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AB-3017 State-funded assistance grants and contracts: advance payments.(2023-2024)

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Date Published: 09/30/2024 09:00 PM
AB3017:v96#DOCUMENT

Assembly Bill No. 3017
CHAPTER 664

An act to amend Section 11019.3 of the Government Code, and to amend Section 39603.1 of the Health and Safety Code, relating to state government.

[ Approved by Governor  September 27, 2024. Filed with Secretary of State  September 27, 2024. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 3017, Hart. State-funded assistance grants and contracts: advance payments.
(1) Existing law authorizes specified state departments and authorities, upon determination that an advance payment is essential for the effective implementation of a program, to advance to a community-based private nonprofit agency with which it has contracted for the delivery of services funds not exceeding 25% of the annual allocation to be made to the agency during the fiscal year.
Existing law authorizes an administering state agency to advance a payment to a recipient entity, defined to mean a private, nonprofit organization qualified under federal law, subject to meeting specified requirements. Existing law requires the administering state agency to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount. Existing law requires the recipient entity to satisfy certain minimum requirements, including providing an itemized budget, submitting documentation, as required by the administering state agency, to support the need for advance payment, and demonstrating its current status in good standing as an organization exempt from taxation under federal law. Existing law declares the intent of the Legislature to improve and expand the state’s existing advance payment practices for state grants and contracts with nonprofits.
This bill would expand the definition of a “recipient entity” to include a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately. The bill would exempt a tribe from the requirement to demonstrate good standing as an organization exempt from taxation under federal law. The bill would additionally declare the intent of the Legislature to improve and expand the state’s existing advance payment practices for state grants and contracts with tribes.
(2)  Existing law imposes various limitations on emissions of air contaminants for the control of air pollution from vehicular and nonvehicular sources. Existing law generally designates the State Air Resources Board (CARB) as the state agency with the primary responsibility for the control of vehicular air pollution. Existing law authorizes CARB to provide advance payments to grantees of a grant program or project if CARB determines specified conditions are met, including a condition that the grantee agrees not to provide an advance payment to any other entity.
This bill would repeal that condition prohibiting an advance payment to any other entity, and instead would authorize a grantee to make an advance payment to a subrecipient consistent with the above-described law relating to advance payments by state agencies. For purposes of these provisions, the bill would expand the definition of “recipient entity” to include a local agency or a nongovernmental entity. The bill would exempt a subrecipient that is a local agency or nongovernmental entity, other than a private, nonprofit organization, from the requirement to demonstrate good standing as an organization exempt from taxation under federal law and instead would require the agency or entity to demonstrate good standing with the United States Internal Revenue Service.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 11019.3 of the Government Code is amended to read:

