Should we get an indirect cost rate?

What is a NICRA (Negotiated Indirect Cost Rate Agreement)?

A NICRA is a negotiated agreement between an organization and its cognizant federal agency. It provides documentation of the federal government’s acceptance of the organization’s estimated indirect rate for the period.


Should we get a NICRA?

It is almost always advantageous to get a NICRA, particularly if you have federal grants. However, if your funding mix includes a high percentage of non-federal grantors who will reimburse you a reasonable percentage for administrative expenses, it could be more cost-effective not to do so. One of the services that I offer is an assessment of your funding profile to help you determine whether a NICRA makes sense for your organization.

     Pros
          A NICRA eliminates the need to provide additional justification for indirect costs charged to federal grants, unless there is a statutory or regulatory cap on chargeable indirect costs.

          Can provide support for charging administrative costs to state, local, or non-governmental grants.

          Supports your organization’s professional competency with grantors. Some grantors require a NICRA as a prerequisite for proposal submission.

     Cons
          Indirect Cost Proposals are detailed and time-consuming. If you don’t have the expertise or personnel resources to do it in-house (due to staff turnover, for instance), you’ll need to contract the proposal preparation.


Direct vs. Indirect Costs

Direct costs are those costs which can be directly attributed to a specific contract, task, grant, or other agreement.

Indirect costs are those costs necessary for the operations of a company which cannot readily be directly attributed to a specific contract, task, grant, or other agreement. Indirect costs are “pooled” together (in your Indirect Cost Pool) and allocated to direct costs via indirect rates.