Welcome news from OMB for nonprofits administering federal grants!

The Office of Management and Budget (OMB) has issued new guidance that increases the de minimis rate for indirect costs on federal grants. The new rate becomes effective on October 1st, 2024. Up until now, organizations without a Negotiated Indirect Cost Rate Agreement (NICRA) have been limited to using a 10 percent de minimis rate to cover their indirect costs on federal grants. As of 10/01/2024, the de minimis rate will increase to 15 percent. This is a welcome change for those managing federal grants and will provide a significant benefit, particularly to smaller organizations whose indirect costs may mostly be covered by a 15 percent rate. We applaud the OMB and all who sent in comments and feedback to bring about this change.

Other positive changes made by the OMB in the new guidance include: 1) an increase in the threshold for the single audit requirement from $750,000 to $1,000,000, and 2) a change in the Modified Total Direct Cost (MTDC) calculation to allow inclusion of up to $50,000 for each subaward instead of just $25,000. All of these changes will result in increased cost savings and cost capture for organizations doing the important work of managing grants for the federal government.

Indirect Rates Consulting continues to urge organizations to give serious consideration to pursuing a Negotiated Indirect Cost Rate Agreement (NICRA) in order to capture their full indirect costs.

While the de minimis increase is significant and a positive move by the OMB, it should not disincentivize organizations from applying for a NICRA. Being approved for a NICRA allows capture of ACTUAL indirect costs an organization is incurring to administer federal grants. For many organizations, opting to rely on the de minimis of 15 percent means that they are still being underpaid for their organization’s work to administer the federal grants they oversee. In practice, the result is that an organization is paying federal grant administration costs out of its own funds and is not being reimbursed for what it truly costs to manage a federal grant.

We invite interested nonprofits to contact us for a free consultation to find out whether applying for a NICRA makes sense for your organization. Our clients find these consultations to be beneficial in making decisions about whether to apply for a NICRA as well as to gain an understanding of the NICRA process.

Our consulting services include preparing NICRA application proposals and assisting in identifying all indirect costs in your organizational budget to maximize the rate you apply for. We also provide other nonprofit support including strategic planning, financial/HR guidance, executive coaching, regulatory compliance guidance, and more.