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Determination of Proper Payee Under Assignment of Claims Act

B-200603 Nov 04, 1980
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Highlights

The National Aeronautics and Space Administration (NASA) requested an advance decision concerning the proper pay under a contract with a financial service company. Two parties claimed the payment, both by virtue of assignments from the company. NASA believed that the first assignment was invalid since it was not a financing institution. Therefore, it believed it appropriate to continue making contract payments to the second assignment. The Assignment of Claims Act constitutes a broad prohibition against the assignment of claims against the United States to third parties. One purpose of the prohibition is the maintenance of the government's defenses against assignor's claims by way of setoff and counterclaim which might not be available against an assignee. A company providing funds to firms by purchasing equipment leased by such firms to third parties may be considered a financing institution under the act. However, GAO has generally restricted the recognition of proper assignees to those institutions which deal in money, as opposed to other commodities, as the primary function of their business activities. Since the first assignee was not regularly engaged in the business of lending or financing government contracts, it was not considered a proper assignee under the act. Consequently, GAO recognized the second assignment as being valid under the act and the proper recipient of the NASA contract payments.

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