California Government Code § 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

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