Existing law generally establishes procedures and requirements for state agencies to enter into contracts for goods and services, including requirements imposed under the State Contract Act for bidding and award of certain public works contracts.

This bill would enact The California State Grants and Contracts Modernization Act which would, commencing July 1, 2025, require a state agency that administers a grant or enters into a contract with any eligible entity to follow certain procedures, including, among other things, providing for and accepting electronic signatures, as defined, and not requiring an original or wet signature on any document associated with the contract or grant. to provide for and accept electronic signatures and electronic transmission, and provide for and offer the option of payment by electronic funds or automatic clearinghouse transfer. The bill would also, among other things, prohibit a state agency that administers a grant or contract with any eligible entity on and after July 1, 2025, from requiring an original or wet signature on a contract or grant document, unless otherwise required by state or federal law.

Existing law, the Grant Information Act of 2018, requires the California State Library to create a funding opportunities internet website that provides a centralized location for grant seekers to find state grant opportunities. 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. Existing law requires each state agency to provide for the acceptance of electronic applications for any grant administered by the agency, as appropriate.

This bill would require the California State Library to, by July 1, 2025, create and make available an internet website that all state agencies administering grants or contracts can access and allows any eligible entity to submit any documents associated with the grant or contract, as specified. Library, by December 31, 2024, to survey all agencies administering grants or contracts with eligible entities and report to the Legislature on the extent and nature of electronic management of documents, as specified.

Existing law generally establishes the Department of General Services within the Government Operations Agency and sets forth its powers and duties, including providing centralized services relating to, among other things, purchasing. procedures and requirements for state agencies to enter into contracts for goods and services, including requirements imposed under the State Contract Act for bidding and award of certain public works contracts.

This bill would enact The California State Nonprofit Grants and Contracts Modernization Act which would, commencing July 1 of an unspecified year, 1, 2025, require a state agency that administers a grant or enters into a contract with a nonprofit organization any eligible entity to follow certain procedures, including, among other things, providing for and accepting electronic signatures, as defined, and not requiring an original or wet signature on any document associated with the contract. contract or grant.

Existing law, the Grant Information Act of 2018, requires the California State Library to create a funding opportunities internet website that provides a centralized location for grant seekers to find state grant opportunities. 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. Existing law requires each state agency to provide for the acceptance of electronic applications for any grant administered by the agency, as appropriate.

This bill would require the California State Library to, by an unspecified date, July 1, 2025, create and make available an internet website that all state agencies administering grants or contracts with nonprofit organizations can access and allows nonprofit organizations any eligible entity to submit any documents associated with the grant or contract, as specified. The bill would require the Department of General Services to, by an unspecified date, create and make available an internet website for the purpose of end-to-end digital procurement that provides specified functionality, including among other things, storing executed contracts.

Existing law permits a partnership or other incorporated association, whether or not organized for profit, to sue and be sued in the name it has assumed or by which it is known.

This bill would make nonsubstantive changes to this provision.

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 696 (Lowenthal) - State agency grants and contracts

Bill Summary:

AB 696 establishes 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.

Fiscal Impact:

• The Department of General Service’s Procurement Division reports total costs of approximately $300,000 ($150,000 per year) for a two-year limited term staff for workload associated with providing updated policy direction and guidance to state agencies regarding the prohibition on requiring wet signatures.
• The California State Library (CSL) reports ongoing General Fund costs of $50,000 for survey tools.
• Unknown, potentially significant fiscal impact to affected state agencies that administer grants or enter into contracts with eligible entities to provide for and accept electronic signatures and offer electronic payment options (General Fund and special funds).

Background:

SB 820 (Sher, Chapter 428, Statutes of 1999) enacted California’s Uniform Electronic Transactions Act (UETA). Its intended scope was all transactions in which records or signatures are transmitted electronically. Most of the provisions in California’s UETA law were drawn from the federal UETA, a model law that establishes the legal framework for public agencies conducting electronic transactions. It provides rules and guidelines for the use of electronic signatures and records in commerce, aiming to facilitate the acceptance and use of electronic documents in place of traditional paper-based methods. There have been many changes since the enactment of the UETA to clarify the validity of electronic signatures and transactions.

