Proposed Federal Grant Rules Could Reshape How Nonprofits Receive Public Funding

The Office of Management and Budget has proposed the most significant revision to the Uniform Guidance (2 CFR Part 200) since the framework was established in 2013. The rule governs how federal grants are awarded, administered, monitored, and closed out, which means it touches nearly every nonprofit, university, health system, and local government that receives federal dollars.

The proposal would expand agency authority to assess recipient risk and determine eligibility, give agencies broader discretion to suspend, terminate, or modify awards based on agency priorities or national interest determinations, incorporate executive branch policy on diversity, equity, and inclusion into compliance review, and add requirements related to employment verification and foreign affiliations. It would also streamline some administrative processes, including funding announcements and multi-year award management.

Supporters describe the changes as a “modernization effort” focused on accountability and alignment with federal priorities. Opponents, including many nonprofit associations and research institutions, argue the rule introduces political discretion into what has been a largely objective process, and creates real instability for organizations running multi-year programs.

The public comment period closed July 13 with more than 38,000 comments submitted. OMB is now reviewing them. Organizations should use this window to assess federal funding exposure, review major awards for vulnerability, evaluate compliance capacity, and brief boards on the risk.

Resources: United Philanthropy Forum, National Council of Nonprofits, and Council on Foundations have each compiled summaries of the proposed changes.