| Frequently Asked Questions |
Small Business (Incl. Non-Profits) with Contracts <$500k and Gross Receipts <$5m |
All Other Businesses |
When is payment due?
• Specified contract term
• No date set forth in contract |
Date set forth in contract (GC 927.1a) and within 45 calendar days (GC 927b) |
Date set forth in contract (GC 927.1) and within 45 calendar days (GC 927b) |
| When does payment clock start? |
The date of receipt of an undisputed invoice by department personnel is equal to Day Zero (GC 927 & 927.4). |
The date of receipt of an undisputed invoice by department personnel is equal to Day Zero (GC 927 & 927.4). |
| What if invoice is disputed (for good cause) within 15 working days? |
Stops penalty clock until dispute resolved (GC 927.3) |
Stops penalty clock until dispute resolved (GC 927.3) |
| When do penalties begin accruing? For the State agency: |
The day after payment due date per contract; if no payment date in contract, on the 31st day after receipt of invoice (i.e., the day after the "required payment approval date") (GC 927.4)
Example: An invoice received on March 1st would begin accruing interest on April 1st if not submitted to the State Controller on or before March 31st (Day Zero = 3/1 plus 30 days = 3/31). |
The day after payment due date per contract; if no payment date in contract, on the 31st day after receipt of invoice (i.e., the day after the "required payment approval date") (GC 927.4)
Example: An invoice received on March 1st would begin accruing interest on April 1st if not submitted to the State Controller on or before March 31st (Day Zero = 3/1 plus 30 days = 3/31). |
| When do penalties begin accruing? For the State Controller: |
On the 16th day after receipt of the state agency claim (GC 927.4) |
On the 16th day after receipt of the state agency claim (GC 927.4) |
| When do penalties stop accruing? For the State agency: |
The day claim schedule is submitted to Controller (GC 927.6a) or check is issued from Revolving Fund. |
The day claim schedule is submitted to Controller (GC 927.6a) or check is issued from Revolving Fund. |
| When do penalties stop accruing? For the State Controller: |
The date warrant is issued (GC 927.7) |
The date warrant is issued (GC 927.7) |
| What is the penalty rate? |
0.25% per calendar day (GC 927.6a)(Factor per day = 0.0025) |
PMIA plus 1% (not to exceed 15%) (GC 927.6b); the 2006-2007 rate is 4.873% (Factor per day = 0.0001335) |
| Is a separate penalty invoice required? |
No; departments must automatically calculate and pay penalties as incurred (GC 927b & 927.6a) |
No; departments must automatically calculate and pay penalties as incurred (GC 927b & 927.6a) |
| Is there a minimum payment? |
No minimum (GC 927.6a) |
No payment under $75.00 (GC 927.6b) |
| Can penalties be waived? |
Penalties may not be waived, altered, or limited by the state agency or the contractor (GC 927.1b) except for non-profits when there is no budget (GC 927.11b), and declaration of major disaster (GC 927.11c) |
Penalties may not be waived, altered, or limited by the state agency or the contractor (GC 927.1b) except for fire season emergency (GC 927.11a), and declaration of major disaster (GC 927.11c) |
| What if there is no Budget Act? |
Penalties shall accrue to small businesses until invoice is paid (GC 927.11d); non-profits will not be paid penalties (GC 927.11b) |
Penalties shall accrue until the invoice is paid (GC 927.11d) |
| Are penalties applicable to Medi-Cal Claims? |
Yes (GC 927.5), when such small businesses are located in California (GC 927.2j) |
Special provisions apply (GC 927.5) |
| Are penalties applicable to advances? |
The law makes no provisions for advances |
The law makes no provisions for advances |
| Are penalties applicable to non-profit organizations? |
Yes, if contract <$500,000 (GC 927.7) |
No (GC 927a) |
| Are penalties applicable to local entities? |
No, the law specifically refers to "contracts with a business" (GC 927.1) rather than with public entities as defined in GC 811.2 |
No, the law specifically refers to "contracts with a business" (GC 927.1) rather than with public entities as defined in GC 811.2 |
| How about subcontractors? |
Agencies shall encourage contractors to promptly pay their subcontractors (GC 927.10) |
Agencies shall encourage contractors to promptly pay their subcontractors (GC 927.10) |
| Are there any exceptions? |
No exceptions |
1. 30-day payment extension in a declared fire season emergency (GC 927.11a);
2. In major calamity, disaster or criminal act, penalty suspended (until reinstated) by Director of Finance (GC 927.11c) |
| Are any reports required? |
Annual report (identifying number of penalty payments and dollar amount) to the Director of DGS 90 days after the end of the fiscal year (GC 927.9) |
Annual report (identifying number of penalty payments and dollar amount) to the Director of DGS 90 days after the end of the fiscal year (GC 927.9) |
