1. Are there any rules, regulations, or laws that specifically prohibit advance payments or prepayments?
The California Constitution Article XVI, Sec. 3 and Sec. 6, prohibits gifts/donations of public funds. Since the State has received no benefit and the subsequent receipt of goods/services cannot be guaranteed, a prepayment is considered a gift of public funds. The State Controller’s Office requires claims presented for payment to include a penalty of perjury certification that the services were rendered and the supplies were delivered. (See Claim Schedule, STD. 218 Cont., 218DD, and 218ET.) Advance payments must be specifically authorized by statute (State Contracting Manual Section 7.32). The following advance payments are permissible:
Any department which, as a part of its regular operations, performs work for other departments may require payments in advance (Government Code [GC] section 11258; State Administrative Manual [SAM] Section 8471)
Advance payments between departments are permissible to mitigate an adverse effect to the appropriation of the performing department (GC section 11257; SAM Section 8453).
Under certain conditions, specific departments may advance payment to a community-based private nonprofit agency (GC section 11019).
Under certain conditions, departments, except the Department of Social Services, may advance payment to a county (GC section 11019.5).
The office revolving fund may advance payment for publications, postage, meter services, travel expenses, and registration fees (GC section 16401; SAM Sections 8101-8120.3).
Subject to all federal provisions and Department of Finance approval, departments may advance payment of federal block grants to contractors or local governments (GC section 16366.7).
2. Can departments pay claims against reverted appropriations from current appropriations? Does Department of Finance (Finance) need to approve reverted year claims?
Departments may pay claims against reverted appropriations from any current appropriation available for the same purpose, e.g., a claim against a reverted support appropriation may be paid from a current support appropriation (GC section 16304.1; SAM Section 8422.12).
Finance approval is not required for such claims.
3. Can departments use current year appropriations to pay for services and/or goods to be delivered in the next fiscal year?
Expenditures/encumbrances are charged to the fiscal year that the goods/services are delivered when the purchase agreement stipulates that delivery be delayed until requested or delayed until on or after a specific date.
Expenditures/encumbrances are charged to the fiscal year that the purchase agreement is issued when the delivery date is construed to mean as soon as possible. As soon as possible includes a delivery date that is:
Not identified or specific.
Specific but not a requested delay in delivery.
Specified as 10 days, 30 days, or the like.
An agreement is issued as of the date it is “made and entered into”. Any required control agency approvals are retroactive to that date.
Agreements which cross fiscal years may be charged totally to the first year of appropriation or more than one fiscal year, depending on the:
Details of the agreement
Above delivery date criteria
4. What laws and/or rules regulate acceptance of gifts?
The statutory and regulatory provisions are in GC sections 8647, 11005-05.1, 16302; and the SAM Sections 1314.1, 8634. Gifts may be either real property or personal property such as cash or equipment. A gift of real property must be approved by Finance after review by the Department of General Services. (GC sections 11005-05.1; SAM Sections 1314.1, 8634) A gift of personal property must be approved by Finance, except:
Unconditional monetary gifts which must be deposited in the State School Fund (GC sections 11005, 16302; SAM Section 8634).
Monetary gifts where the only condition is the designation of a particular fund in the State Treasury (GC sections 11005, 16302; SAM Section 8634).
Departments or funds statutorily exempted from Finance approval (GC section 11005; SAM Section 8634).
See Request for Approval of Gift, form DF-581, to request Finance approval to accept a gift.
5. How are late payment penalties calculated?
The invoice amount less taxes is multiplied by the daily penalty rate to arrive at the daily penalty amount. The daily penalty amount is then multiplied by the number of days the payment is late to calculate the total penalty amount. The number of days the payment is late is the number of calendar days between the payment due date and the date payment is issued. The payment due date and penalty rate is determined as follows:
The California Prompt Payment Act (Act) requires State departments to automatically calculate and pay late payment penalties if they do not make payments for the following: 1) properly submitted, undisputed invoices; 2) victim services or prevention program grant claims; 3) refunds; or 4) other undisputed payments due to individuals, by the date required in the Act.
The payment due date is 45 calendar days of receipt of the invoice or from notice of refund or other payment unless otherwise specified in a contract or grant. State departments shall pay penalties if a correct claim schedule is not submitted to the Controller within 30 calendar days and payment is not issued within 45 calendar days. The Controller shall pay penalties if payment is not issued within 15 calendar days of receipt of the correct claim schedule and payment is not issued within 45 calendar days. Payment is defined as the issuance by a warrant or a registered warrant by the Controller, or the issuance of a revolving fund check by department. Departments must pay the applicable penalties without requiring an additional invoice for the penalty amount (GC Section 927 et seq.).
The Act requires different rates for penalty payments as follows:
Resource Conservation Districts, Small Businesses, Nonprofit Organizations and Nonprofit Public Benefit Corporations (may include grantees for victim services and prevention programs): the penalty rate, per annum, is a rate of 10 percent above the United States Prime Rate on June 30 of the prior fiscal year.
Other Businesses (including local government grantees that provide victim services and prevention programs): the penalty rate, per annum, is 1 percent above the Pooled Money Investment Account daily rate as of June 30 of the preceding year. Penalties of $100 or less will not be paid. (GC Section 927.6; SAM Section 8474 et seq.)
