Indirect cost rates and NICRAs under the Uniform Guidance

Direct or indirect

A direct cost can be tied to a specific award with a high degree of accuracy, such as a project coordinator’s salary. An indirect cost serves several activities at once, such as the finance office or the building. There is no universal list; what matters is consistency. Each cost incurred for the same purpose in like circumstances must be treated the same way every time (§ 200.412, § 200.413).

Negotiated rates (NICRAs)

You prepare an indirect cost rate proposal and negotiate it with your cognizant agency for indirect costs. For a nonprofit, that is generally the federal agency that gives you the most direct federal funding (Appendix IV, C.2.a). A nonprofit with no direct federal funding negotiates with its pass-through entity instead.

Timing, for nonprofits under Appendix IV: submit your first proposal right after you learn an award is coming, and no later than three months after the award’s effective date. After that, submit a new proposal within six months after each fiscal year ends, unless your cognizant agency approved a one-time extension of up to four years under § 200.414(g).

Rates can be predetermined, fixed with a carry-forward adjustment, or provisional then final. Your agreement states the rate, the base it applies to (often MTDC) and the period it covers.

What agencies and pass-through entities must accept

• Federal agencies must accept a negotiated rate. They may use a different rate only when a statute or regulation requires it, or under a published deviation policy, and they must report approved deviations to OMB (200.414(c)).
• The notice of funding opportunity must state the program’s indirect cost policies (200.414(c)(4)). Read that section before you build the budget.
• Pass-through entities must accept a subrecipient’s federally negotiated rate (200.414(d)).
• Without a negotiated rate, you can elect the de minimis rate of up to 15%, and no agency or pass-through entity can require less unless a statute does.

Negotiate or take the de minimis rate?

The de minimis rate costs nothing to adopt. A negotiated rate takes a proposal, supporting documentation and an annual cycle, and is usually worth it only when your real indirect costs run well above 15% of MTDC and you have enough federal work to recover the difference. Some organizations start on the de minimis rate and negotiate later; once you negotiate, you use the negotiated rate on all your federal awards.