A Negotiated Indirect Cost Rate Agreement (NICRA) is the formal document that sets the rate a non-federal entity — a university, hospital, nonprofit, or other organization receiving federal funding — uses to recover its facilities and administrative (F&A, also called “indirect”) costs on federal awards. It is issued under 2 CFR 200.414 of the Uniform Guidance, and it is the single most consulted document in a sponsored-programs office when a budget is built. This guide walks through what a NICRA actually says, who issues it, the four rate types you’ll see written into one, how the Modified Total Direct Cost (MTDC) base is built, and a full worked calculation applying a negotiated rate to a real budget.
This page focuses on the mechanics of the agreement itself and the MTDC calculation. For the broader cost-principles framework it sits inside, see Uniform Guidance (2 CFR 200) and 2 CFR 200 Subpart E: Cost Principles; for a shorter reference definition, see the dictionary entry on the Indirect Cost Rate Agreement (NICRA).
What a NICRA Actually Is
A NICRA is negotiated between an organization and its federal cognizant agency for indirect costs — the single federal agency responsible for reviewing the organization’s indirect cost rate proposal and negotiating the rates it will use across all of its federal awards, regardless of which specific agency funds a given project. Once negotiated, every other federal awarding agency is generally required to accept that negotiated rate rather than impose its own (2 CFR 200.414(c)).
A typical NICRA document specifies, for each rate line: the rate type (provisional, predetermined, fixed with carry-forward, or final), the distribution base the rate applies to (almost always MTDC for research institutions), the fiscal period the rate covers, and any special conditions (e.g., separate on-campus vs. off-campus rates, or a separate rate for a specific program type).
Who Issues a NICRA: The Cognizant Agency
For institutions of higher education (IHEs), cognizant-agency assignment is split between two federal agencies: the Department of Health and Human Services (HHS) and the Department of Defense, acting through the Office of Naval Research (ONR/DOD). The assignment is based on which of the two has provided the larger share of the institution’s federal funding over a recent multi-year period. HHS is the default and covers the large majority of research universities; DOD/ONR is cognizant for a much smaller number. See the Cognizant Federal Agency entry for how this is determined and what it means in practice. Nonprofit organizations and state/local governments have their own cognizant-agency assignment logic under 2 CFR 200 Appendices IV and V respectively.
The cognizant agency does not just set a number — it reviews the organization’s indirect cost rate proposal, a detailed accounting of the institution’s actual indirect costs (general administration, departmental administration, sponsored-programs administration, operations and maintenance, library, and depreciation) allocated against its total direct-cost base, following the cost-allocation methodology in 2 CFR 200 Appendix III (institutions of higher education) or Appendix IV (nonprofits).
The Four NICRA Rate Types
Appendix III of 2 CFR 200 defines four distinct rate types, and a single NICRA can contain more than one type across different rate lines or fiscal years:
- Provisional rate — a temporary rate used while the final rate for that period is still being determined. It is meant to approximate the eventual final rate closely enough to avoid a large over- or under-recovery, and it is always followed by a final-rate reconciliation.
- Predetermined rate — a rate fixed for a specified future period based on an estimate of costs, not subject to later adjustment to reflect actual costs. Institutions of higher education are authorized to negotiate predetermined rates under Public Law 87-638, typically for periods of up to four years, which gives budget certainty that a provisional rate doesn’t.
- Fixed rate with carry-forward — like a predetermined rate, it is set in advance of the period it covers and does not change during that period. Unlike a predetermined rate, any difference between the fixed rate and the rate that actual costs would have produced is carried forward and used to adjust the rate calculation for a future period, rather than being reconciled retroactively for the same period.
- Final rate — established once an organization’s actual costs for a completed fiscal period are known, replacing whatever provisional rate applied during that period. If a final rate turns out higher than the provisional rate that was actually charged, the organization may be able to recover the difference on awards still open; if lower, previously drawn funds may need to be returned or offset against future awards.
