Negotiated Indirect Cost Rate Agreement (NICRA)

RBW Strategy explains the purpose of an indirect cost rate agreement and how it applies to grant recipients.

1. Negotiated Indirect Cost Rate Agreements 1 What is NICRA? The purpose of an indirect cost rate agreement is to publish the reimbursement rate(s) negotiated between the Federal government and a grantee organization which reflects the indirect costs (e.g.; facilities and administrative costs) and fringe benefit expenses incurred by the organization in the conduct of federal programs. When is NICRA applied? It is difficult for a Federal agency to determine the indirect costs associated with conducting a program or project. The indirect cost rate allows the grant or contract officer to calculate the appropriate allocation of indirect costs associated with any one project by applying the negotiated indirect cost rate to the respective base used to develop the rate. This streamlines the entire process.

2. Negotiated Indirect Cost Rate Agreements 2 NICRA Designation Description When Renewed?* Provisional A provisional rate is a temporary rate established for a given period of time to permit funding, claiming, and reporting of indirect costs pending establishment of a permanent rate for that period. Typically for new grantees (like FAS) Upon completion of the grant period. Final A final rate is a permanent rate established after an organization’s actual costs for a current year are known. A final rate is used to adjust indirect costs claimed based on a provisional rate. Typically annually Predetermined A predetermined rate is a permanent rate established for a specific future period based on a review of actual costs from a preceding period. These rates are not subject to adjustment except under very unusual circumstances. Two to five years Fixed A fixed rate has the same characteristics as a predetermined rate; however, the difference between the costs used to establish the fixed rate and the actual costs incurred during the fiscal year covered by the fixed rate is classified as a carry-forward. The carry-forward is used as an adjustment to the current rate to allow the grantee to either recover under recovery or pay back an over recovery in a subsequent year. Fixed rates are often used to establish fringe benefit rates. Two years, then annually thereafter *The renewals vary by cognizant agency reviewing the NICRA agreements, and these are not standardized across all agencies.

3. Negotiated Indirect Cost Rate Agreements 3 New Omni Circular Guidance (for grants received after December 26, 2014): The OMB Guidance explicitly requires all Federal agencies to reimburse a nonprofit’s indirect costs by applying the nonprofit’s Federally negotiated indirect cost rate, if one already exists. If a negotiated rate does not yet exist, then nonprofits are empowered either to request negotiating a rate or to elect the default rate of 10% of their modified total direct costs (MTDC).

4. Negotiated Indirect Cost Rate Agreements 4 How do you apply for a NICRA? Each agency will provide guidance on how to establish NICRA rates. In the case of FAS, the cognizant agency is the Office of Naval Research. Three basis for cost determination: Simplified Allocation – small nonprofits Direct Allocation – small nonprofits Multiple Allocation – nonprofits with budgets over $10 million in Federal funds Acceptable distribution bases for the Simplified and Direct Allocation methods include total direct costs (excluding capital expenditures and other distorting items such as major subcontracts/ subgrants ); direct salaries and wages; or other base which results in an equitable distribution of costs.

5. Negotiated Indirect Cost Rate Agreements 5 NICRA Designation Required Submission Information Provisional Schedule A: Statement of Indirect Costs and Calculation of Indirect Rates for each rate proposed . Schedule B: Reconciliation of Total Costs to Financial Statements. Schedule C: Statement of Fringe Benefits Schedule D: Allocation of Salaries and Wages Schedule E: Schedule of Federal Awards Predetermined Fixed Final Schedules A-E Schedule F: Schedule of Direct Costs by Award and applied indirect expenses Schedule G: Government Participation in Indirect Cost Pools Schedule H: Reconciliation of Total Payroll per accounting records to IRS Form 941

6. Contact Information 6 Rachel Werner, Owner and CEO RBW Strategy, LLC Ph: [phone] Email: [email protected] www.rbwstrategy.com