 Welcome to the nonprofit show. We are so glad you're here, exciting week ahead of us because it is another nonprofit power week. We don't do this often, but when we do it, it is a wonderful opportunity to really see and hear from thought leaders in our sector. So really thrilled to have with us today, representative from your part-time controller. A representative will be with us each and every day this week. So today we have with us Harriet, or as we refer to as Hatsy, Kutchall joining us from your part-time controller. She's here to talk to us about why you need to know about NICRA. And if you're not sure what NICRA is, you're in the right place because she's gonna tell us that too. But before we dive deep in conversation with you, Hatsy, we of course want to let all of our viewers and listeners know if we have not had the opportunity to meet you yet, who we are. So hello to you, Julia Patrick, CEO of the American Nonprofit Academy. And I'm Jarrett Ransom, your non-profit nerd and CEO of the Raven Group. Thrilled to be alongside you Julia, day in and day out with extreme gratitude that goes out to our amazing sponsors, partners that allow us this opportunity. So huge shout out of gratitude to our friends at Fundraising Academy with National University, Blumerang, your part-time controller. Again, who this week is dedicated to a non-profit Power Week. Also thank you to American Nonprofit Academy, non-profit thought leader, staffing boutique, non-profit nerd, as well as non-profit tech talk. If you haven't checked these companies out, as soon as we wrap up today's conversation, we encourage you to do so because each and every one of them are here to help you elevate your mission and to do more good. So they're here in your corner to help you. Just as all of our previous episodes are here to help you free of charge. Again, thanks for our sponsors. So go ahead and take out your smartphone, scan that QR if you are watching. You can grab the app right now. You can go ahead and download the app. And in just a few hours after our live conversation, right now with Hatsy, you will get a notification that the episode has been uploaded. If you find us on your streaming broadcast as well as podcast, we are still in those platforms as well. So we're simply growing and really excited to do that. You know, we are thrilled Hatsy because as Julia mentioned in our green room chatter, our relationship to you actually goes years back well before 2020, as we really talked about the expansion of YPTC. So for those of you watching and listening, we're thrilled you're here. More so thrilled to have Hatsy with us today as director of your part-time controller. Welcome to you. Thank you both. I'm thrilled to be here. It's fun to see you again. Yeah. Hatsy, you're one of those rare birds who, I feel like we could run towards you with our hair on fire, accounting questions or problems and you'd be like, it's okay. You can figure this out. And we need that when we work with experts, especially in accounting, people get freaked out. They're filled with so much fear and so much anxiety. And that's why we wanted to kick off this week talking about NICRA because this is one of those mysterious things for a lot of nonprofits and we need help with it. So when we were chatting in the green room, you made the comment that it sometimes even shocked you how many people in the nonprofit sector don't know anything about this. So what is it? Well, if you haven't ever worked with federal money, this acronym may never have crossed your desk or you've heard it. It is a uniquely, well, somewhat uniquely federal, U.S. federal concept. It's an acronym that stands for Negotiated Indirect Cost Rate Agreement and which relates to a process that the feds have created to help nonprofits document their indirect costs and how they get allocated. You know, Julia and Hattie, you were both talking about this in the green room and I didn't share then, but I was like, you know, this isn't an acronym that I'm familiar with. And so really hearing this, as you said, Hattie, you know, it really goes to that federal cost. And so hearing you just give us the baseline definition, the baseline understanding, I think is a great place to start. For those of you watching and listening, we actually just had a live question asked if we'd be giving the slides out. So all of this is actually broadcasted and you can find it again on our archive. So we don't send anything out separate, but you will have the entire conversation for your viewing and listening pleasure for yourself as well as many others. So Hattie, this is, is there a certain timeline in an organization's tenure? Like once they hit three years, once they hit five years, once they get federal funding, is that when NICRIS starts to really play a role? Yes and no. The process itself of going through the negotiation isn't required until or unless you are receiving federal money, but the concept behind it of knowing and understanding the indirect costs that are part of your organization's activity are crucially important to any organization. And the NICRA process is really just a matter of documenting what you should be doing already when you allocate your shared costs to your many programs to help understand which programs are covering their costs, which are not. And if they're not covering their costs, are there other resources to make up the difference? You know, it's such an interesting thing because it seems to me and Jared and I see this a lot that there are those folks that go out, they get the money, they apply for the grants, they hear about a program and they get all excited, they go out and do all this work. Oh yeah, and then they talk to finance and accounting. And I don't know if you see this as well, but where and why should we be engaging our finance and accounting departments kind of like at the beginning, if you will. It seems to me we should, maybe not. Well, we have seen many of our clients that have applied for and received, pardon me, federal funding and never thought to ask for indirect costs in their budget. So they may receive an award that only pays for salaries or only pays for