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NICRA: How a Negotiated Indirect Cost Rate Agreement Works and How to Track It in Your Accounting System
Last updated: October 9, 2026 · Independent guide · We do not sell rankings or coverage.
A NICRA, or negotiated indirect cost rate agreement, is the signed document in which your cognizant federal agency approves the rates you may use to charge indirect (facilities and administrative) costs to federal awards. Under 2 CFR 200.414(c), every federal agency must accept that negotiated rate unless a statute or regulation requires a different rate or the awarding agency approves a deviation under its publicly available policy. Tracking it in your accounting system takes a base that matches the agreement, effective-dated rates by award, and a true-up when a provisional rate becomes final.
The rule in brief (checked October 9, 2026)
- Who it applies to: Nonprofits and institutions of higher education (IHEs) that want to recover more indirect cost than the de minimis rate of up to 15% of modified total direct costs (MTDC).
- Who negotiates: The cognizant agency: for nonprofits, normally the largest direct federal funder; for IHEs, HHS Cost Allocation Services (CAS) or the Office of Naval Research (ONR).
- Rate types: Predetermined, fixed with carry-forward, provisional and final (2 CFR 200 Appendix III section C and Appendix IV section C).
- Key dates: First proposal within three months of the award’s effective date, then within six months after each fiscal year end (Appendix IV, section C).
- Official source: 2 CFR 200.414, Appendix III (IHEs) and Appendix IV (nonprofits).
What a NICRA is and what the rule requires
A NICRA is an agreement between your organization and one federal agency that acts for all of them. It lists each rate, its type, period and base. Section 200.414(c)(1) says “negotiated indirect cost rates must be accepted by all Federal agencies,” and 200.414(d) requires pass-through entities to accept a subrecipient’s federally negotiated rate.
The indirect cost rate agreement for the American Association of Zoo Veterinarians (July 24, 2023, negotiated by the Interior Business Center) is typical. Its rate table sets provisional rates of 21.17% for two fiscal years on “total direct costs, less capital expenditures, passthrough expenses, and the portion of subawards in excess of the first $25,000.” General terms on audit, accounting changes and record keeping follow.
Current regulations count the first $50,000 of each subaward in MTDC (2 CFR 200.1), but an older agreement like this one may still say $25,000. Your system should follow the agreement that governs the period you bill. Section 200.414(g) also allows a one-time extension of a current rate for up to four years, with the cognizant agency’s approval.
Who negotiates your rate
Appendix IV, section C, assigns a nonprofit to the agency with the “largest dollar value of Federal awards directly funded” to it, and cognizance moves only after a shift lasting at least three years. With only pass-through funding, the pass-through entity negotiates your rate. For IHEs, Appendix III, C.11.a(1) assigns HHS or DoD’s Office of Naval Research, normally whichever provided more direct funding over the most recent three years.
| Negotiating office | Typical organizations | What its guidance says |
|---|---|---|
| HHS Cost Allocation Services (Program Support Center) | Universities, nonprofits, hospitals, state and local governments | Proposals go through the ICAS portal (HHS, reviewed September 3, 2026). |
| Office of Naval Research (DoD) | Universities where DoD is the larger direct funder | Carnegie Mellon reports an ONR fixed rate with carry-forward (CMU, no date shown, copyright 2022). |
| Interior Business Center, Indirect Cost Services (DOI) | Tribes, insular areas and nonprofits under interagency agreements | Proposals due within six months after fiscal year closeout (IBC fact sheet, no date shown). |
| Department of Labor cost determination office | Organizations where DOL is the largest direct funder | Initial proposal within 90 days of the award; final proposals within 180 days of year end (DOL FAQ, no date shown). |
Rate types and what each one means for your books
Both appendices define four rate types. Appendix III, C.4 says predetermined rates for “two to four years should be the norm” for IHEs, while many nonprofits receive provisional and final rates.
| Rate type | How it is set | Adjusted later? | Effect on your ledger |
|---|---|---|---|
| Predetermined | Estimated costs for a future period | No | Charges are final when posted. Over- or under-recovery stays with you. |
| Fixed with carry-forward | Estimated costs for a future period | Not on current awards; the difference adjusts a later rate | No retroactive entries, but you track the cumulative carry-forward balance for the next proposal. |
| Provisional (billing) | Temporary rate for funding and interim reimbursement | Yes, replaced by a final rate | Every charge is an estimate. You post a true-up by award when the final rate arrives. |
| Final | Actual costs for a past period | No | Closes the period. Differences from billed amounts are recovered or refunded. |
For IHEs there is an extra rule. Appendix III, C.7 says agencies “must use the negotiated rates in effect at the time of the initial award” for the life of the award, and C.8 caps the administrative component at 26% of MTDC. A university ledger must look up the rate by award start date, not transaction date.
