From the Editor's Desk
Federal Strategies Group Newsletter
May 2007
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Executive Compensation - Keeping Up With the Jones'

Year after year, executives of closely-held government contractors have been facing increased scrutiny over the amounts and types of compensation they are being paid. DCAA's utilization of a specialized audit team dedicated to determining the reasonableness of executive compensation has made it increasingly difficult for contractors to fight compensation challenges.

For FY 2007, the Office of Management and Budget has set the benchmark for executive compensation at $597,912. Does this mean that this is the amount you are able to pay executives without receiving a challenge from DCAA? The answer is a resounding no! This amount represents the highest compensation that the government will allow for reimbursement purposes, assuming your company meets certain characteristics and/or criteria. If you don't meet these characteristics, then a lower amount would be deemed reasonable.

This edition of Federal Strategic Insights will analyze the issue of executive compensation. First, an analysis of the issues and regulations surrounding executive compensation is discussed, including specialized issues relating to Subchapter S- Corporations and 8(a) companies. Then, various strategies to fight compensation challenges are discussed.

I hope you find these articles to be beneficial to your organization. As always, we are available to discuss in more detail these or other issues your company may currently be facing.

Michael A. Smigocki, CPA/ABV, CVA
Executive Editor

Issue Analysis

Executive Compensation - A Primer

dollar signs

What are the elements of executive compensation? What are the criteria for allowability? Why is executive compensation even an issue for closely held contractors? This article will analyze the various aspects of executive compensation from both the contractor's and government's standpoint. When coupled with the usage of more sophisticated means of compensation (i.e. stock options, phantom stock, stock appreciation rights, etc.), executive compensation will continue to receive a high amount of scrutiny for the foreseeable future. For a text of the entire article, click here

Strategic Formulation

How to Handle Compensation Audit Challenges


DCAA has become increasingly sophisticated in their audit challenges of executive compensation. In addition, armed with wins in high profile cases involving executive compensation, it has become increasingly difficult for contractors to defend compensation challenges. This article will provide some of the strategies that we have successfully utilized with our clients. For a text of the entire article, click here

Firm News

Upcoming Speaking Engagements

speaking room

Members of the Firm will be speaking at the following events:

SECAF Panel Discussion - Small Business Recertification

Michael Smigocki will be a panel member along with a representative from SBA and the legal community analyzing the very controversial issue of small business recertification. Sponsored by SECAF (Small and Emerging Contractor Advisory Forum), the event will be held on May 23, 2007 in Tysons Corner, VA. See for more details.

Deltek Insight 07 Users Conference

Michael Smigocki and Donald Acker will be speaking at the Deltek Users Conference on"Shareholder Value Maximization Strategies". The conference is being held in Las Vegas, NV the week of May 14, 2007. See for more details.

Employment Opportunities

Due to the strong demand for our services we are looking to add several new hires to our rapidly growing team.

Sr. Manager - CFO, Outsourcing Group

  • Former CFO of a government contractor that is either currently consulting or looking to become a consultant.
  • Strong financial and accounting systems expertise, Deltek GCS and/or Costpoint preferred.
  • Experience with mergers & acquisitions preferred.
  • Experience with DCAA and other government audits.
  • Ability to provide strategic advisory services.
Manager - CFO Outsourcing Group
  • Former Controller of a government contractor.
  • Ability to work simultaneously with multiple outsourced engagements.
  • Strong financial and accounting systems expertise, Deltek GCS and/or Costpoint preferred.
  • Strong background with incurred cost submissions, indirect rate development, DCAA audits.
  • Must be very personable.
Manager - Forensics Group
  • Must have experience in government contracting either as a consultant, forensics expert, or an auditor seeking to perform forensics work.
  • Working knowledge of the FAR.
  • Ability to work on multiple assignments and meet strict deadlines.
If you are interested in joining our team, or know of someone that might be interested, please send your resume or inquiries to

Federal Strategies Group is a specialized consulting Firm providing management consulting, forensic accounting and expert testimony to the government contracting industry. Our mission is to guide our clients to building business value through the creative, innovative, and strategic use of our industry knowledge, experience, and expertise.

For more information about these articles or how Federal Strategies Group can assist your company, please call or email Mike Smigocki at

Michael A. Smigocki, CPA, CVA, ABV
Sr. Managing Director
Federal Strategies Group, LLC

Phone: (301) 770-5850
Fax: (301) 770-5922

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