Executive Summary

On May 29, 2026, the Office of Management and Budget (OMB) published a proposed rule (Regulation for Federal Financial Assistance, 91 Fed. Reg. 32,198 (May 29, 2026)), that would significantly revise 2 C.F.R. Part 200, the Guidance for Federal Financial Assistance (also known as the “Uniform Guidance”), which governs federal grants, cooperative agreements and other forms of financial assistance. The proposed rule implements changes, in part, pursuant to Executive Order 14332, Improving Oversight of Federal Grantmaking, 90 Fed. Reg. 38,929 (Aug. 7, 2025). Notable proposed changes include, but are not limited to:

• Changing the purpose and effect of the Uniform Guidance by stating that it is a regulation and not guidance, and renaming the Uniform Guidance to the Uniform Grants Regulation (UGR), thereby effectively eliminating agency interpretation and implementation;

• Requiring that senior political appointees review discretionary grant proposals for consistency with the “President’s policy priorities” prior to approving funding;

• Prohibiting federal funds to be used in collaboration with countries of concern and “foreign adversaries,” including entities owned or controlled by such countries;
• Prohibiting the use of federal funds for certain gender-related services for minors, diversity, equity and inclusion (DEI)-related initiatives, and other programs deemed inconsistent with administration priorities; and
• Expanding the grounds for agency termination of federal financial assistance awards and allowing agencies to suspend any awards for up to 90 days if the agency (or pass-through entity) determines suspension to be in its best interest.

Collectively, these proposed changes represent the most substantial revision to 2 C.F.R. Part 200 since OMB first promulgated the Uniform Guidance in 2013. Comments on the proposed rule are due July 13, 2026.

Rationale for the Proposed Rule

OMB frames the proposed rule around three primary objectives. The first is to improve transparency, accountability, and oversight for the use of federal funds. OMB states that awards have not always aligned with the core purposes authorized by law or served the interests of the American public, citing awards that “promote a woke policy agenda,” resulting in wasted resources, and undermining public trust in government. The second is to clarify the regulatory structure and establish that the Uniform Guidance is a binding OMB regulation rather than mere guidance thereby resulting in uniform regulations across each agency and eliminating the need for each agency to go through the rulemaking process every time the OMB requirements are amended. The third is to reduce recipient burden. By eliminating DEI mandates and other “unnecessary add-on requirements,” OMB argues that recipients would be able to focus instead on “efficient project delivery.”

Why This Matters

The proposed rule would make sweeping changes across the federal financial assistance framework and affect both current and future federal financial assistance recipients. The following are some key takeaways.

The Uniform Grants Regulation as OMB Regulation

As it currently exists, the Uniform Guidance unambiguously states that 2 C.F.R. Part 200 is “guidance to Federal agencies on government-wide policies for the award and administration of Federal financial assistance” and that its inclusion in the C.F.R. does not change its nature from guidance to regulation. 2 C.F.R. §§ 1.100, 1.105. In the current text, OMB has stated that it provides the Uniform Guidance to Federal agencies to “help[] ensure consistent and uniform government-wide policies and procedures for the management of the agencies’ Federal financial assistance.” Id. at § 1.200.  Agencies then are tasked with implementing the guidance in agency regulations in subtitle B of 2 C.F.R., and in agency guidance, policy documents, procedural issuances and other documents.

The proposed rule significantly enhances OMB’s regulatory power by declaring that the UGR is regulation rather than guidance, and that it is binding upon grantees and agencies for new awards issued after the effective date of OMB's amendments. OMB states that this framework eliminates the lengthy notice-and-comment rulemaking process for each agency and ensures uniformity across the agencies. The preamble explains the resulting agency role as more limited, stating that “[a]gencies may still undertake such rulemakings as appropriate to make adjustments in their own chapters, but will not be required to in the case of every OMB amendment.” Further, the preamble states that agencies may remain engaged in OMB’s regulatory process via participation in interagency working groups and the interagency review processes.

This shift raises questions regarding OMB’s asserted authority—not only whether OMB can supersede agency rulemaking, but whether the scope of activities that OMB is regulating extends beyond oversight of financial and general management matters as is authorized by statute.¹  For example,²  arguably, some of the proposed provisions—such as the new provision on discriminatory event services (discussed below)—could fall outside the scope of that authority.

