Existing law establishes various grant programs. Existing law, the Grant Information Act of 2018, requires the California State Library to create an internet web portal to provide a centralized location for grant seekers to find state grant opportunities and requires the California State Library to report to the Legislature on the effectiveness of the portal, including, among other things, the utilization rate by state agencies.

This bill would impose minimum requirements for the administration of covered grants that meet maximum size and duration requirements and are available to nonprofit organizations, as defined. The bill would require administrators, as defined, to perform specified duties, including, among others, posting eligibility, application, and other information for covered grants on their internet website and the above-described grant portal created by the California State Library. The bill would impose minimum requirements on the distribution of grant funds, and would impose limitations on specified reporting requirements for covered grant recipients. The bill would prohibit an administrator from requiring a grant recipient to carry insurance coverage limits in excess of the risk associated with the covered grant activity.

Existing law establishes various grant programs. Existing law, the Grant Information Act of 2018, requires the California State Library to create an internet web portal to provide a centralized location for grant seekers to find state grant opportunities and requires the California State Library to report to the Legislature on the effectiveness of the portal, including, among other things, the utilization rate by state agencies.

This bill would impose minimum requirements for the administration of covered grants that meet maximum size and duration requirements and are available to nonprofit organizations, as defined. The bill would require administrators, as defined, to perform specified duties, including, among others, posting eligibility, application, and other information for covered grants on their internet website and the above-described grant portal created by the California State Library. The bill would impose minimum requirements on the distribution of grant funds, and would impose limitations on specified reporting requirements for covered grant recipients. The bill would prohibit an administrator from requiring a grant recipient to carry insurance coverage limits in excess of the risk associated with the covered grant activity.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2322 (Hart) - Grant programs: administration

Bill Summary:

AB 2322 establishes requirements on the promotion and administration of covered grants by state agencies and third-part contractors, as specified.

Fiscal Impact:

• Unknown, potentially significant costs across all state agencies to identify and post grant information online, create materials covering frequently asked questions, provide telephone support for potential recipients, and create new or modify existing grant administration processes (various special funds).

The actual impact to each state agency will depend on, among other things, the number of covered grants administered annually and the agency’s level of involvement in administering the grant. For example, the California Air Resources Board (CARB) reports total ongoing costs of approximately $1.9 million in Fiscal Year 2024-25 and $1.4 million annually ongoing to implement the requirements of this bill (various special funds). While not all impacted state entities will require the same level of resources, costs may still be significant.

• The California State Library (CSL) anticipates absorbable costs to add fields to the California Grants Portal (Grants Portal), assuming this bill does not precipitate a significant number of new accounts or users. Currently, state agency contractors serving as grant administrators work via an awarding state agency to get an account for the Grants Portal in order to post information. As this bill includes third-party contractors as grant administrators, CSL may be required to provide Grant Portal accounts for this new user group. It is unknown how many third-party contractors would qualify under this bill. To the extent that this new user group is significant, CSL may incur additional, non-absorbable costs to modify the Grants Portal and provide other administrative assistance.

Background:

The California Grant Information Act of 2018 enacted by AB 2252 (Limon, Chapter 318, Statutes of 2018) seeks to streamline the process of grant discovery and application, thereby enhancing the ability of nonprofit organizations to secure necessary funding.

Central to the Act is the establishment of the Grants Portal, and online portal overseen by the CSL. The Grants Portal is mandated to provide a comprehensive and centralized repository of state grant opportunities, thereby simplifying the process of identifying relevant funding sources for nonprofit organizations.

Moreover, the Act mandates that each state agency provide a detailed account of each grant they administer. This includes critical information such as the purpose of the grant, eligibility requirements, and the total available funding. This level of detail and transparency is instrumental in enabling nonprofit organizations to strategically target grants that align with their mission and operational needs.

The Act also emphasizes inclusivity, requiring the portal to be accessible and provide valuable information to a diverse array of potential applicants. This includes community-based organizations and entities that work to support and uplift disadvantaged and low-income communities. This provision ensures that the benefits of the Act are widespread and reach organizations that are often at the forefront of addressing critical societal issues.

Furthermore, the Act modernizes the grant application process by requiring state agencies to accept electronic proposals. This provision not only streamlines the application process but also reduces the administrative burden on nonprofits, allowing them to focus more resources on their core mission.

Proposed Law:

• Requires an administrator to promote equity in and facilitate the effectiveness of covered grant distribution by:
  • Posting eligibility requirements and application information of a covered grant on their internet website and the Grants Portal. Requires the application information to include a section covering frequently asked questions and a telephone number by which applicants can contact the administrator for questions regarding the grant and application.
  • Provide eligible recipients with the ability to complete a covered grant application online.
• Requires an administrator to distribute at least 50 percent of a grant award, and authorizes an administrator to distribute at least 100 percent of a grant award upon execution of a covered grant.
• Prohibits an administrator from requiring any of the following:
  • A covered grant recipient provide receipts for any expense other than nonpayroll expenses paid to a single vender for 50 percent or more of the grant award.
  • For required reports related to progress or award completion, the total word count of narrative sections to be more than 600 words.
  • A grant recipient carry insurance coverage limit that exceeds the risk associated with the covered grant activity.
• Establishes definitions:
  • “Administrator” means a state agency or third-party contractor administering a grant program using state funds.
  • “Covered grant” means a grant made by a state agency or administrator that is not greater than $20,000, the duration of which is one year or less, and eligible recipients include nonprofit organizations.
  • “Nonprofit organization” means an organization exempt from federal income taxation, as specified.
  • “Third-party contractor” means either a nonprofit or other organization that contracts with a state agency to administer a grant program funded by state funds or a grant recipient if the conditions of the grant require the recipient to redistribute a portion of those funds to nonprofits.