travel. And yet there are other costs related to managing that award that the federal government later may not agree to pay. So that's why it's really important to involve the accounting folks from the beginning. You had mentioned to Hatsi, which I love that two of your colleagues had joined us previously to talk about federal grants and talking to the representative within the federal institution, the IRS, what does this look like? What about negotiation? Because if you said, we did not put anything by means of indirect costs into this, can we go back to them and ask if we can kind of, you know, shift some dollars around? We can, but more times than not they may, they're likely to say, I'm sorry, we can't change the budget now. It's always worth asking if you didn't think to ask up front, but we're working with many groups that had not done that and now know that in future renewals or future applications, they will at least ask for the option to have indirect costs. And in fact, we're working with a relatively new group now that got an award within their first year of existence. Wow. Yeah, yeah, they're remarkable. Their rate is still below what is called the de minimis indirect rate, which is 10% in the federal world, but they have deliberately, on our advice, they have deliberately negotiated to revisit their budget in the second year of the award that perhaps negotiate a higher rate if that's the case, if that's the way they're operating at the time. So let's back up a little bit because I hear you saying something that I never think about, two words, government and negotiation. And it doesn't seem to me like you can negotiate with the government. I love my government and I think it's an amazing thing that we have. So this is not like a beat down, but it just seems to me like if it's printed on, you know, government paper, it's set in stone, talk to us about this. How does this work? Every federal award comes with names and contact information of a program officer, sometimes a separate grants officer at the agency that's making the award. They're public servants. They want to hear from you if you have questions. If there's a lot of legalese in those documents, they can be hundreds of pages long. They're not gonna be surprised if you call them up and ask for help. And they would rather that you do that than make assumptions that may, you may find out later, we're not correct assumptions. They're there to negotiate or help you. I agree, Julia. I feel like it's written in black and white or it's been sent over in black and white. Like that is it, the end all be all. Hattie, who should be the one to negotiate? Is there a specific person that really has the authority, if you will, to ask that question? Really good question. When you submit an application for a negotiated indirect cost rate, it's usually the executive director or possibly the CFO who is signing that application. But they may well say, please talk to, in our case, this representative from YPTC or someone else who has been a key player in developing the application and can speak to the numbers. You as the organization can delegate that and then make them an authorized contact and then things go much more smoothly. But there's nothing that says that multiple people can't talk with the officer in charge as well. So, let me understand this, Hattie. Is this, and maybe it's both, is this like while you're making the application that you're stepping forward and asking these questions and trying to figure this out? Or is it after you've been awarded and then you go back in to try and figure out where NICRO works with you? You know, the NICRO knows. I always recommend, especially with a first-time application, that you reach out to the Cognizant Agency. Now, there's another nerdy term. I love it. I love my language. The Cognizant Agency is the agency with whom you will negotiate, with whom you're going to work to finalize this agreement. And it's defined as the agency that is providing the most direct funding to the organization. And I always like to reach out, especially if it's an agency with whom I've not worked before, I cannot and make sure I understand their approach to certain cost principles that are found in the uniform guidance. There's another nerdy term. And so it's really about developing a relationship with someone at the agency who is there to help you figure this out, as well as administer the rate agreement if questions come along once after it's in place. So then let's talk about this issue in terms of, I mean, our nation is incredibly diverse. If you're working in Los Angeles, the costs associated with your operations are gonna be different than if you're in Bozeman, Montana, or New Orleans, or Manhattan. Everything's different. And it's not always just more expensive, but sometimes it's just like you can't find this product or these resources that you need for your programming. How do we mitigate the different costs associated with working across our nation? Well, as we mentioned earlier, certainly rent in Manhattan will be higher than Des Moines or other parts of the country. And, but if that's the cost of doing business in your area and providing the service, federal government understands that. There are some limits put on rent sometimes because that can skew an indirect cost base, but more often than not, I've seen the feds accept rent, gravel, fringe rates, other significant pieces of an indirect cost pool. And as long as you can justify those costs and explain why they're important to carrying out your programs, they will support your interpretation of your indirect cost pool and the way you're distributing those costs. So this brings up a real question. And again, this just popped into my head. When you go to negotiate, do you come to the table with let's pick rent, because that's easy. Okay, here are three office spaces in my community. And these are what the rents are. I mean, here's a PDF of it, you know, government official. I mean, what do you physically do in order to negotiate this? And because otherwise it's a he said, she said, right? I mean, how do you protect yourself and act with integrity? Oh, sure. Now