Elimination of Fixed Amount Awards

Section 200.201 of the proposed rule would eliminate fixed amount awards and subawards unless authorized by federal statute, on the grounds that such awards do not require routine monitoring of costs incurred or financial reporting.

Heightened Oversight of Award Decisions

Section 200.205 would require federal agencies to incorporate a new merit review process into notices of funding opportunities. Political appointees will be required to review all discretionary³ federal award proposals selected for funding to ensure that they are consistent with applicable law, agency priorities, and the national interest, including ensuring that discretionary awards do not fund racial preferences, gender ideology, illegal immigration, or initiatives that compromise public safety or promote “anti-American values,” which remains undefined. The proposed rule further notes that programs that do not align with the current administration’s priorities could be denied funding at the outset during the pre-issuance review or terminated midstream at the agency’s discretion.

The proposed rule also specifies that peer review remains advisory and does not replace agency discretion, and that agencies are not required to issue awards solely as a result of publishing a notice of funding opportunity. This is a major departure from certain discretionary grant programs that have historically been selected through peer review, including grants for research, science and education.

Additionally, under the proposed rule section 200.206, agencies may consider several factors when evaluating the risks posed by applicants before issuing federal awards, such as: an applicant's history of “questionable practices” including plagiarism, publication of discredited or non-replicable studies, engaging in unlawful discrimination or in activities or initiatives that are inconsistent with religious liberty laws; membership in or affiliation with organizations engaged in activities that violate federal law, undermine public safety or national security, or advocate for the overthrow of the United States Government;  and compliance with foreign gift and contract disclosure requirements under section 117 of the Higher Education Act of 1965 (Pub. L. 89-329, as amended, codified at 20 U.S.C. section 1011f). Some of these factors may interact with other proposed changes; for example, noncompliance with section 200.219’s viewpoint-neutrality requirement for event services (further discussed below) may become relevant to an agency’s assessment of applicant risk in future funding applications under the new factor addressing religious liberty laws.

Increased Termination and Suspension Risk

Section 200.340 would broaden government‑wide authority to terminate or suspend federal awards “in the interest of the agency,” or if an award does not “effectuate program goals, federal agency priorities, or the national interest.” The proposed rule represents a change in practice, shifting discretionary termination from a clause that agencies may include in financial assistance awards to a central, government‑wide standard that prevails over non‑statutory agency rules, broadens the standard to include actions “in the interest of the agency” and is backed by Executive Order 14332.⁴ 

The proposed rule appears designed to enable the government to prevail in legal challenges of award terminations. Not only does section 200.340 give the government broad discretion to terminate for convenience, but section 200.341 requires agencies to provide “[a] brief summary of the reason or reasons for finding that termination is in the interest of the Federal agency or pass-through entity,” while specifying that “[t]he reason or reasons may apply to an individual award or class of awards” and that “[t]he Federal agency or pass-through entity is not required to provide a detailed or exhaustive analysis.” Further, under proposed section 200.342, agencies would not be required to provide objection, hearing or appeal rights for discretionary terminations—only for terminations based on noncompliance.⁵ 

The proposed rule could make multi‑year grant revenue less predictable and may push recipients to treat grants more like Federal Acquisition Regulation (FAR) contracts: planning for early termination, exercising caution with long‑term hiring and capital commitments, and tightening documentation around obligations and cost mitigation.

Section 200.340(e) also provides for temporary suspension of federal awards for up to 90 days if the agency or a pass-through entity determines that suspension is in the interest of the agency or entity. This allows agencies to issue written “stop-work” orders and pause grants for up to 90 days, which can only be extended by mutual agreement between the agency and the recipient. There is no definition included in the proposed rule or in statute for “in the interest of the agency or pass-through entity,” so it is entirely up to the agency’s interpretation. The proposed rule does not require the agency to provide a stated reason that aligns with the interest of the agency or pass-through entity, so if a “stop-work” order is issued, recipients may lack clarity on why.

Prohibitions on Certain Social Policies

OMB proposes several new sections to 2 C.F.R. Part 200 that would prohibit the use of federal funds for certain social policies that are inconsistent with federal law, Executive Branch policy, or the national interest.