Most research universities operate on multi-year predetermined or fixed rates for a stable planning horizon, with a provisional rate used for the current unfinalized year and reconciled once actual costs are known. Negotiated on-campus F&A rates at U.S. research universities and academic medical centers commonly fall in roughly the 25%–70% of MTDC range, with a number of major research institutions negotiated in the mid-50s — treat any specific figure as institution-specific, not a government-wide average, and always check the current NICRA rather than assume a rate.
Understanding the MTDC Base
An indirect cost rate is meaningless without knowing what it’s applied to. For most research institutions, that base is Modified Total Direct Cost (MTDC) — total direct costs with a specific, regulator-defined set of items removed. The removals exist because those cost categories either don’t generate a proportional amount of the administrative overhead the rate is meant to recover, or because charging F&A on them would distort the award (equipment and large subawards are the clearest examples of both). See the MTDC dictionary entry for the formal definition.
What’s In vs. Out of the MTDC Base
| Included in MTDC | Excluded from MTDC |
|---|---|
| Salaries and wages (all personnel compensation) | Equipment — tangible personal property with a per-unit acquisition cost at or above the institution’s capitalization threshold or $10,000, whichever is lower (2 CFR 200.1) |
| Fringe benefits associated with included salaries | Other capital expenditures (e.g., building alterations and renovations) |
| Materials and supplies | Patient care costs |
| Travel | Participant support costs (stipends, travel, and subsistence for meeting/training participants) |
| Consultant and other contracted services (non-subaward) | Tuition remission and student aid (scholarships and fellowships) |
| Up to the first tranche of each subaward — currently $50,000 per 2 CFR 200.1’s definition of MTDC | The portion of each subaward beyond that first tranche, regardless of the subaward’s total value or period of performance |
| Rental costs of off-site facilities |
On the subaward tranche figure: OMB’s April 2024 Uniform Guidance revision raised the per-subaward amount included in MTDC from $25,000 to $50,000, effective for awards issued on or after October 1, 2024. That figure only applies if your institution’s current, effective NICRA has itself been updated to reference $50,000 — some institutions’ agreements still cite the older $25,000 threshold pending their own renegotiation cycle, so both figures coexist across the field depending on which institution and award you’re looking at. Always check the specific NICRA in effect for the award, not a general assumption. NIH specifically reverted its own MTDC subaward threshold back to $25,000 for its awards via Notice NOT-OD-26-072 (April 20, 2026) — see the accuracy note below.
Worked Calculation: Building an MTDC Base and Applying a NICRA Rate
The figures below are an illustrative worked example, not a real award — they exist to show the mechanics end to end.
A PI’s proposed budget for a one-year research project includes the following direct-cost line items:
| Line item | Amount | MTDC treatment |
|---|---|---|
| Salaries and wages | $150,000 | Included |
| Fringe benefits | $45,000 | Included |
| Supplies | $10,000 | Included |
| Equipment (one mass spectrometer, $12,000) | $12,000 | Excluded — over the $10,000 capitalization threshold |
| Travel | $8,000 | Included |
| Participant support costs (workshop stipends) | $5,000 | Excluded |
| Consultant fees | $6,000 | Included |
| Subaward to a partner institution | $80,000 | Only first $50,000 included; $30,000 excluded |
| Total direct costs | $316,000 | — |
Step 1 — Total direct costs: $150,000 + $45,000 + $10,000 + $12,000 + $8,000 + $5,000 + $6,000 + $80,000 = $316,000.
Step 2 — Subtract the MTDC exclusions:
- Equipment: −$12,000
- Participant support costs: −$5,000
- Excluded portion of the subaward ($80,000 − $50,000): −$30,000
MTDC base = $316,000 − $12,000 − $5,000 − $30,000 = $269,000.
Step 3 — Apply the negotiated rate: assume this institution’s current NICRA carries a predetermined on-campus F&A rate of 52% of MTDC.
Indirect costs (F&A) = $269,000 × 0.52 = $139,880.
Step 4 — Total budget request: $316,000 (total direct costs) + $139,880 (indirect costs) = $455,880.
