1.
Q: What is a post allowance?
A: It is one of the cost-of-living
allowances found in Law under Title 5, United States Code Section 5924,
administered by the Department of State under Chapter 200 of the government-wide
Standardized Regulations (Government Civilians, Foreign Areas), commonly
referred to as the DSSR. This set of
regulations applies to all USG agencies with civilian employees assigned to foreign
areas (unless the agency has its own authority).
The Law at 5 USC 5924(1) states “The following
cost-of-living allowances may be granted, when applicable, to an employee in a foreign
area: (1)
A post allowance to offset the difference between the cost of
living at the post of assignment of the employee in a foreign area and the cost
of living in the District of Columbia.”
2. Q: What is included in cost of living?
A:
Although employees constantly feel the changing prices of food and auto
fuel the overall cost of living includes more than just these items. The following are the categories of goods and
services, examples of subcategories and percentage of the category as it fits
into the overall cost of living comparison between Washington, D.C. and the
foreign post. Housing & Utilities
and Children’s Education are not included because these are separate allowances
under the DSSR. The following percentages are 2023 updates.
-Food
at and away from home, 32%
-Tobacco/Alcohol, 3%
-Clothing, 7%
-Personal
Care, 3%
-Household Furnishings, 8%
-Medical, 3%
-Recreation, 15%
-Public and Private Transportation, 14%
-Household Operations, 15%
3.
Q:
Why was the cost of living process outsourced?
A: This
was the outcome of a GAO and Congressional inquiry, and a 2017 OIG
recommendation that the Department of State develop an objective method of
generating COLA rates.
4. Q: How
does this outsourced process differ from the previous process?
A: The
major change in the current process is the price collection. Rather than task posts with collecting the prices, the Department's contractor obtains cost data for 210 locations, including the Washington, D.C. suburbs, from Mercer, AirInc, and ECA International. These three companies provide similar support to major U.S. multinational enterprises with worldwide presence. The contractor then uses a uniform methodology to calculate indexes for these locations with Washington, D.C. as the base index of 100.
5. Q:
With only 210 locations priced, what about the significant number of other
posts listed in DSSR 920?
A: Posts
not priced directly are linked to one of the 210 posts priced. This linkage has been developed over years of
survey results submitted by posts. Linkage
has relieved posts from having to conduct individual surveys.
6. Q: How is the post allowance determined?
A: Washington, D.C. is
the base of 100. When the overall cost
of goods and services at the foreign location are at least 2.5% above those in
Washington, D.C. (index 102.5 or higher) then a post allowance is established. Ranges for the post allowance are at DSSR 228.2. The expenditure pattern is based on the average
Washington, D.C. family living in the foreign area. This family consists of three to four persons
with an employee’s salary of a GS-12, Step 6 (or FS-equivalent).
7. Q: Can you use the foreign country
Consumer Price Index (CPI) to determine the appropriate allowance level?
A: The foreign CPI is
based on the local consumer living pattern and would not represent the spending
patterns and products chosen by an American employee assigned to the foreign
post. CPI changes tend to reflect a
number of expenditure categories such as housing & utilities and children’s
education that are not included in the post allowance because they are covered
by other allowances. Thus, employees would not be appropriately compensated,
especially in the under-developed countries of the world.
8. Q: What is the source of exchange rate
information used by the Office of Allowances in updating allowance rates?
A: The Office of
Allowances uses a variety of sources for exchange rates. If the majority of USG
civilian employees at a locality have access to a Department of State-managed
official accommodation exchange rate for currency exchange, we use information
provided by the Department of State's Global Financial Services Center based in
Charleston, South Carolina. These rates can change daily and represent the
exchange rates at which the Department purchases foreign currency for official
uses.
In those countries
where official accommodation exchange services are not available to the
majority of USG civilian employees, we get data from other sources. For
example, in euro countries, the majority of USG employees are affiliated with
DOD and use the DOD Community Bank (Bank of America) (http://dodcommunitybank.com/)
for personal exchange rate accommodation.
For many locations
where the Department of State does not offer official accommodation exchange,
our diplomatic posts transmit information on a biweekly basis reporting
exchange rates from the local banks most used by USG personnel.
9. Q: Is the post allowance a percentage of
base salary?
A: The
post allowance is not a percentage of base salary. DSSR 228.2 states “Post
allowance payments are based on the cost of living index as applied to the
employee's spendable income. Spendable
income is defined as that portion of base salary available to the employee
after typical deductions for Federal, State and local income taxes; U.S.
shelter and household utility expenses; retirement funds; contributions and
gifts to persons and organizations outside the family; life insurance programs
and personal savings. The post allowance
payment tables (Section 229) are based on national Consumer Expenditure Surveys
as conducted periodically by the Bureau of Labor Statistics of the U.S.