Prior Legislation:

AB 860 (Valencia, 2023) was substantially similar to this bill, and would have also required, for grant programs totaling $200,000 or more, an administrator to conduct outreach to nonprofit organizations eligible for a covered grant at least 90 days before the application deadline, including outreach to rural, low-income, and disadvantaged communities. AB 860 was held on the Suspense File in this committee.

-- END --

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2023 - 2024 Regular

Bill No: 2322 Hearing Date: 6/25/2024

SUBJECT: Grant programs: administration

DIGEST: This bill streamlines the process of applying for and receiving small state grants, particularly those not exceeding $20,000 and with a duration of less than 12 months, and requires the creation of a more accessible and equitable grant application process, as specified.

ANALYSIS:

Existing law:

1. The California Grant Information Act of 2018 (Act) requires the California State Library (CSL) to create an internet web portal to provide a centralized location for grant seekers to find state grant opportunities.
2. Requires the CSL to report to the Legislature on the effectiveness of the portal, including, among other things, the utilization rate by state agencies.

This bill:

1. Requires an administrator, defined as a state agency or third-party contractor administering a grant program using state funds, to promote equity in and facilitate the effectiveness of distribution of grant funds for covered grants by doing both of the following:
2. Post the eligibility requirements and application information of a covered grant on their internet website and the internet website for the California Grants Portal. The application information shall include a section covering frequently asked questions and shall provide a telephone number by which applicants can contact the administrator for questions regarding the grant application.
3. An administrator shall provide eligible recipients with the ability to complete an application for a covered grant online.
4. Requires an administrator to distribute at least 50 percent of a grant award, and authorizes an administrator to distribute up to 100 percent of a grant award upon execution of a covered grant.
5. Prohibits an administrator from requiring any of the following:
   1. A recipient of a covered grant to provide receipts for any expense other than non-payroll expenses paid to a single vendor for 50 percent or more of the grant award.
   2. In any report required by the administrator from the recipient nonprofit related to progress or completion of the award, the total word count of narrative section to be more than 600 words.
   3. A grant recipient to carry insurance coverage limits that exceed the risk associated with the covered grant activity.
6. Defines “covered grant” to mean a grant made by a state agency or administrator that meets all of the following requirements:
   1. The grant amount is not greater than $20,000.
   2. The duration of the grant period is not greater than one year.
   3. Eligible recipients of the grant program include nonprofit organizations.
7. Defines “nonprofit organization” to mean an organization exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code, as specified.
8. Defines “third-party contractor” to mean either a nonprofit or other organization that contracts with a state agency to administer a grant program funded by state funds or a grant recipient if the conditions of the grant program require the grant recipient to redistribute a portion of those funds to nonprofit organizations.

Background

Author Statement. According to the author’s office, “AB 2322 is necessary to create a more efficient and equitable process to provide nonprofits with State grants. The bill cuts red tape by streamlining the application process and disbursement of small-dollar state grants for nonprofits. AB 2322 aims to increase access to advanced payments, reduce unnecessary grant requirements, and promote equity in the distribution of grant funds to nonprofits.”

Executive Order N-16-22. In September of 2022, Governor Newsom issued Executive Order (EO) N-16-22, which represents a comprehensive effort by the State of California to address disparities in opportunities and outcomes, and to advance equity through the design and delivery of state services and programs. It calls for explicit consideration of equity in policies and practices, improved data analysis tools, and enhanced community engagement strategies. The order underscores the state's commitment to achieving equal opportunity for all Californians and addressing persistent disparities in outcomes.

The order emphasizes the need for state agencies to embed explicit equity considerations in their policies and practices. This includes analyzing demographic and geographic gaps in outcomes and access to funding and services, developing data analysis tools to understand these gaps, and reviewing community engagement strategies with a focus on Californians residing in historically underserved and marginalized communities.

The CaliforniaGrant Information Act of 2018. The Act, established by AB 2252 (Limon, Chapter 318, Statutes of 2018), seeks to streamline the process of grant discovery and application, thereby enhancing the ability of nonprofit organizations to secure necessary funding.

Central to the Act is the establishment of the California Grants Portal, and online portal overseen by the CSL. This portal is mandated to provide a comprehensive and centralized repository of state grant opportunities, thereby simplifying the process of identifying relevant funding sources for nonprofit organizations.

Moreover, the Act mandates that each state agency provide a detailed account of each grant they administer. This includes critical information such as the purpose of the grant, eligibility requirements, and the total available funding. This level of detail and transparency is instrumental in enabling nonprofit organizations to strategically target grants that align with their mission and operational needs.

The Act also emphasizes inclusivity, requiring the portal to be accessible and provide valuable information to a diverse array of potential applicants. This includes community-based organizations and entities that work to support and uplift disadvantaged and low-income communities. This provision ensures that the benefits of the Act are widespread and reach organizations that are often at the forefront of addressing critical societal issues.

Furthermore, the Act modernizes the grant application process by requiring state agencies to accept electronic proposals. This provision not only streamlines the application process but also reduces the administrative burden on nonprofits, allowing them to focus more resources on their core mission.

