Memorandum
Date: July 28, 2026
To: The Honorable Lake County Board of Supervisors
From: Elise Jones, Director, Lake County Behavioral Health Services
Subject: Consideration of Opioid Settlement Funds Status Update, Reconciliation, Restoration Framework, and Future Governance Direction
Executive Summary:
Lake County Behavioral Health Services is returning to the Board with a comprehensive update regarding Opioid Settlement Funds (OSF), including funds received to date, projected future receipts, prior and current commitments, payments made, current reconciliation findings, restoration planning, corrective controls, and recommended governance structure.
The purpose of this item is to provide a transparent status update and establish a stronger governance framework for the remainder of the opioid settlement period. The presentation is intended to distinguish between received funds, projected future funds, awarded or committed funds, paid or applied funds, current restricted cash held, and amounts identified for restoration.
The County has received opioid settlement funds over multiple fiscal years. These funds were received into Fund 141 / Substance Use Disorder Services and were not structurally separated from other SUD operating cash during early implementation. During this same period, the Department was implementing and expanding significant SUD services, including DMC-ODS, MAT/NTP access, treatment capacity, and opioid-remediation activities. Reconciliation indicates that restricted OSF cash may have temporarily supported broader SUD operating activity during periods when certain costs were not reimbursed, not yet reimbursable, or delayed in reimbursement.
Behavioral Health is now distinguishing final OSF uses from temporary cash-flow support. Amounts that cannot be confirmed as allowable, authorized, documented, and reportable OSF expenditures will be restored to the OSF balance. The Department is also requesting Board direction regarding future governance, Board approval pathways, quarterly reporting, and ongoing public accountability.
BACKGROUND:
The national opioid settlements provide long-term funding to participating jurisdictions for opioid remediation activities. These funds are intended to support prevention, treatment, recovery, harm reduction, service linkage, treatment infrastructure, and other allowable opioid-remediation strategies.
Lake County engaged Health Management Associates to support development of a local opioid abatement settlement fund expenditure plan. From January through July 2024, HMA, Behavioral Health, the local Steering Committee, and community stakeholders completed a structured planning process that included four Community Conversations, stakeholder input, survey responses, and prioritization of local needs. The process resulted in community-endorsed recommendations and an expenditure planning framework focused on local opioid-remediation priorities.
Following completion of the planning process, Behavioral Health moved into implementation through an OSF-related request for proposals, contract development, and identification of additional prospective remediation activities. Current and planned uses are organized around priorities including treatment capacity, MAT/NTP access, youth prevention, naloxone and harm reduction, recovery and re-entry supports, and system infrastructure.
CURRENT OSF STATUS:
The current reconciliation identifies the following:
• Total OSF received to date: $8,226,098.61
• Total paid to providers / OSF uses: $3,573,547.55
• Expected restricted OSF balance: $4,652,511.06
• Current restricted OSF funds held: $2,287,133.00
• Estimated amount currently identified for restoration: $2,365,418.06
The County also anticipates future settlement payments through approximately 2038. Projected future payments are currently estimated at $14,852,138.35. These projected future funds are included for long-range planning only and are not current cash, appropriated funds, or guaranteed receipts.
AWARDS AND COMMITMENTS:
Current awards, authorizations, and commitments include the following:
• Kno’Qoti Native Wellness / ElevateED: $1,000,000 authorized; $220,793.54 paid; $779,206.46 remaining.
• Redwood Quality Management Co.: $1,212,019.80 authorized and paid.
• Sierra Pathways: $960,281.57 authorized and paid.
• Lake County Behavioral Health Services - BHCIP: $600,000 authorized and paid.
• Lake County Behavioral Health Services - MAT: $709,665.53 identified; $530,901.64 paid/applied; $178,763.89 remaining; under review for final approval pathway and allowability.
• HMA Plan Facilitation: $49,551 authorized and paid.
• Redwood Community Services: $228,537 authorized/identified; pending contract execution.
