A Negotiated Indirect Cost Rate Agreement (NICRA) is a formal arrangement between an organization and a federal agency that establishes the indirect cost rate allowable for reimbursement on all federal grants and cooperative agreements. The resulting agreement specifies the maximum rate for indirect cost reimbursement, providing a structured framework for cost recovery on federally funded projects.
Indirect costs, sometimes referred to as “overhead,” include expenses that support overall operations but cannot be readily assignable to just one program or activity. Typical examples include facility costs and administrative costs such as the salaries and benefits of administrative staff (e.g. human resources, finance staff, and executive leadership), and office supplies and insurance.
NICRA by definition is very dependent on the specific nonprofit. A NICRA is negotiated with a recipient organization’s cognizant federal agency, following submission of a detailed proposal and supporting documentation in the agency’s preferred format. The cognizant agency for reviewing and approving indirect costs is the federal agency that provides the largest dollar amount of funding directly to the recipient organization. Thus, when negotiating a cost allocation plan or proposal, it’s important to identify the appropriate cognizant agency as some federal agencies contract with other agencies to negotiate rate agreements.
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Applying for a NICRA can be a strategic asset for organizations with substantial federal funding and significant indirect costs, offering structure, legitimacy, and the possibility of more complete cost recovery. However, the rigorous application and compliance demands may deter smaller or less administratively resourced organizations. A thoughtful assessment of current and potential federal funding, internal capacity, and long-term organizational goals is crucial before pursuing a NICRA. YPTC helps clients assess the best strategy including preparing a NICRA application and supporting the negotiation process.
Explanations of NICRA Agreements
Guide for Indirect Cost Determination – Dept of Labor
Cost Allocation Services – HHS.gov
NAO Consulting Referrals
If a nonprofit would like to receive NICRA guidance and application support, fill ou the NAO Help Desk form to request consulting referrals.