Chapter 4.5 - Prompt Payment of Claims

California Government Code — §§ 927-927.13

Sections (6)

Amended by Stats. 2010, Ch. 719, Sec. 13. (SB 856) Effective October 19, 2010.

(a)This chapter shall be known and may be cited as the California Prompt Payment Act.

(b)It is the intent of the Legislature that state agencies pay properly submitted, undisputed invoices, refunds, or other undisputed payments due to individuals within 45 days of receipt or notification thereof, or automatically calculate and pay the appropriate late payment penalties as specified in this chapter.

(c)Notwithstanding any other provision of law, this chapter shall apply to all state agencies, including, but not limited to, the Public Employees’ Retirement System, the State Teachers’ Retirement System, the Treasurer, and

the Department of General Services.

§ 927.1

Amended by Stats. 2006, Ch. 861, Sec. 1. Effective January 1, 2007.

(a)(1) A state agency that acquires property or services pursuant to a contract with a business, including any approved change order or contract amendment, shall make payment to the person or business on the date required by the contract and as required by Section 927.4 or be subject to a late payment penalty.

(2)A state agency that awards a grant, as defined in subdivision (b) of Section 927.2, shall make payment to the person or business that is the recipient of the grant on the date required by the grant and as required by Section 927.4 or be subject to a late payment penalty.

(b)Except in the event of an emergency as provided in Section 927.11, effective January 1, 1999, the late payment penalties specified in this chapter may not be waived, altered, or limited by either of the following:

(1)A state agency acquiring property or services pursuant to a contract or that awards a grant.

(2)Any person or business contracting with a state agency to provide property or services or that is the recipient of a grant.

§ 927.10

Amended by Stats. 2006, Ch. 861, Sec. 6. Effective January 1, 2007.

State agencies shall encourage claimants to promptly pay their subcontractors and suppliers, especially those that are small businesses. In furtherance of this policy, state agencies shall utilize expedited payment processes to enable faster payment by prime contractors to their subcontractors and suppliers, and shall promptly respond to any subcontractor or supplier inquiries regarding the status of payments made to prime contractors.

§ 927.11

Amended by Stats. 2025, Ch. 47, Sec. 1. (AB 1177) Effective January 1, 2026.

(a)Except in the case of a contract with a resource conservation district, a certified small business, a nonprofit organization, or a nonprofit public benefit corporation, if an invoice from a business under a contract with the Department of Forestry and Fire Protection would become subject to late payment penalties during the peak fire protection staffing period, as determined by the Director of Forestry and Fire Protection, or their designee, then the required payment approval date shall be extended by 30 calendar days.

(b)No nonprofit public benefit corporation shall be eligible for a late payment penalty if a state agency fails to make timely payment because no Budget Act has been enacted.

(c)(1) If the Director of Finance determines that a state agency or the Controller is unable to promptly pay an invoice as provided for by this chapter due to a major calamity, disaster, or criminal act, then otherwise applicable late payment penalty

provisions contained in Sections 927.6 and 927.7 shall be suspended, except as they apply to a claimant that is any of the following:

(A) A resource conservation district.

(B) A certified small business.

(D) A nonprofit public benefit corporation.

(E) A small business or nonprofit organization that provides services or equipment under the Medi-Cal program.

(2)A suspension pursuant to this subdivision shall remain in effect until the Director of Finance determines that the suspended late payment penalty provisions should be reinstated.

(d)Except as provided in subdivision (b), in the event a state agency fails to make timely payment because no Budget Act has been enacted, penalties shall continue to accrue until the time that the invoice is paid.

§ 927.12

Added by Stats. 1998, Ch. 916, Sec. 5. Effective January 1, 1999.

Section 926.10 shall not apply to any contract covered by this chapter.

§ 927.13

Amended by Stats. 2019, Ch. 29, Sec. 85. (SB 82) Effective June 27, 2019.

(a)Unless otherwise provided for by statute, any state agency that fails to submit a correct claim to the Controller within 30 days of receipt of a notice of refund or other payment due, and fails to issue payment within 45 days from the notice of refund or other payment due, shall be liable for penalties on the undisputed amount pursuant to this section. The penalties shall be paid out of the agency’s funds at a rate equal to the Pooled Money Investment Account daily rate on June 30 of the prior fiscal year minus 1 percent. The penalties shall cease to accrue on the date full payment or refund is made. If the amount of the penalty is ten dollars ($10) or less, the penalty shall be waived and not paid by the state agency. On an exception basis, state agencies may avoid payment of penalties for failure to submit a correct claim

to the Controller by paying the claimant directly from the state agency’s revolving fund within 45 calendar days following the agency’s receipt of the notice of refund or other payment due.

(b)The Controller shall pay claimants within 15 calendar days of receipt of a correct claim from the state agency. If the Controller fails to make payment within 15 calendar days of receipt of the claim schedule from a state agency, and payment is not issued within 45 calendar days following the agency’s receipt of a notice of refund or undisputed payment due, the Controller shall pay applicable penalties to the claimant. Penalties shall cease to accrue on the date full payment is made, and shall be paid out of the Controller’s funds. If the amount of the penalty is ten dollars ($10) or less, the penalty shall be waived and not paid by the Controller.

(c)The Department of FISCal shall be

responsible for applicable penalties if the Financial Information System for California delays the delivery of a correct claim from the state agency to the Controller, preventing the Controller from making payment within 15 calendar days and payment is not issued within 45 calendar days from the agency’s receipt of a notice of refund or an undisputed payment due.

(d)No person shall receive an interest payment pursuant to this section if it is determined that the person has intentionally overpaid on a liability solely for the purpose of receiving a penalty payment.

(e)No penalty shall accrue during any time period for which there is no Budget Act in effect, nor on any payment or refund that is the result of a federally mandated program or that is directly dependent upon the receipt of federal funds by a state agency.

(f)This section shall not apply to any of the following:

(1)Payments, refunds, or credits for income tax purposes.

(2)Payment of claims for reimbursement for health care services or mental health services provided under the Medi-Cal program, pursuant to Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code.

(3)Any payment made pursuant to a public social service or public health program to a recipient of benefits under that program.

(4)Payments made on claims by the Department of General Services.

(5)Payments made by the Commission on State Mandates.

(6)Payments made by the Department of Human Resources pursuant to Section 19823.