Purpose:

To supplement Bulletin A-316 “Not-For-Profit Prompt Contracting” by providing operational guidance on the processing of grant contracts as affected by the recently enacted amendments to Article 11-B of the State Finance Law, entitled the Prompt Contracting Law, effective January 1, 2008.

Background:

Chapter 292 of the Laws of 2007 added amendments to Article 11-B. The amendments prohibit state agencies from generally requiring not-for-profit (NFP) organizations to waive claims for interest that would otherwise be due; pro vide that the term of the contract is automatically deemed to continue in effect when a state agency does not timely notify a NFP of an intent to terminate the contract; require that any waivers of interest be subject to the Office of State Comptroller’s (OSC) approval and provide for the calculation and payment of interest to NFPs when OSC disapproves a waiver; require state agencies to report prompt contracting information to the Comptroller for inclusion in the annual reports; and expand the NFP Contracting Advisory Committee to sixteen members, require meetings at least quarterly, and expand the scope of what the committee evaluates.

Based on these requirements OSC, in accordance with the Prompt Contracting Law, will:

• file state agency notification and suspension letters;
• review state agency requests of unusual circumstances for failure to provide timely notification;
• review waivers of interest, and subsequently assess interest for unwarranted waivers; and,
• compile and analyze state agency prompt contracting data submitted no later than March 31 of each year, for inclusion in an annual report that is submitted to the Governor, Senate, Assembly, and Division of Budget (“DOB”) as required by the Prompt Contracting Law.

NOTE: Prompt Contracting requirements apply to all grant contracts with NFPs regardless of the $50,000 threshold for OSC pre-audit approval.

OSC Requirements for Processing Grant Contracts affected by the Prompt Contracting Law

Notification and Suspension Letters (SFL §179-w):

General Criteria

The law has provided the ability to start and stop the time frames associated with Prompt Contracting Law through the use of notification and suspension letters. The state agency must put all determinations or notifications in writing and immediately submit them to any directly affected NFP, to the Chairman of the Senate Finance Committee, to the Chairman of the Assembly Ways and Means Committee, and to OSC, where they will be included in the procurement record.

To meet these requirements, state agencies must submit notification and suspension letters to OSC, preferably with the AC-340 and contract transaction.

• All notification and suspension letters must be dated and include the contract number.
• Suspension letters must clearly document the circumstances for the suspension of time frames and specify the length of the suspension.
• The cumulative length of suspensions declared by a state agency when added together shall not exceed 4 ½ months in any fiscal year.
• If the state agency determines that the NFP is not negotiating in good faith, or that significant and substantive differences exist between the state agency and the NFP, the state agency may suspend the time frame indefinitely.
• To avoid a waiver of interest being determined unwarranted, the suspension letter should clearly indicate this information.

New Contract Transactions

Legislative Initiatives

The time frame for prompt execution of legislative initiatives is 120 days from the date the NFP is identified to a state agency. As such, OSC will require that the agency date stamp the receipt of the Local Grant Awards Form (Legislative Initiative) and continue to include it with the contract transaction.

Grant Contracts Funded with One Hundred Percent (100%) Federal Funds

The time frame for prompt execution of 100% federally funded grant contracts is 120 days from the date that the state agency receives the notice of federal grant award. This notice needs to be provided to OSC either with the contract transaction or with documents submitted as a part of the Program Procurement Record. For those grant contracts funded by a mix of state and federal funds, the time frame for prompt execution is 150 days after the latest date on which any state appropriation included in the program is enacted.

Renewal Contract Transactions

Unusual Circumstance

If a state agency is not able to provide timely notification to a NFP of its preliminary intent to renew or terminate a contract due to unusual circumstances beyond the control of the state, the state agency may request that OSC determine whether the unusual circumstances warrant the denial of interest to a NFP, due to late execution of the contract renewal. A determination of unusual circumstances being warranted will be based on exceptional and unforeseeable reasons, such as natural disasters, homeland security issues, or other emergency situations.

Requests for OSC determination of unusual circumstances for failure to notify a NFP of the state agency’s intent to renew a contract must be in writing and where appropriate include the grant procurement record identification, and an explanation of the basis for the state agency’s inability to comply with the time frames for notification as established in the Prompt Contracting Law. The request should be submitted to the Office of the State Comptroller, Bureau of Contracts’, Attn: Grants Team Leader, Division of the Budget, and the affected NFP. The request must be received by OSC within 90 days prior to the beginning of the renewal period.

In situations where the state agency is requesting a determination of unusual circumstances for failure to notify a NFP of its intent to terminate a contract, the contract continues and remains in effect until such time as the state agency provides a 90 day notice of termination.

Upon OSC’s determination of unusual circumstances being warranted or unwarranted, the state agencies will receive a notification letter from OSC within 20 days of receipt of the letter requesting unusual circumstances.

Notifications of Termination

Notices of termination must be filed with OSC ninety (90) days prior to the end of the initial contract term for those contracts that contain language providing for optional renewal. If the state agency does not intend to renew the contract, it must notify the NFP in writing with the reasons. If the notice is not sent in a timely manner, the contract will continue and remain in effect until such time as the NFP receives 90 days notice of termination. Expenses incurred during the extension will be reimbursable under the terms of the existing contract.

In order to allow for payment of such expenses, as required by the amended statute, the state agency must submit to OSC an AC-340 extending the term of the contract for the necessary additional time, accompanied by a copy of the dated notification letter.

When a contract will not be continued despite the state agency’s original intent to renew the contract, the state agency is still required to notify the contractor of the termination. This situation may arise when a renewal contract is returned non-approved by either the Office of the Attorney General (OAG) or OSC, or when a state agency receives information that causes them to change their vendor responsibility determination. In such circumstances, the contract will continue and remain in effect until the NFP has received a 90 day notice.

