BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular
SB 208 (Lara) - Integrated regional water management plans:
grants: advanced payment
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|Version: February 11, 2015 |Policy Vote: N.R. & W. 7 - 2, |
| | E.Q. 5 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: April 27, 2015 |Consultant: Marie Liu |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 208 would allow a project proponent that is awarded
a grant under the Integrated Regional Water Management Planning
(IRWMP) Program, to receive an advance payment of up to 50% of
the grant award provided that specific conditions are met.
Fiscal
Impact:
Unknown potential losses, potentially in the hundreds of
thousands of dollars, of bond/General Fund monies for advanced
funds that are spent on ineligible uses and are unrecoverable.
Unknown costs, but potentially in the tens of thousands of
dollars, from the General Fund for increased administrative
costs to DWR for the administration and oversight of advanced
funds.
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Background: Numerous water bonds, including most recently Proposition 1,
provide funding for projects and programs through the IRWMP
program. Typically, the Legislature appropriates bond funds to
DWR for a competitive grant solicitation. DWR then issues
guidelines for a round of IRWMP funding, and regional water
management groups submit their list of local projects. DWR ranks
the projects and makes the awards within each IRWMP funding
region.
In many cases, regional water management groups contract with
their local entities to carry out the projects. These entities
are reimbursed for their work by submitting invoices to its
regional water management group, who then submits the invoices
to DWR. Depending on the specific details of the funding
agreement and the administrative processes of the management
group, a number of months may pass between the time the local
entity incurs the expense and the time they receive
reimbursement from the management group.
Proposed Law:
This bill would establish a process whereby the state agency
administering an IRWMP grant could provide advance funding of an
IRWMP grant award if the project proponent is a nonprofit
organization or a disadvantaged community, or the project
benefits a disadvantaged community. The process would be as
follows:
1.Within 90 days of receiving notice of that it has been awarded
in IRWMP grant, the regional water management group would be
required to provide DWR with a list of projects to be funded
by the grant funds where the project proponent is a nonprofit
organization or a disadvantaged community, or the project
benefits a disadvantaged community. The list shall specify how
the projects are consistent with the adopted integrated
regional water management plan and shall include specific
information each project.
2.Within 60 days of receiving the project information from the
regional water management group, DWR would provide advanced
payment of 50 percent of the grant award for those projects
that satisfy both of the following criteria:
SB 208 (Lara) Page 2 of
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a. The project proponent is a nonprofit organization or
a disadvantaged community, or the project benefits a
disadvantaged community.
b. The grant award for the project is less than one
million dollars.
3.Recipients of advanced funds would be required to do the
following:
a. Deposit the funds in a noninterest-bearing account
until expended.
b. Expend the funds within six months of receipt,
unless DWR waives this requirement.
c. Periodically, but not more frequently than
quarterly, provide an accountability report to the
administering agency regarding the expenditure and use of
any advanced grant funds in a format as determined by
that state entity.
d. Return any funds to the administering agency that
are not expended within 60 days after project completion
or the end of the grant performance period, whichever is
earlier.
The provisions of this bill sunset on January 1, 2025.
Staff
Comments: According to the sponsor of the bill, under the
existing reimbursement process, it can sometimes take up to 12
months to receive reimbursement for projects. This wait period
SB 208 (Lara) Page 3 of
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for reimbursement is especially difficult for nonprofits or
disadvantaged communities who may not have the cash flow to
shoulder project debt for such a long period. This bill would
try to alleviate this difficultly by advancing up to half of the
project funds for small awards (less than $1 million).
While advanced funds can assist project proponents, especially
those with limited budgets, advanced funds pose a financial risk
to the state is if the award is spent not in accordance with
grant guidelines. Ensuring monies are only spent on eligible
purposes is straightforward in a reimbursement process as
payments can simply be denied for ineligible expenses. But when
funds are advanced, the administering agency, in this case DWR,
would need to take corrective action to recover monies that are
spent on ineligible expenditures. Recovering funds is more
difficult than simply denying reimbursement and may not be
successful, especially if the grantee has a small budget, which
are the entities most likely to utilized advanced funds.
This bill provides several assurances to reduce the odds of any
funds being spent on ineligible expenses or becoming
unrecoverable. Specifically, the requirements that the monies be
spent in a set period of time and the reporting requirements
will assist DWR's oversight in verifying expenditures. Also,
limiting advanced funds to only half the award grant may help
ease the recovery of any funds spent on ineligible expenses as
DWR could recover the funds by reducing reimbursements for later
project expenditures rather than requesting payment from the
project proponent. The author and committee may wish to consider
additional assurances, such as explicitly allowing DWR to make
advance payments in several installments with each installment
being contingent on completing specific benchmarks and requiring
that all or a portion of the advanced funds be spent before
reimbursements begin.
To give an estimate on the magnitude of funds that potentially
could be advanced, in the last three IRWMP grant rounds, the
state awarded $577 million in grants for 462 projects. Of this
amount, $57.6 million and 140 projects would have fit the
eligibility criteria under this bill, which translates to a
maximum of $29 million in advanced funds. It is unknown what
portion of these funds might be spent on ineligible expenditures
but if one assumes that less than one percent of project
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spending is questionable, state costs could potentially be in
the low hundreds of thousands of dollars, some of which may be
recoverable from the project proponent.
Staff notes that allowing advance payments would increase DWR's
workload to administer the IWRMP grants, with part of this
increase being offset by the reduction in reimbursement claims.
The increased workload would be dependent on the number of
requests for advances and therefore is an unknown cost. Staff
estimates that this cost is potentially in the tens of thousands
of dollars. However, staff further notes that most bonds,
including the most recent water bond, cap the amount of bond
dollars that can be used for administration. As such, any
workload increases as a result of this bill must be absorbed, or
be paid for from another funding source, presumably General Fund
dollars.
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