Section 11019.3 - Expansion of existing advance payment practices for state grants and contracts with nonprofits(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.(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 a private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code.(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) 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.(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.Added by Stats 2023 ch 535 (AB 590),s 1, eff. 1/1/2024.