BILL NUMBER: AB 2541 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 3, 2006
AMENDED IN ASSEMBLY APRIL 17, 2006
INTRODUCED BY Assembly Members Matthews and Negrete McLeod
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 amended, 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. The state agency is
required to pay to the contractor a late payment penalty of 0.25% of
the amount due, per calendar day, from the required payment date, if
the contractor 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, and for all other businesses, a
penalty at a rate of 1% above the rate accrued on June 30 of the
prior year by the Pooled Money Investment Account, as specified.
This bill would increase the 0.25% late payment penalty to 1%. The
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
either of the following:
(1) A state agency acquiring property or services pursuant to a
contract or 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 either of the following:
(1) A
a solicited or unsolicited proposal of a state agency,
including, but not limited to, a request for proposals (RFP) and a
request for applications (RFA), to furnish assistance to a nonprofit
service organization so that the latter may carry out its own program
to provide public services. The term shall not include the
procurement of goods or services for a state agency nor the
acquisition, construction, alteration, improvement, or repair of real
property for a state agency.
(2) 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.
(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.
(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.
(f) "Nonprofit service organization" means a nonprofit entity that
is organized to provide services to the public.
(g) "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 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
claimant.
(4) The invoice has been improperly executed or needs to be
corrected by the claimant.
(5) The state agency making the determination or the claimant
involved has been subject to a computing or accounting failure
related to the Year 2000 Problem.
(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.
(i) "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.
(j) "Revolving fund" means a fund established pursuant to Article
5 (commencing with Section 16400) of Division 4 of Title 2.
(k) "Small business" means a business certified as a "small
business" in accordance with subdivision (d) of Section 14837.
(l) "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.
(m) "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 claimant for reasonable cause if the state agency
notifies the claimant within 15 working days from receipt of the
invoice, or delivery of 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 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 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 claimant a penalty of 1 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 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 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 claimant without requiring that the
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 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 claimant a penalty of 1 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 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
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.