippi                   -2         z                     z           1,364              902        2,266
Missouri                                 1           -3        9           4,274           5,318         9,592
Montana                        1'        2                     3              231             362           593
Nebraska                       2                     -2        4           1,220              294        1,514
Nevada                                                         1              505                           505
New Hampshire                  t                               2              833                           833
New Jersey                     8                     -3       11           5,119           3;097         8,216
New Mexico                                                                    700          2,513         3,213
N&I York                     -9          t           1:       212         15,261          20,151        35,412
North Carolina               11                       2       16           5,009           1,102         6,111
North Dakota                             z            2        5              330          1,790         2,120
Ohio                                                  3       12           9,032           2,845        11,877
Oklahoma                       F         t            2        4           2,523           2,461         4,984
Oregon                                                1        2              801             537        1,338
Pennsylvania                  1;        -7           10 a     34          11,011          24,710        35,721
Rhode Island                                                   1              515                           515
South Carolina                 i                       5       6           3,585           2;618         6,203
South Dakota                   1                                              267                           267
Tennessee                      2                     -6        ii          4,325           1,888         6,213
Texas                          3        i0            4       17           6,533          11,327        17,860
utah                                      2                                   254          1,326         1,580
Vermont                                                ::       23            542             709        1,251
Virginia                      -3                       2                   4,307              452        4,759
Washington                     2        -3             2        5          2,700           3,330         6,030
West Virginia                  3         1             1                   2,102           1,106         3,208
Wisconsin                      8         2             1        11'        4,058              657        4,715
Wyoming                                  1                        1                           291           291
Puerto Rico                            - 5          - -3      - 8    3,800                 1,996         5,796
    Total
                            Z165       117
                                                    =138      420 $176,336
                                                             -----                    $185,105      $361,441




                                               51
:I               APPENDIX II



i/
                                  DEPARTMENT       OF HEALTH,       EDUCATION.            AND WELFARE
                                                    WAS-HINGTON.        D.C.    20201




     OFF!CE   OF THE SECRETARY
                                                        DEC 29           1970
I




                         Mr.    Dean K. Crowther
                         Assistant   Director,     Civil Division
                         U.S. General      Accounting    Office
                         Washington,     D. C. 20548

                         Dear    Mr.   Crowther:

                         The Secretary      has asked that I reply to the draft report        of
                         the General     Accounting     Office on needed improvements        in
                         the administration       of the Community     Mental Health    Centers
                         Program.       As requested,       we are enclosing   the DepartmenVs
                         comments      on the findings     and recommendations      in your report,
                         together  with those of the responsible        State and county agencies,

                         We appreciate      the opportunity           to review            and comment    on your
                         draft report.

                                                                   Sincerely            yours,




                                                                   James B. Cardwell
                                                                   Assistant Secretary,             Comptroller

                         Enclosure




                                                                   52
                                                                                                                      APPENDIX II



COMMENTS         ON THE GENERAL               ACCOUNTING           OFFICE       DRAFT       REPORT        ENTITLED:           NEEDED

IMPROVEMENTS             IN    THE ADMINISTRATION                  OF THE        COMMUNITY         MENTAL        HEALTH       CENTERS

PROGRAM,         HEALTH        SERVICES         AND MENTAL           HEALTH       ADMINISTRATION,                DHHW



GAO Reconmxendation:          That     the     Secretary    direct     NIMH to establish           a
     national       goal    of centers         to be constructed         and funded,       based
     on updated        State    plans,      and proposed        annual    program    goals     for
     meeting      the national!        objective.
        :
HEW Comment:           We concur         in this        recommendation.
The original         goal      of 2000       community          mental      hea!th       centers       was based        upon
the total       population         prior       to the development                 of the first           set of State
plans.       NIElH no longer           uses      that     figure.          Each State         plan     must    now delin-
eate   the State’s           catchment         areas.         These     updatt:d       State     plans      were     due in
the regional         offices       by September             30,    1970.        The total         number     of catchment
areas    for    the    immediate         future       is now being            updated.          The annual         planning
goal   for    FY ‘71 is 34 community                    mental       health      centers,        bringing        the total
to 454.

