The Office of Management and Budget (OMB) just proposed the most sweeping overhaul of federal financial assistance rules since the Uniform Guidance was established in 2013, with a comment period that closes July 13, 2026.
If your organization receives federal grants or cooperative agreements, this proposed rule touches virtually every stage of your grant lifecycle, including how awards are designed, how funds can be used, how programs get monitored, and under what circumstances awards can be terminated. Here’s what you need to know.
What Is This Rulemaking?
On May 29, 2026, OMB published a proposed rule in the Federal Register (91 FR 32198) to revise 2 CFR Part 200, the government-wide Uniform Guidance that governs how federal grants and cooperative agreements are administered.
The proposed rule has three stated objectives: improving transparency, accountability, and oversight of federal awards; clarifying the binding legal status of the regulation; and reducing recipient burden.
A note on the name change: Beyond the policy changes, OMB is also proposing to convert the Uniform Guidance into a formal Uniform Grants Regulation (UGR) with a single government-wide effective date. Future amendments would take effect across all federal agencies without requiring each agency to adopt them separately.
Forty-plus federal agencies are joining OMB in this rulemaking, meaning the changes would reach nearly every federal grant program your organization touches. OMB is targeting an October 1, 2026, effective date, and the comment period closes July 13, 2026.
Many of the proposed changes align with Executive Order 14332, Improving Oversight of Federal Grantmaking, released in August 2025.
The Proposed Changes Local and State Grant Managers Need to Know
1. Discretionary Grant Terminations Would Become Easier for Agencies and Harder to Contest
This is the change that carries the most immediate risk for recipients.
The proposed rule would significantly expand and codify federal agency authority to terminate discretionary grants mid-performance if an award “no longer effectuates program goals, Federal agency priorities, or the national interest as they exist at the time of the termination.” In plain language, agencies could terminate awards they believe no longer support current program objectives or federal priorities.
A version of this authority has existed since the 2020 update to the Uniform Guidance. Still, the proposed rule would make it more explicit and broader in scope, and require that it appear in the terms and conditions of every discretionary award.
Key details to understand:
- Agencies would be required to provide written notice with a brief explanation of why termination is in the federal interest, but the proposed rule describes this bar as not “exceptionally high.”
- Recipients would get an opportunity to submit a written statement of termination costs. Whether the agency allows those costs would be largely at agency discretion.
- Termination for discretionary reasons would not trigger the same administrative appeal rights as termination for noncompliance.
- A parallel temporary suspension authority is also proposed, allowing agencies to issue written stop-work orders for up to 90 days.
- This provision would apply only to discretionary awards, meaning grants that agencies choose to award through a competitive process. Block grants, formula grants, and disaster recovery grants are expressly excluded.
What this means for your organization: Awards that were considered stable could be paused or terminated due to changing federal priorities. Strong internal documentation, real-time tracking of obligations and expenditures, and clean closeout procedures are now risk-management tools organizations should have in their toolboxes. Grant management systems that make it easy to document deliverables, obligations, and financial activity throughout the performance period will help process termination cost claims and demonstrate compliance.
2. Fixed Amount Awards Would Generally Be Prohibited
The proposed rule would generally prohibit fixed amount awards and fixed amount subawards, unless expressly authorized by statute or an agency-specific exception. OMB’s rationale is that under fixed amount awards, there is no routine monitoring of actual costs incurred and no financial reporting required, which limits transparency and oversight. Note that some agency-specific exceptions would remain. The State Department, for example, would retain the ability to use fixed amount awards for certain Foreign Assistance and Public Diplomacy programs.
The proposed rule specifies that existing fixed amount awards issued before a final rule takes effect would not be affected.
What this means for your organization: if any of your programs or subaward structures currently use fixed amount arrangements, you would need to transition to standard reimbursement or advance payment structures with full financial reporting requirements. Plan for the administrative capacity increase that comes with that change.