this, the application process is a very well documented explanation of what your costs are as well as how you attribute them to your various cost areas. The rate that you negotiate with the feds really doesn't have any meaning to a foundation or a corporation or other donors, but it gives you an understanding of what your true indirect costs are. So that if you make an application to a non-federal thunder, you know to ask for how much you need. And if you're paying for rent for three facilities, then the calculations, there are a series of schedules that are common across all agencies. You illustrate how you attribute those costs to the various program areas and the agency may come back and raise questions, sometimes ask for more information, but as long as you're following the cost principles in the uniform guidance, there's usually not a problem as long as you can explain the way you're doing things. See, I have what I feel is a curveball question, but it's probably not for you. Is there like so many times that like a maximum amount that we can go and ask for a negotiation or is this common practice? We can do it with any contract or is it like, no, in our records, we saw that you've already reached your peak negotiation amount. You get one question. Yeah, that's a good question, yeah. Now, as long as you're receiving funding and have applied for a negotiated rate, in fact, you are required in most instances to finalize that rate each year. So they want you to come back. They will likely issue a provisional rate in advance of one fiscal year. And then part of the application process after you've already got the rate in place is to finalize that rate. And that's usually an annual exercise. If you've been doing it for 10 or 15 years and your rate fluctuates very little, sometimes some agencies will issue a four-year rate, but that can be risky if your operations change significantly or if a pandemic comes along and changes your operations significantly. But that'll never happen, of course. Right? Unfortunately, it's not planned on any of that. Well, this is, I mean, it's so important to hear this. Now, as I shared with our viewers and listeners, I was just in Nashville for a conference. The cost of gas, the cost of living, the cost of things were very different than in my local community of Phoenix, right? So really looking at that comparison, and so as Julia asked the question, aren't markets changed? And even within our own geographic market, that changes. And so I just think there's so much to be aware of. Another perhaps random question, but how involved is the board in these conversations? When it comes to financial transparency and it comes to the budgets and often you have a finance committee, are they involved in any of the conversations that maybe happen internally before we go to negotiate that micro? Sometimes when we are asked to help an organization, especially when they're doing their initial application, we ask them, why? Why do you want a negotiated rate? And there are good reasons and bad reasons for getting a rate. Good reasons are that you may have been accepting what's called the de minimis rate, which was never intended to cover the true costs for any organization. It was intended to essentially force most organizations to negotiate. But if you do that for a long period of time, it can start bleeding your unrestricted resources. And having a NICRA in place can also make it easier when you apply for other federal awards. But if the reason you're going after a negotiated rate is because someone on the board heard about it and thought it was a good idea, then it's worth exploring further. Because once you get a rate agreement, there is significant administrative burden to keep it up and you just need to be prepared, be sure you have the capacity. So we've talked about rent, but talk to us about what some of these items might look like in NICRA. I mean, is it like pages and pages and pages, a hundreds of things, or is it like 10 things? Like what is in the spectrum of NICRA? The application itself in the very beginning will be very lengthy because you're required to submit a copy of the federal award itself that requires it. And that could be four pages, it could be a hundred and four pages and could make for a very hefty document. But once you've negotiated for several years with an agency, I'm even working with some agencies now that say, skip the narrative, skip all this other nice stuff we used to ask for, just send me the numbers, just send me the math and explain why anything might have changed. Part of the numbers includes some variance analysis. Here's our cost pool this year, here's last year, why did it change, things like that. But it's, in that case, you're looking at schedules that are maybe six or eight pages worth instead of one. Interesting. Well, we don't have a lot of time left and it's been really interesting to even, to start our nonprofit Power Week with NICRA because it gives us a bunch of different things to think about. But I've got to ask you this question. First of all, for a lot of us, it's a shock and it's kind of like a hair and fire moment to think we can negotiate with the government and we can have a dialogue. But what's the reality of this in terms of a timeframe and the process? Cause it's not going to just happen overnight or maybe surprise me again, Hatsy, maybe it will. Seldum, no, I've never seen it happen overnight. The application process itself with diligence can be completed within a week or two. And that's involves some waiting around to find the right documents. But once you submit to an agency, I've seen turnaround in as little as one to two weeks, but I've also seen turnaround in 12 to 18 months. So it really varies significantly by agency. I'm not going to name names, but I think many agencies are overwhelmed because more and more funding funders are requiring the negotiations. So many agencies are still ripping up. Amazing. Well, my biggest takeaway is the same as your previous colleagues, which is literally pick up the phone, you know, have a conversation. Perhaps it's in an email, but start that conversation with