AMENDED IN SENATE AUGUST 21, 2026

AMENDED IN SENATE AUGUST 13, 2026

AMENDED IN SENATE JUNE 18, 2025

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

96

Introduced by Assembly Member Hart

(Coauthor: Assembly Member Soria)

February 20, 2025

An act to amend Sections 8334 and 11019.3 of the Government Code, relating to state government.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: no

LEGISLATIVE COUNSEL’S DIGEST

Existing law authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements. Existing law defines “recipient entity” for these purposes to mean a private, nonprofit organization qualified under federal law, or a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, as specified. Existing law requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and underresourced communities, to stipulate an advance payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified. Existing law requires recipient entities to satisfy specified minimum requirements, including submitting prescribed documentation, providing progress reports on the expenditure of advanced funds no less than on a quarterly basis, and depositing any funds received as an advance payment into a federally insured account, as specified.

This bill would expand the definition of “recipient entity” to include a private, nonprofit organization qualified under state law and would limit the requirement to prioritize recipient entities and projects to grants and contracts advertised before January 1, 2026. The bill would eliminate the requirement to stipulate an advance payment structure and request process. The bill would limit the above-described documentation and federally insured account requirements to apply only to grants and contracts in excess of $10,000 and, for grants or contracts less than $10,000, would instead require recipient entities to provide the above-described progress reports no less than annually. The bill would revise and recast the above-described authorization for an administering state agency to instead require the agency to advance a payment to an eligible recipient entity in accordance with the above requirements for any grants and contracts advertised on or after January 1, 2027, with a total award value of $150,000 or less, receiving an initial disbursement of 25 percent of the total award that meets one or more of specified criteria. The bill would authorize an administering state agency to distribute advance payments in multiple installments over the course of the grant or contract term and would authorize a recipient entity to request subsequent advance payment installments, as provided.

This bill would authorize an administering state agency to opt out of the default advance payment requirement for a specific funding opportunity if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, the bill would require the agency to follow prescribed procedures, including clearly stating in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.

Existing law requires each state agency to register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant, and to provide specified information that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities.

This bill would require a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.

This bill would require, on or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified. The bill would require the Department of General Services to actively promote the Master Guide across state agencies and would require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as provided.

The people of the State of California do enact as follows:

SECTION 1.

Section 8334 of the Government Code is amended to read:

8334.

(a) (1) On or before July 1, 2020, each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant, that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:

(A) The title of the grant opportunity and grant identification number.

(B) The revenue source allocated to fund the grant.

(C) The purpose of the grant.

(D) A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.

(E) Any eligibility requirements, including, but not limited to, any matching funds requirements.

(F) Geographic limitations, if any.

(G) A description of the total available grant funding, the number of awards, and the amounts per award.

(H) The period of time covered by the grant.

(I) The date the grant will be issued.

(J) The deadline for proposals to be submitted.

(K) Internet address for electronic submission of the proposal.

(L) Contact information of a staff member responsible for communicating the grant requirements.

(M) The percentage of the grant funds that may be distributed as an advance payment.

(2) Each state agency shall provide a link to the California State Library’s funding opportunities internet web portal on the state agency’s internet website.

(b) On or before July 1, 2020, each state agency shall provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.

(c) “Grant” as used in this chapter means any mechanism used by a state agency to distribute appropriations that have been allocated for the purpose of financial assistance through a competitive or first-come, first-served award process. The term shall include loans and federal assistance funds that are administered by a state agency. 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.

(d) The Government Operations Agency shall assist the California State Library with state agency compliance and creating streamlined processes, as appropriate.

SEC. 2.

Section 11019.3 of the Government Code is amended to read:

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 contracts 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 or is exempt from state income taxation under Section 23701d of the Revenue and Taxation 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 both of the following:

(A) For grants or contracts advertised before January 1, 2026, prioritize recipient entities and projects serving disadvantaged, low-income, and underresourced communities or organizations with modest reserves and potential cashflow problems.

(B) 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. An administering state agency may also provide advanced payments continuously through the grant or contract term.

(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) For grants or contracts in excess of ten thousand dollars ($10,000), submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but not be limited to, invoices, contracts, estimates, payroll records, and financial records.

(iii) Demonstrate that it is an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code or from state income taxation under Section 23701d of the Revenue and Taxation 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) For grants or contracts in excess of ten thousand dollars ($10,000), 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, except for grants or contracts under ten thousand dollars ($10,000), for which progress reports shall be provided no less than annually, 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 timeline, shall be returned to the state.

(viii) Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.

(B) (i) Recipient entities that receive advance payments pursuant to this section may advance funds from the advance payment to any subrecipients in accordance with their grant program requirements or contract.

