August 7, 1998

TO:   Community Mental Health Service Program Executive Directors

FROM:    Richard L. Baldermann, CPA
              Administrator
              Local Audit and Finance Division

REGARDING:   Community Mental Health Agencies

The Mental Health Code (Public Act 258 of 1974, as amended) has been recently amended to allow for the establishment of certain Community Mental Health Authorities. Due to this change, Community Mental Health Authorities can now be established under either the Mental Health Code or the Urban Cooperation Act (Public Act 7 of 1967 (extra session), as amended). Borrowing power and audit filing requirements vary dependent upon the authorizing statute for the Authority.

Urban Cooperation Act Community Mental Health Agencies may issue obligations, bonds, notes, lines of credit, installment purchase agreements and other loans, if such obligations are authorized in the interlocal agreement. Prior approval of the Department of Treasury is required before any of these obligations can be issued, however, other provisions of the Municipal Finance Act (Public Act 202 of 1943, as amended) are not applicable to these obligations.

Mental Health Code Community Mental Health Authorities shall not issue bonds, notes and other evidences of indebtedness. They may enter into contracts, debt, liabilities or obligations pursuant to section 205(4)(f)(v) including normal business transactions and not including the borrowing of money. These normal business transactions (contracts, debt, liabilities or obligations pursuant to section 205(4)(f)(v)) will not be obligations of the creating counties and would not be subject to either prior approval nor exception from prior approval of the Department of Treasury.

A Community Mental Health Service Program originally organized under the Urban Cooperation Act and reorganized as a Mental Health Authority under the Mental Health Code is required to assume all debt created by the original Community Mental Health Service Program.

Statutorily authorized debt currently outstanding, issued by Urban Cooperation Act Community Mental Health Agencies that did not receive the prior approval of the Department of Treasury should contact the Department and make arrangements to have that debt authorized retroactively. (Application for State Treasurer's Approval to Issue Bonds)

Neither the Urban Cooperation Act Community Mental Health Agencies nor the Mental Health Code Community Mental Health Authorities has the authority to use credit cards and enter into credit card debt. Public Act 266 of 1995, authorizing certain municipalities to use credit cards, does not include these agencies.

All Community Mental Health Authorities shall file audited financial statements with the Department of Treasury, annually, within 120 days of the end of their fiscal year (one 60 day extension can be granted).

All Community Mental Health Authorities shall comply with the requirements of Public Act 20 of 1943, as amended in investment of authority funds. Public Act 40 of 1932 (first extra session), as amended, prescribes authorized depositories of authority funds.