Proposed Law:

• Establishes the California State Grants and Contracts Modernization Act.
• Beginning July 1, 2025, requires a state agency that administers a grant to or enters into a contract with any eligible entity to do all of the following:
  • Provide for and accept electronic signatures and transmissions.
  • Provide for and offer the option of payment by electronic funds transfer or automated clearinghouse transfer.
• Beginning July 1, 2025 and unless otherwise required by state or federal law, prohibits a state agency that administers a grant to or enters into a contract with any eligible entity from doing any of the following:
  • Require an original or wet signature on any document associated with the grant contract.
  • Require a facsimile, Unites State mail, or in-person delivery of any documents associated with the grant or contract.
• Provides that nothing prohibits a state agency from still accepting wet signatures, physical documents, or alternative means of funds transfer or payment, including physical checks.
• By December 31, 2024, requires the CSL to survey all state agencies administering grants or contracts with eligible entities and report to the Legislature on the extent and nature of electronic management documents associated with grants and contracts with those entities.
  • Repeals this requirement January 1, 2029.

Related Legislation:

AB 590 (Hart, 2023) authorizes a state agency administering a grant program to provide an advance payment to a recipient 501(c)(3) non-profit organization. AB 590 is pending in this committee.

AB 619 (Vince Fong, 2023) authorizes a process for nonprofit entities contracted with the state to request an alteration to the services provided in the event of a state of war, state of emergency, or other disruption. AB 619 is pending in this committee.

AB 860 (Valencia, 2023) imposes requirements on the administration of covered grants by state agencies and third-party contractors. AB 860 is pending in this committee.

Staff Comments:

While the fiscal impact to all affected state agencies is unknown at this time, it is likely to total into the hundreds of thousands of dollars. For example, the Department of Justice’s California Justice Information Services Division reports costs of approximately $66,000 in Fiscal Year (FY) 2023-24 and $111,000 ongoing to assist with grant administration and management (General Fund). While not all impacted state entities will require the same resources, to the extent that other agencies experience similar workload pressures, the cost of the bill may be significant.

-- END --

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2023 - 2024 Regular

Bill No: 696 Hearing Date: 7/11/2023

SUBJECT: State agency grants and contracts

DIGEST: This bill enacts the California State Grants and Contracts Modernization Act and requires a state agency that administers a grant or enters into a contract to provide for and accept electronic signatures and offer the option of payment by electronic funds, as specified.

ANALYSIS:

Existing law:

1. Requires, under the Grant Information Act of 2018, the California State Library (CSL) to create funding opportunities internet website that provides a centralized location for grant seekers to find state grant opportunities.
2. Establishes procedures and requirements for state agencies to enter into contracts for goods and services, including requirements imposed under the state Contract Act for bidding and award of certain public works contracts.
3. Requires each state agency to register every grant the state agency administers with the CSL prior to commencing a solicitation or award process for distribution of the grant.
4. Requires each state agency to provide for the acceptance of electronic applications for any grant administered by the agency, as appropriate.

This bill:

1. Requires any state agency that administers a grant to, or enters into a contract with, any eligible entity commencing July 1, 2025, to do all of the following:
   1. Provide for and accept electronic signatures.
   2. Provide for and accept electronic transmission.
   3. Provide for and offer the option of payment by electronic funds or automated clearinghouse transfer.
2. Prohibits, unless otherwise required by state or federal law, a state agency that administers a grant to, or enters into a contract with, any eligible entity commencing July 1, 2025, from doing any of the following:
   1. Require an original or wet signature on any document associated with the grant or contract.
   2. Require a facsimile, United States mail, or in-person delivery of any documents associated with the grant or contract.
3. Requires, by December 31, 2024, the CSL to survey all state agencies administering grants or contracts with eligible entities and report to the Legislature on the extent and nature of electronic management documents associated with grants and contracts with those entities. The bill sunsets this provision on January 1, 2029.

