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.