Notice that the $80,000 subaward contributes only $50,000 to the base the 52% rate is multiplied against — the remaining $30,000 still appears in the total direct-cost figure and in the subaward’s own cost, but it generates zero F&A recovery for the prime institution. This is the single most common source of budgeting errors on multi-subaward proposals: treating the full subaward value as F&A-bearing, or forgetting to exclude equipment and participant support costs before multiplying by the rate. For a second worked example built from a single lump-sum direct-cost figure rather than an itemized budget, see How to Calculate Indirect Costs (F&A) vs. Direct Costs.
No NICRA? The De Minimis Rate Option
An organization that has never had a federally negotiated indirect cost rate may elect to use a de minimis rate instead of negotiating a full NICRA. Under 2 CFR 200.414, OMB’s April 2024 Uniform Guidance revision raised the government-wide de minimis rate from 10% to up to 15% of MTDC, effective for federal awards issued on or after October 1, 2024. Once elected, an entity generally may use the de minimis rate indefinitely, without further federal approval, until it chooses to negotiate a full rate instead. Full mechanics, eligibility, and the pass-through-entity rules that apply to subrecipients are covered in De Minimis Indirect Cost Rate: Who Qualifies and How It’s Calculated.
NIH is a documented exception, not the general rule: NIH briefly adopted the updated 15% de minimis rate and the $50,000 MTDC subaward threshold for its own awards via Notice NOT-OD-25-059, then reversed both via Notice NOT-OD-26-072 (April 20, 2026), reinstating the longstanding 10% de minimis rate and $25,000 subaward threshold specifically for NIH awards. NIH’s notice ties the reversal to a recurring appropriations rider (most recently the Consolidated Appropriations Act, 2026) that requires NIH’s indirect-cost provisions to keep operating “in the same manner as” they did in FY2017. This is a statutory constraint specific to NIH, not a government-wide reversal — other federal agencies’ awards continue to use the 15%/$50,000 figures from the 2024 revision. See NIH Indirect Cost Policy for the full NIH-specific picture, which is a separate story from NIH’s now-blocked 15% across-the-board rate cap proposal.
Applying a Rate Correctly in a Budget
- Confirm the current, effective NICRA — rate agreements have defined effective dates and expiration dates; using an expired rate line or the wrong fiscal year’s rate is a common proposal error caught in institutional budget review.
- Identify which distribution base applies. Almost all research-focused NICRAs use MTDC, but some institutions (or some award types, such as training grants) carry a rate applied to a different base, such as total direct costs or salaries and wages only — check the specific rate line, don’t assume MTDC applies universally.
- Build the MTDC base first, before multiplying. Remove equipment, capital expenditures, participant support costs, tuition remission, patient care costs, off-site rental costs, and the excluded portion of each subaward, exactly as shown in the worked calculation above.
- Match the rate type to the award’s timing. A provisional rate charged during the award period will be trued up against the eventual final rate — budget and financial-reporting staff should anticipate that a final-rate reconciliation may adjust recoverable indirect costs after the fact.
- Watch for sponsor-specific rate caps or restrictions that override the institution’s negotiated rate for a particular program (e.g., training grants capped at a flat percentage, or a private foundation’s own maximum indirect-cost policy, which is not the same base or figure as a federal NICRA — see Foundation vs. Federal Indirect Cost Rates).
Accuracy Note: What’s Changed and What’s Still Pending (as of August 2026)
Two distinct regulatory developments affect the figures in this guide and are worth tracking separately:
- Already final: OMB’s April 2024 Uniform Guidance revision (effective for awards issued on or after October 1, 2024) raised the government-wide de minimis rate from 10% to up to 15% of MTDC and raised the MTDC per-subaward tranche from $25,000 to $50,000. These are the current default figures used throughout this guide, subject to the NIH-specific carve-out noted above.