Background

Author Statement. According to the author’s office, “nonprofits deliver crucial services to our constituents and we must do everything in our power to facilitate access to funding and grant dollars awarded to these entities by the state. AB 696 is a key component in the effort to modernize contracting, and will require the state to provide for and accept electronic signatures, electronic transmission of documents, and electronic funds transfers. State public health, housing and homelessness, and corrections programs payments in the tens of millions of dollars are still issued via paper checks sent through the U.S. mail.”

The author’s office further argues that, “earlier this year, a Los Angeles nonprofit housing provider was mailed a paper check for $20 million. When the occasional check is inevitably lost in the mail, it can take more than two months to have it re-issued. Giving nonprofits, like disability centers and preschools, access to fast, secure, and trackable payments saves everyone time and money. The modernizations we are seeking are well within the state’s reach. The technologies to facilitate this transition are widely available and it’s time to utilize them at the state level in order to streamline contracting and grant administration with entities, such as nonprofits.”

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.

Central to the Act is the establishment of the California Grants Portal, 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.

Uniform Electronic Transactions Act (UETA). The UETA is a federal model law that establishes the legal framework for public agencies conducting electronic transactions. It provides rules and guidelines for the use of electronic signatures and records in commerce, aiming to facilitate the acceptance and use of electronic documents in place of traditional paper-based methods. The UETA has been adopted by most U.S. States, including California in 1999, to ensure consistency and legal recognition of electronic transactions across the United State. Supporters of the bill claim that some state agencies provide for electronic transactions associated with contracts and grants and some do not.

This bill would require state agencies to provide, but not require, for electronic signatures, electronic transmission, and electronic payments. It also prohibits state agencies from requiring a wet signature, unless otherwise required by state or federal law.

Prior/Related Legislation

SB 336 (Umberg, 2023) requires the Department of General Services to establish a process for nonprofits to negotiate a state standard negotiated cost agreement, as defined, and requires state agencies administering grant programs to use the same terms as contained in a grantee’s existing negotiated indirect cost rate agreement policies approved by the federal government, or the same terms contained in the state standard negotiated cost agreement, as specified. (Pending in the Assembly Accountability and Administrative Review Committee)

SB 557 (Limon, 2023) expands the definition of a grant for the purposes of the California Prompt Payment Act 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. (Pending in the Assembly Accountability and Administrative Review Committee)

AB 590 (Hart, 2023) authorizes a state agency administering a grant program to provide an advance payment to a recipient 501(c)(3) non-profit organization. (Pending in the Senate Governmental Organization Committee)

AB 619 (V. Fong, 2023) authorizes a process for nonprofit entities contracted with the state to request an alteration to the services provided in the event of a state of war, state of emergency, or other disruption. (Pending in the Senate Governmental Organization Committee)

AB 860 (Valencia, 2023) imposes 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. The bill also requires the expansion of the California Grants Portal to include specified information about such grants. (Pending in the Senate Appropriations Committee)

AB 885 (Luz Rivas, 2023) establishes 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. (Pending in the Assembly Accountability and Administrative Review Committee)

AB 2252 (Limon, Chapter 318, Statutes of 2018) requires the CSL 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

California Association of Nonprofits (Source)

