State-funded assistance grants and contracts: advance payments.

The definition of 'recipient entity' is expanded to include private nonprofits exempt from state income taxation under Section 23701d of the Revenue and Taxation Code, not just those with federal 501(c)(3) status. This broadens the pool of eligible organizations.

A new exception allows recipients to receive an advance exceeding the 25% single-time balance cap if the payment is necessary for a large purchase (construction, land acquisition, major equipment) or if the recipient is a small nonprofit or tribe with low cashflow that would suffer negative financial impacts without the expanded advance.

The mandatory advance payment requirement (subdivision (d)) is significantly narrowed: it now applies only to grants or contracts advertised on or after January 1, 2027 (previously January 1, 2026), with a total award value of $150,000 or less, and the recipient must meet at least one of two criteria - maintaining less than 120 days of operating reserves, or being headquartered in or primarily serving an underresourced community as defined by specific Health and Safety Code and Public Resources Code sections.

A new multi-installment advance payment mechanism allows agencies to distribute advances over the grant term. The outstanding balance at any single time cannot exceed 25% of the total award, but cumulatively a recipient may receive up to 95% of the total grant or contract amount as advance pay over the full term.

Recipients now have an explicit right to decline the advance payment and elect a standard reimbursement-only schedule. Agencies must provide a simple method of opting out within the agreement.

The documentation submission requirement (invoices, contracts, estimates, payroll records) and the federally insured account requirement now apply only to grants or contracts in excess of $10,000. For grants under $10,000, progress reports are required annually instead of quarterly.

The prior requirement that agencies 'stipulate an advance payment structure and request process within the grant agreement or contract' is eliminated and replaced with a softer requirement to 'consider utilizing advance payment best practices and processes' identified by the Strategic Growth Council's CACE program.

A new agency opt-out provision allows administering agencies to exempt a specific funding opportunity from the default advance payment requirement if it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk program profile. Agencies must clearly state in the solicitation that advance payment is unavailable, maintain a written notice signed by the fiscal officer or director, and provide summaries to DGS and the State Library upon request.

A new subdivision (h) requires the Strategic Growth Council, in consultation with DFG and DGS, to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide) by July 1, 2027. All state agencies must adopt it as their standard operating procedure for disbursement, tracking, and reconciliation of advance payments. The Master Guide must include a Standardized Advance Payment Toolkit with a one-page request/opt-out form, a priority status demonstration form, and a simplified quarterly reconciliation form. Annual training webinars and dedicated technical assistance to nonprofits are required, and the guide must be reviewed biennially.

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Agencies must now consider utilizing advance payment best practices and processes identified by the Strategic Growth Council's Community Assistance for Climate Equity (CACE) program when structuring advance payments.

Clarified that recipient entities receiving advance payments under the section may advance funds to subrecipients in accordance with their grant program requirements or contract, making the pass-through mechanism more explicit.

The requirement to deposit advance payments into a federally insured account now applies only to grants and contracts in excess of $10,000. Smaller grants and contracts are exempt from this requirement.