Executive Summary
On May 29, 2026, the Office of Management and Budget (OMB) issued proposed revisions to the Uniform Guidance governing federal financial assistance. If finalized, these changes would represent the most significant overhaul of federal grant administration since the comprehensive revisions issued in 2024.
The proposal would expand federal oversight authority, introduce new compliance requirements for recipients and subrecipients, impose restrictions on certain federally funded activities, and increase monitoring responsibilities for pass-through entities. While the proposal is not yet final, nonprofit organizations that receive federal funding should begin evaluating the potential impact on their grant management, compliance, and internal control processes. The public comment period is currently scheduled to close on July 13, 2026.
Key Proposed Changes
1. Expanded Authority to Terminate Federal Awards
Proposed Section: §200.340
Under current Uniform Guidance, federal awards generally may be terminated for noncompliance, by mutual agreement, or under specific award conditions.
The proposed rule would permit federal agencies and pass-through entities to terminate awards when they determine that continued funding no longer serves program goals, agency priorities, or the national interest.
What This May Mean for Your Organization:
- Increased uncertainty regarding continuation of federal awards
- Potential effects on long-term program planning and staffing decisions
2. New Restrictions on Certain Activities Funded with Federal Awards
Proposed Section: §200.300
OMB proposes several new restrictions governing how federal funds may be used.
Among other provisions, recipients would be prohibited from using federal funds to:
- Support activities that violate federal anti-discrimination laws
- Fund illegal diversity, equity and inclusion (DEI) initiatives that conflict with federal policy
- Support specified gender ideology or gender-transition-related activities involving minors
What This May Mean for Your Organization:
- Organizations may need to review federally funded programs, training activities, communications, and subawards
- Additional compliance monitoring and documentation may be necessary
- Legal review may be warranted for organizations operating programs in affected areas
3. New E-Verify Requirement
Proposed Section: §200.303(f)
Recipients and subrecipients would be required to participate in the Department of Homeland Security’s E-Verify program for employees and contractors performing work under federal awards within the United States.
What This May Mean for Your Organization:
- New human resources compliance requirements
- Additional onboarding procedures
- Expanded monitoring responsibilities for subrecipients and contractors
4. Additional Payment Documentation Requirements
Proposed Section: §200.305(c)
The proposal would require non-state recipients and subrecipients to provide written support for every request for federal funds, whether the request is for an advance payment or reimbursement of expenditures. Implementation would occur as federal payment systems are updated to accommodate this requirement.
What This May Mean for Your Organization:
- Additional documentation requirements before drawdowns
- Increased administrative burden for finance departments
- Potential modifications to grant accounting procedures
5. Expanded Subrecipient Monitoring Requirements
Proposed Sections: §200.331, §200.332, §200.329
The proposal expands pass-through entity responsibilities. New requirements would include:
- Federal agencies and pass-through entities would be authorized to conduct virtual or on-site monitoring visits
- Federal agencies would oversee recipient compliance with SAM.gov subaward reporting requirements
- Pass-through entities would be required to classify all downstream payments as subawards or contracts, including payments to affiliates and related organizations
- Pass-through entities would be required to verify that subrecipients comply with Single Audit requirements
- Pass-through entities would be required to review subrecipient audit results, site visits, and monitoring findings
- Pass-through entities would be expected to take corrective or enforcement action when subrecipients are not in compliance
What This May Mean for Your Organization:
- Increased monitoring and oversight by federal agencies and pass-through entities
- Greater focus on compliance with SAM.gov reporting requirements
- Increased responsibility for addressing subrecipient noncompliance
6. Enhanced Pre-Award Review Process
Proposed Section: §200.205 and §200.206
OMB proposes expanded federal review requirements for discretionary awards, including review by senior agency officials. Award decisions would consider:
- Requires pre-award review to ensure awards align with federal priorities and the national interest consider of history of compliance concerns and affiliations with organizations engaged in activities deemed inconsistent with federal law or policy
- Requires discretionary awards to support applicable Administration priorities.
- Prohibits funding for certain activities that conflict with federal policy requirements including those identified as conflicting with federal anti-discrimination, immigration, public safety, or other federal policy objectives.
- Preference may be given to applicants with lower indirect cost rates when all other factors are substantially equal
- Encourages awards to be distributed across a broader range of recipients.
What This May Mean for Your Organization:
- Longer award processing timelines
- Greater scrutiny of applications
- Increased emphasis on demonstrating alignment with agency priorities, strong governance and compliance
- Organizations may wish to evaluate whether partnerships, affiliations, or public activities could affect their competitiveness for discretionary federal funding.
- Grant applications may require increased attention to documenting compliance with federal laws and policy requirements.
7. Elimination of Fixed Amount Awards and Subawards
Proposed Sections: §200.201 and 200.333
The proposal would generally eliminate fixed amount awards and fixed amount subawards unless specifically authorized by statute.
What This May Mean for Your Organization:
- Greater reliance on cost reimbursement arrangements
- Increased documentation requirements
- Potential reduction in administrative flexibility
8. Record Retention and Documentation Requirements
Proposed Section: §200.334
The proposal retains the existing three-year record retention requirement, clarifies that the retention period begins upon submission of the final financial report and limits the ability of federal agencies and pass-through entities to impose additional record retention requirements, except in specified circumstances.
What This May Mean for Your Organization:
- Policies and procedures may need to be updated to reflect the clarified retention requirements if the proposal is finalized.
9. Cost Principle Revisions
Proposed Sections: §200.421, 200.429, 200.430, 200.432, 200.454 and related sections
OMB proposes several changes to cost allowability provisions, including:
- Additional restrictions on advertising and public relations costs
- Explicit treatment of commencement and convocation costs as unallowable
- Reinforces the need to document the reasonableness of compensation charged to Federal awards, including compensation paid to key personnel and their immediate family members
- Limits the allowability of conference costs to conferences that are expressly approved by the Federal agency and included in the terms and conditions of the Federal award
- Requires prior Federal agency approval for membership costs necessary to fulfill award requirements, while prohibiting costs for subscriptions and memberships in social, lobbying, or issue advocacy organizations
- Additional compliance requirements tied to allowability determinations
What This May Mean for Your Organization:
- Additional documentation supporting allowability
- Policies and procedures may need to be updated to address revised cost allowability requirements
- Internal monitoring procedures may need to be strengthened to reduce the risk of questioned costs
Conclusion
The proposed revisions reflect a significant shift toward increased federal oversight, expanded compliance requirements, and greater accountability for recipients and subrecipients of federal financial assistance. Organizations receiving federal funds should closely monitor the rulemaking process and begin evaluating potential operational and compliance implications.