11019.3.
 (a) It is the intent of the Legislature to improve and expand the state’s existing advance payment practices for state grants and contract with nonprofits and tribes.
(b) For purposes of this section, all of the following definitions apply:
(1) “Administering state agency” means a state agency that administers a grant program or contract.
(2) “Recipient entity” means either of the following:
(A) A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code.
(B) A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
(3) “State agency” has the same meaning as in Section 11000.
(c) An administering state agency may advance a payment to a recipient entity subject to all of the following requirements:
(1) The administering state agency shall do all of the following:
(A) Prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cashflow problems.
(B) Stipulate an advance payment structure and request process within the grant agreement or contract between the administering state agency and the recipient entity.
(C) Ensure the advance payment to the recipient entity does not exceed 25 percent of the total grant amount or contract awarded to that recipient entity. An administering state agency may exceed the 25-percent limit if the administering state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance to the administering state agency.
(2) (A) Except as provided in clause (iii), the recipient entity shall satisfy the following minimum requirements:
(i) Provide an itemized budget for the eligible costs the advanced payment will fund, indirect or other costs needed to operate, a spending timeline, and a workplan developed in a form and manner specified by the administering state agency.
(ii) Submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but is not be limited to, invoices, contracts, estimates, payroll records, and financial records.
(iii) Demonstrate its current status in good standing as an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. This clause shall not apply to tribes.
(iv) Obtain insurance in an amount commensurate with the assessed risk, if required by the administering state agency and stipulated within the grant agreement or contract.
(v) Deposit any funds received as an advance payment into a federally insured account of the recipient entity that provides the ability to track interest earned and withdrawals. Any accumulated interest shall be deemed to be grant or contract moneys, subject to federal and state laws and regulations, and the recipient shall report interest earned on the advance payment to the administering state agency. The recipient entity’s account shall be in the recipient entity’s name, and not in the name of any of its directors or officers.
(vi) Establish procedures to minimize the amount of time that elapses between the transfer of funds and the expenditure of those funds by the recipient or subrecipient. Further advance payments may be made if a grantee or contract recipient is able to demonstrate that a sufficient amount of previously advanced funds has been expended or that a plan is in place to ensure the expenditure of those funds in a timely manner, as determined by the administering state agency.
(vii) Provide progress reports on the expenditure of advanced funds no less than on a quarterly basis and as otherwise required by the administering state agency. All unused funding provided as an advance payment, but not expended within the grant or contract timeline, shall be returned to the state.
(viii) Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.
(B) (i) Recipient entities may provide moneys from the advance payment to subrecipients in accordance with their grant program requirements or contract.
(ii) Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements and the terms and conditions of the state award.
(iii) Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.
(d) Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agency’s approval of the recipient entity’s or recipient state agency’s workplan and written justification.
(e) The Department of Finance or its designee may audit, during or after the conclusion of the term of the grant agreement, any state agency subject to this section or any recipient or subrecipient that received an advance payment under this section. The state agency, recipient, or subrecipient shall cooperate fully with the audit, including, but not limited to, providing access to its staff, books, records, accounts, or other materials, as requested.
(f) This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.

SEC. 2.

 Section 39603.1 of the Health and Safety Code is amended to read:

39603.1.
 (a) Notwithstanding any other law, the state board may provide advance payments to grantees of a grant program or project if the state board determines all of the following:
(1) The advance payments are necessary to meet the purposes of the grant program or project.
(2) The use of the advance funds is adequately regulated by grant or budgetary controls.
(3) The request for application or the request for proposals contains the terms and conditions under which an advance payment may be received consistent with this section.
(4) The grantee is either a small district or the grantee meets all of the following criteria:
(A) Has no outstanding financial audit findings related to any of the moneys eligible for advance payment and is in good standing with the Franchise Tax Board and Internal Revenue Service.
(B) Agrees to revert all unused moneys to the state if they are not liquidated within the timeline specified in the grant agreement.
(C) (i) Submits a spending plan to the state board for review prior to receiving the advance payment.
(ii) The spending plan shall include project schedules, timelines, milestones, and the grantee’s fund balance for all state grant programs.
(iii) The state board shall consider the available fund balance when determining the amount of the advance payment.
(D) Reports to the state board any material changes to the spending plan within 30 days.
(5) In the event of the nonperformance of a grantee, the state board shall require the full recovery of the unspent moneys. A grantee shall provide a money transfer confirmation within 45 days upon the receipt of a notice from the state board.
(b) (1) A grantee may provide moneys from an advance payment to subrecipients in accordance with Section 11019.3 of the Government Code for purposes of reimbursement or advance payment pursuant to the grant program requirements or contract.
(2) For the purposes of this subdivision, both of the following apply:
(A) “Recipient entity,” as that term is defined in Section 11019.3 of the Government Code, also includes a local agency or a nongovernmental entity.
(B) If the subrecipient is a local agency or a nongovernmental entity, other than a private, nonprofit organization, the subrecipient shall not be subject to the requirements of clause (iii) of subparagraph (A) of paragraph (2) of subdivision (c) of Government Code Section 11019.3, but instead shall demonstrate good standing with the United States Internal Revenue Service.
(c) The state board, in consultation with the Department of Finance, shall adopt a regulation implementing this section to ensure the moneys are used properly.