It should        also      be noted      that    Public        Law 91-211      will     assist    the higher
priority       areas       to develop        community        mental    health      centers     bjr the increased
time     and percentages            allowed      for    staffing      grants,       the higher        rates       of
Federal      participation            in construction             and staffing        in designated          urban   and
rural     poverty        areas,    and initiation              and develcpment          grants    for     poverty    areas.

GAO Recommendation:                  To strengthen           the management            of the construction                  grant
     program,        we recommend             that     the Secretary         direct         NIMH to (1) issue
     guidelines           for      the allocation            of construction             costs       of common       service
     areas      which       are properlv            chargeable       to the grant              for     a connnunitv
     mental      health          center     being      built      as part     of a larger              hospital      facility
     and (2) require                 that   grant      applicants        adequately?           justifv        the size        of
     inpatient          facilities          to be constructed              in a center             and establish
     criteria         for      evaluating         the size        of such     facilities             which      will
     adequately           serve        the needs       of the catchment              area.

HEW Comments:              We recognize             that       during      the initial           stage       of the Community
Mental      Health        Centers        Construction              Program      the allocation               of costs           of
common service              areas      was often          a problem.            In June        of 1968 a formula                     for
pro-rating           the costs         of community             mental       health      center       facilities,               which
are part        of a larger            medical        facilitv,          was developed             and distributed                   to the
regional        offices.            This     formula         is utilized           by regional          office          staff        in
their      work     with      State      agencies         and applicants              on a project             by project              basis.
It would        appear        from     the recommendation                  that     this     formula         and its          utiliza-
tion     merit      additional           study      unless         the problems          noted      arose         prior       to the
development            of the formula.




                                                                    53
APPENDIX II


  Page      2   - Comments     on GAO Drift-        Report

  The size of an inpatient               f,7ciliLy       ,~ill   vrll r' rr~liil ( / (irer to c<'liter depending
  upon many factors.              These f.1, I )rs in~-ltrc!t~ ;11e I 111t~lral patterns                   of the
  persons served,           the treatment.        go:>1 s ::lld II<'! l11rd.s :)f the center            and of its
  professional         staff,     geographic        fnc.tf>rs,     and .Ivailahle         facilities         in the
  community.         The essential         issllc     is flexibility.            Celjter facilities,              including
  inpatient      units,       should be so constructed                that    the areas can be changed to
  meet changing          program needs.           Provided       that the space constructed                    is utilized
  to carry out a center program that                       is rcsponsi\Ye        to the needs of the people
  served,     it can be expected             that !he prlmber of beds nccdcd may change with
  program experience.              In addition,          it is required          of construction            grant
  applicants        that they describe            all faciljties           to be utilized            in the program,
  not just      those to be constructed,                 and to descl-ibr            Ihc rationale          behind
  the arrangement           and designation           cf space for p;lrti(,lIl,tr            l~sic's, including
  inpatient       space.       While these        factors      are IIO~ c~sidbli~hcrl             as national        pro-
  gram criteria,          t-hey definitrly         .ire a part tjf the evaluative                    data in each
  construction         application       and ,ir-e judged during              the rr\riew         and approval        pro-
  cedure.       We feel that it would not be prudent to attempt                                to establish
  national      criteria       for the nlunber of inpatient                 beds to be provided               by a
  community mental health              centers       program.

  GAO Recommendation:      That the Secretary      provide   for implementation                               of the
       improved review procedures         proposed .by NIFiH, including    issuance                              of
       adequate guidelines,to        grant applicants     and HEW review staff,                               to keep
       NIMH adequately     informed     of the finaqcial    needs and resources                               of-re-
       cipients  of staffing      grants   under the Comnunitv Mental Health                                  Centers
       Program.

  HEM Comments:     We concur with the recommendation    to implement    improved
  review procedures      proposed by the NIMH, which would contain    guidance    to
  applicants    and review staff    for informing NIMH about the financial     needs
  and resources    of grant recipients.

