Federal grantees must decide between using the standard 15% de minimis indirect cost rate or negotiating a tailored rate through a Negotiated Indirect Cost Rate Agreement (NICRA). A NICRA provides a method for organizations to recover allowable indirect costs based on detailed financial data submitted to a cognizant federal agency.
Key Insights
- Organizations may opt for a flat 15% de minimis rate or negotiate a custom indirect cost rate that reflects actual overhead needs.
- Once a NICRA is approved by a cognizant federal agency, all other federal agencies must accept the established rate, which may take up to two years to finalize.
- NICRAs typically remain valid for four years, and organizations may continue using the expired rate during re-negotiation until a new agreement is reached.
This lesson is a preview from our Grants Management Certificate Program. Enroll in a course for detailed lessons, live instructor support, and project-based training.
When it comes to negotiating a NICRA, a Negotiate Indirect Cost Rate Agreement, many of you or your recipients are going to determine whether you have a flat de minimis rate of 15% or have an individualized rate based on your organization's specific needs. A NICRA allows grantees to recover a fair share of allowable costs that perhaps they cannot couch in the 15% de minimis rate. It requires the submission of detailed cost data to the cognizant agency.
The cognizant agency is the agency that negotiates and agrees upon a Negotiate Indirect Cost Rate Agreement. And once a cognizant federal agency has agreed upon a NICRA, that means all other cognizant federal agencies have to accept that rate as well. The final rate may take up to two years.
You can start off with a provisional rate for a fiscal year or two to determine if it's going to meet all the needs of your indirect costs. Typically, NICRAs are valid for up to four years. And if your NICRA expires and you're negotiating a new NICRA, you still apply the previously expired rate until a new NICRA rate has been established and agreed upon.
Now the de minimis rate is a flat rate of 15% of indirect costs. And there's no documentation to show the federal grantor agency what you have in an indirect cost pool. It was made, and it's designed to make it easier for smaller, simpler nonprofits to be able to have an indirect cost rate without going through the burden and the expenses of negotiating a NICRA, which could be very expensive and time and resource consuming.