Small Grant Programs. This bill is designed to further streamline the process of applying for and receiving covered grants, defined as those not exceeding $20,000 and with a duration of less than one year and involving nonprofits.

The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, and improving the lives of vulnerable community members in countless ways.

This bill requires an administrator – defined to mean either a state agency or third-party contractor administering a grant program using state funds – to distribute at least 50 percent of a grant award and up to 100 percent of a grant award upon execution of a covered grant. It also sets limitations on what an administrator can require from a recipient of a covered grant, such as not requiring receipts for any expense other than non-prayroll expenses paid to a single vendor for 50 percent or more of the grant award, not requiring the total word count of narrative sections in any report to be more than 600 words, and not requiring a grant recipient to carry insurance coverage limits that exceed the risk associated with the covered grant activity.

Déjà Vu All Over Again. This bill is substantially similar to AB 860 (Valencia, 2023), which would have streamlined the process of applying for and receiving small state grants, particularly those not exceeding $20,000 and with a duration of less than 12 months, and required the creation of a more accessible and equitable grant application process, as specified. Additionally, that bill required, for grant programs totaling $200,000 or more, an administrator to conduct outreach to nonprofit organizations eligible for a covered grant at least 90 days before the application deadline, including outreach to rural, low-income, and disadvantaged communities.

That bill was unanimously supported in this Committee, however, it was eventually held on the Senate Appropriations Committee Suspense File.

Prior/Related Legislation

AB 3017 (Hart, 2024) authorizes a state agency administering a grant program to provide for advance payments to a federally recognized Indian tribe, as specified. (Pending in the Senate Appropriations Committee)

SB 336 (Umberg, 2023) requires a state agency administering a grant program to reimburse a grantee's indirect costs at one of three specified rates requested by the grantee in its state grant program application. (Pending on the Assembly floor)

AB 590 (Hart, Chapter 535, Statutes of 2023) authorizes a state agency administering a grant program to provide for advance payments to a recipient 501(c)(3) nonprofit organization, as specified.

AB 860 (Valencia, 2023) would have streamlined the process of applying for and receiving small state grants, particularly those not exceeding $20,000 and with a duration of less than 12 months, and requires the creation of a more accessible and equitable grant application process, as specified. (Held on the Senate Appropriations Committee Suspense File)

AB 2252 (Limon, Chapter 318, Statutes of 2018) the California Grant Information Act of 2018, requires the CSL to create an internet web portal to provide a centralized location for grant seekers to find state grant opportunities and requires the CSL to report to the Legislature on the effectiveness of the portal, including, among other things, the utilization rate by state agencies.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

California Association of Nonprofits (Source)
California Council of Community Behavioral Health Agencies
California Partnership to End Domestic Violence
California ReLeaf
Center for Nonprofit Management
Children's Institute
Community Alliance With Family Farmers
Community Bridges
Community Water Center
El Concilio of Stockton
Fresno Building Healthy Communities
HealthRight 360
Inland Empire Community Collaborative
Inland Southern California United Way
Koreatown Youth + Community Center
Meals on Wheels California
Nonprofit Finance Fund
PATH
Rural Community Assistance Corporation
Santa Cruz Volunteer Center
Self-Help Enterprises
The Greenlining Institute
TreePeople
United Ways of California

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: A coalition of nonprofits write in support that, “[t]he size of state grants and contracts vary significantly. Opportunities currently listed on the state’s grant portal – grants.ca.gov – include grants as large as $22 million and as small as $320. Using the same application, qualifications, and reporting processes for both large and small grants and contracts is unnecessary and expensive.”

Further, the coalition notes that, “VaccinateAll58 – an outreach program from the California Department of Public Health – offers an example of a step in the right direction. The agency made dozens of outreach grants of $5,000 or less to both small and large nonprofits, utilizing a simplified application. The final report was likewise simplified, requiring no more than 1,100 words in narrative, and requiring no receipts to be submitted to justify expenses. While not appropriate for large grants and contracts, this process was efficient, and appropriate for small contracts, and resulted in a more equity-oriented pool of grant recipients.”

ASSEMBLY THIRD READING

ATR Bill Id:AB 2322

Author:(Hart and Bennett)

As Amended Ver:May 20, 2024

Majority vote

SUMMARY

This bill streamlines the process of applying for and receiving small state grants, particularly those not exceeding $20,000 and with a duration of less than 12 months, and requires the creation of a more accessible and equitable grant application process, as specified. The bill also requires the expansion of the California Grants Portal (a project by the California State Library (CSL)) to include specified information about such grants.

Major Provisions

1) Provides an administrator shall promote equity in and facilitate the effectiveness of distribution of grant funds for covered grants by doing both of the following:

a) An administrator shall post the eligibility requirements and application information of a covered grant on their internet website and the internet website for the California Grants Portal, as specified. The application information shall include a section covering frequently asked questions and shall provide a telephone number by which applicants can contact the administrator for questions regarding the grant and application.

b) An administrator shall provide eligible recipients with the ability to complete an application for a covered grant online.

2) Provides an administrator shall distribute at least 50% of a grant award and may distribute up to 100% of a grant award upon execution of a covered grant.

3) Provides an administrator shall not require any of the following:

a) A recipient of a covered grant to provide receipts for any expense other than non-payroll expenses paid to a single vendor for 50% or more of the grant award.

b) In any report required by the administrator from the recipient nonprofit related to progress or completion of the award, the total word count of narrative sections to be more than 600 words.

c) A grant recipient to carry insurance coverage limits that exceed the risk associated with the covered grant activity.