Notifications Submitted Without a Contract Transaction and AC-340

All notifications not accompanied by an AC-340 and contract transaction, including notifications of termination, should be sent to the Office of the State Comptroller, Bureau of Contracts, Attn: Grants Team Leader.

Advances and Fifth (“5 th”) Quarter Financing:

In an effort to reduce the potential for interest payments, state agencies are encouraged to maximize use of advances on renewal contracts through the use of written directives.

For detailed instructions for the completion of an advance voucher refer to OSC Bulletin A-316.

If the state agency plans to utilize 5 th quarter financing:

• Contract documents must include language that provides payment for the first quarter of the new or renewal contract.

• The AC-340 accompanying the new contract must clearly indicate in the second description field the contract number of the contract providing the funding for the 5 th quarter. This information should be handwritten and not data entered.

• The AC-340 accompanying renewal contracts must clearly state in the second description field “5 th Quarter Financing”. This information should be handwritten and not data entered.

• A worksheet should be included with the new and renewal contract that reconciles the AC-340 “Contract Amount” with the total contract value.

Waivers of Interest:

OSC will review waivers of interest submitted with grant contract transactions with NFPs to determine: (i) if all the time frames required by the Prompt Contracting Law have been met, (ii) the state agency and the NFP have mutually agreed in writing to waive any interest due, and (iii) the applicable information as to the reason for waiving the interest has been included and properly justified.

Upon OSC’s determination of a waiver being warranted or unwarranted, state agencies will receive a notification letter within 20 days of receipt of the waiver.

If the waiver is deemed to be unwarranted, the state agency must immediately submit a voucher. Code the voucher with the object code 56075, the batch type VNC and the cost center code charging appropriations for state operations that are available for the administrative programs of the state agency.

If the voucher is not received by OSC’s Bureau of State Expenditures within 30 days of notification of OSC’s determination, OSC will assess the amount of unpaid interest in the manner prescribed by law.

Contracts Valued Under $50,000 Threshold

Waivers of interest for grant contracts with NFPs valued at under the $50,000 threshold must be sent to OSC for pre-audit approval. Send these waiver requests to the attention of the Office of the State Comptroller, Bureau of Contracts, Attn: Grants Team Leader. Complete the attached form “Transaction Under $50,000 Threshold Waiver of Interest Transmittal”, and include any notification letters, and the associated “T contract”. Provide the following information on the transmittal: originating agency code, batch type “PCL”, contract number, originating agency, payee identification number, where applicable, administering agency, payee name and address, contract amount, and contract period. “waiver of interest” is entered in the first description field. Enter the procurement record identification number or the contract reporter exemption request number, if applicable, in the second description field.

NOTE: All waivers of interest must be submitted to OSC, DOB, and the NFP.

Any questions regarding the processing and payment of interest should be directed to OSC’s Help Desk at 518-408-4672 or 1-866-370-4672, or Helpdesk@osc.state.ny.us.

Reporting Requirements:

State agencies are required to submit to OSC, an annual report on programs affected by the Prompt Contracting Law. The reports must include:

• the number of programs affected by the Prompt Contracting Law;
• the ability of the state agency to meet the time frames of the law;
• the number of programs, contracts, and renewal contracts both complying and failing to comply with the time frames of the law;
• the number of contracts on which interest was paid, and the amount of interest paid; and,
• any other relevant information regarding the implementation of prompt contracting and payments affecting NFPs.

To ensure consistency in reporting, central agencies with multiple regional offices, such as Office of Mental Retardation and Developmentally Disabled (OMRDD), Department of Corrections (DOCS), Department of Transportation (DOT), and the State University of New York (SUNY), among others, are requested to report the required information for all their regional offices. The attached Annual Prompt Contracting Report – Instructions for Completion should be used. At the beginning of each year, your agency will be electronically reminded to submit the form via e-mail to promptcontracting@osc.state.ny.us by March 31 of each year.

By May 31 of each year, OSC will make available to the public a report aggregating the state agency information and will prepare an analysis examining the effectiveness and implementation of prompt contracting and payments, including recommendations deemed necessary to improve existing contracting and payment methods between state agencies and NFPs. A report will also be submitted to the Governor, the Temporary President and Minority Leader of the Senate, the Speaker and Minority Leader of the Assembly, the Director of DOB, the Chairman of the Senate Finance Committee, and the Chairman of the Assembly Ways and Means Committee.

Not-for-Profit Contracting Advisory Committee:

State agency staff need to be aware that a Not-for-Profit Contracting Advisory Committee is established by the amended the Prompt Contracting Law. The committee is charged with meeting at least quarterly each year to comment and report on the implementation and operation of the NFP short-term revolving loan fund; advise the Governor, OSC, and state agencies on the implementation and operations of the Prompt Contracting Law; to evaluate the benefits of requiring all state agencies to use standard contract language and the extent to which standard language may be effectively included in contracts with NFP; review the annual report submitted by OSC; propose any legislation they deem necessary to improve the fund and the article; and make recommendations on improving contracting procedures with not-for-profit organizations, which receive state funds through the intermediary of municipalities.

This Advisory Committee is composed of 16 members:

• eight members from the NFP community;
• eight members representing state agencies:
  • Ex officio – DOB, OAG, OSC, and State Education (SED);
  • Office of Children and Family Services (OCFS), Department of State (State), Office of Mental Health (OMH), Office of Temporary and Disability Assistance (OTDA), Department of Health (DOH), Department of Labor (DOL), OMRDD.

Contact:

Bureau of Contracts, Grants Team Leader

(518) 474-3488