Bill Text: CA SB557 | 2023-2024 | Regular Session | Enrolled

California Senate Bill 557

Bill Title: California Prompt Payment Act: nonprofit organizations.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Vetoed) 2024-01-25 - Veto sustained. [SB557 Detail]

Download: California-2023-SB557-Enrolled.html

Enrolled September 14, 2023

Passed IN Senate May 30, 2023

Passed IN Assembly September 12, 2023

Amended IN Senate May 18, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill

No. 557

Introduced by Senator Limón

February 15, 2023

An act to amend Sections 927.2, 927.6, 927.7, and 927.9 of the Government Code, relating to state government administration.

LEGISLATIVE COUNSEL'S DIGEST

SB 557, Limón. California Prompt Payment Act: nonprofit organizations.

Under the California Prompt Payment Act, a state agency that awards a grant or that acquires property or services pursuant to a contract is required to make timely payments pursuant to the grant or contract. If a state agency or the Controller fails to take certain timely actions, and payment is not issued within 45 calendar days from the state agency receipt of an undisputed invoice, the act requires the state agency or the Controller, as applicable, to pay certain penalties. The act provides an exception from those penalty provisions if the grant or contract was awarded to a nonprofit organization in an amount less than $500,000. The act defines the term “grant” to mean a signed final agreement between any state agency and a local government agency or organization authorized to accept grant funding for victim services or prevention programs administered by any state agency or restoration activities performed by a resource conservation district.

This bill would define the term “grant” to additionally mean a signed final agreement between any state agency and a nonprofit organization and would delete the $500,000 exception described above.

The act authorizes a state agency to dispute for reasonable cause an invoice, refund request, or claim for Medi-Cal reimbursement, as specified. The act defines “reasonable cause” to mean a determination by a state agency that any of certain conditions exist, including that there is a discrepancy between the invoice or claimed amount and either the claimant’s actual delivery of property or services to the state or the state’s acceptance of those deliveries.

This bill would revise the condition described above to apply if there is a discrepancy of an amount greater than $250 or 5% of the invoiced amount, whichever is lesser, between the invoice or claimed amount and either the claimant’s actual delivery of property or services to the state or the state’s acceptance of those deliveries.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

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

SECTION 1.

Section 927.2 of the Government Code is amended to read:

927.2.

The following definitions apply to this chapter:

(a) “Claim” means payment requests prepared and submitted by a state agency to the Controller for payment to the named claimant.

(b) (1) (A) “Grant” means a signed final agreement between any state agency and a local government agency or organization authorized to accept grant funding for victim services or prevention programs administered by any state agency, or restoration activities performed by a resource conservation district.

(B) “Grant” also means a signed final agreement between any state agency and a nonprofit organization.

(2) A grant defined by this subdivision is a contract and subject to this chapter.

(c) “Invoice” means a bill or claim that requests payment on a contract under which a state agency acquires property or services or pursuant to a signed final grant agreement.

(d) “Medi-Cal program” means the program established pursuant to Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code.

(e) “Nonprofit public benefit corporation” means a corporation, as defined by subdivision (b) of Section 5046 of the Corporations Code, that has registered with the Department of General Services as a small business.

(f) “Nonprofit organization” means an organization that qualifies as an exempt organization under Section 501(c)(3) of the Internal Revenue Code.

(g) “Notice of refund or other payment due” means a state agency provides notice to the person that a refund or payment is owed to that person or the state agency receives notice from the person that a refund or undisputed payment is due.

(h) “Payment” means any form of the act of paying, including, but not limited to, the issuance of a warrant or a registered warrant by the Controller, or the issuance of a revolving fund check by a state agency, to a claimant in the amount of an undisputed invoice.

(i) “Reasonable cause” means a determination by a state agency that any of the following conditions are present:

(1) There is a discrepancy between the invoice or claimed amount and the provisions of the contract or grant.

(2) There is a discrepancy of an amount greater than two hundred fifty dollars ($250) or 5 percent of the invoiced amount, whichever is lesser, between the invoice or claimed amount and either the claimant’s actual delivery of property or services to the state or the state’s acceptance of those deliveries.

(3) Additional evidence supporting the validity of the invoice or claimed amount is required to be provided to the state agency by the claimant.

(4) The invoice has been improperly executed or needs to be corrected by the claimant.

(5) There is a discrepancy between the refund or other payment due as calculated by the person to whom the money is owed and by the state agency.

(j) “Received by a state agency” means the date an invoice is delivered to the state location or party specified in the contract or grant or, if a state location or party is not specified in the contract or grant, wherever otherwise specified by the state agency.

(k) “Required payment approval date” means the date on which payment is due as specified in a contract or grant or, if a specific date is not established by the contract or grant, 30 calendar days following the date upon which an undisputed invoice is received by a state agency.

(l) “Resource conservation district” means a resource conservation district established pursuant to Division 9 (commencing with Section 9001) of the Public Resources Code.

(m) “Revolving fund” means a fund established pursuant to Article 5 (commencing with Section 16400) of Chapter 2 of Part 2 of Division 4 of Title 2.

