What in the world is an indirect cost rate?
- You’re probably leaving HUGE money on the table! Most nonprofits recover little to no overhead costs from grants, meaning unrestricted donations subsidize grant-funded programs. An approved indirect cost rate could unlock $50,000 to $500,000+ annually in legitimate reimbursements you’re currently not claiming.
- Indirect costs are NOT “bad overhead.” They’re essential operating expenses! Your executive director’s time, accounting staff, administrative rent, utilities, IT systems, insurance, maintenance, security, and HR support make programs possible—funders know this, and federal regulations explicitly allow you to recover these costs proportionally.
The 15% de minimis rate requires ZERO paperwork or approval – The Office of Management and Budget (OMB) updated the rate from 10% to 15%. The updated rate is applicable for federal awards issued on or after October 1, 2024. Any organization can claim 15% of Modified Total Direct Costs on federal grants without documentation or negotiation. It’s automatic, it’s allowed, and if you’re not using it, you’re literally turning down free money!- Negotiated rates are often 20-35% or higher – Organizations that develop formal indirect cost rate agreements (NICRAs) with federal agencies typically recover far more than the de minimis 15%. The effort it takes to calculate and negotiate pays off exponentially in increased revenue.
- It changes how you think about true program costs – Calculating your indirect rate reveals what it ACTUALLY costs to deliver programs when you include a fair share of leadership, infrastructure, and support. This intelligence helps you price services realistically and negotiate better contracts.
- Many foundations and corporate funders WILL accept indirect costs – The myth that “only government allows overhead” is outdated. While some funders cap it at 10-15%, many will pay approved rates if you ask, include indirect costs in your budget, and explain why infrastructure costs matter to program quality.
- Once a NICRA is established, your rate works for ALL eligible grants – You don’t negotiate separately with every funder. Your federally approved rate becomes your standard, making budget development faster and ensuring consistent, fair cost recovery across your entire grant portfolio year after year.
nipipani is here to help. We understand the process, the documentation, and the filing requirements for NICRA. Contact us to find out more.