  In October 1969, the NIMH issued a brochure                        entitled      -- Community Mental
 Health Centers Staffing               Grants -- Policy          Statement.        This policy       statement
 was made available          to applicants,           granteek      and NIMH review staff            and covers
  such areas as:       grant applications              and awards, funding            of staffing       grants,
 grantee responsibilities,                accounting,       records,      and audit.        Since the
 issuance    of the policy          statement,       however,       new legislation         has been enacted
 which amended the Cprrrmunity 'lental                 Health Centers Program to the extent
 that the policy       statement         must be amended.            In that regard,         the NIMH has
 developed    an updated policy             manual which is expected               to be issued in
 January 1971.        The policy         manual is entitled            -- Manual of Policies            for the
 Community Mental Health Centers Program.                         It will     provide     all applicants,
 grantees   and review staff             with extensive         guidance      on the NIMH staffing
 grant program and covers such areas as:                        programming       for cormnunity mental
 health   centers,     eligibility          requirements        for applicants         for community
 mental   health center          staffing      and/or construction            grants,     application
 process,   financing,        accounting,         records,      and audit.        The manual defines
 the responsibilities            of the applicant          in the fiscal         area, clearly        identifies
 eligible        grant   costs,     and contains          a special       section      on the     financing       of
                                                                                                                 APPENDIX II


Page     3 -     Comnents        on GAO Draft             Report

community         mental        health       centers          programs.

Administration               of the Community                  Yenta1       Health      Centers        Program      was
decentralized              to the regional                 offices        of HEW effective               July    1, 1970.          In
 that    connection,              extensive         effort         was devoted          by both        regional        and central
office       NIMH staff             to the development                  of’ modified          review       and approval          pro-
cedures        and policies,                This      material          was incorporated               with     a larger
document         entitled           -- Community             Mental       Health       Center      Grants       Operating
Handbook.            The section            on review            and approval           procedures          was issued        in
 final     form      in July          1970 and was the subject                       of considerable             discussion          in
 a training          program          conducted          for     all    regional        office       program       and grants
management           staff      0 Since         that       time,      the procedures              and policies           have    been
 applied       in each         region       and appear             to be effective,               based      on the limited
experience           to date.            This     document,identifies                   the responsibility                 of the
regional         grants        management           office         in the monitoring               of active         grants,
tiith    particular             interest        on the financial                  aspects       of the program             and of
 the grantee            operation.

GAO Recommendation:                That     the Secretary             direct       NIMH to sun,o,then                  the
     administration              of the staffing                grant      program       by such        :Iesns      as
     requiring          more     informative            evoenditure           reporting           bv granttres,
     expanding          the scope         of and making              more’timelv            on-site       evaluations
     at newlv         established           centers,          and providing             adequate -      guidance         to
     grantees         and HEX review              staffs        for   the purpose             of obtaining           an
     accurate         accounting          for     grant       funds     used.         Also,        that    the    Secretarv
     direct       NIllH    to make timely               settlements           of all        staffing         grants      which
     involve        overpavments            resulting           from     the unauthorized               expenditure            of
         grant       funds.

HEW Cements:                We concur         with      the      recommendation            and     will     direct       NIMH      to
carry it out.

The    expenditure            report       form      currently            used
                                                                            on NIMH staffing          grants    is
being reviewed   by NIMH with  the expectation          of                       recommending         changes      that
would make it more informative     and administratively                                   useful    in monitoring
the grant.    It would also make it possible          for                        grantees        to control     and
report     expenditures              by    types       of service,       similar     to the application           re-
quirement,       rather           than     just      in total      amount.

In July        1969 the  NIMH requested         the HEW Audit             Agency       to initiate            an audit
program    for   the Community        Mental      Health      Centers        Program         for     determining,
in part,     the management       effectiveness            of the progr&,                particularly             in the
area   of fiscal     management       and reporting.              Pilot      audits       have       been performed
on 27 centers       (three     in each region)           and draft         audit       reports        have      been
issued    on all    but    a few of these         centers.         These       reports         are     under      review
by NIMH for the purpose           of determining             which      facets       of grant         management
need   to be strengthened.
  APPENDIX          II

 Page 4 - Cements               C-II the GA@ Draft     Report

 The soon to be issued Community &ntal                           Health Center Grants Operating
 Randboo'k will         include       a policy     manual which incurporates                specific
 guidance      to grantees          and reDL n;cnal     office      staff    concerning      tile importance
 of obtaining         accurate        fiscal    information         both as part of the review             of
 applications         and in terns of monitoring                  on-going     grant programs.           The
 review     and approval          procedures       section      *of the handbook,        which has already
 been disseminated            to regional        office      staff,      emphasizes     the importance         both
 to reviewers         and to operating            staff    of obtaining        clear    information       con-
 cerning     the fiscal         liability       of applic’ants         and/cr    grantees.       The concern
 for grantee        fiscal      liability       extends beyond that of accounting                    for grant
 funds used, since the broader                   information         and knowledge        is necessary       to
 forestall       the inappropriate            use of grant funds.

