BILL ANALYSIS
AB 2541
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ASSEMBLY THIRD READING
AB 2541 (Matthews)
As Amended May 26, 2006
Majority vote
BUSINESS & PROFESSIONS 10-0APPROPRIATIONS
(vote not available)
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|Ayes:|Negrete McLeod, Shirley | | |
| |Horton, Bass, Koretz, | | |
| |Maze, Nation, Tran, | | |
| |Frommer, Yee, Canciamilla | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires the state to pay a penalty for the late
payment of a grant. Specifically, this bill :
1)Requires the state to pay a penalty for the late payment of a
grant in the same manner that penalties are paid for the late
payment of amounts due on contracts.
2)Defines "grant" as a solicited or unsolicited proposal of a
state agency to furnish assistance to nonprofit service
organizations that perform public services.
3)Defines "nonprofit service organization" as a nonprofit entity
that is organized to provide services to the public.
EXISTING LAW requires the state to pay amounts due on contract
on the date specified in the contract or within 45 days of a
properly submitted, undisputed invoice, or pay a penalty of
0.25% per day if the contractor is a small business, or 1% above
the Pooled Money Investment Account rate for all other
businesses.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the impact of adding grantees to those eligible for
late payment penalties is unknown, but assuming an increase in
penalties of only 5% yields an annual cost of $200,000 from all
funds.
COMMENTS : According to the author: "The California Budget Act
of 2003, Chapter 229, abolished the Office of Criminal Justice
AB 2541
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Planning (OCJP) effective 12/31/03. The OCJP administered most
of the majority of victim services grants in the state. The
duties and obligations of the OCJP were transferred to and
assumed by the Office of Emergency Services (OES). Soon
thereafter, funding issues arose concerning all programs funded
by the Criminal Justice Division of OES, especially for victim
services programs. These victim services programs were not
receiving reimbursements from either federal or state grant
programs in a timely manner.
"Under current law, state agencies are required to remit payment
to the person or business under specified conditions of the
contract, and within 45 days of the state agency's receipt of an
undisputed invoice, or be subject to a late penalty. The late
payment penalty is currently 0.25% of the amount due per day.
This is known as the Prompt Payment Act (PPA), California
Government Code section 927 et seq.
"Even though existing law under the PPA requires state agencies
to maintain practices of prompt payment, numerous small business
and non-profit organizations such as victim services programs
are not under the purview of the PPA and thus regularly see
payment delays extending as long as nine months after submission
of invoices.
"In the last year, several Rape Crisis Centers nearly closed
their doors as a result of delayed reimbursements, in some cases
as much as $97,000 (34% of the center's annual budget) and in
many cases as long as nine months after submission of
appropriate paperwork. Some centers found that in order to
continue to provide services to their community, they had to lay
off as much as 60% of their staff.
"AB 2541 would close a loophole in the current statute by
including certain defined grantees within the requirements of
the PPA. AB 2541 would ensure that state agencies will be
consistent in the procedures for paying/reimbursing claimants,
and that payments will be made in a timely manner."
Analysis Prepared by : Ross Warren / B. & P. / (916) 319-3301
AB 2541
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FN: 0014838