4) Defines "Administrator" to mean a state agency or third-party contractor administering a grant program using state funds.

5) Defines "Covered grant" to mean a grant made by a state agency or administrator that meets all of the following requirements:

a) The grant amount is not greater than $20,000.

b) The duration of the grant period is not greater than one year.

c) Eligible recipients of the grant program include nonprofit organizations.

6) Defines Nonprofit organization" to mean an organization exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(3)).

7) Defines "Third-party contractor" to mean either a nonprofit or other organization that contracts with a state agency to administer a grant program funded by state funds or a grant recipient if the conditions of the grant require the grant recipient to redistribute a portion of those funds to nonprofit organizations.

8) Provides that this legislation shall control the minimum terms of a covered grant.

COMMENTS

Background.

Grant Information Act of 2018. AB 2252 (Limon), Chapter 318, Statutes of 2018, required CSL to create an online grant portal providing a centralized location for grant seekers to find state grant opportunities. Each state agency must register every grant administered with CSL prior to commencing a solicitation or award process, provide a link to the Portal on the agency's website, and accept electronic grant proposal applications, as appropriate. The ensuing Portal (www.grants.ca.gov) facilitates the search of current grant opportunities filtered by applicant type (such as business, nonprofit, public agency), grant category (such as education, food and nutrition, veterans and military), and timeframe.

Small Grant Programs. The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, and improving the lives of vulnerable community members in countless ways.

AB 2322 is designed to further streamline the process of applying for and receiving covered grants, defined as those not exceeding $20,000 and with a duration of less than one year and involving nonprofits.

This bill also requires an administrator – defined to mean either a state agency or third-party contractor administering a grant program using state funds – to distribute at least 50% of a grant award upon execution of a covered grant. It also sets limitations on what an administrator can require from a recipient of a covered grant, such as not requiring receipts for any expense other than non-payroll expenses paid to a single vendor for 50% or more of the grant award, not requiring the total word count of narrative sections in any report to be more than 600 words, and not requiring a grant recipient to carry insurance coverage limits that exceed the risk associated with the covered grant activity.

Executive Order N-16-22. In September of 2022, Governor Newsom issued Executive Order (EO) N-16-22, which represents a comprehensive effort by the State of California to address disparities in opportunities and outcomes, and to advance equity through the design and delivery of state services and programs. It calls for explicit consideration of equity in policies and practices, improved data analysis tools, and enhanced community engagement strategies. The order underscores the state's commitment to achieving equal opportunity for all Californians and addressing persistent disparities in outcomes.

The order emphasizes the need for state agencies to embed explicit equity considerations in their policies and practices. This includes analyzing demographic and geographic gaps in outcomes and access to funding and services, developing data analysis tools to understand these gaps, and reviewing community engagement strategies with a focus on Californians residing in historically underserved and marginalized communities.

Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, "A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies" focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic.

The committees concluded that government contracting challenges remain a key barrier for nonprofits providing needed services. "Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities."

According to the Author

AB 2322 is necessary to create a more efficient and equitable process to provide nonprofits with State grants. The bill cuts red tape by streamlining the application process and disbursement of small-dollar State grants for nonprofits. Additionally, it requires the State to conduct proper outreach to nonprofits supporting disadvantaged and low-income communities, providing information on large grants well in advance of the application deadline.

Arguments in Support

According to the California Association of Nonprofits (CalNonprofits), "AB 2322 will support the state's equity and access goals by reducing the effort and expense associated with very small state contracts and grants to nonprofits, including when they are administered by a third party. The size of state grants and contracts vary significantly. Opportunities currently listed on the state's grants portal include grants as large as $22 million and as small as $320. Using the same application, qualifications, and reporting processes for both large and small grants and contracts is unnecessary and expensive. This bill is part of the California Nonprofit Equity Initiative that our organizations, along with more than 500 other nonprofit and community leaders, are supporting to level the playing field for nonprofits. Improving how state government contracts with nonprofits is a question of equity for our most vulnerable communities and for the nonprofits that serve them. Nonprofits are a powerful force for equity."

The United Way of California writes, "Aligned with the Governor's "California for All" vision, AB 2322 responds to the impact the pandemic has had on our communities, the need to address inequity and inequality in access to state resources, and the imperative to support strong and varied community-based organizations to address increased need. Passing this bill and the rest of the California Nonprofit Equity Initiative will strengthen the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California."

Arguments in Opposition

None on file.

FISCAL COMMENTS

1. According to the Assembly Committee on Appropriations analysis, "Costs of an unknown, but potentially significant, amount to the state by creating new requirements for state agencies administering smaller grants, as well as for third-party contractors administering such grants with state funds (General Fund (GF), special fund, or bond funds). The magnitude of costs depends on the volume of impacted grants and may be minor and absorbable for a state agency with few impacted grant programs (whether the state agency is the direct administrator or oversees administration of a state-funded grant by a third-party contractor), but significant for other state agencies. For example, the California Air Resources Board anticipates needing $2.2 million in fiscal year (FY) 2024-25 and $1.7 million in FY 2025-26 and annually thereafter for six positions and an external contract to implement this bill.

