Processing of Retainage

A GAO decision was requested in connection with the processing of a retainage withheld by the Army from a dredging company which was no longer in existence. The Army retained the payment in order to keep the company's file open in anticipation of an appeal of the contracting officer's denial of claims for additional payment. Since the 6-year statutory period for appeal had elapsed, the Army had proceeded to a final accounting. During this period, the Army was advised that the company had been dissolved. GAO stated that, upon dissolution of a corporation, the assets of the corporation generally are regarded as a trust for payment of its creditors and then its stockholders. There was no evidence that there were any unpaid creditors, nor was there any evidence of the identity of the stockholders who would have been entitled to the payment. Absent the existence of any claimants, the Army should close its file on the contract and deobligate the appropriated amount. Thereafter, the appropriation should be handled in accordance with 31 U.S.C. 706.