The proposed legislation aims to modify the state's financial interactions with nonprofit organizations by implementing two key changes:
Prompt Payment Requirement: Currently, the state is obligated to settle liabilities within 45 days upon receiving a correct notice of the incurred liability. The bill proposes that this 45-day payment period should commence either upon receipt of a correct notice or when a good faith effort to provide such notice is demonstrated. This adjustment ensures that nonprofits are not unduly penalized for minor administrative oversights, facilitating more timely payments.
Advance Retainer for Nonprofit Contracts and Grants: State agencies typically reimburse nonprofits after expenses have been incurred. To alleviate the financial strain this can place on nonprofits, especially smaller ones with limited cash flow, the bill mandates that state agencies provide an upfront retainer of at least 35% of the total grant amount or the first year's contract disbursement. This retainer must be utilized within one year for expenses directly related to the specified grant or contract, offering nonprofits greater financial stability and capacity to initiate projects without delay.
Additionally, the bill requires nonprofits receiving state funds to disclose information regarding their leadership's ethnicity, organizational structure, and prior state funding history. This measure aims to enhance transparency and ensure equitable distribution of state resources among diverse organizations.
By implementing these changes, the legislation seeks to support nonprofits in managing their finances more effectively, enabling them to focus on delivering services and fulfilling their missions without the added burden of financial uncertainty.
Summary
Currently, the controller is required to adopt fiscal rules requiring
the state to make disbursements in the payment of any liability incurred on behalf of the executive branch of the state within 45 days of receiving a correct notice that this liability was incurred. The bill modifies this requirement so that either a correct notice of the state's liability or a demonstration of a good faith effort to provide a correct notice of the state's liability initiates the 45-day period.
A state agency that awards a grant generally requires the grant
recipient to access the grant amount awarded by applying for the reimbursement of costs incurred in completing the activity for which the state agency awarded the grant. The bill directs the controller to adopt fiscal rules requiring a state agency to award a nonprofit organization a retainer when entering into a contract with or awarding a grant to a nonprofit organization. The retainer amount must equal at least 35% of the grant amount or 35% of the amount to be disbursed by the state to the nonprofit organization in the first year of a contract between the state and the nonprofit organization. A nonprofit organization is required to spend the retainer amount within a year of the state awarding the grant to or entering into the contract with the nonprofit organization. A nonprofit organization may only expend a retainer on expenses the nonprofit organization incurs in connection with the relevant grant or contract.
The bill also requires a nonprofit organization that receives
disbursements from the state to provide the following information to the controller and requires the controller to make that information available upon request:
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The ethnicity of the nonprofit organization's leadership;
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The business structure of the nonprofit organization; and
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Whether the nonprofit organization has previously received a disbursement from the state.