Anticipated state agency workload costs include identifying which grants qualify as a "covered grant," posting grant information on the agency's website, inputting grant information through the CSL Portal, and distributing advanced payments, as well as overseeing execution of these new responsibilities by third-party contractors. Additionally, to the extent this bill makes grant administration more complex and results in more funds spent on administrative services instead of direct services and programming, this bill may create cost pressures to increase total grant program funding to meet existing program goals. Some third-party contractors may also choose to cease bidding on such contracts or applying for certain grants, resulting in increased workload for the administering state agency.

CSL has heard from numerous grant administrators that they struggle to enter all the currently-required data into the Portal. As data requirements increase, the greater the opportunity for data to become "messy" as administrators rush through the submission process. This, in turn, detracts from the Portal's biggest strength – finding all grant opportunities in a single place.

1. Likely absorbable costs to CSL to add additional fields to the Portal so grant administrators can input new information for covered grants. However, this cost estimate is predicated on the assumption that third-party contractors will continue to work through the administering state agency to post grant information on the Portal. CSL may incur non-absorbable costs if CSL must modify the Portal to provide third-party contractors direct access.

According to the Legislative Analyst's Office, the GF faces a structural deficit in the tens of billions of dollars over the next several fiscal years."

VOTES

ASM GOVERNMENTAL ORGANIZATION: 21-0-1

YES: Blanca Rubio, Lackey, Addis, Bains, Bryan, Davies, Dixon, Gabriel, Gipson, Haney, Jones-Sawyer, Low, McKinnor, Pacheco, Papan, Jim Patterson, Ramos, Soria, Waldron, Valencia, Wallis

ABS, ABST OR NV: Cervantes

ASM APPROPRIATIONS: 11-0-4

YES: Wicks, Arambula, Bryan, Calderon, Wendy Carrillo, Mike Fong, Grayson, Haney, Hart, Pellerin, Villapudua

ABS, ABST OR NV: Sanchez, Dixon, Jim Patterson, Ta

UPDATED

VERSION: May 20, 2024

CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0003284

Date of Hearing: April 24, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2322

Author:(Hart) – As Introduced Ver:February 12, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill imposes requirements on the administration of short-term grants of $20,000 or less made by a state agency or third-party contractor using state funds.

Specifically, this bill:

1. Imposes requirements for the administration of a “covered grant,” meaning a grant made by a state agency or third-party contractor (“administrator”) meeting the following requirements:
2. The grant amount is $20,000 or less.
3. The duration of the grant is one year or less.
4. A 501(c)(3) nonprofit organization is an eligible recipient of the grant program.
5. Defines a “third-party contractor” to mean either (a) a nonprofit or other organization that contract with a state agency to administer a grant program funded by state funds, or (b) a grant recipient if the conditions of the grant require the grant recipient to redistribute a portion of those funds to nonprofit organizations.
6. Requires an administrator to post eligibility and application information for covered grants on the administrator’s website, as well as the California Grants Portal (Portal) website managed by the California State Library (CSL). Required application information includes frequently asked questions and a telephone number where applicants can contact the administrator with questions. The administrator must provide an online application process for the covered grant.
7. Requires an administrator of a grant program of $200,000 or more to conduct outreach to eligible nonprofit organizations, including those in rural, low-income, and disadvantaged communities, at least 90 days before the application deadline.
8. Requires an administrator to distribute at least 50% of a grant award upon execution of a covered grant.
9. Prohibits an administrator from requiring a covered grant recipient to provide specified receipts or carry specified insurance coverage limits.

FISCAL EFFECT:

1. Costs of an unknown, but potentially significant, amount to the state by creating new requirements for state agencies administering smaller grants, as well as for third-party contractors administering such grants with state funds (General Fund (GF), special fund, or bond funds). The magnitude of costs depends on the volume of impacted grants and may be minor and absorbable for a state agency with few impacted grant programs (whether the state agency is the direct administrator or oversees administration of a state-funded grant by a third-party contractor), but significant for other state agencies. For example, the California Air Resources Board anticipates needing $2.2 million in fiscal year (FY) 2024-25 and $1.7 million in FY 2025-26 and annually thereafter for six positions and an external contract to implement this bill.

Anticipated state agency workload costs include identifying which grants qualify as a “covered grant,” posting grant information on the agency’s website, inputting grant information through the CSL Portal, conducting outreach to nonprofit organizations, and distributing advanced payments, as well as overseeing execution of these new responsibilities by third-party contractors. Additionally, to the extent this bill makes grant administration more complex and results in more funds spent on administrative services instead of direct services and programming, this bill may create cost pressures to increase total grant program funding to meet existing program goals. Some third-party contractors may also choose to cease bidding on such contracts or applying for certain grants, resulting in increased workload for the administering state agency.

CSL has heard from numerous grant administrators that they struggle to enter all the currently-required data into the Portal. As data requirements increase, the greater the opportunity for data to become “messy” as administrators rush through the submission process. This, in turn, detracts from the Portal’s biggest strength – finding all grant opportunities in a single place.

1. Likely absorbable costs to CSL to add additional fields to the Portal so grant administrators can input new information for covered grants. However, this cost estimate is predicated on the assumption that third-party contractors will continue to work through the administering state agency to post grant information on the Portal. CSL may incur non-absorbable costs if CSL must modify the Portal to provide third-party contractors direct access.

According to the Legislative Analyst’s Office, the GF faces a structural deficit in the tens of billions of dollars over the next several fiscal years.