Refunds and other payments due to individuals: the penalty rate, per annum, is 1 percent below the Pooled Money Investment Account daily rate. Penalties of $10 or less will not be paid. (GC Section 927.13: SAM Section 8474 et seq).
Finance annually issues a Budget Letter informing departments of the annual and daily penalty rates.
The penalty payment is charged to the fiscal year based on the payment due date.
Penalties calculated using a payment due date in the prior fiscal year (prior July 1 to June 30) are prior year expenditures. The penalty is calculated at the prior year rate and paid from a prior year appropriation.
Penalties calculated using a payment due date in the current fiscal year (July 1 forward) are current year expenditures. The penalty is calculated at the current year rate and paid from a current year appropriation.
Note: Current year penalties are not payable until a current year Budget Act has been enacted.
6. What is the definition of equipment? What costs are recorded in the property register?
Equipment is defined in the Property Accounting section of the SAM as all tangible and intangible personal property that meets the capitalization criteria set forth in the SAM Section 8602.
The acquisition cost of all property, capitalized and non-capitalized, is included in the property register. All costs to acquire, install, and prepare property for its intended use are included in the acquisition cost. This amount is used to determine if the property meets the capitalization criteria. See SAM Sections 8615 and 8635 for further criteria on intangible and internally generated intangible assets. The capitalized segment of the property register also serves as the subsidiary ledger to the Capital Assets Group of Accounts (SAM Section 8600 et seq.).
7. What is a Payee Data Record form, STD 204 and why must the payee complete it before the State can make a disbursement?
The purpose of the Payee Data Record form, STD. 204, is to obtain payee information for income tax reporting and to ensure tax compliance with state and federal law. A STD 204 is required for any non-governmental entity or individual entering into a business transaction that may lead to a payment from the state as described in SAM Section 8422.190, Obtaining Payee Information (STD. 204). Therefore, a completed, dated, and signed STD 204 with handwritten or electronic signature must be on file with the state before payments are disbursed. Note: Non-state employees authorized to receive travel expense reimbursements directly from departments must also complete a STD 204. If a payment is reportable to the IRS and/or the FTB, the state prepares an Annual Information Return for the Taxpayer Identification Number (TIN) provided by the payee on the STD 204. The payee will follow the instructions on the STD 204 in accordance with Internal Revenue Code section 6109(a); and, Revenue and Taxation Code sections 18646 and 18661. Use Payee Data Record Supplement form, STD 205, to provide the payee’s remittance address information if different from the mailing address on the STD 204.
8. Why is the State exempt from the Utility Users Tax assessed by local governmental entities?
Cities and counties possess the power to levy utility users taxes; however, that power is limited in application to the State. As a general principle, it has long been declared that the State is ordinarily regarded as exempt from taxes imposed by a local entity. Therefore, the Legislature must expressly limit or waive the State’s immunity for the State to be subject to local taxation.
9. Is there a glossary or a definition for each expenditure object code listed in the Uniform Codes Manual (UCM)?
No, there is no glossary or definition for the object codes. The State accounts and reports on a budgetary basis. As such, departmental budget staff establish allotments for object codes and the expenditures should be consistent with the budgetary allotments. In addition, comparability should be maintained from year-to-year.
10. Can departments issue agency checks when the current year Budget has not been passed?
Yes, departments can disburse general cash to:
Issue refunds (SAM Section 8095).
Remit money to the State Treasury (SAM Section 8091).
Purchase or buy back dishonored checks from the bank (SAM Section 8043).
Departments can disburse revolving fund cash for:
Prior fiscal year payments (SAM Section 8110).
Payment to an employee for salary earned when errors or delays prevent the payroll warrant from being delivered (SAM Section 8595).
11. How should CAL-Card rebates be recorded?
The CAL-Card rebate is a performance bonus that is distributed by the credit card company to departments for timely payment of invoices. Because the rebate cannot be identified to a specific invoice or vendor, the bonus will be classified as Miscellaneous Revenue for those departments whose primary funding source is a governmental cost fund. Departments whose primary funding source is a nongovernmental cost fund will use Operating Revenue, Other.
12. How do departments obtain FSCU approval, as required by some sections of the State Administrative Manual (SAM), or fiscal policy clarification/assistance? How long does the process take?
The Accounting Officer may submit a PDF with a digitally certified signature of the written request on departmental letterhead with the required supporting documentation to firstname.lastname@example.org or mail the signed hardcopy to:
Fiscal Systems and Consulting Unit, IMMS A-15
Department of Finance
915 L Street
Sacramento, CA 95814
The request must include all pertinent information necessary to review the request such as:
- Description of request; including description of current process if proposing a change
- Information required in applicable SAM section
- Justification for request
- Details of the costs and/or dollar amounts involved
- Completed forms, if required (e.g., form AUD-10 for Special Deposit Fund accounts)
- Contact name, email address, and telephone number
Please include the email address and telephone number of a contact person so that we can acknowledge the receipt of your request. The request will be assigned to an analyst for review. A written response will be provided in approximately 3 to 4 weeks.
13. Is FSCU responsible for the content in all sections of the State Administrative Manual (SAM)?
No, FSCU is only responsible for specific sections of SAM. The responsible department and contact person for all SAM sections are listed in SAM Section 0030.