BILL NUMBER: AB 2541 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Matthews
FEBRUARY 23, 2006
An act to amend Sections 927.1, 927.2, 927.3, 927.6, 927.7,
927.10, and 927.11 of the Government Code, relating to claims against
the state.
LEGISLATIVE COUNSEL'S DIGEST
AB 2541, as introduced, Matthews Claims against the state.
Existing law requires a state agency that acquires property or
services pursuant to a contract with a business to make payment to
the person or business on the date required by the contract, and
within 45 days of the state agency's receipt of an undisputed
invoice, or be subject to a late payment penalty.
This bill additionally would require a state agency that awards a
grant, as defined, to make payment to the person or business that is
the recipient of the grant on the date required by the grant, and
within 45 days of the state agency's receipt of an undisputed
invoice, or be subject to a late payment penalty. The bill would make
other conforming changes.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 927.1 of the Government Code is amended to
read:
927.1. (a) (1) A state agency that acquires
property or services pursuant to a contract with a business,
including any approved change order or contract amendment, shall make
payment to the person or business on the date required by the
contract and as required by Section 927.4 or be subject to a late
payment penalty.
(2) A state agency that awards a grant, as defined in subdivision
(b) of Section 927.2, shall make payment to the person or business
that is the recipient of the grant on the date required by the grant
and as required by Section 927.4 or be subject to a late payment
penalty.
(b) Except in the event of an emergency as provided in Section
927.11, effective January 1, 1999, the late payment penalties
specified in this chapter may not be waived, altered, or limited by
a either of the following:
(1) A state agency acquiring
property or services pursuant to a contract or by any
that awards a grant.
(2) Any person or business
contracting with a state agency to provide property or services
or that is the recipient of a grant .
SEC. 2. Section 927.2 of the Government Code is amended to read:
927.2. The following definitions apply to this chapter:
(a) "Claim schedule" means a schedule of invoices prepared and
submitted by a state agency to the Controller for payment to the
named claimant.
(b) "Grant" means a signed final agreement between the Office
of Emergency Services and a local government agency or organization
authorized to accept grant funding for victim service programs
administered by the Criminal Justice Programs Division of the Office
of Emergency Services.
(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 grant .
(c)
(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.
(d)
(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.
(e)
(f) "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 between the invoice or claimed amount
and either the contractor's 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
contractor claimant .
(4) The invoice has been improperly executed or needs to be
corrected by the contractor claimant .
(5) The state agency making the determination or the
contractor claimant involved has been subject to
a computing or accounting failure related to the Year 2000 Problem.
(f)
(g) "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.
(g)
(h) "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.
(h)
(i) "Revolving fund" means a fund established pursuant
to Article 5 (commencing with Section 16400) of Division 4 of Title
2.
(i)
(j) "Small business" means a business certified as a
"small business" in accordance with subdivision (c)
(d) of Section 14837.
(j)
(k) "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.
(k)
(l) "Year 2000 Problem" has the same meaning as that
set forth in subdivision (a) of Section 3269 of the Civil Code.
SEC. 3. Section 927.3 of the Government Code is amended to read:
927.3. Except where payment is made directly by a state agency
pursuant to Section 927.6, any undisputed invoice received by a state
agency shall be submitted to the Controller for payment by the
required payment approval date. A state agency may dispute an invoice
submitted by a contractor claimant for
reasonable cause if the state agency notifies the
contractor claimant within 15 working days from
receipt of the invoice, or delivery of the
property or services, whichever is later. No state employee shall
dispute an invoice, on the basis of minor or technical defects, in
order to circumvent or avoid the general intent or any of the
specific provisions of this chapter.
SEC. 4. Section 927.6 of the Government Code is amended to read:
927.6. (a) State agencies shall pay applicable penalties, without
requiring that the contractor claimant
submit an additional invoice for these amounts, whenever the state
agency fails to submit a correct claim schedule to the Controller by
the required payment approval date. The penalty shall cease to accrue
on the date the state agency submits the claim schedule to the
Controller for payment, and shall be paid for out of the state agency'
s funds. If the contractor claimant is
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 state agency shall pay to the contractor
claimant a penalty of 0.25 percent of the amount
due, per calendar day, from the required payment date. However, a
nonprofit organization shall only be eligible to receive a penalty
payment if it has been awarded a contract or grant in an
amount less than five hundred thousand dollars ($500,000).
(b) For all other businesses, the state agency shall pay a penalty
at a rate of 1 percent above the rate accrued on June 30 of the
prior year by the Pooled Money Investment Account, not to exceed a
rate of 15 percent, except that, if the amount of the penalty is
seventy-five dollars ($75) 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
schedule to the Controller by the required payment approval date, by
paying the contractor 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. 5. Section 927.7 of the Government Code is amended to read:
927.7. The Controller shall pay contractors
claimants within 15 calendar days of receipt of a correct
claim schedule from the state agency. If the Controller fails to make
payment within 15 calendar days of receipt of the claim schedule
from a state agency, the Controller shall pay applicable penalties to
the contractor claimant without
requiring that the contractor 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 contractor
claimant is 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
contractor claimant a penalty of 0.25
percent of the amount due, per calendar day, from the 16th calendar
day following receipt of the claim schedule from the state agency.
However, a nonprofit organization shall only be eligible to receive a
penalty payment if it has been awarded a contract or grant
in an amount less than five hundred thousand dollars
($500,000). For all other businesses, the Controller shall pay
penalties at a rate of 1 percent above the rate accrued on June 30 of
the prior year by the Pooled Money Investment Account, not to exceed
a rate of 15 percent, except that, if the amount of the penalty is
seventy-five dollars ($75) or less, the penalty shall be waived and
not paid by the Controller.
SEC. 6. Section 927.10 of the Government Code is amended to read:
927.10. State agencies shall encourage contractors
claimants to promptly pay their subcontractors
and suppliers, especially those that are small businesses. In
furtherance of this policy, state agencies shall utilize expedited
payment processes to enable faster payment by prime contractors to
their subcontractors and suppliers, and shall promptly respond to any
subcontractor or supplier inquiries regarding the status of payments
made to prime contractors.
SEC. 7. Section 927.11 of the Government Code is amended to read:
927.11. (a) Except in the case of a contract with a certified
small business, a nonprofit organization , or a nonprofit
public benefit corporation, if an invoice from a business under a
contract with the Department of Forestry and Fire Protection would
become subject to late payment penalties during the annually declared
fire season, as declared by the Director of Forestry and Fire
Protection, then the required payment approval date shall be extended
by 30 calendar days.
(b) No nonprofit public benefit corporation shall be eligible for
a late payment penalty if a state agency fails to make timely payment
because no Budget Act has been enacted.
(c) If the Director of Finance determines that a state agency or
the Controller is unable to promptly pay an invoice as provided for
by this chapter due to a major calamity, disaster, or criminal act,
then otherwise applicable late payment penalty provisions contained
in Section 927.7 shall be suspended except as they apply to a
contractor which claimant that is
either 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 suspension shall remain in effect until the
Director of Finance determines that the suspended late payment
penalty provisions of this section should be reinstated.
(d) Except as provided in subdivision (b), in the event a state
agency fails to make timely payment because no Budget Act has been
enacted, penalties shall continue to accrue until the time that the
invoice is paid.