COMMENTS:

1. Purpose. According to the author:

AB 2322 is necessary to create a more efficient and equitable process to provide nonprofits with State grants. The bill cuts red tape by streamlining the application process and disbursement of small-dollar State grants for nonprofits. Additionally, it requires the State to conduct proper outreach to nonprofits supporting disadvantaged and low-income communities, providing information on large grants well in advance of the application deadline.

This bill is supported by a coalition of nonprofit organizations led by the California Association of Nonprofits (CalNonprofits).

1. Background.

California Grants Portal. AB 2252 (Limon), Chapter 318, Statutes of 2018, required CSL to create an online grant portal providing a centralized location for grant seekers to find state grant opportunities. Each state agency must register every grant administered with CSL prior to commencing a solicitation or award process, provide a link to the Portal on the agency’s website, and accept electronic grant proposal applications, as appropriate. The ensuing Portal (grants.ca.gov) facilitates the search of current grant opportunities filtered by applicant type (such as business, nonprofit, public agency), grant category (such as education, food and nutrition, veterans and military), and timeframe.

Administration of Smaller Grants. According to CalNonprofits, the size of state grants and contracts vary significantly, with current grant opportunities listed on the Portal ranging from $320 to $22 million. As an example of how the administration of smaller grants should differ from larger grants, CalNonprofits highlights VaccinateAll58, a California Department of Public Health outreach program that made grants of $5,000 or less to both small and large nonprofits. The program utilized a simplified application and final report “requiring no receipts to be submitted to justify expenses. While not appropriate for large grants and contracts, this process was efficient, and appropriate for small contracts, and resulted in a more equity-oriented pool of grant recipients.”

This bill specifies how smaller grant amounts of $20,000 or less, with a duration of one year or less, and for which a nonprofit organization is eligible, must be administered when state funds are utilized for the grant. Since this bill also applies to a grant made by a third-party contractor, some larger grant amounts in excess of $20,000 may also be indirectly subject to the bill, if the recipient of the larger grant must, as a condition of the grant, redistribute a portion of those funds to nonprofit organizations and the “sub-grant” amount is $20,000 or less. While this bill will bolster nonprofit grantees, this bill’s provisions also apply to other types of grant applicants, such as local agencies or for-profit entities, otherwise eligible for the grant.

Advance Payments. Existing law generally allows an advance payment of up to 25% only, with a larger advance payment authorized if the administering state agency determines a larger advance is necessary and the recipient entity provides sufficient justification and documentation. When the outcome of a contract is a one-time deliverable, such as a report, advance payments carry additional risks in comparison to contracts providing ongoing deliverables through the duration of the contract. Additionally, to the extent an agency is unable to recover unused or misused advanced funds from a recipient entity, advance payments could result in significant losses of state monies. It is also costly for the state to legally pursue recoupment of payments if the recipient entity fails to perform. This bill requires an administrator to distribute at least 50% of a grant award upon execution of a covered grant, while also authorizing distribution of the full award amount upon execution.

1. Related Legislation. AB 590 (Hart), Chapter 535, Statutes of 2023, authorized a state agency administering a grant program or contract to provide an advance payment to a recipient nonprofit organization. AB 590 is pending hearing in this committee.

AB 860 (Valencia) is substantially similar to this bill. AB 860 was held on the Senate Appropriations Committee’s suspense file.

AB 2781 (Irwin) requires a state agency to include, in a contract award for grant administration services, standards for resolving actual or perceived conflicts of interest by the contractor. AB 2781 is pending hearing in this committee.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 3, 2024

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Blanca Rubio, Chair

ABPCA Bill Id:AB 2322 (

Author:Hart) – As Introduced Ver:February 12, 2024

SUBJECT: Grant programs: administration

SUMMARY: This bill streamlines the process of applying for and receiving small state grants, particularly those not exceeding $20,000 and with a duration of less than 12 months, and requires the creation of a more accessible and equitable grant application process, as specified. The bill also requires the expansion of the California Grants Portal (a project by the California State Library) to include specified information about such grants. Specifically, this bill:

1) Provides an administrator shall promote equity in and facilitate the effectiveness of distribution of grant funds for covered grants by doing all of the following:

a) An administrator shall post the eligibility requirements and application information of a covered grant on their internet website and the internet website for the California Grants Portal, as specified. The application information shall include a section covering frequently asked questions and shall provide a telephone number by which applicants can contact the administrator for questions regarding the grant and application.

b) An administrator shall provide eligible recipients with the ability to complete an application for a covered grant online.

c) For grant programs totaling $200,000 or more, an administrator shall conduct outreach to nonprofit organizations eligible for a covered grant at least 90 days before the application deadline, including outreach to rural, low-income, and disadvantaged communities.

2) Provides an administrator shall distribute at least 50 percent of a grant award and may distribute up to 100 percent of a grant award upon execution of a covered grant.

3) Provides an administrator shall not require any of the following:

a) A recipient of a covered grant to provide receipts for any expense other than non-payroll expenses paid to a single vendor for 50 percent or more of the grant award.

b) In any report required by the administrator from the recipient nonprofit related to progress or completion of the award, the total word count of narrative sections to be more than 600 words.

c) A grant recipient to carry insurance coverage limits that exceed the risk associated with the covered grant activity.

4) Defines “Administrator” to mean a state agency or third-party contractor administering a grant program using state funds.

5) Defines “Covered grant” to mean a grant made by a state agency or administrator that meets all of the following requirements:

a) The grant amount is not greater than $20,000.

b) The duration of the grant period is not greater than one year.

c) Eligible recipients of the grant program include nonprofit organizations.

6) Defines Nonprofit organization” to mean an organization exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(3)).

7) Defines “Third-party contractor” to mean either a nonprofit or other organization that contracts with a state agency to administer a grant program funded by state funds or a grant recipient if the conditions of the grant require the grant recipient to redistribute a portion of those funds to nonprofit organizations.

8) Provides that this legislation shall control the minimum terms of a covered grant.

EXISTING LAW:

1) Establishes various grant programs.

2) The California Grant Information Act of 2018 (Act), requires the California State Library, on or before July 1, 2020, to create a funding opportunities Internet Web portal that provides a centralized location for grant seekers to find state grant opportunities.

3) Provides that the Portal shall include an interactive Internet Web site that includes, at minimum, information identifying every grant administered by the state and any incentive opportunities allocated by statute or in the annual budget that will provide local assistance funds.

4) Requires each state agency, on or before July 1, 2020, to register every grant the state agency administers with the Library prior to commencing a solicitation or award process for distribution of the grant.

5) Requires each state agency to provide information regarding the grant, that assists the Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, as defined.

6) Makes each state agency to provide a link to the Library’s Portal on their Internet Web sites. Requires each state agency, on or before July 1, 2020, to provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.

7) Authorizes an administering state agency to advance a payment to a recipient entity, defined to mean a private, nonprofit organization qualified under federal law, as specified. Requires the administering state agency to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount. Requires the recipient entity to satisfy certain minimum requirements, including providing an itemized budget and submitting documentation, as required by the administering state agency, to support the need for advance payment.

FISCAL EFFECT: This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

Purpose of the bill. According to the author, “AB 2322 is necessary to create a more efficient and equitable process to provide nonprofits with State grants. The bill cuts red tape by streamlining the application process and disbursement of small-dollar State grants for nonprofits. Additionally, it requires the State to conduct proper outreach to nonprofits supporting disadvantaged and low-income communities, providing information on large grants well in advance of the application deadline. AB 2322 aims to increase access to advanced payments, reduce unnecessary grant requirements, and promote equity in the distribution of grant funds to nonprofits.”

Background.

Grant Information Act of 2018. The California Grant Information Act of 2018, AB 2252 (Limon, Chapter 318, Statutes of 2018), in its essence, seeks to streamline the process of grant discovery and application, thereby enhancing the ability of nonprofit organizations to secure necessary funding. Proponents stated “government grants make up almost half of contributed income to nonprofits, and there are notable disparities in the geographic distribution of the revenue and assets that nonprofits receive. California currently does not have a centralized database that nonprofits can access to identify state grants they might be eligible for, making it difficult for many nonprofits to find the information they need about state funding opportunities. This disproportionately impacts underserved communities, making it harder for them to compete for and procure state funds.”

Central to the Act is the establishment of the California Grants Portal (www.grants.ca.gov), and online portal overseen by the California State Library. This portal is mandated to provide a comprehensive and centralized repository of state grant opportunities, thereby simplifying the process of identifying relevant funding sources for nonprofit organizations.

Moreover, the Act mandates that each state agency provide a detailed account of each grant they administer. This includes critical information such as the purpose of the grant, eligibility requirements, and the total available funding. This level of detail and transparency is instrumental in enabling nonprofit organizations to strategically target grants that align with their mission and operational needs.

The Act also emphasizes inclusivity, requiring the portal to be accessible and provide valuable information to a diverse array of potential applicants. This includes community-based organizations and entities that work to support and uplift disadvantaged and low-income communities. This provision ensures that the benefits of the Act are widespread and reach organizations that are often at the forefront of addressing critical societal issues. Furthermore, the Act modernizes the grant application process by requiring state agencies to accept electronic proposals. This provision not only streamlines the application process but also reduces the administrative burden on nonprofits, allowing them to focus more resources on their core mission.

Small Grant Programs. AB 2322 is designed to further streamline the process of applying for and receiving covered grants, defined as those not exceeding $20,000 and with a duration of less than one year and involving nonprofits.

The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, and improving the lives of vulnerable community members in countless ways.

AB 2322 requires an administrator – defined to mean either a state agency or third-party contractor administering a grant program using state funds – to distribute at least 50% of a grant award upon execution of a covered grant. It also sets limitations on what an administrator can require from a recipient of a covered grant, such as not requiring receipts for any expense other than non-payroll expenses paid to a single vendor for 50% or more of the grant award, not requiring the total word count of narrative sections in any report to be more than 600 words, and not requiring a grant recipient to carry insurance coverage limits that exceed the risk associated with the covered grant activity.

Executive Order N-16-22. In September of 2022, Governor Newsom issued Executive Order (EO) N-16-22, which represents a comprehensive effort by the State of California to address disparities in opportunities and outcomes, and to advance equity through the design and delivery of state services and programs. It calls for explicit consideration of equity in policies and practices, improved data analysis tools, and enhanced community engagement strategies. The order underscores the state's commitment to achieving equal opportunity for all Californians and addressing persistent disparities in outcomes.

The order emphasizes the need for state agencies to embed explicit equity considerations in their policies and practices. This includes analyzing demographic and geographic gaps in outcomes and access to funding and services, developing data analysis tools to understand these gaps, and reviewing community engagement strategies with a focus on Californians residing in historically underserved and marginalized communities.

