Winners of the September Fall Give-away
Okay, technically itâ€™s not a website, but a PDF booklet posted on the U.S. Treasury website, for which the introduction states: "This booklet describes the fundamentals of accounts receivable and inventory financing (ARIF). The booklet summarizes ARIF risks and discusses how a bank can prudently manage these risks. One of a series of specialized lending booklets of the Comptroller's Handbook, 'Accounts Receivable and Inventory Financingâ€™ supplements the general guidance in the 'Loan Portfolio Management' and 'Commercial Lending booklets.'"
The booklet also contains a valuable glossary defining accounting terms used in everyday government receivables.
The winners of Septemberâ€™s Blumberg's Laws: Getting Paid by Uncle Sam are Sherri Haggard from C.R. Bard and Wanda Bogan, CBF from Grainger. Congratulations!
If you didn't win this month, your name will stay in for the October drawing. If you'd like to enter for the October drawing, please complete the GBG contest entry form by September 19.
The Assignment of Claims Act
The Assignment of Claims Act of 1940, 31 U.S.C. Â§ 3727, 41 U.S.C. Â§ 15 (the "Act"), permits a company to assign monies due or to become due under a contract, but only if certain conditions are met. The Act and implementing regulations, 48 C.F.R. subpart 32.8, lay out the procedures. A contractor may assign monies due or to become due under a contract if all the following conditions are met, "(a) the contract specifies payments aggregating $1,000.00 or more; (b) the assignment is made to a bank, trust company, or other financing institution, including any federal lending agency; (c) the contract does not prohibit the assignment; (d) unless otherwise expressly permitted in the contract, the assignmentâ€”
i. covers all unpaid amounts payable under the contract;
ii. is made only to one party, except that any assignment may be made to one party as agent or trustee for two or more parties participating in the financing of the contract; and
iii. is not subject to further assignment.
In 48 C.F.R. 32.805, the assignor must have the assignment executed by an authorized representative, attested to by the Secretary or Assistant Secretary and include a corporate seal. The assignee must forward written notice of the assignment, together with a true copy of the assignment instrument to the contracting officer or agency head, surety on any bond applicable to the contract, and dispersing officer designated in the contract to make payment. The assignee must forward to the parties identified above three copies of the Notice of Assignment together with one true copy of the Instrument of Assignment. The true copy shall be a certified duplicate or photostat copy of the original assignment.
Sometimes banks will take advantage of the Assignment of Claims Act and require its government contractor customers to assign all moneys due or to become due under their government contracts to the bank. If a contractor makes such an assignment, the bank also must register in the CCR database and maintain an active registration in order to be paid. While the assignment under the act assures that the government will not make assigned payments to the contractor, the assignment alone does not assure that the bank will receive those payments. The bank also must have an active CCR registration to assure receipt of all assigned contract payments.
What is Factoring?
In the government contractors' realm, we hear the terms "factoring" or "factor company" but do you understand them? Factoring is the sale of receivables where the receivable is used as collateral. You may have also heard the term "invoice discounting," however, this does not include the same definition as factoring. Why would a company "sell" its invoices to a third party? This method is often used to obtain cash when cash is needed to meet obligations. A company sells its invoices at a discount to a factoring company. It is then up to the factoring company to collect on these invoices. What do government agencies think about a contractor factoring their government invoices? Most government agencies have processes that must be met before considering the sale of invoices to factoring companies. This falls under the Assignment of Claims Act. Factoring may be the best option for a contractor if they cannot meet their obligations by any other means. There are many factoring companies willing to buy your government invoices; however, you need a factoring company that specializes in government receivables.