The Office of Federal Procurement Policy maintained the maximum compensation of $487,000 for determining the amount of allowable compensation for contracts entered into after June 24, 2014. This cap applies to larger companies. Smaller companies may have much lower caps, depending on the salary survey being used.
Companies complying with AASHTO typically follow the National Compensation Matrix (NCMA), which is published by AASHTO annually. Those that are subject to AASHTO but don’t believe the NCMA accurately reflects reasonable compensation as defined by the FAR have the option to use three national surveys and follow the steps as outlined in the 2016 AASHTO Audit Guide (using the median salary). Those that claim superior performance must justify why superior performance is applicable and determine what percentile in the three national surveys is most appropriate and follow the steps as outlined in the AASHTO Audit Guide. If you decide to use NCMA, the median salary, or superior performance, you are still limited to the $487,000 cap described above.
For federal government contractors, DCAA or DCMA will typically use the ERI Salary Survey, which is published annually. If you are a government contractor and would like to know what the reasonable compensation would be for one of your executives, we have access to the NCMA and we have purchased the ERI Salary Survey so please do not hesitate to contact us.
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If you have any questions or comments about this topic, please contact David E. Shaffer, Director, Audit & Accounting, at Email or 215-441-4600.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.