The GAO report          covers the Commulrity Mental Health                  Centers Program thy ough
 fiscal     year 1969.       Developw~ii       s ill the program in the subsequent                 year. and
 a half     have been profound           irl i-erms of the extension             of the program aui:ho~.
 ization     by the Congress in Narch of 1970, together                        with the extensive
modification         contained     in that authorization              concerning       the percentage       o{
Federal       support     and the period        of the Federal         support     from 51 months to
eight    years,      the introduction          of special      provisions       for more favorable
funding       of centers     located       in poverty      areas,     and provision       for waiver      of
some of the five essential                 se&ices     in poverty        areas during       the initial
period      of operation.        These rather        extensive       changes in the program
authorization         have made it necessary             to introduce        considerable       revisions
in our po?icLes          and procedures,          a development        which is still        underway.       We
are attempting          at the same time to introduce               management improvements
learned      from the earlier        program experience,             including       those difficulties
enmerated        in and indentified           by the GAO report.            We are grateful          to the
GAO for the many frank discussions                   with our staff          about the management and
program aspects          of the Community Xentai             Health Centers Program.              We believe
the benefits        and the insight          derived    from these discussions             will   be very
useful     in introducing        and refining        changes in program management.

With regard to the repayment              by grantees      for unauthorized         use of grant funds,
it should,,pe     noted that:      full     collection      and settlement        has been made with
grantee   B; that a repayment           schedule      has been established         with grantee     F'*'
($5,000   collected      to date);      that a repa-yment schedule             has been established
with grantee     GL3k$27,500 collected           to date).      Adjustments       are pending on the
other grantees       noted in your report.             We anticipate      full    settlement   with
each of these grantees         consistent       with the public        interest.

Couiments     of   Responsible        State    and County       Agencies
                                                                      .-.    on the Draft        Report

As requested by GAO, comments were solicited         from the responsible    State and
county agencies.      They are enclosed.    We find that some of the comments in
these letters    are inaccurate,   or do not reflect     an adequate understanding      of
the Community Health Centers Program;       we plan to clarify     these points    with
the grantees   involved.     One of the comments critical     of the NIMH catchment
center concept states     that there should be gradual      improvement   in services     -

GAO notes:
   1.   Grantee          B is     designated         as grantee         E in      final      report.
   2. Grantee            F is     designated         as grantee         C in      final     report.
   3. Grantee            G is     designated         as grantee         D in      final     report.



                                                             56
                                                                                                                        APPENDIX II


Page    5 - Comments             of   Responsible            State      and    County       Agencies         on   the     Draft      Report

throughout         the county          without         any singling            out of subareas.               This    approach,
however,       gives      no preference              to areas         of greatest          need,       a concept      which h'1E-l
has advocated           and to which             the GAO report               seems     in agreement.              We believe
that    many of the co-l-runities                    that     hat:e     received        Community         Mental     Health     Center
grant      support      initiated          their       applications             because      they      were   not    being    ade-
quately       served      by the State             and/or        county       system;      frequently,           in areas     of
demonstrated          great       need.

Comment       is also     made that          patients,             potential           patients,         and concerned          citi-
zens,     in general,         are totaly           left        out of the planning                    in Federal       mental
health      programs.         This     is incorrect.                   Existing         procedures          provide      for    routine
involvement         of State       and county             officials            in the submission               and review         of
Community        Mental     Health       Center         grant        applicati,ons.               A mechanism         has existed
through       the NIX3 regional              staff        for      including           30th      county     and State        analysis
and recommendations              with      regard         to these           applications.               Similarly,        the NI>lX
has advocated           maximum      citizen         participation                 in the development               and sub-
mission       of Community         .Mental       Health          Center        grant       applications.

