LOS ANGELES COUNTY
DEPARTMENT OF MENTAL HEALTH
  Policy 813.04 Financial Responsibility Requirements for
Contracting with DMH
 
Policy Category:  Administrative
Distribution Level:  Directly-Operated Programs and Contracted Agencies
Responsible Party:  Contract Development and Administration
 
Approved by Marvin J. Southard, DSW, Director, on September 29, 2009
 
I.  PURPOSE
 
To establish the financial responsibility requirements applicable for any non-profit or for profit non-government organizations (NGOs) that seeks to contract with the Los Angeles County Department of Mental Health (DMH).

To identify which types of prospective contracts are waived from this Policy/Procedure and the reason for the waiver.
 
II.  DEFINITIONS
 
Conditions for Eligibility to Contract with DMH: A NGO shall demonstrate fiscal soundness and assumption of full financial risk before being eligible to contract with DMH.

Evaluation Process: DMH evaluates financial soundness with the use of financial ratios based on actual and/or pro forma financial statements.
 
III.  POLICY
 
A NGO must demonstrate fiscal soundness and assumption of full financial risk in order to contract with DMH.
  • A NGO must provide to DMH financial statements consisting of a balance sheet, an income statement, and a statement of cash flow, or Form 990 (for non-profit), Department of the Treasury, Internal Revenue Service (IRS) Return of Organization Exempt from Income Tax, or Form 1120 (for profit) U.S. Corporation Income Tax Return. The financial statements or IRS forms must show the NGO meets DMH's solvency/working capital requirements. 

    OR
     
  • A NGO that cannot demonstrate fiscal soundness because its actual financial statements or IRS form do not meet DMH's solvency/working capital requirements, or has no available actual financial statements or IRS form may either submit: A. Corrective Action Plan (CAP) that would demonstrate future compliance with DMH's solvency/working capital requirements or B. Pro forma financial statements consisting of a balance sheet, an income statement, and a statement of cash flow.
Exemptions: Prospective contract awards that have statements of work which do not include any requirements for the provision of mental health treatment services, and do not require any other type of direct client care and which restrict reimbursement to payment in arrears, and are not Legal Entity Agreements are exempted from this Policy. DMH does not require prospective contractors seeking such contracts to pass the Financial Responsibility Requirements in order to be qualified to bid in response to a contract solicitation. The exceptions to this Policy/Procedure are provided in Attachment 1, Prospective Contractors Waived from the Financial Responsibility Requirements.
  1. Exception means the prospective provider is not required to submit the financial documents specified in this Policy/Procedure.
     
  2. DMH Director will provide with each solicitation for services/activities a statement whether prospective contractors submitting a proposal under the solicitation are subject to the requirements set forth in this Policy/Procedure to submit the referenced financial documents as part of the proposal package to be provided to DMH.
IV.  PROCEDURES
 
V.  AUTHORITY
 
DMH Administrative Directive
 
VI.  ATTACHMENTS