3. New National Policy Conditions Would Be Embedded in Every Award
The proposed rule would add three programmatic restrictions that recipients must comply with as a condition of receiving federal funds:
- No use of funds for DEI or DEIA policies or practices that violate federal anti-discrimination laws, including racial preferences in employment or program participation.
- No use of funds to promote “gender ideology” as defined in Executive Order 14168.
- No use of funds for gender transition procedures for minors.
A related provision (§200.218) would also prohibit use of award funds to promote or support theories of disparate-impact liability.
These would be incorporated into every new federal award through terms and conditions, and noncompliance would constitute a material breach justifying termination and fund recovery.
What this means for your organization: Grant-funded programs, services, and related internal practices would need to be reviewed against these conditions. The compliance risk is most pronounced for organizations with broad human services, public health, education, or workforce development missions where program design and participant services may intersect with these restrictions.
4. Senior Political Appointees Would Review Every Discretionary Award Before It’s Issued
The proposed revision to §200.205 would require federal agencies to conduct a “pre-issuance review” of all discretionary award proposals by senior political appointees before awards are made. These reviewers would be expected to use independent judgment (not just ratify staff or peer review recommendations) and to apply specific principles, including whether the award “demonstrably advances the President’s policy priorities.”
The pre-issuance review would also introduce a merit-based preference for institutions with lower indirect cost rates. The rule would not change the indirect cost rate-setting system itself, but this preference language could influence award decisions at the margin. The rule would also direct agencies to “prioritize institutions demonstrating rigorous and reproducible scholarship over historical reputation or perceived prestige.”
What this means for your organization: Political review of discretionary awards would become a formal part of the award process. Proposals should be reviewed not just for programmatic merit but for alignment with current administration priorities. Application narratives, framing, and any language that could read as DEI-adjacent would warrant closer attention than before.
5. Subaward Monitoring, Reporting, and Payment Requirements Would Tighten
Several proposed changes would increase day-to-day obligations for pass-through entities and all recipients:
- Recipients would need to confirm in performance reports that all subawards issued during the reporting period have been reported to SAM.gov. Failure to report subawards could constitute grounds for termination.
- Payment requests would need to include a brief written justification that describes the purpose of the payment and the award-related work it supports.
- States would be required to conduct prepayment verification checks through Treasury’s Do Not Pay (DNP) system or an equivalent before disbursing federal funds to verify payee eligibility and prevent improper payments. Federal agencies would similarly be required to run Do Not Pay checks before making disbursements to recipients.
- Payments to affiliates, subsidiaries, and related entities would need to go through the formal subrecipient vs. contractor determination process. They could no longer be treated as internal transfers exempt from classification and reporting.
- Pass-through entities would need to ensure subrecipients “do not take actions that could significantly damage the reputation of the pass-through entity, the Federal agency, or the Federal Government.”
What this means for your organization: Subaward management and payment documentation processes would need to be formalized. Grant management systems with strong subaward tracking, payment justification, and SAM.gov reporting capabilities would make compliance more manageable.
6. E-Verify Participation Would be Required for All Recipients
The proposed rule would add a new internal controls requirement (§200.303(f)) mandating that all recipients and subrecipients participate in the Department of Homeland Security’s (DHS) E-Verify program to confirm the employment eligibility of employees and contractors hired or performing work in the United States under a federal award. This would extend a requirement that has applied to federal contractors for over 15 years into the grant context.
Final Non-Confirmation notices through E-Verify would also need to be reported to the awarding agency.
What this means for your organization: If your organization does not already use E-Verify, implementation needs to be on your planning horizon before October 1, 2026.
7. Applicant Risk Reviews Would Expand
The proposed rule would revise §200.206(b)(2) to give agencies more factors to consider when deciding whether an applicant presents a low or high risk before awarding funding. In addition to existing factors such as financial stability and prior performance, agencies would be able to consider:
- An applicant’s financial capacity to manage high-dollar awards, specifically, not just overall financial stability.
- An applicant’s history of questionable practices based on publicly available and verifiable information, including plagiarism, discredited or non-replicable studies, or activities inconsistent with federal civil rights laws.