(n) “Small business” means a business certified as a “small business” in accordance with subdivision (d) of Section 14837, including certified small businesses engaged in the development, design, and construction of California’s high-speed rail system pursuant to the California High-Speed Rail Act (Division 19.5 (commencing with Section 185000) of the Public Utilities Code).

(o) “Small business” and “nonprofit organization” mean, in reference to providers under the Medi-Cal program, a business or organization that meets all of the following criteria:

(1) The principal office is located in California.

(2) The officers, if any, are domiciled in California.

(3) If a small business, it is independently owned and operated.

(4) The business or organization is not dominant in its field of operation.

(5) Together with any affiliates, the business or organization has gross receipts from business operations that do not exceed three million dollars ($3,000,000) per year, except that the Director of Health Services may increase this amount if the director deems that this action would be in furtherance of the intent of this chapter.

(p) “Department of FISCal” means the organization responsible for operating and maintaining the Financial Information System for California integrating statewide accounting, budgeting, cash management, and procurement pursuant to subdivision (b) of Section 11890.

SEC. 2.

Section 927.6 of the Government Code is amended to read:

927.6.

(a) State agencies shall pay applicable penalties, without requiring that the claimant submit an additional invoice for these amounts, whenever the state agency fails to submit a correct claim to the Controller by the required payment approval date and payment is not issued within 45 calendar days from the state agency receipt of an undisputed invoice. The penalty shall cease to accrue on the date the state agency submits the claim to the Controller for payment or pays the claimant directly, and shall be paid for out of the state agency’s support appropriation. If the claimant is a resource conservation district, certified small business, a nonprofit organization, a nonprofit public benefit corporation, or a small business or nonprofit organization that provides services or equipment under the Medi-Cal program, the state agency shall pay to the claimant a penalty at a rate of 10 percent above the United States Prime Rate on June 30 of the prior fiscal year. If the amount of the penalty is ten dollars ($10) or less, the penalty shall be waived and not paid by the state agency.

(b) For all other businesses, the state agency shall pay a penalty at a rate of 1 percent above the Pooled Money Investment Account daily rate on June 30 of the prior fiscal year, not to exceed a rate of 15 percent. If the amount of the penalty is one hundred dollars ($100) or less, the penalty shall be waived and not paid by the state agency. On an exception basis, state agencies may avoid payment of penalties for failure to submit a correct claim to the Controller by the required payment approval date by paying the claimant directly from the state agency’s revolving fund within 45 calendar days following the date upon which an undisputed invoice is received by the state agency.

SEC. 3.

Section 927.7 of the Government Code is amended to read:

927.7.

(a) The Controller shall pay claimants within 15 calendar days of receipt of a correct claim from the state agency. If the Controller fails to make payment within 15 calendar days of receipt of the claim from a state agency, and payment is not issued within 45 calendar days from state agency receipt of an undisputed invoice, the Controller shall pay applicable penalties to the claimant without requiring that the claimant submit an invoice for these amounts. Penalties shall cease to accrue on the date full payment is made, and shall be paid for out of the Controller’s funds. If the claimant is a resource conservation district, a certified small business, a nonprofit organization, a nonprofit public benefit corporation, or a small business or nonprofit organization that provides services or equipment under the Medi-Cal program, the Controller shall pay to the claimant a penalty at a rate of 10 percent above the United States Prime Rate on June 30 of the prior fiscal year, from the 16th calendar day following receipt of the claim from the state agency. If the amount of the penalty is ten dollars ($10) or less, the penalty shall be waived and not paid by the Controller. For all other businesses, the Controller shall pay penalties at a rate of 1 percent above the Pooled Money Investment Account daily rate on June 30 of the prior fiscal year, not to exceed a rate of 15 percent. If the amount of the penalty is one hundred dollars ($100) or less, the penalty shall be waived and not paid by the Controller.

(b) The Department of FISCal shall be responsible for applicable penalties if the Financial Information System for California delays the delivery of a correct claim from the state agency to the Controller, preventing the Controller from making payment within 15 calendar days and payment is not issued within 45 calendar days from state agency receipt of an undisputed invoice.

SEC. 4.

Section 927.9 of the Government Code is amended to read:

927.9.

(a) Except as provided in subdivision (c), on an annual basis, within 90 calendar days following the end of each fiscal year, state agencies shall provide the Director of General Services with a report on late payment penalties that were paid by the state agency in accordance with this chapter during the preceding fiscal year.

(b) The report required by subdivision (a) shall separately identify the total number and dollar amount of late payment penalties paid to small businesses, other businesses, nonprofit organizations, and refunds or other payments to individuals. State agencies may, at their own initiative, provide the director with other relevant performance measures. The director shall prepare a report separately listing the number and total dollar amount of all late payment penalties paid to small businesses, other businesses, nonprofit organizations, and refunds and other payments to individuals by each state agency during the preceding fiscal year, together with other relevant performance measures, and shall make the information available to the public.

(c) The reporting requirements of subdivisions (a) and (b) are not applicable to the Department of Forestry and Fire Protection.