This bill requires administrators to promote equity in and facilitate the effectiveness of distribution of grant funds for covered grants. This includes posting eligibility requirements and application information on their website and the California Grants Portal, providing eligible recipients with the ability to complete an application for a covered grant online, and conducing outreach to eligible nonprofit organizations at least 90 days before the application deadline for grant programs totally $200,000 or more.

Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, “A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies” focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic.

The committees concluded that government contracting challenges remain a key barrier for nonprofits providing needed services. “Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities.”

In support. According to the California Association of Nonprofits (CalNonprofits), “AB 2322 will support the state's equity and access goals by reducing the effort and expense associated with very small state contracts and grants to nonprofits, including when they are administered by a third party. The size of state grants and contracts vary significantly. Opportunities currently listed on the state's grants portal include grants as large as $22 million and as small as $320. Using the same application, qualifications, and reporting processes for both large and small grants and contracts is unnecessary and expensive. This bill is part of the California Nonprofit Equity Initiative that our organizations, along with more than 500 other nonprofit and community leaders, are supporting to level the playing field for nonprofits. Improving how state government contracts with nonprofits is a question of equity for our most vulnerable communities and for the nonprofits that serve them. Nonprofits are a powerful force for equity.”

The United Way of California writes, “Aligned with the Governor’s “California for All” vision, AB 2322 responds to the impact the pandemic has had on our communities, the need to address inequity and inequality in access to state resources, and the imperative to support strong and varied community-based organizations to address increased need. Passing this bill and the rest of the California Nonprofit Equity Initiative will strengthen the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California.”

Related legislation. AB 3017 (Hart) of 2024. Existing law requires the administering state agency to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount. This bill would include within the definition of a recipient entity, 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. (Assembly Committee on Governmental Organization)

Prior legislation. AB 590 (Hart), Chapter 535, Statutes of 2023. Authorized a state agency administering a grant program to provide for advance payments to a recipient 501(c)(3) nonprofit organization, as specified. The bill ensures the advance payment does not exceed 25% of the total grant or contract amount, unless the state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance.

AB 619 (Vince Fong) of 2023. Would have authorized nonprofits providing services to a state agency to request to modify their service delivery methods during a declared state of war emergency or state of emergency and additionally authorizes nonprofits to request contract flexibility whenever a disruption occurs that prohibits a nonprofit entity from providing services to a state agency. (Senate Committee on Appropriations - Held under submission)

AB 696 (Lowenthal) of 2023. Would have established the California State Grants and Contracts Modernization Act, which beginning July 1, 2025, requires a state agency that administers a grant or enters into contracts with eligible entities to provide for and accept electronic signatures and offer electronic payment options, as specified. (Senate Committee on Appropriations - Held under submission)

AB 860 (Valencia) of 2023. Would have imposed new requirements on the administration of short-term grants of $20,000 or less made by a state agency or third-party contractor using state funds. This bill also requires the expansion of the California Grants Portal to include specified information about such grants. (Senate Committee on Appropriations - Held under submission)

AB 885 (L. Rivas of 2023. This bill would have established the “California Nonprofit Fairness in Contracting Act” which would provide nonprofits preferential treatment when contracting with the state for goods or services or when contracting with a local agency using state funds. (Never heard by the Assembly Committee on Accountability and Administrative Review

SB 336 (Umberg) of 2023. This bill would require a state agency administering a grant program to reimburse a grantee's indirect costs at one of three specified rates requested by the grantee in its state grant program application. (Assembly floor inactive file)

SB 557 (Limon of 2023. This bill would have expanded the definition of a grant for the purposes of the California Prompt Payment Act (PPA) requiring timely payments to include nonprofits by changing what is considered a grant and sets a specific monetary threshold of $250 or 5% of the invoiced amount (whichever is lower) for when a state agency can dispute a bill related to property or services delivered. (Vetoed by the Governor)

AB 132 (Committee on Budget), Chapter 144, Statutes of 2021. Required state agencies to provide the State Library post award data for grants by July 1, 2022. Specifies that the data include various information including the number of grants awarded and information about the award recipient and geographic location served.

AB 2252 (Limón), Chapter 318, Statutes of 2018. Enacted the Grant Information Act of 2018, and required the State Library to create a funding opportunities Internet Web portal that provides a centralized location for grant seekers to find state grant opportunities, as specified.

AB 1348 (Irwin), Chapter 444, Statutes of 2016. Established the position of federal grant administrator within the State Clearinghouse, to serve as the state’s primary point of contact for information on federal grants related to community, economic, and local development.

AB 187 (Hertzberg), Chapter 405, Statutes of 1999. The Grant Information Act of 1999 authorized state agencies to make available on their Internet Web sites a listing of all grants administered by that agency, as specified.

REGISTERED SUPPORT / OPPOSITION:

Support

California Council of Community Behavioral Health Agencies
California Partnership to End Domestic Violence
California ReLeaf
Calnonprofits
Center for Nonprofit Management
Children's Institute
Community Alliance With Family Farmers
Community Bridges
Community Water Center
El Concilio of Stockton
Fresno Building Healthy Communities
Healthright 360
Inland Empire Community Collaborative
Inland Southern California United Way
Koreatown Youth + Community Center
Meals on Wheels California
Nonprofit Finance Fund (NFF)
Path
Rural Community Assistance Corporation (RCAC)
Santa Cruz Volunteer Center
Self-help Enterprises
The Greenlining Institute
Treepeople
United Ways of California

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531