We would       also     like     to point         out     that     the comments           m&de on the              role     of the
National       Advisory        Mental       Health       Council       are inaccurate.                 The;        suggest        that
the “financial            decision         with     regard       to t11e awarding             of the        staffing          grant”       is
carried       out    by the Council.                The amendments             to the Community                 Mental        Health
Center      Act-(PL       91-211)        include        a requirement            t2at     all     applications              be sub-
mitted      to the National             Advisory         Mental       Health       Gouncil        for     recommendation               be-
fore     an award       can be made.              In practice,            the Regional            Health        Director          for-
wards     his     recommendation             to the Council,              which       in turn       makes       a reconmendation
 to the Regional            Health      Director          for    approval        or disapproval               of the applica-
 tion.      Subsequently,           the Regional              Health      Dfrector        is responsible                for     deter-
mining      which,      if any,       of the applications                   recommended           for     approval          by the
Council       are to receive            a grant         award.        This     authority          and responsibility                   is
clearly       and entirely          that       of’ the Regional             Health       Director         within        available
funds.        The decision          process,          therefore,          does     take     place       at the regional
 level.




                                                                       57
                  APPENDIX III
     >:hlE        OF CALIFORNIA---HUMAN        RELAilONS      AGENCY                                                                             RONALD   REAG4N.   Governor
             --       __.-                   _-___-              _~__._~   _       --------z.-:        - .2~-~.~_~~--~         STer         1.m:_===-:                 = zzzZ

     DEPARTMENT                     OF MENTAL               HYGIENE
     744     P STREET
     SACRAMENTO           95814




                                                                                                                         October      28,   1970




                                      Mrs.     Ruth Morley
                                      Associate        Regional      Health    Director
                                      National      Institute        of Mental      Health
                                      Regional      Office      IX
                                      Federal      Office     Building
                                      50 Fulton        Street
                                      San Francisco,           CA 94102

                                      Dear    Mrs.         Morley:

                                                    You will      find   enclosed             a copy of my letter     to
                                      Mr. Clavelli,         Regional     Manager,             United States   General
                                      Accounting       Office,        He was kind             enough  to send to me for
                                      review     a draft       of the complete              report.     Since you sent
                                      only    chapters      1, 4, and 6, some                 of my comments    to him may
                                      not appear       relevant.

                                                                                           Best   regards,




                                                                                    wJames     V. Lowry,    M.D.
                                                                                      Director    of Mental      Hygiene

                                     Enclosure




                                                                                        58
fr

 I
                                                                                                                            APPENDIX III

STATE   OF CALIFORNIA      HUMAN        RFLAllONS   AGENCY                                                                            RONALD     REAGAN,      Goveriaor
                                                        __-   .-.----          ---        ~. -     -                             --       _~-~.-         .---         -.

DEPARTMENT               OF MENTAL                  HYGIENE
744   P STREET
SACRAh4ENTO      95814




                                                                                                                 O-: )ber     28,       1970



                 Mr. A. M. Clavelli,            Regional       Manager
                 United    States      General      Accounting      Office
                 143 Federal       Office      Building
                 50 Fulton      Street
                 San Francisco,         California          94102

                 Dear    Mr.       CldWlll:


                                   On October     23, 1970,  you sent to me a copy of the draft          of your
                 report     of      your   review    of the community   mental  health center    program.      I
                 appreciate           very much your courtesy       in allowing  me the opportunJ”y        to see
                 this    draft       of your report.

                              I found       the report          interesting,           educational           and, as near as I
                 can determine,         accurate         in its presentation.                   You might         wish to add one
                 small    item in that          section      that      has to do with              the review         of applications
                 for staffing        grants.          The Regional           Office      staff       of the Nation-l            Institute
                 of Mental      Health      in San Francisco               cooperated          completely         with     this     depart-
                 ment in the review             of the applications                 for the grants.               Although        there     is
                 no legal     requirement           for them to do so, they have forwarded                               a copy of the
                 staffing     grant      application          to this        department          in every       instance        so far as
                 I know.      The staff         of this      department           obtains        information          from the director
                 of the county        mental       health       program       or programs            that    would be affected              by
                 the staffing        grant      being      made to the applying                  center.        This     information
                 is then given         to the Regional              Office       staff     for their         use.

