Are You in Compliance with the Latest Government Rules? 

By Wayne Leland, Partner
 

There are new rules for Government Contractors and Subcontractors that require them to report the compensation of their top five highest paid executives.
 

Government contractors and first tier subcontractors large and small must be aware of new executive compensation disclosure requirements that began last July and will be phased in through March 2011. The new rules implement the contract clause FAR 52.204-11, Reporting Executive Compensation and First-Tier Subcontract Awards. The new clause is to be included in any contract that uses Recovery Act Funds except for classified contracts and solicitations.
 

The rules require the prime contractor to report the executive compensation of its top five highest paid executives. The prime is also responsible to report the executive compensation of any

qualifying first tier subcontractor's top five highest paid executives. Therefore, the prime must gather the information regarding the executive compensation of the subcontractor's five highest paid executives and let the subcontractor know the information will be disclosed to the public. The terms compensation and executives are defined very broadly.
 

Once phased in, the rules will apply to all contracts valued at $25,000 or more. The phase in for first tier subcontracts began in July 2010 including contracts valued at $20,000,000 or more, then beginning in October of 2010 with contracts valued at $550,000 or more, and finally in March of 2011 with contracts valued at $25,000 or more. The new rules also apply to existing IDIQ contracts and GSA Schedule contracts.
 

Contractors and first-tier subcontractors are not required to report the total compensation information required by the rule, unless:
 

A. In the contractor or subcontractor's preceding fiscal year, the contractor or subcontractor received:
 

1. 80 percent or more of its annual gross revenue in Federal contracts (and subcontracts),

loans, grants (and subgrants), and cooperative agreements; and
 

2. $25,000,000 or more in annual gross revenue from Federal contracts (and subcontracts), loans, grants (and subgrants), and cooperative agreements; and
 

B. The public does not have access to information about the compensation of the senior executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.
 

As with many teaming agreements the prime contractor may be the smallest of the group and not be required to disclose its top five executive's compensation. However, it is required to gather and report that compensation information on the top five executives of the larger subcontractors if they meet the requirements above.
 

The new reporting obligations in FAR 52.204-10 reflect the increased emphasis on oversight, transparency, and accountability contractors and subcontractors are under when they are in receipt of Recovery Act Funds. Contractors and subcontractors should review these rules carefully when they accept contractors that are subject to these rules.
 

Nperspective's team has a proven track record of helping Government contractors and subcontractors implement systems for success.
 

Nperspective would be pleased to discuss your business valuation needs with you. Contact any of our CFO partners for additional information.
 

Please contact Janet Watson at 813.317.3460 or

jwatson@npcfo.com. 

 

Please a

 

Answer:
 

The first thing to understand is: "What is the CFO's role?"

• The CFO is responsible for four major functions for the company - planning, accounting, reporting and treasury. In addition the CFO is responsible for managing the financial resources of the company, putting these resources to work to maximize returns, and providing strategic direction/advice to management.  Financial statements position companies for future growth, as the absence of good financial statements can inhibit growth due to the lack of available financing that normally accompanies an inability to produce timely and accurate financial statements on a routine basis.
  
  The next questions you need to ask and answer for your organization and yourself are:
   

• Will it increase the value of your time?

• Will it increase the value of information received and your overall business?

• Will you gain a better understanding of the financial aspects of your business?

• Will you gain a better understanding of the operational aspects of your business?

• Will you establish a better and more valid and achievable business plan and financial model?
   
• Will this help to secure and ACCOUNT for your future?

Did you know that Nperspective was recently engaged by a major Tampa Bay non-profit agency to provide an interim CFO?

 

Contact Janet Watson for more information.