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Office of Allowances

Office of Allowances



The majority of the Post Allowance (COLA) changes effective 10/11/2020 are the result of a revised COLA process that was an outcome of a GAO and Congressional inquiry, and a 2017 OIG recommendation that the Department develop an objective method of generating COLA rates.

The major change in the process from the prior method is with respect to collection of market data.  Rather than task posts with collecting the data, the Department’s contractor now obtains it for 210 locations, including 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 used a uniform methodology, adjusting for costs of housing and utilities since these are provided by USG agencies to their employees assigned to foreign posts, to calculate an index that assigned a base score of 100 to the Washington, D.C. suburbs and compared other locations to that base.  The rate for each post is based on how the post index compares to the base index.

The data for the foreign post’s expat basket of goods and services is compared to that of the Washington, D.C. suburbs.  The contractor will provide updated index information to the Department of State’s Office of Allowances every August.  New COLA rates based on that data will be implemented in the first full pay period of each Fiscal Year.  Post indexes will be reviewed on a biweekly basis for exchange rate fluctuations and post allowances will be adjusted when necessary.  Posts determined to have hyperinflation will be adjusted biannually.  More information about how COLA levels are determined is available in DSSR 228.

Frequently Asked Questions
Post (Cost of Living) Allowance

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.

-Food at Home (Grocery Store Items), 14%

-Food Away from Home (Restaurants & Fast Food), 14%

-Tobacco/Alcohol, 3%

-Clothing (Laundry & Clothing Purchases), 7%

-Personal Care (Salon, Beauty and Grooming Items), 3%

-Household and Operations (Household staff, Internet and Cleaning Supplies), 15%

-Medical (Over-the-counter and out-of-pocket medical expenses), 16%

-Recreation (Sports, Entertainment and Movies), 10%

-POV and Public Transportation (POV expenses and Transportation), 18%

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) ( 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 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 vary 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.