Department of Labor.”
10. Q: How do I calculate my post allowance
payment?
A: The annual post
allowance amounts are found in the six payment tables in DSSR 229.1. To assist employees in calculating the amount
they might receive on a biweekly basis, the Office of Allowances has created a
'COLA Calculator' which is available on our website on the Post Allowance (COLA)
page. The base salary does include the Overseas
Comparability Pay.
11. Q: Is the post allowance taxable?
A: No. Per DSSR 054.1 the
post allowance is not taxable.
12. Q: How do you calculate locality pay into
the allowance?
A: Locality
pay is not a cost of living allowance. It is a salary comparability benefit to
attract workers in the continental US to the Federal Government versus private
sector.
13. Q: How
are prices selected?
A: Prices are
based on the medium prices in the foreign area as well as in the Washington,
D.C. suburbs – not the most expensive nor the lowest. While organic could cost you much more than
non-organic this is a personal choice.
14. Q: Did the three companies have the same finds
or did the Department of State use the lowest index to drive down the COLAs the
most?
A: The contractor
used the most advantageous for the employee.
The Department of State did nothing to the data nor the calculation of
the Indexes. As recommended by the OIG,
this was to be an independent process out of post and DC hands.
15. Q: How is the Value Added Tax (VAT) being
handled? Many of us pay HEAVY VAT taxes and
many countries don’t have mechanisms to allow Diplomatic exemptions of VAT at
the point of transaction, even with proper accreditation and documentation at
the point of sale.
A: VAT and all other taxes are included in
prices collected (and have not been extracted from the prices).
16. Q: Did the Department of State consider that
most employees do not live in DC because it is too expensive on a government
salary?
A: The suburban DC Metro area prices were used
as the base.
17. Q: What
if there are no Western goods at a post?
A: That is not part of the COLA – that would be part of consumables if
mandatory items were not available.
18. Q: The
post levies up to 20% import tariffs on nearly all goods imported into the
country, along with up to 17.5% sales taxes, driving up the costs of most goods
and services U.S. employees purchase in country. Bribery and corruption costs
of doing business are also passed on to the consumer. The prices for food --
both at grocery stores and restaurants -- are particularly jaw dropping. I have
purchased a single bunch of parsley for roughly $20. A small box of cereal can
go for $9 or $10. Does the price collection
include these expenses?
A: Yes, all taxes and other add-ons
are included in the collected prices.
While some category prices such as for grocery items may be extremely
high other category prices may not be extreme.
All category costs are considered in an overall index of living costs at
the foreign post as compared with the same items in the Washington, D.C. area.
19. Q:
Where are prices collected? In the
capital where the Embassy staff actually shop or in other areas?
A: Prices are collected from locations where the
executive expats shop and are within the area where they live for that city.
20. Q: How
is the system transparent when the algorithm is proprietary? Gas is $5 a gallon and meat is much more
expensive than DC. Unless I am supposed
to be vegetarian and ride a bicycle, this is very unfair. At the very least
there should be a grandfathering in for those of us who considered COLA as part
of the compensation package.
A: We have never shared the
algorithm that has been used for the past many years. We do, though, provide the percentage of each
category of expense included in the development of the index. The change in the process was how the data
was collected – not how the index was derived.
One must look at all the categories to come up with the index – not just
certain items. Pertaining to
grandfathering, on the bid list it is clear that discretionary allowances such
as the Post Allowance (COLA), Post Hardship Differential and Danger Pay are subject to change
and are not locked in as part of a compensation package.
21. Q: Like
many other posts around the world, goods are widely available but the quality
of goods varies considerably, as well as the safety to shop at the less expensive
stores and markets. How did the third
party contractors determined the basket?
Yes, I want confidence in their methodology.
A: The contractor used similar if
not the same items in the market basket as the Office of Allowances has been
using. We provided them the information
and added some items such as internet – which was not there before.
22. Why isn’t VAT removed from collected prices if employees
can receive reimbursement?
Some posts do not reimburse VAT to A&T staff and other Civil
Service employees from other agencies working in our foreign Missions.
We know that sometimes one size does not fit all but in order to not
disadvantage any of our USG populations, we defer to the process that benefits
everyone. It is a totally objective process mirroring private industry
and allowing people to make a personal choice as to where, how and what goods
and services they purchase based on expendable income.
23. If I am on temporary duty (TDY) at a foreign post am I eligible for the post (cost of living) allowance?
No. This allowance is only for employees permanently assigned to the foreign post.
Last updated 02/09/2024