                                There     has been a continuing      awareness       of the financial         ability
                 problem      which     you have discussed       so succinctly       in your report.          I would
                 endorse       strongly      your recommendation     that      the future    financial      support
                 determination          be made prior     to the granting         of the staffing      grant.

                                 Perhaps        it is not appropriate                for your review         but,   nevertheless,
                 I would       like     to repeat        my comments           that    the catchment        center   concept      may
                 be a useful          theoretical          device       but is not suitable           for application          every-
                 where in the United                 States     and, particularly,             in California.          The studies
                 that   were       done in California               prior      to the establishment            of the program
                 for the support             of local       mental        health     services     showed that       because      of
                 geographical,            political,         ethnic,        economic,       and other     reasons,     the service
                 area for a mental                health     program        should     be a county      or combination         of




                                                                                 59
APPENDIX III




  counties.        As you know,        California      has had considerable            experience          in local
  mental    health     program      operation.        The funds       expended      in local     mental        health
  programs      in California         are now about       equal     to the appropriation             for     the
  entire    United     States     for    the staffing      grants       for  community       mental      health
  centers.        This   fiscal     year     the state    appropriated         funds   total      $72.4      million
  and the local        funds    total      $6.9 million.

                  I would     like   to comment         on one other        item    and that     is the require-
  ment     that    the National        Advisory      Mentap       Health    Council     make the financial
  decision       with    regard    to the awarding             of a staffing        grant.      This   seems to
  be incompatible           with   the concept          that     decisions      should     be made as close
  to the site         of operation        as po:      ible.       One one hand authority             is allegedly
  deirgared        io the Regional         Office       but at the same time             the authority       is
  removed       to an even greater           distance        by placing       it within      the National
  Advisory       Mental     Health     Council.

                Perhaps        it isn’t        within        the purview       of your review             but I think
  it is time        to re-examine            the concept          of federal         grants       being     made to local
  agencies       since      there     is no mechanism              to assure       that     these      grants      are com-
  patible      with     local      health      planning         or state     health       planning.           Instead    of
  making     individual          center      grants        the funds      available         for    this     purpose    could
  be added       to the 314(d)            funds      for mental       health       services.           This would      dispense
  with    considerable           administrative              expense     and would        permit       the design      of a
  mental     health       delivery        system       that     is appropriate          for     the particular         state
  and local        community.

                 Again,      I   thank    you    for   allowing        me to     review      the   draft     of   your
  report.

                                                                        Sincerely         yours,




                                                                        James V.       Lowry,    M.D.
                                                                        Director       of Mental      Hygiene

  cc :      Mrs.   Ruth Morley
            Regional    Off ice




                                                                  60
                                                                                                          APPENDIX      IV




Mrs. Ruth Simonson Morely
Associate   Regional     Health    Director
  for Mental Health
Department    of Health,      Education,    and Welfare
Regional   Office
50 Fulton   Street
San Francisco,     California      94102

Dear Mrs.    Merely:

Subject:     Needed Improvements         in the
             Administration        of the Community
             Mental Health       Center Program -
             GAO Draft      Report

A review has been made of Chapters      1, 2, and 6 of the GAO draft                          rc,p,vt     11~~ Needed
Improvements in the Administration      of the Community Mental Health                              Center Program,
as requested in your letter     of October   15, 1970, and the following                             comments are
submitted:

       1.   Chapter    1 is a historical     surmnary of           the   construction        dr.d staffing      grant
            program    and requires     no comment.

       2.   Chapter      2, page 6, indicates             that     some of the State Plans submitted
            have not divided            the State      into cat&sent            areas as specified,       and a
             logical     question       to follow      is "why has this been allowed".                 It was my
            understanding          that catchment         areas of specified            population   limits     were
            required       in order       to receive       financial        assistance     under the construction
            and staffing         grant      provisions       of the Act.          There has been in California
            disatisfaction           with the population             limitation       of the catchment      area
            requirement;         however,       it has been adhered             to, and it seems rather         un-
            wise and unfair           to allow other           States     to submit State Plans without
             complying       with basic requirements.

