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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5791 September 30, 1980 MENTAL HEALTH: Withholding of state funds from community mental health boards Department rules and policies The Department of Mental Health may withhold funds from a community mental health board for its failure to comply with the rules of the Department, but it may not withhold State funds for failure of the board to comply with policies of the Department. Dr. Frank M. Ochberg Director Michigan Department of Mental Health Lewis Cass Building Lansing, Michigan Your predecessor asked for my opinion as to the following question: Does the Department of Mental Health have authority to withhold state financing from community mental health boards on the ground that their community mental health programs lack compliance with departmental rules or established policy? The answer to your question is controlled by two opinions of the Attorney General. In OAG 1979-1980, No 5685, p 703 (April 9, 1980), it is stated: 'Your last three questions, relate to the circumstances under which state financial support may be withheld from the county mental health program. 1974 PA 258, supra, Secs. 202 and 242 (1) are applicable to those questions. They provide as follows: "Sec. 202. The state shall financially support, in accordance with chapter 3, county community mental health programs that have been established and that are administered pursuant to the provisions of this chapter. "Sec. 242. The following expenditures by a county program are not eligible for state financial support: "(a) The construction, purchase, remodeling, or any similar capital cost of a building or facility, except that such cost shall be eligible for state financial support or an annual expense basis in an amount equal to a fair rental value of the space or building being utilized. "(b) The capital cost of equipment or similar items in an amount greater than that established by the department. "(c) Any cost item that does not represent or constitute a real or actual expenditure by the county program. "(d) That part of any expenditure that is obviously and manifestly extravagant in relation to its specific objective and context. "(e) Any category of expenditure or any portion of any category of expenditure whose ineligibility the department shall determine is necessary and appropriate to assure the reasonable use of state funds or to assure a legitimate interest of the state and which determination is in accord with the intent and provisions of this chapter. This subdivision shall be effectuated by officially adopted rules of the department.' [Emphasis supplied] 'It is evident that the State has an obligation to provide financial support for county community mental health programs. Section 242 enumerates those expenditures by a county program which are not eligible for State financial support. The Department has effectuated the statutory provision by promulgating an administrative rule which states in part: "Programs ineligible for state financial support. "A program ineligible for state financial support shall include: "(b) Programs and services which directly or indirectly violate the act and the rules promulgated thereunder.' 1979 AACS, R 330.2058 'The contractual arrangement in question falls within the prohibition of 1974 PA 258, Sec. 222(3), supra. Thus, the Department may determine that the expenditure of monies to pay the lease rentals is not a reasonable use of state funds and is contrary to a legitimate interest of the state in accordance with 1974 PA 258, Sec. 242, supra, and Rule 2058. Under such circumstances, 1974 PA 258, supra, Sec. 236 is applicable. It provides in pertinent part as follows: '. . . The department may withdraw funds that have been allocated to a county program when such funds are being expended in a manner not provided for in the approved plan and budget.' Although the above-quoted opinion dealt with a specific violation of the Mental Health Code, 1974 PA 258, MCLA 330.1001 et seq; MSA 14.800(1) et seq, the same conclusion would follow in any instance where a community mental health program was not being operated in conformance with the Mental Health Code, 1974 PA 258, supra, or rules promulgated by the Department of Mental Health. See also OAG, 1979-1980, No 5665, p 636 (February 22, 1980). Your question as phrased inquires into the ability to withhold funds for failure to comply with rules or 'established policy.' It should be noted that 1974 PA 258, supra, Sec. 242 and 1979 AACS, R 330.2058, discussed in the above-quoted portion of 1979-1980, No 5685, p 703 (April 9, 1980), both make the Department's authority to withhold funds contingent on the provisions of the statute or the existence of rules. Those rules must be properly promulgated pursuant to the Administrative Procedures Act of 1969, 1969 PA 306; MCLA 24.201 et seq; MSA 3.560(101) et seq. It is my opinion, therefore, that the Department of Mental Health may withhold funds from a community mental health board for its failure to comply with rules of the Department, but the Department may not withhold funds from a community mental health board for violation of its policies. Frank J. Kelley Attorney General (1)
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