- Still pending, not yet final: OMB published a proposed rule in the Federal Register on May 29, 2026 (“Regulation for Federal Financial Assistance,” document 2026-10817, docket OMB-2026-0034) that would substantially rewrite 2 CFR Part 200 — described by OMB and commenting organizations as the largest revision to the Uniform Guidance since it was first issued in 2013. The public comment period closed July 13, 2026, and the proposal targets an effective date of October 1, 2026, but no final rule has been published as of this guide’s last-verified date below. Do not treat any provision of the proposed rewrite as current policy until a final rule is published. See OMB’s Proposed 2 CFR 200 Rewrite: Current Status for ongoing coverage.
Given the pace of change in this area, verify the current de minimis rate and MTDC subaward threshold directly against your institution’s own current NICRA and against ecfr.gov before relying on any specific figure for an active proposal.
NICRA and Related Concepts
A NICRA is not the only cost-recovery framework an organization will encounter. For a side-by-side comparison of how the U.S. NICRA mechanism differs from the UK’s TRAC methodology, Horizon Europe’s flat-rate overhead, and Canada’s Research Support Fund, see US NICRA vs. UK TRAC vs. Horizon Europe vs. Canada RSF. For the foundational distinction the whole rate mechanism depends on, see Direct Cost vs. Indirect Cost and the dictionary entries for Indirect Costs (Overheads) and Indirect Cost Rate (F&A Rate). Institutions above the $50 million federal-funding threshold should also be aware of the related Cost Accounting Standards Disclosure Statement (DS-2) documentation, which describes the cost-accounting practices underlying the NICRA calculation itself. Institutions that expend $1,000,000 or more in federal awards in a fiscal year are also subject to a Single Audit — see CASRAI’s guide to Single Audit (2 CFR 200 Subpart F) requirements and thresholds for the audit that tests how those federal awards, including the F&A recovered under a NICRA, were actually spent.
Frequently Asked Questions
What does NICRA stand for?
Negotiated Indirect Cost Rate Agreement — the formal document a federal cognizant agency issues under 2 CFR 200.414 after negotiating an organization’s indirect cost rate(s).
Who issues a NICRA?
The organization’s cognizant agency for indirect costs. For institutions of higher education this is HHS or DOD (via ONR), assigned based on which agency has provided the larger share of the institution’s recent federal funding; HHS is cognizant for the large majority of research universities.
What is the difference between a provisional and a final indirect cost rate?
A provisional rate is a temporary estimate used during a fiscal period whose actual costs aren’t yet known; a final rate is established once actual costs for that period are known and replaces the provisional rate, potentially triggering a retroactive adjustment on open awards.
What is included in the MTDC base?
Salaries and wages, associated fringe benefits, materials and supplies, travel, consultant/contracted services, and up to the first tranche (currently $50,000 under the general 2 CFR 200.1 definition, though some NICRAs still reference $25,000) of each subaward.
What is excluded from the MTDC base?
Equipment, other capital expenditures, patient care costs, participant support costs, tuition remission, off-site rental costs, and the portion of each subaward beyond the included tranche.
What is the current de minimis indirect cost rate if my organization doesn’t have a NICRA?
Up to 15% of MTDC government-wide, per OMB’s April 2024 Uniform Guidance revision (effective for awards issued on or after October 1, 2024) — except at NIH, which reverted to the longstanding 10% rate for its own awards via Notice NOT-OD-26-072 (April 2026).
How often is a NICRA renegotiated?
It depends on the rate type: predetermined and fixed-with-carry-forward rates are typically negotiated for multi-year periods (up to four years for IHEs), while a provisional rate is trued up to a final rate annually, once actual costs for that year are known.
Last verified: August 16, 2026, against 2 CFR 200.414, 2 CFR 200.1, 2 CFR Part 200 Appendix III, NIH Notice NOT-OD-26-072, and OMB’s proposed rule (Federal Register document 2026-10817, May 29, 2026). Regulatory dollar thresholds and rate percentages in this area change periodically — verify current figures against your institution’s own NICRA and ecfr.gov before relying on them for an active budget.
