NICRA stands for Negotiated Indirect Cost Rate Agreement. It is a federal U.S. concept related to helping nonprofits document their indirect costs and how they are allocated. Indirect costs are crucial for organizations to understand because they help determine which programs are covering their costs and which are not, as it’s essential to know if additional resources are needed to cover shortfalls. Costs associated with running programs can vary depending on the geographic location. Hatsy Cutshall from Your Part-Time Controller (YPTC) talks about NICRA and why nonprofits need to pay attention to it.
It’s important to involve finance and accounting departments, and the Board, from the beginning, especially when applying for federal funding. Often, departments within organizations fail to include indirect costs in their budgets, which can lead to financial challenges later.
You can negotiate with government agencies when it comes to indirect cost rates. Agencies have program officers or grants officers who are willing to help and answer questions. They prefer organizations to reach out directly for clarification rather than making incorrect assumptions.
Building relationships with agency representatives is crucial. Start developing a rapport with them as soon as you receive funding, as these relationships can make the negotiation process smoother.
NICRA is not a one-time effort. Organizations must regularly review and update their rates to ensure they reflect their current financial situations and program needs, and this conversation emphasizes the value of open communication with agency representatives and the benefits of building relationships throughout the nonprofit sector.