Bases and how the rate is calculated
Appendix IV, section B gives nonprofits three methods. The simplified method divides allowable indirect costs by one base, such as direct costs less capital expenditures and participant support. The multiple base method allocates separate pools on their own bases, and the direct allocation method prorates joint costs to each function. A nonprofit with more than $10 million in direct federal funding in a fiscal year must split its rate into facilities and administration components (Appendix IV, section B).
Illustration only. A nonprofit using the simplified method budgets an indirect pool of $900,000 and an MTDC base of $4,500,000, and CAS sets a provisional rate of 20.0% ($900,000 ÷ $4,500,000). At year end the actual pool is $940,000 and the actual base is $4,300,000, so the final rate proposal shows 21.86%.
The proposal and true-up cycle
Under Appendix IV, section C, a new organization submits its first proposal “in no event, later than three months after the effective date of the Federal award.” Organizations with rates submit “within six months after the close of each fiscal year.” A CAS letter to Case Western Reserve University (August 18, 2025) sets the next proposal, for the year ending June 30, 2028, as due by December 31, 2028.
In practice, you close the year, finish the audit, build the proposal from audited figures, and have an official no lower than vice president or chief financial officer sign the certificate in Appendix IV, section D. After negotiation you sign the agreement, post the true-up and update billing rates.
Continuing the illustration: the nonprofit charged $2,000,000 of MTDC to federal awards at the 20% provisional rate, or $400,000. At the final rate of 21.86% the allowable amount is $437,200, so $37,200 is under-recovered across those awards. Under a fixed rate with carry-forward, nothing is rebilled; the full-year shortfall of $80,000 ($940,000 less 20% of $4,300,000) feeds a future rate instead.
| Account (illustrative true-up) | Debit | Credit | Note |
|---|---|---|---|
| Indirect cost expense, by award | $37,200 | Split by each award’s share of MTDC | |
| Indirect cost recovery, management and general | $37,200 | Offsets the pool | |
| Grants receivable, by award | Billable portion | Only where award funds remain | |
| Federal grant revenue, by award | Billable portion | Confirm presentation with your auditor |
Recovery is not automatic. The DOL FAQ says DOL “could” provide more funds subject to availability, and amounts above an agency-imposed ceiling are not recoverable.
Who is exempt or limited
You do not need a NICRA if you elect the de minimis rate under 200.414(f), which is available only when you have no current negotiated rate, including a provisional one, and then applies to all your federal awards.
A NICRA also does not override statutory caps. The Congressional Research Service (Insight IN12516, updated April 17, 2026) notes USDA’s statutory 30% cap for research and education programs. It also reports that NIH’s February 2025 15% rate policy was permanently enjoined on April 4, 2025, an injunction the First Circuit upheld on January 5, 2026.
OMB’s proposed rule of May 29, 2026 (91 FR 32198) is not final. Law firm Feldesman (May 28, 2026) quotes OMB as saying it is “not proposing updates to indirect cost rate negotiations, but may consider this topic in future rulemaking.” SPARC, an advocacy group, quotes the preamble as favoring institutions “with lower indirect cost rates” for discretionary awards when all else is equal.
Deadlines and consequences
The regulations set no cash penalty for a late proposal. The NEH guidance (published February 1, 2023) says you need a NICRA to include indirect costs in a federal budget unless you elect the de minimis rate, and that negotiations “typically take four to six months.”
Closeout does not end the exposure. 2 CFR 200.345(a)(2) keeps your obligation to return funds, or your right to remaining funds, from “final indirect cost rate adjustments.” DOL tells grantees to close out at the provisional rate, note that a final rate is pending, and request an amended closeout later.
Records you must keep
Under 2 CFR 200.334(f), records supporting an indirect cost rate proposal submitted for negotiation must be kept for three years “from the date of submission.” Otherwise the three years start at the end of the fiscal year covered. Keep every signed NICRA, the proposal workbook tied to audited statements, the certificate, and a schedule of indirect costs billed by award and rate period. The AAZV agreement also says accounting system changes “may require the prior approval of the cognizant agency,” so log any chart of accounts restructuring.
What to set up in your accounting system
The de minimis guide covers the MTDC account flags and subaward split. A NICRA adds four requirements on top of those.
- Effective-dated rate tables. Store each rate with its type, dates, base and location (on-campus or off-campus). For IHEs, key the lookup on award start date.
- A provisional-to-final true-up. Recompute charges by award at the final rate and post the difference, flagging awards where funds or ceilings limit recovery.
- Award-level overrides and caps. Record lower statutory or sponsor rates on the award and track the unrecovered amount.
- A carry-forward schedule. For fixed rates, keep a running over- and under-recovery balance by fiscal year.
