House committee advances bill to require upfront retainers, faster reimbursement for nonprofits

The Colorado House Finance Committee advanced House Bill 11‑01 to the Committee on Appropriations on a 9‑4 vote after testimony from nonprofit leaders, state finance officials and agency staff about long reimbursement delays for state grants and contracts.

Sponsors said the bill aims to prevent smaller and mid‑size nonprofits from being forced to front months of operating costs while waiting for state reimbursements. Representative Rob Garcia, a co‑prime sponsor, told the committee that many community organizations “cannot afford to go three months, four months, even six months without receiving payment” and framed the measure as a way to let nonprofits “do the good work we entrust them to do.”

The bill would require an upfront retainer of 35% on state grants and contracts for organizations that qualify as 501(c)(3) nonprofits, limit the requirement to state (not federal) dollars, change invoicing rules so payments are made for the portion of an invoice that reaches “substantial compliance,” and start the statutory payment clock when a correct invoice is submitted. Sponsors also amended the bill to change a mandatory data collection about nonprofit leadership to a request.

Why it matters: Sponsors and supporting witnesses said the current reimbursement model effectively bars many community providers from contracting with the state. Stuart Jenkins of Boys & Girls Clubs of Colorado said reimbursement delays can “total as much as $150,000 in needed funds” for smaller clubs and that the new retainer would “provide nonprofits with the financial stability needed to plan and execute programs.” Naomi Amaha of the Denver Foundation and other philanthropy and provider witnesses described private funders and some local governments that already make partial or full upfront payments to reduce the barrier for small providers.

State finance and agency witnesses warned of fiscal and compliance risks. Bob Jaros, state controller representing the Department of Personnel & Administration (DPA), said the bill as drafted could require a large new outlay for advance payments and cited a corrected fiscal estimate of up to $11.8 million in year one and $11.6 million ongoing tied to advance payments, lost interest and new information‑system costs. DPA and the Colorado Department of Human Services (CDHS) told the committee that prepayments increase high‑risk monitoring requirements, raise audit and recovery burdens if contracts are later amended or reduced, and may conflict with federal rules when federal funds are involved.

Dr. Megan Stid, director of the Division of Community Programs at CDHS, said, “This bill mandates that state agencies provide nonprofit organizations with the retainer of at least 35% of the first year contract amount. Advanced payment or prepayment automatically increases an entity to a high risk determination.” She and Christina Beisel, CDHS deputy executive director for financial services, described the additional audits, site visits and staff time that high‑risk monitoring requires.

Fiscal and implementation questions dominated the hearing. The committee’s fiscal analyst and DPA officials said agencies currently can and do approve advance payments on a case‑by‑case basis under existing rules, but that converting the practice into a statutory requirement limited to 501(c)(3) organizations and state dollars would require system changes and new rulemaking. DPA’s testimony said agencies already provided advanced payments in 2024 totaling about $1.3 billion (dollars advanced, per testimony), but that a new centralized tracking mechanism for the specific funding split proposed would impose development and ongoing costs.

Supporters pushed back on claims that prepaid funds would be misused, noting existing contract budgets, auditing and reporting requirements. Representative Garcia said, “When you contract with the state, you are contracted with a very detailed scope of work and a budget that has to be approved,” and argued nonprofits face structural barriers that the bill seeks to remove.

Action taken: Representative Rob Garcia moved the bill (as amended) to the Committee on Appropriations; Representative Zukai seconded the motion. The committee approved the motion and advanced the bill by a recorded tally of yes 9, no 4.

Next steps: The bill will go to the Appropriations Committee for further consideration. Sponsors and DPA officials said they will continue negotiating implementation language, rulemaking authority and clarifications about federal funds and exceptions for organizations without standard audits or multiple financial cycles.

Ending: Committee members asked the sponsors to continue working with agencies on fiscal and technical fixes before the bill reaches the floor; sponsors said they will pursue those changes while moving the policy forward.