Amigos de los Rios

Angelenos for Trees

Arts District Community Council LA

Breathe California

California Coalition for Community Investment

California Family Resource Association

California Partnership to End Domestic Violence

California ReLeaf

California Urban Forests Council

Canopy

Center for Nonprofit Management

Central Coast Urban Forests Council

Child Abuse Prevention Center

Children’s Institute

Clean & Green Pomona

Climate Action Now

The Climate Center

Community Alliance with Family Farmers

Community Forest Advisory Committee

Community Bridges

El Concilio of Stockton

Fresno Building Healthy Communities

Growing Together

HealthRight360

Industrial District Green

Inland Empire Community Collaborative

Inland Urban Forest Council

International Society of Arboriculture Wester Chapter

Koreatown Youth + Community Center

Los Angeles Area Chamber of Commerce

Los Angeles Beautification Team

Los Angeles Neighborhood Land Trust

Lumber City

Madera Coalition for Community Justice

Meals on Wheels California

Meals on Wheels – Orange County

Nonprofit Finance Fund

North East Trees

PATH

Rural Community Assistance Corporation

Sacramento Tree Foundation

Sacramento Urban Forests Council

San Diego Regional Urban Forests Council

San Joaquin Urban Forest Council

Santa Cruz Volunteer Center

Self-Help Enterprises

Sustainable Claremont

Tree Fresno

TreePeople

United Ways of California

Urban Ecos

Watsonville Wetlands Watch

Your Children’s Trees

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to supporters of the bill, “the state increasingly relies on nonprofits to help put critical policies into action, partnering with community organizations to help the homeless, build affordable housing, respond to the impacts of climate change, support domestic violence victims, and in countless ways improve the lives of vulnerable members of our communities. To succeed, nonprofits need contracting terms that set us up to partner effectively. AB 696 responds to the impact the pandemic has had on our communities, the need to address equity and inequality in access to state resources, and the imperative to support strong and varied community-based organizations to address increase need. Passing AB 696 and the rest of the California Nonprofit Equity Initiative will strengthen nonprofits’ essential partnership with the state and our mutual efforts to deliver the highest quality service to the people of California.”

ASSEMBLY THIRD READING

ATR Bill Id:AB 696

Author:(Lowenthal)

As Amended Ver:May 18, 2023

Majority vote

SUMMARY

Enacts the California State Grants and Contracts Modernization Act to require all state agencies to provide for, but not require, all state grant and contract transactions to occur online.

Major Provisions

1. Requires, beginning July 1, 2025, a state agency that administers a grant or enters into a contract with an entity to provide for and accept electronic signatures, electronic transmission, and payment by electronic funds transfer or automated clearinghouse transfer.
2. Prohibits a state agency, unless otherwise required by state or federal law, from requiring an original or wet signature or the facsimile, United States (U.S.) mail, or in-person delivery of any documents associated with a state grant or contract.
3. Provides that this bill shall not prevent a state agency from providing for or accepting wet signatures, physical documents, or alternative means of funds transfer or payment such as physical checks.
4. Requires, by December 31, 2024, the California State Library (CSL) to survey all state agencies administering grants or contracts with eligible entities and report to the Legislature on the extent and nature of electronic management documents associated with those grants and contracts.

COMMENTS

According to the Author

State public health, housing and homelessness, and corrections programs payments in the tens of millions of dollars are still issued via paper checks sent through the U.S. mail. Earlier this year, a Los Angeles nonprofit housing provider was mailed a paper check for $20 million. When the occasional check is inevitably lost in the mail, it can take more than two months to have it reissued. Giving nonprofits like disability centers and preschools access to fast, secure, and trackable payments saves everyone time and money.

Applicable to All Eligible Entities. This bill is part of the California Nonprofit Equity Initiative, a package of legislation developed by the California Association of Nonprofits (CalNonprofits) intended to improve how state government contracts with nonprofits. However, this bill's provisions that require state agencies to provide for electronic transactions associated with grants and contracts apply to any eligible entity, not just nonprofits.

Electronic and Wet Signature Options. Current law, under the Uniform Electronic Transactions Act, generally authorizes the transaction of business, commerce, and contracts by electronic means and establishes standards for conducting electronic transactions in this state. Current law authorizes, but does not require, government agencies to use an electronic signature in transactions with other parties. Supporters of this bill claim that some state agencies provide for electronic transactions associated with contracts and grants and some do not. While some eligible entities may prefer the streamlining and efficiencies of electronic transactions, others may prefer paper-based transactions, especially for sensitive financial information.

