The American Association of State Highway and Transportation Officials (AASHTO) formed a sub-committee of the Internal and External Audit Committee to revamp the National Compensation Matrix (NCM). The sub-committee is made up of members from State DOT’s, FHWA, and ACEC affiliated firms as well as a compensation consultant. The common goal is to revamp the NCM that is in place and compare the new NCM with the old to test the assumptions used to develop the original matrix. The sub-committee uses several salary surveys as the basis for the development of the matrix.
The group is expecting to complete the project and issue the updated NCM in 2014. With the issuance additional changes are expected to Chapter 7 – Compensation of the AASHTO audit guide which will further outline requirements of executive compensation testing and provide additional guidance related to elements of compensation and superior performance. A revised AASHTO audit guide is expected to be released in 2014. AASHTO is looking to add additional tools to the NCM as well as updating the Q&A guidance on the AASHTO website.
How will this impact A/E firms?
The salary amounts and ranges of reasonableness are likely to be changing but the expectations are that the changes will not be dramatic at this time. An ongoing issue that resurfaced is whether or not there should be adjustments for geographical locations since the cost of living can vary significantly depending on the location from which the executives work. The subcommittee currently is not looking to add adjustments to take into account the location from which the executives work.
The key take-a-ways concerning the NCM and salary surveys are:
- Executive Compensation is still a hot button topic receiving significant attention by both State and Federal agencies
- The NCM continues to gain momentum as the preferred mechanism for analyzing executive compensation due to its ease of use and the bright line nature of the results
- Firms can still perform executive compensation based on salary surveys if they feel the results could benefit their firm. The downside includes additional time to pull survey results together and analyze information and opportunity for invalidation of results based on difference of opinions by State and/or Federal agency auditors
- The sub-committee will not disclose the salary surveys they use but were extremely vocal about the importance of firms of all sizes and from all locations to respond to those surveys so that there is ample salary data from which the sub-committee can produce realistic and relevant compensation benchmarks
Answer: YES, IT MATTERS. In addition to shaping the results of the current and forthcoming NCM the salary surveys are critical in maintaining statistically relevant salary benchmarks. Once the NCM comes out in 2014 it can be indexed for inflation for up to three years and still be statistically accurate. Not completing the surveys this year could impact your compensation limits for years to come.
To learn more about the NCM, executive compensation matters, and other related topics that are top of mind for A/E firms, visit our Architectural/Engineering Firms page or contact Keith Eldredge, CPA, Partner, at 717.843.3804 or firstname.lastname@example.org.
Contributed by Hunter Mink, CPA, (email@example.com) a manager in RKL’s Auditing and Accounting Services Group. Hunter has extensive experience working with A/E firms and a comprehensive understanding of Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS).