Law:Division 25. Health And Welfare Agency--direct Service Contracts Reform Act (California)

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Chapter 1. Legislative Intent And Policy

Ca Codes (hsc:38000) Health And Safety Code Section 38000

38000. The Legislature states its intent with respect to direct service contracts of the departments within the Health and Welfare Agency as follows: (a) Contract approval process should take no longer than 30 days from the time the administrative agency generating the contract has approved its provisions. (b) Payment for services rendered shall take no longer than 30 days after an invoice has been approved by the responsible department. (c) If contract approval or payment or both are delayed, the state shall notify community based agencies within 15 days with instructions to either defer or interrupt services to be contracted. If the state requests an agency to continue providing services, conditions shall be mutually agreed upon in advance for amortization of particular additional costs to the agency involved.

Chapter 2. Contract Authority

Ca Codes (hsc:38010-38015) Health And Safety Code Section 38010-38015

38010. Notwithstanding any other statutes to the contrary, this division shall prevail. This division shall not apply to contracts entered into pursuant to Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code.

38011. Administrative departments are responsible for: Program planning, issuing requests for proposal, reviewing and choosing contractors, negotiating service agreements with contractors, oversight of contract review and payment processes, preparing claims for payment, monitoring services, and evaluating contractors.

38012. The Department of General Services shall review and approve contracts in accordance with Article 4 (commencing with Section 10335) of Chapter 2 of Part 2 of Division 2 of the Public Contract Code.

38013. The Department of Finance shall review and approve contracts in accordance with the provisions of Section 10336 of the Public Contract Code.

38014. The Controller shall approve payments based on the provisions of approved contracts.

38015. The State Department of Social Services may advance up to 90 percent of any federal emergency food and shelter funds under Public Law 98-8 which the state appropriates to the department, to counties or local United Way organizations which have contracts with the department for the purpose of providing emergency food and shelter services. Any interest earned on any funds received pursuant to this section by a county, a United Way organization, or the department shall be used for the purpose of emergency food and shelter services.

Chapter 3. Contract Approval Process

Ca Codes (hsc:38020-38021) Health And Safety Code Section 38020-38021

38020. (a) All departments under the Health and Welfare Agency may write and execute direct service contracts prior to July 1 of any fiscal year for the mutual benefit of both parties in order to avoid program and fiscal delay which could occur if the contracts were executed after July 1. Such contracts are valid and enforceable only if sufficient funds are made available by the Budget Act of the appropriate contract year. In addition, contracts may be subject to such additional restrictions, limitations, or conditions as enacted by the Legislature and contained in the Budget Bill or any statute enacted by the Legislature. If the Budget Act does not appropriate sufficient funds for the program, such contracts shall be invalid and of no further force and effect. In this event, the state shall have no liability to pay any funds whatsoever to the contractor, or to furnish any other considerations under this contract and the contractor shall not be obligated to perform any provisions of this contract. (b) As used in this act "direct service contract" means a contract for services contained in local assistance or subvention programs, or both.

38021. If the renewal of a direct service contract is not approved in a timely manner through no fault of the contractor, the administrative department may request a simple 90-day extension of the existing approved contract pending final approval of the contract renewal and provide notification and the information and forms necessary for the agency contractor to bill for up to 90 days pursuant to this section.

Chapter 4. Direct Service Contract Procedure

Ca Codes (hsc:38030-38037) Health And Safety Code Section 38030-38037

38030. Each department under the Health and Welfare Agency shall identify each program (1) within which direct service contracts are awarded totaling in the aggregate contract amount of more than two hundred fifty thousand dollars ($250,000), and (2) which awards more than five direct service contracts per year. For the purposes of this chapter, "direct service contracts" shall not include contracts, grants, or subventions to other governmental agencies or units of government nor contracts with regional centers or area agencies on aging.

38031. For each program identified pursuant to Section 38030, each department shall develop an annual calendar identifying target dates for requests for proposal, contract bid deadlines, contract award announcements, contract approvals, and contract evaluations. Where funding or funding levels for a program are uncertain or subject to delays beyond the control of the program, the calendar shall so indicate and shall specify a range of dates within which final decisions on funding availability are likely to be made. Each such calendar shall be available to the public and shall be updated at least annually.

38032. For each program identified pursuant to Section 38030, each department shall develop and maintain a central distribution list for requests for proposal. Such lists shall contain a statement of the basis for making additions to the list and any affirmative action policies pertinent to the program's contracting practices.