This bill preserves both options. While this bill requires state agencies to provide for electronic signatures, electronic transmission, and electronic payments, it also prohibits agencies from requiring a wet signature, unless otherwise required by state or federal law. At the same time, it states that nothing in this bill shall prevent a state agency from providing for or accepting wet signatures, physical documents, or alternative means of funds transfer or payment such as physical checks.

Report to Legislature. While this flexibility for alternative options remain, this bill would require the CSL, by December 31, 2024, to survey all state agencies administering grants or contracts with eligible entities and report to the Legislature on the extent and nature of electronic management documents associated with those grants and contracts.

California State Library's Role in Grants. AB 2252 (Limón), Chapter 318, Statutes of 2018, required the 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 the CSL prior to commencing a solicitation or award process, provide a link to the CSL grant portal on the agency's website, and accept electronic grant proposal applications, "as appropriate." The resulting California Grants 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. AB 132 (Budget Committee), Chapter 144, Statutes of 2021, required each state agency, starting no later than July 1, 2022, to submit to the CSL postaward data for every grant administered by that agency.

Thus, the CSL web portal is a clearinghouse of information on grant opportunities and post award data as submitted by state agencies. The duties of the CSL are generally not related to procurement nor similar to those of a control agency that establishes processes for all other agencies to follow. Nonetheless, this bill expands the CSL's role regarding information about state grants by requiring it to survey state agencies on use of electronic transactions associated with grants and contracts. It does not authorize a role for the CSL in grant administration.

Arguments in Support

This bill is supported by CalNonprofits and a range of individual nonprofit organizations. According to the Los Angeles Chamber of Commerce: "As shown during the COVID-19 pandemic, many administrative processes are overly burdensome and inflexible for rapidly changing circumstances and for the modern way of doing business. State agencies that administer grants and contracts for nonprofits should have the flexibility to accept modern, digital signatures during an emergency and during normal times as a best-practice for expediting bureaucratic processes. Digital signatures have numerous forms of encryption and security to verify their validity. Further, a fully digital procurement system and central database of grants and contracts would reflect a long standing practice of fully digital procedures in the business world. AB 696 takes the necessary steps to modernize grant and contract management for nonprofits while establishing a path towards fully digital procurement. Such a result would greatly benefit the nonprofit sector in California and keep engagement with state agencies a viable form of business for nonprofits."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. Costs of an unknown, but potentially significant, amount to state agencies to implement this bill's electronic signature provisions (General Fund (GF) or special fund). For its part, the Department of General Services notes that its Procurement Division, which oversees state contracts for non-information technology goods and services, permits, but generally does not require, state agencies to use electronic signatures on contracts. However, it is unclear whether other state agencies are prepared to accept electronic signatures and how state agencies may handle contacts that must be notarized, as electronic notarization is not an industry standard. It is also unclear whether this bill allows a state agency to set standards around the type of electronic signature accepted. State agencies will also likely incur costs related to this bill's electronic transmission and payment provisions.
2. One-time GF costs of an unknown amount to the CSL to survey all agencies administering grants or contracts with eligible entities and report to the Legislature those entities' use of electronic management documents.

VOTES

ASM ACCOUNTABILITY AND ADMINISTRATIVE REVIEW: 6-0-1

YES: Petrie-Norris, Dixon, Davies, Stephanie Nguyen, Rodriguez, Wilson

ABS, ABST OR NV: Bains

ASM APPROPRIATIONS: 11-0-5

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

ABS, ABST OR NV: Megan Dahle, Dixon, Mathis, Robert Rivas, Sanchez

UPDATED

VERSION: May 18, 2023

CONSULTANT: Jacqueline Kinney / A. & A.R. / (916) 319-3600 FN: 0000936

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 696

Author:(Lowenthal) – As Amended Ver:April 25, 2023

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

SUMMARY:

This bill enacts the California State Grants and Contracts Modernization Act to require all grant and contract transactions to occur online.

