Relates to requirements associated with contracts between state agencies and not-for-profit organizations including an advance payment of 25% of the total award to cover expenses incurred in the first quarter.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A11179
SPONSOR: Paulin TITLE OF BILL:
An act to amend the state finance law, in relation to requirements asso-
ciated with contracts between state agencies and not-for-profit organ-
izations
PURPOSE OF BILL:
To improve the administration of the Prompt Contracting Law by estab-
lishing clear and consistent requirements for advance payments to not-
for-profit organizations, standardizing timelines for contract modifica-
tions, and ensuring the inclusion of indirect costs where permissible.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends section 179-u of the state finance law to require state
agencies to provide a twenty-five percent advance payment within thirty
days of executing a contract with a not-for-profit organization; provide
comparable advances where services continue under a written directive
pending contract renewal. Additional quarterly advances are required if
the contract remains unexecuted. Advance payments are not required
where prohibited by federal funding restrictions.
Section 2 amends section 179-ee of the state finance law to establish
timelines for the approval of contract modifications, require inclusion
of de minimis indirect costs in not-for-profit contracts where permissi-
ble, and allow certain final invoices to be treated as modification
requests.
Section 3 sets the effective date.
JUSTIFICATION:
New York State has long contracted with not-for-profit organizations to
provide critical services in communities throughout the state, including
early childhood education, mental health services, homeless housing
programs, and substance use treatment. These essential social safety net
services are delivered as an extension of the state to millions of New
Yorkers each day.
Delays in payment and a complex contracting process have long challenged
not-for-profit providers. A recent statewide survey found that 33
percent of not-for-profit organizations awarded state funds reported
being owed more than $58 million for services already delivered.
Reimbursement delays regularly last for months and, in some cases, more
than a year. As a result, organizations are often required to rely on
lines of credit and incur interest costs in order to meet payroll and
maintain operations. In a recent survey conducted among the New York
Council of Nonprofits' members, 65 percent reported concern about fund-
ing basic operations in 2025, up from 62 percent the prior year.
These challenges are particularly acute when not-for-profit organiza-
tions are required to begin or continue providing services prior to full
contract execution or during delays in contract renewal, without timely
access to funding. While current law permits advance payments in certain
circumstances, such payments are not consistently provided and lack
uniform standards.
This bill addresses these issues by establishing clear and consistent
requirements for advance payments, including requiring state agencies to
provide an advance equal to twenty-five percent of the contract value
within thirty days of contract execution and to provide comparable
advances when contracts are delayed and services continue under a writ-
ten directive. These provisions are limited to a defined percentage of
the contract value and apply only where funds have been appropriated.
Advance payments are not required where prohibited by the terms and
conditions of applicable federal funding.
In addition, the bill establishes defined timelines for the review and
approval of contract modifications and clarifies that certain final
invoices may be processed as modification requests. The bill also
requires the inclusion of de minimis indirect costs in not-for-profit
contracts, where permissible under federal funding rules.
By clarifying and standardizing these practices, this legislation is
intended to improve consistency and predictability in the contracting
process and ensure that not-for-profit organizations have access to
funding necessary to continue providing services without disruption.
PRIOR LEGISLATIVE HISTORY:
New Bill.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
One hundred eighty days after it shall have become a law.
STATE OF NEW YORK
________________________________________________________________________
11179
IN ASSEMBLY
May 1, 2026
___________
Introduced by M. of A. PAULIN -- read once and referred to the Committee
on Governmental Operations
AN ACT to amend the state finance law, in relation to requirements asso-
ciated with contracts between state agencies and not-for-profit organ-
izations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 179-u of the state finance law, as added by chapter
2 166 of the laws of 1991, is amended to read as follows:
3 § 179-u. Advance payments. 1. When a state agency administering a
4 contract enters a new contract with a not-for-profit organization and
5 funds have been appropriated, the agency shall provide within thirty
6 days of executing the contract an advance payment of an amount equal to
7 twenty-five percent of the total award to cover expenses incurred and
8 services provided in the first quarter.
9 2. When a state agency administering a contract [shall advise] advises
10 the not-for-profit organization of the agency's intention to renew or
11 extend the contract, [the not-for-profit organization, may, upon receipt
12 of a written directive, be entitled to an] and the funds have been
13 appropriated, the agency shall either fully execute such contract or
14 shall issue a written directive prior to the commencement date of the
15 succeeding contract. In either case, the agency shall issue, prior to
16 the commencement date of the succeeding contract, an advance payment of
17 an amount equal to twenty-five percent of the total award to cover
18 expenses incurred and services provided in the first quarter pending
19 execution of the renewal or extension contract [if such contract is not
20 fully executed by the commencement date of the succeeding contract; the
21 written directive shall specifically set forth the dollar amount and the
22 period of time covered by the advance payment]. Such advance [payment]
23 payments shall offset future payments due to the organization for
24 services provided during the term of the prospective renewal or exten-
25 sion contract and shall not exceed the maximum contract amount set forth
26 in said renewal or extension contract.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD15448-04-6
A. 11179 2
1 [2.] 3. A state agency providing an advance payment pursuant to subdi-
2 vision one or two of this section shall submit a written directive, a
3 voucher and such other documents as may be required to the comptroller
4 for approval.
5 4. Such advance payments shall not be required if funding for such
6 contract includes federal funding and the terms or conditions of such
7 federal funding prohibit such advance payments.
8 § 2. Subdivision 3 of section 179-ee of the state finance law, as
9 added by section 38 of part L of chapter 55 of the laws of 2012, is
10 amended and a new subdivision 4 is added to read as follows:
11 3. A modification to a contract that would result in a transfer of
12 funds among program activities or budget cost categories but does not
13 affect the amount, consideration, scope or other terms of such contract
14 shall not, by itself, require such contract and modification to be
15 submitted to the comptroller for review; provided, however, where the
16 amount of such modification is, as a portion of the total value of the
17 contract, equal to or greater than ten percent for contracts of less
18 than five million dollars, or five percent for contracts of more than
19 five million dollars, the comptroller may require that such modification
20 be submitted to [him or her] such comptroller for review. All modifica-
21 tions that do not require comptroller review shall be approved within
22 sixty days, and all modifications that require comptroller review shall
23 be approved within ninety days. When a contractor submits their final
24 vouchers or invoice, if such voucher or invoice would result in a
25 modification between budget categories of, as a portion of the total
26 value of the contract, equal to or lesser than ten percent for contracts
27 of less than five million dollars, or five percent for contracts of more
28 than five million dollars, then the agency may consider the voucher or
29 invoice a request for contract modification and may process the modifi-
30 cation as such.
31 4. Notwithstanding any other provisions of this article, de minimus
32 indirect costs shall be included in all not-for-profit organization
33 contracts with state agencies. Provided, however, such de minimus indi-
34 rect costs shall not be included if funding for such contract includes
35 federal funding and the terms or conditions of such federal funding
36 prohibit the inclusion of such costs.
37 § 3. This act shall take effect on the one hundred eightieth day after
38 it shall have become a law.