       3.   The problem     of constructing         centers     in areas having        the greatest      need
            and the highest       priority      has bee& stated        correctly,      and I would assume
            this    is the situation       throughout       the county.        It is correct      that NIMH
            cannot assist     conanunities       which do not have required              matching    funds;
            however,     it is also difficult         for the State Agency to perform                such a
            function     as such responsibility           is ultimately        a decision     of the
            applicant.




                                                         61
APPENDIX IV


         MI-S. Ruth   Simonson   Merely              -2-                           Octirber   26,   1970



         Those chapters    of the draCt rrlT”‘t   .lvailable     are essentially     correct,  and I
         find no areas    of conflict  with the   program      as administered     by the State Agency
         in California.




                                                    RAbert C. Kimball,   Ckef
                                                    Bureau of Health   Facilities
                                                      Planning and Construction

         RCK:bs




                                             62
                                                                                       APPENDIX V


                                             COUNTYOFLOSANGELES
                                              DEPARTMENT   OF MENTAL   HEALTH



HARRY   R    BRICKMAN.     M D                                                            MARVIN      KARNO,     MD
            DIRECTOR                                                                      C”lEF    DEPUTY   DlRECTOA


                         October 22, 1970




                         Mrs. Ruth S. Morley
                         Associate Regional Health Director
                             for Mental Health
                         Department of Health, Education and Welfare
                         50 Fulton Street
                         San Francisco, California 94102

                         Dear Mrs. Morley:

                         I want you to know how grateful we are to have received drafts of
                         chapters of the General Accounting Office audit of Commnity Mental
                         Health Centers. We originally    were given these drafts for review
                         about a month ago by Mr. Sheldon of the General Accounting Office,
                         and we sent him a letter (a copy of uhich is encloeed), as well as
                         the 'draft copies with our corrections noted in them. You should not
                         underestimate the importance of the break-through in conrmunication
                         among our various departments that this exchange of infomation
                         represents, and we sincerely hope that it will continue to grow in
                         future years.

                         Although few of our suggestions have been included in this draft,
                         we are withholding comments pending the receipt of the next draft
                         which is due to arrive soon. If you or your staff have a chance to
                         read this material, I will welcome your concnents.

                         Sincerely,


                         Harry R. Brickman, M.D.
                         Director

                         GM/ebr

                         enclosure




                                                               63
APPENDIXY


                          COuN’rY    OF LOS      ANGELES




      September 11, 1970




     Richard A. Sheldon, C.P.A*
     General Accounting Office
     50 Fulton Street
     San Francisco, California  94102

      Dear Mr. Sheldon:
     It was a pleasure meeting with you      and Mr. Jack Birkholze last
     Priday to discuss issues of mutual      concern in comunity mmtal
     health, and specifically   your draft    report on Foblems in the
     development of the Faderal program.       A few of us have made some
     minor notes and corrections in the      draft which is being re-
     turned to you with this letter.
     Your description of some of the objections raised by our Depart-
     ment go%ng back to 1965 and 1% is accurate enough, but simply
      does not describe this bietory    in sufficient    detail.    As ws
     noted in the met*,      the County of Los Angeles made t&se appli-
      catious to the National Institute    of Mental malt& for staffing
     grarrts.   Along with the applications m requested that the
     Burgson General of the the United States Public Health Service
     grant exceptions to the IWleral catchmsnt area population limIta-
     tions.    In LX Angeles County, catchment areas as ge0gxqM.c
     units serve us poorly because they are too small.           Our request
     for waiver was based ou planning for populations of over 600,000,
     while the Bzderal regulations United us to a mximm of2OO,OO0.
     The applications were moved frm desk to desk back at Health,
     Education and Welfare and were rejected.         The County proceeded
     to develop these services notwithstanding        our failum to obtain
     these badly needed hderal funds.
     Your draft report does not reflect saw of the discussions we
     initiated  with Dr. Brown, Dr. Feldman, Dr. Birotkin and othem
     in NIMH in our efforts to initiate  some kind of coordination
     between the Pederal program and the public program in Los Angeles.
     These discussions got nowhere even though WBraised such cogent