Specifically, this bill:

1. Requires, beginning July 1, 2025, a state agency that administers a grant or enters into a contract with an entity to provide for and accept electronic signatures, electronic transmission, and payment by electronic funds transfer (EFT) or automated clearinghouse transfer (ACH). This bill also prohibits a state agency from requiring an original or wet signature or the facsimile, U.S. mail, or in-person delivery of any documents associated with the grant or contract.
2. Requires, by July 1, 2025, the California State Library (CSL) to develop an internet website where an entity can submit documents, such as tax returns and banking information, associated with the grant or contract.

FISCAL EFFECT:

1. Costs of an unknown, but potentially significant, amount to state agencies to implement this bill’s electronic signature provisions (General Fund (GF) or special fund). For its part, the Department of General Services (DGS) notes that its Procurement Division, which oversees state contracts for non-information technology goods and services, permits, but generally does not require, state agencies to use electronic signatures on contracts. However, it is unclear whether other state agencies are prepared to accept electronic signatures and how state agencies may handle contacts that must be notarized, as electronic notarization is not an industry standard. It is also unclear whether this bill allows a state agency to set standards around the type of electronic signature accepted. State agencies will also likely incur costs related to this bill’s electronic transmission and payment provisions.
2. One-time GF costs of approximately $2.4 million and ongoing GF costs of approximately $1.0 million to the CSL to develop and maintain the document repository, including new vendor contracts, software subscriptions, and staff workload. CSL notes this repository would be a completely different and more robust platform than the California Grants Portal currently administered by CSL, which exceeded $1.5 million to build and has ongoing maintenance costs of $700,000. Additionally, CSL notes the completion deadline of July 1, 2025, is likely infeasible, given Department of Technology approval processes and DGS procurement limits. Lastly, CSL notes the storage of sensitive financial data of various public and private entities on a state-operated public site poses an inherent costly liability risk for the state should security protocols be breached.

COMMENTS:

1. Purpose. According to the author:

State public health, housing and homelessness, and corrections programs payments in the tens of millions of dollars are still issued via paper checks sent through the U.S. mail. Earlier this year, a Los Angeles nonprofit housing provider was mailed a paper check for $20 million. When the occasional check is inevitably lost in the mail, it can take more than two months to have it reissued. Giving nonprofits like disability centers and preschools access to fast, secure, and trackable payments saves everyone time and money.

This bill is part of the California Nonprofit Equity Initiative, a package of legislation developed by the California Association of Nonprofits (CalNonprofits) intended to improve how state government contracts with nonprofits. This bill is supported by CalNonprofits and a range of individual nonprofit organizations.

1. California Grants Portal. AB 2252 (Limon), Chapter 318, Statutes of 2018, required the 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 the CSL prior to commencing a solicitation or award process, provide a link to the CSL grant portal on the agency’s website, and accept electronic grant proposal applications, as appropriate. The resulting California Grants 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.

This bill requires the CSL to additionally create a website where an entity can submit documents, such as tax returns and banking information, associated with a state grant or contract. As noted in the Assembly Accountability and Administrative Review Committee’s analysis of this bill, the CSL web portal is a clearinghouse of information on grant opportunities as submitted by state agencies and is not a repository of information from potential grant applicants. Moreover, the authority and duties of the CSL are generally not related to procurement nor similar to those of a control agency that establishes processes for all other agencies to follow.

This bill also requires a state agency to provide for and accept only electronic signatures, electronic transmission, and EFT or ACH payment in relation to a state grant or contract. While this requirement may streamline operations for some recipient entities, other recipient entities may prefer paper-based transactions, especially for sensitive financial information. This bill prohibits such transactions.

1. Related Legislation. AB 860 (Valencia) imposes requirements on the administration of short-term grants of $20,000 or less made by a state agency, local agency, or third-party contractor using state funds. This bill also requires expansion of the California Grants Portal to include specified information about such grants. AB 860 is pending on this committee’s suspense file.

