OMB’s Overhaul of Federal Uniform Guidance: Key Proposed Changes to Grant Rules

BACKGROUND

Last week, the Office of Management and Budget (OMB) released a 412-page proposed rule to revise the federal government’s grant management framework under 2 CFR (Uniform Guidance). This proposed rule formalizes several executive orders that have been introduced since the beginning of the second Trump administration, including “Improving Oversight of Federal Grantmaking.” These executive orders demonstrate the administration’s interest in expanding agency authority for federal grantmaking. In the last year, the Trump administration has instituted restrictions on the use of federal funds that do not align with policy priorities and canceled awards due to a “shift in agency interests”. Many of these suggested rules were rejected by the courts, forcing federal agencies to restore the federal awards or requiring justification for canceled awards. This rule provides another avenue to expand agency authority over the implementation of federal funding opportunities. Likely, by formalizing the rule through OMB, the administration hopes to protect these changes against upcoming legal challenges.  

The proposed rule positions these changes as necessary to realign awards with statutory purposes and “basic American principles of equality and equal opportunity,” while also reducing certain recipient burdens. Although details may change after the comment period, OMB clearly signals an intent to finalize many of these reforms later this year. 

KEY CHANGES

1. New Restrictions on Use of Federal Funds

The proposal introduces new limitations on how federal funds may be used. Funds cannot be used for DEI-related programming, certain “gender ideology” related activities, voter registration efforts, political advocacy, fundraising or lobbying. 

2. Elimination of Fixed-Amount Awards

OMB proposes removing fixed-amount grants and subawards in most cases. Limited exceptions may apply only where specifically required by statute. Instead, fixed amounts will be replaced by cost-reimbursement models where recipients must track and document actual expenses and justify costs as allowable.  

3. Expanded Compliance and Oversight Requirements

Senior leadership at federal agencies can terminate awards and suspend or modify funding. These appointees will now be required to conduct a “pre-issuance” review of every discretionary grant before it is awarded. Additionally, federal agencies can terminate or suspend awards based on: 

• • Mandatory use of E-Verify for employees working on federally funded projects, recipients and subrecipients of federal funds 

  • Required “Do Not Pay” checks prior to disbursing funds 

  • Enhanced reporting on subawards, affiliates, and funding flows 

4. Broader Federal Authority to Terminate Awards

The rule establishes new compliance requirements, including: 

• • Alignment with agency priorities 

  • National interest considerations 

  • Reputational or performance risks 

Under this new rule, agencies can terminate projects even when the recipient is technically compliant, but the project no longer aligns with policy direction or priorities.

5. New Limits on Foreign Participation

The proposal introduces stricter controls on foreign entities receiving federal R&D funding and the use of equipment or technologies from high-risk countries. 

6. Standardization Across Federal Agencies

The rule formalizes Uniform Guidance as a binding government-wide regulation, requiring agencies to adopt OMB changes automatically. Agencies no longer have the flexibility in adopting OMB guidance. 

7. Streamlining of Grant Applications

The rule encourages multi-year awards to reduce the frequency of applications and awards generated each year. Additionally, the rule requires mandatory posting of grant opportunities on grants.gov, a 500-word cap on executive summaries, and the use of “Statements of Interest.” 

WHAT TO WATCH NEXT

The proposed revisions to the Uniform Guidance formalize changes already introduced to the federal grants landscape. This proposed rule would increase restrictions on grantees and ensure uniformity across agencies. Currently, the rule is the proposal stage. Stakeholders can submit comments through the end of the comment period by July 13. The White House is also expected to release accompanying directives as the rules move to final implementation, scheduled for October 1. Be on the lookout for any other specific agency changes or guidance. Continue to monitor the Federal Register for any changes to the rule following the comment period.