38033. Each request for proposal shall contain, but not be limited to, the following information: the goals and objectives of the entire program, identification of the specific minimum range of services to be purchased related to those goals, quantitative as well as qualitative measures which will be used by the department to evaluate service outcomes, specific criteria and a description of the methodology and timetable which will be followed to review and approve bids, and all minimum performance standards any agency must meet prior to direct service contract approval.

38034. For each program identified pursuant to Section 38030, each department shall identify the following steps: time estimated for each step; specific staff names, office addresses, and telephone numbers for those responsible for each step; and legal requirements and signatory approvals required prior to final approval of any contract. Any conditions for advance or interim payments shall also be identified. All bidders shall receive, in writing, all information required pursuant to this section.

38035. For each program identified pursuant to Section 38030, each department shall identify and transmit to all agencies awarded direct service contracts forms required for contract payments, management information or reports required pursuant to contract objectives, and conditions and methods for contract evaluations. Methods and conditions for payment recoveries, withholding of payments, and contract terminations relating to nonperformance shall also be identified. This information shall be made available to each agency awarded a direct service contract prior to final approval of the contract.

38036. Each department under the Health and Welfare Agency shall develop a grievance procedure for resolving disputes arising from the awarding or administering of direct service contracts.

38037. Pursuant to Section 38030 through Section 38035, inclusive, all departments under the Health and Welfare Agency shall prepare an implementation schedule to develop the information required pursuant to this chapter. These schedules shall be transmitted within 90 days after the effective date of this chapter to the Joint Legislative Budget Committee and the Assembly and Senate Offices of Research for their review. The implementation schedule shall cover the period of one year from the effective date of this chapter.

Chapter 5. Direct Service Contract Audit Requirements

Ca Codes (hsc:38040-38041) Health And Safety Code Section 38040-38041

38040. As used in this chapter: (a) "Financial and compliance audit" means a systematic review or appraisal to determine each of the following: (1) Whether the financial statements of an audited organization fairly present the financial position and the results of financial operations in accordance with generally accepted accounting principles. (2) Whether the organization has complied with laws and regulations that may have a material effect upon the financial statements. (b) "Public accountants" means certified public accountants, or state licensed public accountants. (c) "Independent auditors" means public accountants who have no direct or indirect relationship with the functions or activities being audited or with the business conducted by any of the officials or contractors being audited. (d) "Generally accepted auditing standards" means the auditing standards set forth in the financial and compliance element of the "Standards for Audit of Governmental Organizations, Programs, Activities, and Functions" issued by the Comptroller General of the United States and incorporating the audit standards of the American Institute of Certified Public Accountants. (e) "Direct service contract" means any contract provided by a state agency pursuant to Chapter 4 (commencing with Section 38030). (f) "Nonprofit organization" means an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 that is exempt from taxation under Section 501(a) of that code or any nonprofit, scientific or educational organization qualified under Section 23701d of the Revenue and Taxation Code.

38041. (a) Annually, there shall be a single independent financial and compliance audit of nonprofit organizations that contract with the state under a direct service contract. Any such audit shall include an evaluation of the accounting and control systems of the direct service contractor and of the activities by the contractor to comply with the financial requirements of direct service contracts received by the contractor from the state agency. Audits carried out pursuant to this section shall be audits of the contractor, rather than audits of individual contracts or programs. In the case of any contractor that receives less than twenty-five thousand dollars ($25,000) per year from any state agency, the audit required by this section shall be conducted biennially, unless there is evidence of fraud or other violation of state law in connection with the direct service contract. The cost of such audit may be included in direct service contracts up to the proportionate amount that the contract represents of the contractor's total revenue. (b) A nonprofit organization shall have responsibility for financial and compliance audits of the nonprofit organization and any subcontractors. The audits shall be made by independent auditors in accordance with generally accepted auditing standards. The audit shall be completed by the 15th day of the fifth month following the end of the contractor's fiscal year. (c) (1) Nothing in this chapter limits the authority of state agencies to make audits of direct service contracts; provided, however, that if independent audits arranged for by direct service contractors meet generally accepted auditing standards state agencies shall rely on those audits and any additional audit work shall build upon the work already done. (2) The state is responsible for conducting, or contracting for the conduct of, contract performance audits which are not financial and compliance audits. (3) Nothing in this chapter limits the state's responsibility or authority to enforce state law or regulations, procedures, or reporting requirements arising pursuant thereto.

Chapter 6. Contract Reform Process

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