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

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Cottie Petrie-Norris, Chair

ABPCA Bill Id:AB 696 (

Author:Lowenthal) – As Amended Ver:March 20, 2023

SUBJECT: State agency grants and contracts: nonprofit agencies

SUMMARY: Requires state agencies that administer grants and contracts to provide for electronic signature and other electronic processes for grant and contract applicants that are nonprofit organizations, requires the California State Library to establish an electronic document vault for nonprofit organizations, and requires the Department of General Services to establish a website for digital procurement. Specifically, this bill would:

1. Require any state agency that administers a grant to, or enters into a contract with, a nonprofit organization, commencing July 1, ___, to provide for and accept electronic signatures, electronic transmission, and the option of payment by electronic funds transfer or automated clearinghouse transfer.
2. Prohibit any state agency that administers a grant to, or enters into a contract with, a nonprofit organization, commencing July 1, _­­_, from requiring an original or wet signature on any document associated with the contract or require a facsimile, United States mail, or in-person delivery of any documents associated with the contract.
3. Define “electronic signature” as an electronic sound, symbol or process associated with an electronic record adopted by a person with an intent to sign the record and with the same legal effect as a wet signature.
4. Define “electronic transmission” as delivery of information by electronic mail, by posting to a web site or by other means of electronic communication to a state agency that consents to the electronic form of transmission, and creates a record that can be retained and retrieved.
5. Require the California State Library, by an unspecified date, to create and make available an internet website, that all state agencies administering grants or contracts with nonprofit organizations can access, which allows nonprofit organizations to submit any documents associated with a grant or contract, including, but not limited to, incorporation documents, proof of insurance, audited financials, tax returns, standard provision attestations, banking information, and signing authorizations.
6. Require the Department of General Services, by an unspecified date, to create and make available an internet website for the purpose of end-to-end digital procurement that stores executed contract documents, tracks amendments and approvals, and allows nonprofit organizations to submit invoices and supporting documents, including, but not limited to, progress reports, work plan updates, and budget modifications.

EXISTING LAW:

1. Authorizes, generally, under the Uniform Electronic Transactions Act, the transaction of business, commerce, and contracts by electronic means and establishes standards for conducting electronic transactions in this state. (Civil Code Sec. 16631.1 to 16633.17)
2. Authorizes, but does not require, government agencies to use an electronic signature in transactions with other parties. (Civil Code Sec. 1633.5)
3. Provides that an electronic signature, when its use is authorized and agreed to by the parties, be given the same legal effect as a wet signature. (Civil Code Sec. 1633.7)
4. Requires each state agency, on or before July 1, 2020, to provide for “acceptance of electronic proposals” for any grant administered by the state agency, “as appropriate.” (Gov. Code Sec. 8334(b))
5. Requires, through numerous statutory provisions, state agencies to follow specified procedures in award of contracts and identifies specific requirements for individual contract and grant programs.
6. Requires the California State Library to create a web portal that provides a centralized location for grant seekers to find state grant opportunities, and requires each state agency to provide information about every grant it administers to the California State Library for inclusion in the portal. (Gov. Code Sec. 8333.1)