                                      64
                                                                      APPENDIX V


Richard   A. Sheldon,   C.P.A.
September 11, 1970
Page TWO


points as our request for involvement and participation          in the
planning process and our concern for where applicants would obtain
increasing mounts of operating money in the face of declining
Federal assistance.     We also pointed out then, as we did again
last week, that there is an assumption in the F'ederal program that
a particular    size of geographic unit and a particular      style of
staffing is the unquestioned ideal model for building conanunity
mental health programs throughout the country.          We have been com-
plaining about being left out of the planning and reviewing processes
but at the same time must point out that patients,         &ential     patients
and concerned citizens in general are totally        left out of the
planning in the hderal program. Whereas both the regional medical
program legislation    and comprehenalve health planning legislation
have included devices to assure citizen participation         in planning,
the nrental health progrm has not. We have a serious question
about the philoaopby of richly saturating a relatively          ma31 area
with scarce mental health remurcea as a way of solving commmity
mental health problems. Limitations      of tti,     manpower and money
make that style of program developneat unrealistic         apart frcan the
question of its basic validity.      The philosophy of Los Angeles
County has been to reach the same goals by very different           means.
We have tried to create some minimal mental health service to cover
the entire county as rapidly as possible.        F'rom minimal coverage
we 'aim eventually to locate mental health services that would be
literally    in and for a particular  conxnunity. S= of our regional
services have already established satellites        and a couple of our
original mental health regions, have deliberately        been split   to
enable UB to get a better &rasp of the local. and unique problems
in certain areaa. In a certain sense VB are saying that local
mental health prograimxlng needs to be rmetan tailored to the needs
of the locale and not imposed by formula.
I hope thbe ccaimnts are usefultoyou    ineditingyour               draft report,
and want you to know that we greatly appreciate our         being     included
in theee disausaions.




Dire&or




                                        65
APPENDIXVI

                   PRINCIPAL OFFICIALS

                           OF

     THE DEPARTmNT OF HEALTH, EDUCATION, AND WELFARE

             RESPONSIBLEFOR THE ACTIVITIES

                DISCUSSEDIN THIS REPORT


                                         Tenure of office
                                         From            -To
SECRETARYOF HEALTH, EDUCATION,
  ANI WELFARE:
    Elliot L. Richardson            June     1970   Present
    Robert H. Finch                 Jan.     1969   June 1970
    Wilbur J. Cohen                 Mar.     1968   Jan. 1969
    John W. Gardner                 Aug.     1965   Mar. 1968
    Anthony J. Celebrezze           July     1962   Aug. 1965
ASSISTANT SECRETARY(HEALTH AND
  SCIENTIFIC AFFAIRS):
    Roger 0. Egeberg                July     1969   Present
    Philip R. Lee                   Nov.     1965   Feb. 1969
SURGEONGENERAL, PUBLIC HEALTH
  SERVICE:
    Jesse L. Steinfeld              Dec.     1969   Present
    William H. Stewart              Ott  l   1965   July    1969
    Luther L. Terry                 Mar.     1961   Oct. 1965
ADMINISTRATOR, HEALTH SERVICESAND
  MENTAL HEALTH ADMINISTRATION
  (note a>:
    Vernon Wilson                   &Y    1970      Present
    Joseph T. English               Jan. 1969       &Y      1970
    Irving Lewis (acting)           Sept. 1968      Jan. 1969
    Robert Q. Marston               Apr.  1968      Aug. 1968




                          66
                                                                APPENDIX VI


                                                    Tenure _----___-
                                                             of office
                                                    From               -To
DIRECTOR, NATIONAL INSTITUTES           OF
  HEALTH:
    Robert Q. Marston                           Sept.   1968     Present
    James A. Shannon                            Aug.    1955     Aug.    1968

DIRECTOR, NATIONAL INSTITUTE          OF
  MENTAL HEALTH:
    Bertram  S. Brown                           June    1970      Present
     Stanley F. Yolles                          Dec.    1964      June    1970


aThe Health     Services     and Mental Health Administration             was
 established       in April   1968 and the National     Institute         of Men-
 tal Health was made one of its constituent             bureaus.          The
 National    Institute      of Mental Health    had been made an inde-
 pendent bureau within          the Public  Health  Service      in January
 1967 when it was transferred           out of the National        Institutes
 of Health.




 U.S. GAO. Wash.. D.C.
                                      67