MIP Fund Accounting (Momentive Software). MIP’s recipient tab help (no date shown, checked October 9, 2026) has an IC Rate for each recipient code and an ICR Begin Date field. Its cap rules stop allocations once posted amounts reach the limit and tag the line “XCAP.” The page describes one rate per code and one begin date, so plan how to handle a mid-year rate change.
Blackbaud Financial Edge. Blackbaud’s Allocation Management guide (copyright 2015) links rates to projects, with multiple dated values that “cannot overlap.” It predates Financial Edge NXT, so confirm current behavior.
Oracle Grants Accounting (E-Business Suite). Oracle’s burdening setup guide (Release 12.1, copyright 2010) uses versioned burden schedules, award-level overrides and a Fixed Date field used “only if burden schedule is firm, not provisional.” That fits university rate locking, but this is a legacy release.
Sage Intacct. Sage Intacct’s allocation definition page (last modified October 8, 2026) has a “Percentage to allocate” field on the source pool and financial or statistical bases, but no effective-date setting, so you keep one definition per rate period. For a wider comparison, see our nonprofit accounting software guide. Indirect cost recovered under a NICRA also flows into the expenditures you report on the schedule of expenditures of federal awards.
How we researched this
We read the current text of 2 CFR 200.414, 200.334, 200.345 and Appendices III and IV on October 9, 2026, using the Cornell Legal Information Institute reproduction of the eCFR, and linked the official eCFR pages. We reviewed guidance from HHS CAS, DOL, the Interior Business Center and NEH, a published NICRA, and vendor documentation. The top-ranking pages for this term explain rate types but not how to record rates, true-ups or carry-forward in a ledger. No vendor paid for inclusion.
Related guides
Frequently asked questions
What does NICRA stand for?
NICRA stands for negotiated indirect cost rate agreement. It is the signed agreement with your cognizant federal agency that sets the indirect cost rates you may charge to federal awards, and other agencies must accept it.
How do I find out who my cognizant agency is?
For a nonprofit, it is normally the federal agency that gives you the largest dollar value of direct awards. For a university, it is HHS or the Office of Naval Research. If all your federal money comes through a pass-through entity, that entity negotiates your rate.
What happens if my final rate is higher than my provisional rate?
You may bill the difference on open awards if funds remain and no ceiling applies, and request an amended closeout on closed ones, but recovery is not guaranteed. If the final rate is lower, you owe the difference back.
Can I switch from the de minimis rate to a NICRA?
Yes. Section 200.414(f) says the de minimis rate applies to all federal awards until you choose to receive a negotiated rate. Once you hold a negotiated rate, including a provisional one, you can no longer use de minimis.
Sources
- 2 CFR 200.414 Indirect costs, eCFR (text checked October 9, 2026 via Cornell LII)
- 2 CFR 200 Appendix III, Indirect (F&A) Costs Identification and Assignment, and Rate Determination for IHEs, eCFR (checked October 9, 2026 via Cornell LII)
- 2 CFR 200 Appendix IV, Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations, eCFR (checked October 9, 2026 via Cornell LII)
- 2 CFR 200.334 Record retention requirements and 2 CFR 200.345 Post-closeout adjustments, eCFR (checked October 9, 2026)
- HHS Program Support Center, Indirect Cost Negotiations (Cost Allocation Services), last reviewed September 3, 2026
- HHS CAS transmittal letter to Case Western Reserve University, August 18, 2025
- Indirect cost rate agreement, American Association of Zoo Veterinarians (DOI Interior Business Center), July 24, 2023
- Interior Business Center, Indirect Cost Rate fact sheets, no date shown
- U.S. Department of Labor, Cost and Price Determination Division FAQ, no date shown
- NEH, Guidance for Negotiating an Indirect Cost Rate Agreement, February 1, 2023
- Carnegie Mellon University, Rates FAQ, no date shown (copyright 2022)
- Congressional Research Service, NIH Indirect Costs Policy for Research Grants: Recent Developments (IN12516), April 17, 2026
- OMB, Regulation for Federal Financial Assistance, proposed rule, 91 FR 32198, May 29, 2026
- Feldesman, OMB Announces Long-Awaited Changes to Uniform Guidance, May 28, 2026
- SPARC, 2026 OMB Proposed Updates to 2 CFR Part 200: FAQs, last modified September 3, 2026
- MIP, Allocation Codes Recipient Tab and Indirect Cost Rate Cap Rules, no date shown (Momentive Software sells MIP)
- Blackbaud, Allocation Management Guide for Financial Edge, copyright 2015 (Blackbaud sells Financial Edge)
- Oracle Grants Accounting User Guide, Release 12.1, Burdening Setup, copyright 2010 (Oracle sells the product)
- Sage Intacct, Create allocation definitions, last modified October 8, 2026 (Sage sells Intacct)
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