the representatives so that when you want to consider negotiating this, right? Like you've had this rapport that's been built, which takes me to my question, Hatsy, looking at this, should we, like as soon as we get this contract, you know, should we really start to build relationships with as many representatives from the funder as possible in hopes, I guess, right? Of kind of like, you know, making everything easier for us down the road, what does that look like? And what do you advise? Because YPTC works with clients, organizations, all nonprofits across the nation. What does this process look like? As my other colleagues have said, yes, please, please reach out, ask those questions, whether they're financial questions or questions about the way you're running the program, they're there to help you. And I'm, you know, yeah, I'm a strong believer in public service, the federal employees, they're there to serve, that's the intention. So don't feel like, never feel like you're going to raise questions or red flags with an agency by asking questions. They want to help, they want to prevent you from making mistakes and they want to see their money spent in the best way possible. And they can help you do that. I feel like there's so much intimidation. You know, we hear that Julia around funders in general, but then you add the government to it. And I just feel like there's so much intimidation where it's like, we're just gonna, you know, stay away from any radar, we're going dot our I's and cross our T's, be silent, you know, and really not develop this relationship. But from what I've learned from you and your other colleagues is really, these relationships help. They really are significant. Oh, sure. Yeah. And that's true in any fundraising capacity, as you well know, all about relationships. It really is. And Hatsi, you are like really the key to the relationship that we have with YPTC because we met you so many years ago. And it's just amazing where this journey has taken us. And so it's really been amazing to have this time with you. Harriet Hatsi Ketchel, director of your part time controller. Hatsi has really been with the organization from the get go in so many ways, really helped to expand the national web of folks that work with YPTC. And it's really been an honor and a pleasure to see you grow and see this journey. Check out YPTC.com because this episode will actually probably go back up into their website and at some point in the near future. So for that person that asked the question, can we get to the slides? You can. So visit YPTC.com. There is an amazing amount of free information. It goes all the way through with what their teams are doing, how they're working, all different types of things that are coming up, trends, YPTC is doing a lot of really innovative things outside of what we think our accounting and finance teams do. And you're gonna learn more about that this week. We have a bunch of wonderful representatives that are gonna be coming on to talk about all things accounting and finance. And it's gonna be fun. This is the thing that Jared and I always are like, wow, the YPTC folks are really fun. And they have lots of great information. So you can join us every day this week. And again, as Jared mentioned, if you miss this, you can certainly come back to us through our archives. We have a lot of really interesting discussions that sometimes I think that we'll have this week. You'll think, oh, that's not an accounting and finance topic, but it actually comes back to it, doesn't it, Jared? It does. And what I love is looking here at the faces, the names, we've got some new faces, some new names. The YPTC team always shows up and shows out because the knowledge, but the character, the personality, I mean, I even go back to the data visualization team. And I was thinking, oh, how fun is this gonna be? You know, kind of sarcastic, honestly. And it's one of my favorite conversations is really looking at all of the ways like this holistic approach that YPTC helps our community, helps our sector. It's just fascinating. So I'm very much looking forward to this week. Excited to have you, Hatsi, kick off the first of the five day nonprofit power weeks. So thank you. And my pleasure, thank you. It's been a lot of fun. Again, we are so blessed to have these conversations each and every day, moving up onto 900 episodes. And our partners join us day in and day out. And they include Fundraising Academy at National University, Bloomerang, of course, your part-time controller, Staffing Boutique, Nonprofit Thought Leader, American Nonprofit Academy, Nonprofit Nerd, and Nonprofit Tech Talk. These are the folks that join us in these conversations and really help us plumb the depths of this important and vibrant sector that changes day in and day out according to the needs of our people. And so really fascinating to be able to align ourselves with these folks that help us navigate these tough times and tough issues. Hatsi, you really inspired me to talk to a government official today. Be not afraid. I'm like, be not afraid. Boy, that's wisdom of the ages, isn't it, Jim? Absolutely. I honestly wish that it seemed so simple, yet it is so significant. And if I had, I'm gonna say that permission, but really that confidence, 20 plus years ago when I started my career, I think that I would have served my organizations in a very different manner, and I just love that. And so when I started my career, I very much was part of the intimidation bandwagon, of like, no, no, no, let's just kind of, let's just stay quiet and stay in our lane. But I love this relationship. I love that public service and service, so absolutely significant. Well, thank you. I learned to do this myself by working with cognizant agents who taught me a lot over the years. Great, and you're passing it on, I love it. Absolutely. Well, hey everybody, we like to end every episode of the nonprofit show with a simple message, but it's really a profound message. And as we navigate nonprofit Power Week with your part-time controller, we want to remind everyone to stay well, so you can do well. We'll see you back here tomorrow, everyone.