Indirect cost rates, and the money most organizations leave behind
What is an indirect cost rate and do I need one?
Indirect costs are the real costs of running your organization that no single grant causes: rent, utilities, accounting, insurance, leadership time. An indirect cost rate is the percentage of a grant you may charge to cover them. You have two routes. Negotiate a rate with your federal cognizant agency, which produces a NICRA and takes months, or use the de minimis rate available to organizations without one, which federal agencies must accept. The mistake that costs the most money is not knowing which base the percentage applies to, because it is usually modified total direct costs rather than the whole budget.
Last reviewed 10 August 2026.
Your two routes
- A negotiated rate, or NICRA
- Agreed with the federal agency that gives you the most money, and then honored by every other federal agency. It takes months and it requires your financial records to support the rate you claim. Worth doing once your federal funding is large enough that the difference outweighs the effort.
- The de minimis rate
- Available to organizations without a negotiated rate, applied to modified total direct costs, and federal agencies must accept it. No negotiation and no application. If you have never thought about indirect at all, this is the route.
- The base is where the money is
- Modified total direct costs excludes equipment, capital expenditure, participant support costs and the portion of each subaward beyond the first $25,000. Applying your rate to the whole budget overstates what you can recover and produces a budget that comes back for correction.
Why this is worth an afternoon
Organizations routinely leave indirect recovery on the table because it feels like an administrative detail rather than money. It is money. On a $300,000 project it is the difference between covering your finance director's time on the grant and absorbing it out of unrestricted funds you had other plans for.
It also changes which opportunities are worth pursuing. A programme that caps indirect at 10% is a materially different proposition from one that honors your negotiated rate, and that is a decision to make before you write rather than after you win.
Foundations are a separate world. Many cap indirect low or decline it entirely, and their caps are stated in the guidelines rather than negotiated. Read them before you build the budget.
Who asks this most
The answer above is the same whoever you are. What Quillify does about it is not.
Related
- The budget narrative, line by lineWhat goes in a grant budget narrative?
- Cost share and matching fundsWhat does a matching funds or cost share requirement actually mean?
- The work that starts when the money arrivesWhat are my obligations after winning a grant?
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