1. © 2011 | All Rights Reserved | 805 King Farm Boulevard | Suite 300 | Rockville, Maryland 20850 | 301.231.6200 P | 301.231.7630 F | www.aronsonllc.com Surviving Your Pay on Display – Executive Compensation and Subcontract Award Reporting Tom Marcinko Principal Consultant Aronson LLP March 31, 2011

2. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Founded in 1962 200+ Professionals located in Rockville, MD One of the largest CPA firms in the DC Metro Area 60 multi-disciplined Professionals dedicated to supporting Government Contractors – Audit, Assurance & Tax – Deltek Systems and Outsourcing – Financial and Contract Compliance – GSA schedules www.aronsonblogs.com/fedpoint – News and Trends for Today’s Savvy Government Contractor 2 About Aronson LLC

3. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Mr. Marcinko is responsible for providing clients with a broad variety of both pre and post award support. Mr. Marcinko has over 30 years of government contracts experience. His experience includes proposal development, contract & subcontract administration, FAR compliance, small business programs, and Government audits. Mr. Marcinko has presented numerous training classes on a variety of subjects including several courses in the fundamentals of government contracting for the University of Virginia’s government contracting certificate program. Mr. Marcinko has also written articles for the National Contract Management Association (NCMA) magazine as well as other periodicals. Mr. Marcinko earned his Bachelor of Science Degree in Accounting from the University of Central Florida and his law degree from the University of Florida. He is a member of the Florida Bar and the NCMA. 3 Tom Marcinko Principal Consultant

4. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Background & Applicability FAR requirement for reporting – 1 st Tier Subcontract Awards – Executive Compensation Compliance Tips Ramifications 4 Agenda

5. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Federal Funding Accountability & Transparency Act of 2006 as amended by the Government Funding Transparency Act of 2008 These laws required the Office of Management and Budget to establish a free public web-site containing a wide variety of information pertaining to Federal contracts USASpending.gov Background 5

6. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com FAR 52.204-10 “Reporting Executive Compensation and First Tier Subcontract Awards” (Jul 2010) – Applies to contracts of $25,000 or more! – Exceptions Contracts with individuals Classified Contracts – Includes GSA schedule, IDIQs & commercial contracts (future task orders only) – Virtually all government contractors will be subject to these requirements 6 Applicability

7. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Information to be reported - Subcontract DUNS Number for the subcontractor and the subcontractor’s parent company, if any Name of the subcontractor & subcontract No. Amount & date of the subcontract award Subcontractor’s physical and primary performance location addresses including street address, city, state, and country. Also include the nine-digit zip code and congressional district. Description of the products or services being provided under the subcontract, including the overall purpose and expected outcomes or results of the subcontract. 7 1 st Tier Subcontract Awards

8. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Information to be reported - Prime Contract The prime contract number, and task order number if applicable. Awarding & funding agency name and code. Government contracting office code. Treasury account symbol (TAS) as reported in FPDS. The applicable North American Industry Classification System code (NAICS). 8 1 st Tier Subcontract Awards

9. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Requirement Report must be submitted by the end of the month following the month the subcontract was awarded Information must be updated every time previously reported information changes Subcontractor must be notified that information will be publically available Exceptions – Subcontracts less than $25,000 – Prime or subcontractor with less than $300,000 of gross revenue during the previous tax year. 9 1 st Tier Subcontract Awards

10. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Reporting Mechanism – 1 st tier subcontract award information is to be reported at http://www.fsrs.govhttp://www.fsrs.gov – Reporting instructions are contained on that site https://www.fsrs.gov/documents/FSRS_Awardee_User _Guide.pdf https://www.fsrs.gov/documents/FSRS_Awardee_User _Guide.pdf https://webinars.symplicity.com/fsrs/paoverview/paov erview1.htm https://webinars.symplicity.com/fsrs/paoverview/paov erview1.htm 10 1 st Tier Subcontract Awards

11. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Prime Contractor Requirement The total compensation of the prime contractor’s 5 most highly compensated executives must be reported if in the their last fiscal year the prime contractor received: – 80% of its revenue from Government sources – Has at least $25 million in Government revenue, & – The public does not already have access to compensation information via the SEC or IRS Executive is defined as officers, managing partners, or any other employees in management positions 11 Executive Compensation

12. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Subcontractor Requirement The prime contractor must report the total compensation of the subcontractor’s 5 most highly compensated executives to the extent the subcontractor meets the 80%, $25 million, not otherwise available criteria Exceptions – Subcontracts less than $25,000 12 Executive Compensation

13. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Total compensation means the cash and noncash dollar value earned by the executive during the Contractor’s preceding fiscal year – Salary and bonus. – Awards of stock, stock options, and stock appreciation rights. – Earnings for services under non-equity incentive plans. – Change in pension value. – Above-market earnings on deferred compensation which is not tax- qualified. – Other compensation, if the aggregate value of all such other compensation for the executive exceeds $10,000. 13 Executive Compensation

14. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Due Date Prime Executive Compensation – Report due by the end of the month following award of the contract and annually thereafter. Subcontractor Executive Compensation – Report due by the end of the month following the month of subcontract award and annually thereafter. 14 Executive Compensation

15. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Reporting Mechanism Prime Executive Compensation – Reported at http://www.ccr.govhttp://www.ccr.gov Subcontractor Executive Compensation – Reported at http://FSRS.govhttp://FSRS.gov 15 Executive Compensation

16. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Challenges Information must be obtained from variety of sources Reporting schedule varies based on prime/subcontract award dates 16 Compliance Tips

17. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Obtaining 1 st Tier Subcontract Award Information Revise standard agreements – Establish exemption from reporting Operating as an individual < $300K gross revenue 80%/$25 million/Not otherwise available – Establish contractual requirement for reporting and updating the required information – Notify subcontractor that data will be made public – Provide remedy for failure to report 17 Compliance Tips

18. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Obtaining 1 st Tier Subcontract Award Information Implement Data Collection Protocols – Who receives data from subcontractors? – Is there a prescribed media? – Develop process for obtaining internal information Prime contract information Subcontract Descriptions Prime and subcontract award dates – Establish work flow from receipt to report – Pay careful attention to description of subcontract Match the subcontract value Well written 18 Compliance Tips

19. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Obtaining the Prime Contractor Exec Comp Schedule year-end exec comp calculation per FAR definition – Identify 5 most highly compensated executives – Notify executives their compensation will be disclosed – Consult with tax advisor 19 Compliance Tips

20. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Reporting the information Assign responsibility for data collection & reporting to one person Draft data collection and reporting procedure(s) – Roles and responsibilities – Establish scheduling system with trigger points – Maintain documentation – QA, training 20 Compliance Tips

21. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Direct Agencies shall ensure that contractors comply with the reporting requirements. Agencies shall review the reports on a quarterly basis. Contracting Officers shall exercise appropriate contractual remedies if the contractor fails to report. A contractor’s failure to report will be noted in their past performance review. False Statements? Civil False Claims Act violation? 21 Ramifications & Consequences

22. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Indirect Increased indirect/direct costs Subcontract Award Data – Competitive analysis – Small business subcontracting Executive compensation – Lack of privacy – Standardize (reduce) compensation – Allowability of executive compensation 22 Ramifications & Consequences

23. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Welcome to the age of transparency The following reactions are understandable Disbelief – Anger – Dismay – Resignation The following reactions are required – Understand the requirements – Comply with the requirements Good luck and be careful out there! 23 Conclusion

24. © 2011 | All Rights Reserved | Aronson LLC | www.aronsonllc.com Tom Marcinko Principal Consultant Aronson LLC 805 King Farm Boulevard, Suite 300 Rockville, MD 20850 Tmarcinko@aronsonllc.com (301) 231-6237 Hope Lane Lead Partner, Government Consulting Aronson LLC 805 King Farm Boulevard, Suite 300 Rockville, MD 20850 Hlane@aronsonllc.com (301) 231-6266 24 Contact Information