(ii) Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements, and the terms and conditions of the state award.

(iii) Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.

(d) (1) Except as provided in subdivision (f), an administering state agency shall advance a payment to an eligible recipient in accordance with the requirements of subdivision (c) for any grant or contract opportunity advertised on or after January 1, 2027, with a total award value of one hundred fifty thousand dollars ($150,000) or less, receiving an initial disbursement of 25 percent of the total award that meets one or both of the following criteria:

(A) The recipient maintains less than 120 days of operating reserves, as demonstrated by a signed affidavit or the organization’s most recent financial statement showing operating reserves of less than four months.

(B) The recipient is headquartered in, or can demonstrate that the majority of the grant-funded services will be provided within, an underresourced community. For purposes of this paragraph, “underresourced community” means a community identified pursuant to Section 39711 of the Health and Safety Code, subdivision (d) of Section 39713 of the Health and Safety Code, or subdivision (g) of Section 75005 of the Public Resources Code.

(2) An administering state agency may distribute advance payments in multiple installments over the course of the grant or contract term, provided that the outstanding advance payment balance held by the recipient entity does not exceed 25 percent of the total grant or contract amount at any single time. As the recipient entity submits documentation justifying the expenditure of previously advanced funds through the agency’s invoicing process, the recipient entity may request subsequent advance payment installments. Cumulatively, a recipient entity may receive up to 95 percent of the total grant or contract amount as advance pay payments over the course of the term.

(3) An administering state agency may allow an eligible recipient entity to request and receive an advance payment that exceeds the 25-percent single-time balance cap described in paragraph (2) if the recipient entity demonstrates, and the agency verifies, that the recipient entity meets all other eligibility requirements, has properly accounted for or spent down prior advances, or satisfies either of the following conditions:

(A) The advance payment is necessary for a large purchase, including, but not limited to, a construction project, land acquisition, or major equipment purchase.

(B) The recipient entity is a small, nonprofit organization or a tribe with low cashflow that requires the expanded advance payment to implement the project without causing negative impacts to the organization’s or tribe’s financial standing.

(e) A recipient shall have the right to decline the advance payment and elect a standard reimbursement-only schedule. The state agency shall provide a simple method of opting out within the agreement to facilitate this choice.

(f) An administering state agency may elect to opt out of the default advance payment requirement for a specific funding opportunity under subdivision (d) only if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, opt-out provision, a state agency shall do all of the following:

(1) Clearly state in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.

(2) Maintain a written notice of nonparticipation in the program file, signed by the agency’s fiscal officer or director, specifying the legal, fiscal, or programmatic reasons why advance payment is not feasible.

(3) Upon request, provide a summary of all such justifications to the Department of General Services and the California State Library to ensure transparency in the use of the opt-out provision.

(g) Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agency’s approval of the recipient entity’s or recipient state agency’s workplan and written justification.

(h) (1) On or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, shall develop a Statewide Advance Funds and Reconciliation Guide (Master Guide).

(2) The Department of General Services shall actively promote the Master Guide across all state entities to support widespread agency adoption and successful implementation.

(3) Every state agency subject to this chapter shall adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, including any forms and policies of the Master Guide. To ensure governmentwide cost reduction and eliminate duplicative administrative burdens in the development of individual advance pay policies, agencies shall not create independent or additional reconciliation requirements that exceed the standards set forth in the Master Guide, unless the following conditions are satisfied:

(A) The independent or additional reconciliation requirements are required by federal law or specific bond act covenants.

(B) The agency provides a written justification to the Department of General Services documenting exactly why the Master Guide is insufficient for the agency’s specific processes and receives written authorization from the department to develop and implement alternative agency-specific policies or procedures.

(4) The Master Guide shall include a Standardized Advance Payment Toolkit for use by all agencies and recipients, including all of the following:

(A) A simplified, one-page form for recipients to request or opt out of advance payments.

(B) A standardized form for organizations to demonstrate priority status based on operating reserves or geographic equity.

(C) A simplified quarterly reconciliation form to be used across all state programs to ensure consistent tracking of advanced funds.

(5) The Strategic Growth Council, in coordination with the Department of General Services, shall provide both of the following:

(A) An annual training webinar for state agency staff to ensure the uniform application of the Master Guide, thereby reducing the administrative workload on individual departments.

(B) Dedicated technical assistance, guidance, and training materials to community organizations and nonprofit entities to clarify application processes, eligibility criteria, and required forms.

(6) The Strategic Growth Council shall biennially review and update the Master Guide to reflect best practices in fiscal transparency and to incorporate feedback from nonprofit stakeholders and state auditors.

(i) This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.