- An applicant’s affiliation with organizations engaged in activities that violate federal law, undermine public safety or national security, or advocate for the overthrow of the U.S. government.
- An applicant’s compliance with foreign gift and contract disclosure requirements under section 117 of the Higher Education Act.
What this means for your organization: The risk review process would become more expansive, with agencies given additional factors to consider when evaluating applicants. Organizations with complex affiliate structures, international partnerships, foreign funding relationships, or recent compliance findings may want to review how these factors could be assessed during agency risk reviews.
Proposed Changes to Reduce Recipient Burden
OMB cites reducing recipient burden as one of the three primary objectives of this rulemaking. Several provisions reflect that goal:
Multi-year awards would be encouraged. The proposed rule would add language at §200.202(f) encouraging agencies to design programs as multi-year awards with budget periods longer than one year, rather than requiring annual re-competition.
NOFO standards would get clearer. The proposed revision to §200.204 would push agencies toward shorter, more readable funding announcements, including a 500-word executive summary requirement, mandatory posting to Grants.gov, and the option to use Statements of Interest as a pre-screening step before full proposals are required.
Funding opportunity availability windows would expand. The rule would encourage a minimum 60-day posting period (compared to the current 30-day floor), giving applicants more time to prepare competitive applications.
Other Proposed Changes to Watch
A few additional provisions for grant managers to consider:
Conflicts of interest disclosure. The proposed rule would require recipients and subrecipients to disclose whether any employees who worked on an application or will support the resulting award were employed by the awarding agency within the preceding two years. This is informational only, as it wouldn’t automatically create a conflict, but it adds a new disclosure obligation to the application process.
Advertising and outreach costs would become more restricted. The proposed rule would make most advertising and public relations costs unallowable by default, with limited exceptions for procurement-related advertising, program outreach expressly required by the award, and scrap/surplus disposal. Organizations that routinely charge program communications or outreach costs to federal awards should review whether those activities would still qualify.
Conference attendance costs would require prior approval from the agency. Under the proposed rule, costs for attending conferences would be allowable only if participation is expressly permitted by the awarding agency and included in the award’s terms and conditions.
Membership and subscription costs would tighten. Membership costs would be allowable only if necessary to fulfill award requirements and would require prior written agency approval. Subscriptions to professional periodicals would be unallowable entirely.
Voter registration and issue advocacy costs would be expressly prohibited. Federal funds could not be used for voter registration drives or for issue advocacy unrelated to the award’s express objectives.
The Comment Period
OMB is accepting comments through July 13, 2026, via regulations.gov (docket OMB-2026-0034).
If your organization receives federal funding, you may want to review the proposed changes in more detail and determine if any provisions would create operational, administrative, or compliance challenges for your jurisdiction.
When submitting comments, OMB asks that you begin each comment with the relevant section number in brackets. For example, [200.340] for the termination provisions or [200.303] for E-Verify.
What to Do Now
The proposed effective date of October 1, 2026, is three months after the close of the comment period, with a final rule still to be issued. However, your organization doesn’t need to wait for a final rule to begin assessing potential impacts.
Assess whether your current grants management system or processes can support the proposed documentation, payment justification, subaward tracking, and SAM.gov reporting requirements and identify any gaps before the effective date.
Review your current award portfolio for fixed amount awards or subaward structures that would require changes.
Assess your programs and activities for potential compliance gaps under the new national policy conditions, especially if you manage human services, workforce development, public health, or education programs.
Implement or confirm E-Verify participation before the rule takes effect.
Audit your subaward tracking and SAM.gov reporting practices. Regardless of whether this rule is finalized as proposed, these requirements reflect enforcement trends already underway.
Review your applicant profiles for any factors that could come up in an expanded risk review, including affiliate structures, international relationships, and recent audit findings.
Submit comments on provisions that would create operational challenges for your organization.
The comment period closes July 13, 2026, at regulations.gov, docket OMB-2026-0034.
