Is Compensation For Employee Release Agreements Allowable
Q. You recently wrote “There have also been changes to employee release agreements where employees are given more severance pay than they would otherwise receive in exchange for releasing the contractor from potential liability for wrongful termination. DCAA initially took the position such costs were unallowable because they represented payment for work not performed. DOD firmly rejected DCAA’s position, forcing DCAA to issue guidance prohibiting auditors from questioning such payments because they are unallowable backpay for work not performed and directed auditors to examine such payments on a case-by-case basis for reasonableness.” Can you tell me where I can find this DCAA guidance.
A. The reference is in Chapter 7-2107.7 in the DCAA Contract Audit Manual.