• Pride Fair / Department of Health Services: $867 identified; Health Services has since identified alternative funding and does not anticipate invoicing OSF for this amount.
• SafeRx / Department of Health Services: $160,000 pending Board consideration.
Total current maximum authorization / identified commitments are $4,920,921.90. Total paid or applied to date is $3,573,547.55. Total remaining identified commitments are $1,347,374.35.
RECONCILIATION FINDINGS:
The central reconciliation finding is that OSF receipts were held within Fund 141 / SUDS and were not structurally segregated from other SUD operating cash during early implementation. During this same period, SUD experienced costs that were not reimbursed or not yet reimbursable through other sources. Because OSF receipts were maintained within the same operating cash structure, reconciliation indicates restricted cash may have temporarily supported broader SUD operating activity.
Some historical costs may be opioid-remediation-aligned. However, programmatic alignment alone does not establish final fiscal allowability. Prior-period costs will be applied to OSF only after review confirms that the expenditure is an allowable opioid-remediation use and meets applicable fund-source, timing, authorization, documentation, non-duplication, and reporting requirements.
Amounts that cannot be confirmed as allowable, authorized, documented, and reportable OSF expenditures will be restored to the OSF balance.
RESTORATION FRAMEWORK:
The current amount identified for restoration is $2,365,418.06.
Behavioral Health and Fiscal have identified the following restoration sources:
• FY 2024/25 DMC-ODS QA/UR reimbursement: $88,048.04
• In-house SUD charges billed, not yet paid: $434,376.50
• In-house SUD charges not yet billed: $92,159.18
• Reimbursement revenue for eligible expenditures previously supported by OSF: $95,000.00
Total identified restoration sources are $709,583.72.
After application of identified sources, the remaining balance for monthly restoration is estimated at $1,655,834.34. The Department estimates restoration capacity of approximately $180,000 per month after State payments resume, with an estimated completion period of approximately 10 months. Timing will depend on claim adjudication, actual payments received, and availability of appropriate revenue sources.
The Department will protect the current OSF holdback, suspend further discretionary OSF use until the Board provides governance direction, and return quarterly until the OSF cash balance is fully reconciled and restored.
CORRECTIVE CONTROLS:
Behavioral Health is implementing the following corrective control framework:
1. Dedicated OSF tracker
A single source for receipts, uses, commitments, and restoration; updated monthly by Fiscal.
2. Cash holdback
Protection of available OSF cash while reconciliation is completed; reviewed weekly during restoration.
3. Historical use review
Review of historical costs to confirm allowable uses versus amounts to restore; completed by Fiscal, Program, and County Counsel as needed.
4. Quarterly Board reporting
Public updates regarding receipts, uses, balances, restoration status, commitments, project status, and outcomes.
5. Project outcome reporting
Documentation of how OSF-funded activities advance opioid remediation outcomes.
6. Governance decision log
Documentation of approval path, authority, fund source, and decision record for each OSF use.
PROPOSED FUTURE INVESTMENT FRAMEWORK:
Behavioral Health recommends organizing current and future OSF planning within three broad categories:
1. Infrastructure Expansion - 40%
Examples include treatment infrastructure, BHCIP match or eligible operating costs, youth residential treatment, recovery residence/housing, multi-SUD clinic infrastructure, withdrawal management, medically integrated services, co-occurring capacity, sobering center concepts, and access-to-treatment infrastructure.
2. Community-Based Grants - 30%
Examples include youth prevention, safe spaces, culturally responsive outreach, peer response, local recovery support, harm reduction, naloxone distribution, recovery support services, community education, and access-to-treatment supports.
3. County-Operated Remediation - 30%
Examples include MAT access, mobile care services, justice-involved population supports, MAT re-entry and linkage, access-to-treatment activities, program compliance, and OSF administration where allowable.
This framework is proposed for long-term planning and Board discussion. Future commitments, allocations, or internal uses would return to the Board through the governance process approved by the Board.
GOVERNANCE STRUCTURE:
Behavioral Health recommends a governance structure that clearly separates program administration from final fiscal and legislative authority.
Under this framework:
The Board of Supervisors retains final legislative, fiscal, fiduciary, and policy authority. The Board approves, denies, or amends budgets, expenditure plans, contracts, MOUs, and funding actions. The Board also provides final review, oversight, and accountability.
Behavioral Health serves as the subject-matter expert and operational arm. Behavioral Health identifies SUD service gaps and opioid-remediation priorities, gathers public and stakeholder input, uses the OSF expenditure plan and SafeRx Steering Committee input, develops RFPs and recommendations, and administers approved contracts, monitoring, invoicing, and reporting.
The proposed decision flow is:
Community input and clinical expertise → Behavioral Health recommendation → Board authorization → Behavioral Health implementation → Board oversight → Quarterly reporting.
INTERNAL FUNDING REQUEST PROCESS:
For future LCBHS-operated activities proposed for OSF support, Behavioral Health recommends the following process:
1. Identify the internal remediation need, including activity, service gap, target population, opioid nexus, and expected outcome.
2. Prepare program narrative, budget, and spending plan, including scope, timeline, staffing or operating costs, direct costs, administrative or indirect costs, fund source, fiscal year, and any budget adjustment needed.
3. Complete allowable-use alignment, including Exhibit E Schedule A/B, HIAA status, future-remediation purpose, community priority, and documentation requirements.
4. Route for internal review with Behavioral Health leadership, Fiscal, Administration, and County Counsel as needed.
5. Bring forward Board action approving program scope, fund source, not-to-exceed amount, budget action, and tracking expectations.
6. Implement, monitor, and report separately by fund, activity, Exhibit E category, and outcome measure.
QUARTERLY REPORTING:
Behavioral Health recommends quarterly OSF updates to the Board. Proposed reporting dates include:
• October 2026: Reconciliation/restoration status and initial spending-plan update.
• December 2026: Contracting/RFP status, budget category updates, and early outcomes.
• March 2027: Implementation progress, fund balance, and priority-area updates.
• June 2027: Annual closeout preview, outcomes, and next-year recommendations.
Each quarterly report will include receipts, expenditures, commitments, restoration progress, cash held, fund balance, project status, allowable-use review, outcome data where available, and recommended next steps.
FISCAL IMPACT:
There is no requested General Fund allocation associated with this item.
The current OSF reconciliation identifies $2,365,418.06 for restoration, subject to final Fiscal verification and allowable-use review. Identified restoration sources total $709,583.72. The remaining amount to be restored after identified sources are applied is estimated at $1,655,834.34. Behavioral Health anticipates applying identified reimbursements, DMC/DMC-ODS revenue, in-house SUD revenue, and other appropriate sources toward restoration as funds are received.
Future OSF commitments, allocations, contracts, MOUs, internal uses, or budget actions will return to the Board as directed.
CONCLUSION:
The OSF presentation and proposed governance framework are intended to provide the Board and public with a transparent status update, corrective action plan, and long-term oversight structure.
The Department has identified that OSF receipts were not structurally segregated from SUD operating cash during early implementation. The Department is now protecting current OSF cash, completing historical use review, restoring amounts that cannot be confirmed as allowable and reportable OSF expenditures, strengthening fiscal controls, and requesting formal Board direction regarding future governance.
Today’s requested action will establish the framework needed to protect remaining funds, restore unsupported amounts, ensure allowable use, strengthen transparency, and support opioid-remediation outcomes throughout the remainder of the settlement period.
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Recommended Action: Receive a presentation from Lake County Behavioral Health Services regarding Opioid Settlement Funds; accept the current reconciliation and restoration framework; approve the proposed Opioid Settlement Fund planning categories for future budgeting and reporting; direct Behavioral Health to return with future spending plans prior to new discretionary OSF commitments, allocations, or internal uses; affirm the proposed governance structure; and direct Behavioral Health to provide quarterly updates to the Board regarding receipts, expenditures, restoration progress, commitments, project status, and outcomes.