FISCAL EFFECT: Unknown. This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s Purpose and Intent. According to the author: “Nonprofits deliver crucial services to our constituents and we must do everything in our power to facilitate access to funding and grant dollars awarded to nonprofits by the state. AB 696 is a key component in the effort to modernize contracting and will require the state to provide for and accept electronic signatures, electronic transmission of documents, and electronic funds transfers. State public health, housing and homelessness, and corrections programs payments in the tens of millions of dollars are still issued via paper checks sent through the U.S. mail. Earlier this year, a Los Angeles nonprofit housing provider was mailed a paper check for $20 million. When the occasional check is inevitably lost in the mail, it can take more than two months to have it reissued. Giving nonprofits like disability centers and preschools access to fast, secure, and trackable payments saves everyone time and money. The modernizations we are seeking are well within the state’s reach. The technologies to facilitate this transition are widely available and it’s time to utilize them at the state level in order to streamline contracting and grant administration with nonprofits.”
2. Electronic Transactions for All. This bill would require every state agency, in administering all contracts and grants, to provide the advantages of electronic transactions only to nonprofit organizations, even if other types of entities are eligible applicants. The author’s stated purpose is to ensure that nonprofits have these advantages so that California benefits from nonprofits participating in state programs. However, providing this advantage to only some eligible applicants may create an unlevel playing field and may be inconsistent with particular contract or grant program requirements. Moreover, if a state agency modernizes its technology and systems to enable electronic transactions for one type of applicant, it would seem reasonable and practical to make it available to all eligible applicants. This also would likely increase each agency’s overall efficiency in administering all contracts and grants. Thus, the committee may wish to consider amending the bill to require state agencies to adopt electronic processes for all eligible applicants for contracts and grants, not just nonprofit organizations.
3. Static Document Vault for All. This bill would require the California State Library to establish a web site that functions as an electronic vault for nonprofit organizations to submit static documents frequently required in state contract and grant applications, such as incorporation documents, proof of insurance, and tax returns, among others. Any state agency would be able to access these documents as needed in its administration of any particular contract or grant, thereby creating efficiencies for nonprofit applicants and the agencies. However, for the same reasons discussed in Comment 2, if an electronic document vault is required for one type of contract and grant applicant, it should be available for all applicants. Thus, the committee may wish to consider amending the bill to require that the California State Library establish an electronic document vault that allows any entity eligible for a state contract or grant to submit specified documents, not just nonprofit organizations.
4. Is the State Library the Right State Body? The author and sponsor state that the California State Library was identified for the document vault requirement in this bill because, as required by current law, it already maintains an internet web portal with state grant information. However, that California State Library web portal is a clearinghouse of information on grant opportunities as submitted by state agencies and is not a repository of information from potential grant applicants. Moreover, the authority and duties of the California State Library are generally not related to procurement nor similar to those of a control agency that establishes processes for all other agencies to follow. The author has acknowledged these concerns and stated an intent to consider whether another state entity would be more appropriate to maintain the electronic document vault required by this bill.
5. Unspecified Compliance Dates. This bill has unspecified dates for when state agencies must provide electronic processes for grants and contracts and for when the California State Library must establish an electronic document vault. The author proposes that 2025 should be the compliance date, which would give agencies a year after the bill takes effect to update their systems and would provide grant and contract applicants time to plan for the new processes. Thus, the committee may wish to consider amending the bill to require state agencies to provide the electronic processes by July 1, 2025, and require the California State Library to establish an electronic document vault by July 1, 2025.
6. Remove DGS Requirement. This bill would require the Department of General Services to establish an internet web site for the purpose of “end-to-end digital procurement.” The author has stated an intent to remove this requirement from the bill. Thus, the committee may wish to consider amending the bill to strike subdivision (b) from Government Code Section 8338 in this bill.

Arguments in Support

According to the Los Angeles Chamber of Commerce: “As shown during the COVID-19 pandemic, many administrative processes are overly burdensome and inflexible for rapidly changing circumstances and for the modern way of doing business. State agencies that administer grants and contracts for nonprofits should have the flexibility to accept modern, digital signatures during an emergency and during normal times as a best-practice for expediting bureaucratic processes. Digital signatures have numerous forms of encryption and security to verify their validity. Further, a fully digital procurement system and central database of grants and contracts would reflect a long standing practice of fully digital procedures in the business world. AB 696 takes the necessary steps to modernize grant and contract management for nonprofits while establishing a path towards fully digital procurement. Such a result would greatly benefit the nonprofit sector in California and keep engagement with state agencies a viable form of business for nonprofits.”

Opposition

None received.

RELATED LEGISLATION:

AB 860 (Valencia) would, among other provisions, require any state agency administering a grant in an amount not greater than $20,000 for a duration not greater than one year to provide eligible recipients with the ability to complete a grant application online.

REGISTERED SUPPORT / OPPOSITION:

Support

California Family Resource Association
Child Abuse Prevention Center
Los Angeles Area Chamber of Commerce

Opposition

None received

Analysis Prepared by: Jacqueline Kinney / A. & A.R. / (916) 319-3600