Through Assembly Bill 590 (AB 590), the Legislature intends to improve and expand California’s existing advance payment practices for state grants and contracts with nonprofit entities. AB 590 authorizes a state agency that administers a state grant program or contract to advance payments under that program or contract, provided certain requirements are met. For example, the private, nonprofit organization must qualify as tax-exempt under Section 501(c)(3) of the Internal Revenue Code. As another example, AB 590 requires the administering state agency to prioritize organizations and projects serving disadvantaged, low-income, and under-resourced communities. The state agency must also include a stipulation about the advance payment structure and a request process within the grant agreement or contract, and ensure an advance payment to an organization does not exceed 25% of the total grant or contract amount, unless certain additional requirements and justifications are met.
To receive the advance payments, the organization receiving the grant or contract must also satisfy certain minimum requirements, including but not limited to providing an itemized budget, documentation to support the need for advance payment, progress reports, and documentation of good standing under Section 501(c)(3). There are also requirements relating to obtaining the requisite insurance as required by the administering agency, and holding the funds as stipulated or otherwise required by law.
Under AB 590, the Department of Finance or its designee may also audit organizations that receive advanced payments.
(AB 590 adds Section 11019.3 to the Government Code.)