Indirect Cost Rate Agreement (NICRA)

An Indirect Cost Rate Agreement — almost universally called a NICRA, for Negotiated Indirect Cost Rate Agreement — is the actual signed document that authorizes an organization to charge indirect (F&A) costs to its federal awards at a specific, agreed rate. It is distinct from the indirect cost rate (F&A rate) itself, which is the percentage the NICRA states, and from the underlying 2 CFR 200 cost-principles framework, which is the rulebook the rate proposal must comply with. A NICRA is the concrete instrument: a letter-form agreement, typically a few pages, listing each negotiated rate, the base it applies to, the rate type, and the fiscal period each line covers.

Who issues a NICRA

A NICRA is issued by the organization’s cognizant agency for indirect costs — the single federal agency responsible for negotiating and approving that organization’s indirect cost rates on behalf of the entire federal government, so that other agencies do not each negotiate separately. For most US institutions of higher education, the cognizant agency is the Department of Health and Human Services, acting through its Division of Cost Allocation; a smaller number of institutions (historically around 40-50, mostly those with heavier Department of Defense funding) are cognizant to the Department of the Navy’s Office of Naval Research. Cognizance is assigned per-institution based on which agency has provided the largest share of that institution’s federal funding over a recent multi-year period, and it does not change simply because a different agency later becomes a larger funder in a given year. Once a NICRA is negotiated and signed, every federal awarding agency must accept it (2 CFR 200.414(c)) — an individual sponsor may still apply a lower programmatic payment cap as a separate award term, but that does not alter the negotiated rate itself.

What’s inside the agreement

2 CFR 200.414 and its appendices govern how the underlying rate proposal is built, but the appendix that applies depends on the type of organization: Appendix III covers institutions of higher education, Appendix IV covers nonprofit organizations, and Appendix V covers state and local government central service cost allocation plans (commercial/for-profit organizations follow a parallel Federal Acquisition Regulation-based process rather than 2 CFR 200). A typical university NICRA does not contain a single rate — it lists several, because indirect costs differ by activity type and location: an on-campus research rate, an off-campus research rate (applied when the majority of a project’s work happens away from institution-owned facilities, and typically much lower since it excludes facilities costs), and separate rates for instruction and for other sponsored activities. Each rate line specifies the Modified Total Direct Cost (MTDC) base it is applied to and the fiscal period it covers.

Provisional, predetermined, fixed, and final rates

Appendix III recognizes several distinct rate types, and a single NICRA commonly uses more than one across its covered years:

• Provisional rate — a temporary rate used for funding and reimbursement during a period until a final rate for that period is established; it exists specifically to prevent substantial over- or under-payment while final costs are still being determined.
• Predetermined rate — a fixed rate, based on an estimate of costs for a future period, that is not subject to later adjustment once negotiated (authorized for educational institutions under Public Law 87-638 specifically to simplify budgeting and speed up award closeout).
• Fixed rate with carry-forward — similar to a predetermined rate in that it is set in advance and not adjusted for the period it covers, but any over- or under-recovery against actual costs is carried forward and factored into the rate negotiated for a later period.
• Final rate — established after an organization’s actual costs for a period are known, if that period was never replaced by a predetermined or fixed rate before the organization’s fiscal year closed; it triggers a retroactive upward or downward adjustment against whatever provisional rate was billed during the period.

A single multi-year NICRA might therefore show, for example, fixed rates for its first two years and provisional rates for its final year pending the next full negotiation — research administrators need to check the rate type on each line, not just the percentage, since a provisional line signals that a later adjustment is still coming.

Negotiation cycle

There is no single statutory renegotiation interval, but Appendix III agreements for research universities commonly cover a period of roughly three to five fiscal years before a full renegotiation is required, with the specific span, and which years use which rate type, set individually in each institution’s negotiation. An organization new to substantial federal funding, or one without an established cost-accounting history, typically starts with a provisional rate while it builds the documentation needed to support a full negotiated proposal; organizations that would rather skip negotiation altogether may instead elect the de minimis indirect cost rate under 2 CFR 200.414(f), which requires no NICRA at all.

How a NICRA relates to other cost-accounting documents

A NICRA is often confused with two adjacent but distinct compliance documents. The Cost Accounting Standards Disclosure Statement (DS-2) describes an institution’s cost-accounting practices — how it distinguishes direct from indirect costs, treats depreciation, leave, and similar items — and historically supported a NICRA negotiation; it is not the rate agreement itself. The broader Cost Accounting Standards (CAS) are the consistency rules an institution’s accounting practices must follow once it crosses certain federal-funding thresholds. A NICRA is the output of a negotiation informed by both: the agreed rate, base, rate type, and period, in one signed document.

Examples

• A research university’s current NICRA, issued by HHS’s Division of Cost Allocation, sets a fixed on-campus research rate of 58 percent of MTDC for fiscal years 2024 and 2025, and a provisional rate of 58 percent for fiscal year 2026 pending the next negotiation.
• A mid-sized nonprofit research organization negotiates its first NICRA under Appendix IV, receiving a provisional rate while its inaugural indirect cost rate proposal and supporting financial documentation are reviewed by its cognizant agency.
• A university’s NICRA lists four separate rate lines in the same document — on-campus research, off-campus research, instruction, and other sponsored activities — each with its own percentage and MTDC base.

Counter-examples

• A sponsor’s internal budget worksheet assuming a 25 percent overhead allowance is not a NICRA — only the document actually issued by the cognizant federal agency constitutes the agreement.
• An organization’s election of the 2 CFR 200.414(f) de minimis rate is not a NICRA — it requires no negotiation, no cognizant-agency approval, and no signed agreement at all.
• NIH’s 2025 notice attempting to apply a flat 15 percent indirect cost rate government-wide (since permanently enjoined) was not an amendment to any institution’s NICRA — it was a separate payment-cap policy layered on top of each institution’s own negotiated agreement, not a renegotiation of it.

Related CASRAI vocabulary

• Indirect Cost Rate (F&A Rate) — the percentage the NICRA authorizes
• Indirect costs (overheads) — the underlying cost category the rate recovers
• MTDC (Modified Total Direct Cost) — the base each NICRA rate line applies to
• Indirect cost recovery — the institutional revenue that results from applying the rate
• Cost Accounting Standards Disclosure Statement (DS-2) — supporting cost-accounting documentation
• Cost Accounting Standards (CAS) — the consistency rules behind the underlying cost accounting
• NIH Grants Policy Statement (NIH GPS) — agency-specific policy referencing negotiated rates
• Sponsored research agreement — the award document the negotiated rate is applied against

References

• US Office of Management and Budget, Uniform Guidance, 2 CFR Part 200, Section 200.414 (Indirect costs) and Appendix III (Institutions of Higher Education), Appendix IV (Nonprofit Organizations), and Appendix V (State/Local Government-wide Central Service Cost Allocation Plans).
• Public Law 87-638 (authorizing predetermined indirect cost rates for educational institutions).
• 2 CFR 200.414(c) (federal agencies’ obligation to accept a negotiated rate) and 200.414(f) (de minimis rate election).