• Section 200.218 Disparate-Impact Liability. Prohibits federal awards from being used to “promote or support theories of disparate-impact liability” based on federally protected characteristics such as race, age, or sex. While the scope of prohibited activities is not entirely clear, the revised text states in part that federal funds cannot be used “in support of disparate-impact studies,” which raises the question of whether scientific research studying health disparities across different groups based on age, race or sex would be prohibited. The proposed rule would provide an exception for internal statistical or demographic analysis as long as recipients or subrecipients do not use federal funds to conduct the analysis nor are the results of the analysis used in connection with the federal award.
• Section 200.219 Discriminatory Event Services. Prohibits public entity recipients and subrecipients from discriminating on the basis of viewpoint, content, or subject matter of speech in providing event services, including political, ideological or religious affiliation.  This prohibition applies to events that occur on the public entity’s property or facilities regardless of whether the event is funded by federal funds. The prohibition applies to non-public entities to the extent that the event is funded by federal funds.
• Section 200.220 Covered Foreign Collaborations. Prohibits the use of federal funds for bilateral or multilateral collaborations with covered foreign countries or covered foreign entities, including any programs or activities where federal funds are used for direct programmatic activities, research, technical assistance, travel, or allocable indirect costs. This would be a major expansion with significant implications for university research and international scientific cooperation. “Covered foreign countries” are not explicitly identified, but rather identified as those designated by statute, Executive Order, or other federal law as: (i) A foreign adversary; (ii) A country of particular concern; or (iii) A country subject to sanctions or restrictions relating to national security, defense or intelligence activities. “Covered foreign entities” are defined as: (i) An entity owned or controlled by, or acting on behalf of, a covered foreign country; (ii) An entity identified as an “entity of particular concern” on a list maintained by a federal agency pursuant to statute (including lists maintained under a National Defense Authorization Act or the International Emergency Economic Powers Act); or (iii) An entity affiliated with the military, intelligence, or security services of a covered foreign country. 
• Section 200.300 National Policy Requirements. Prohibits federal awards from being used to fund, promote, encourage, subsidize or facilitate: (1) unlawful DEI or diversity, equity, inclusion and accessibility (DEIA) policies; (2) gender ideology, as defined in Executive Order 14168; or (3) the "transition" of a child under 19. The proposed rule also prohibits discrimination against faith-based organizations and states those organizations “are eligible to apply for federal financial assistance on the same basis as any other eligible organization.”
• Section 200.477 Abortion. Costs associated with elective abortions are unallowable unless expressly authorized by federal law. Express abortion-related funding restrictions already appear in certain program-specific regulations, but not as a standalone cost principle in the Uniform Guidance. The proposed rule would add a cost principle making costs associated with elective abortions unallowable under federal financial assistance awards, except as expressly authorized by federal law.

New Rules on Immigrant Status

Proposed changes to section 200.303 would require grant recipients and subrecipients to verify that all individuals working under a federal award are authorized to work in the U.S. Recipients would need to comply with all requirements of the Department of Homeland Security’s E-Verify program. If a recipient discovers through E-Verify that a person working on a grant is not authorized to work in the U.S., the recipient must submit that information to the federal agency or pass-through entity. Failure to provide notice or take appropriate action may result in termination of the federal award. The rule also would strengthen flow-down requirements, including mandatory reporting on SAM.gov and new obligations for pass-through entities to ensure subrecipients comply with the rule’s policy restrictions.

New Priorities for Program Planning and Design

Section 200.202 of the proposed rule would require federal program funds to be spent only on public purposes authorized by law and would prohibit using them for unrelated political activities such as political advocacy, lobbying or any attempt to influence legislation, elections or government officials. The proposed rule emphasizes avoiding “even the appearance of supporting such prohibited activities.”

For research and development awards, the rule would require that awards be made to entities organized under the laws of the U.S., a State, or a Tribal government and establish a “domestic-first framework,” where international elements⁶ would be allowed only if the agency determines that they are justified, consistent with program objectives, and in the national interest of the U.S.

The proposed rule also would encourage agencies to design multiyear awards with budget periods longer than one year, reducing the need for annual re-competition and providing greater funding stability for recipients.

Indirect Cost Rates

The proposed rule does not place a cap on indirect cost rates, as the administration previously sought to do⁷, but gives preference for discretionary awards to applicants with lower indirect cost rates during the pre-issuance review process, all else being equal. OMB may consider issuing a request for information on indirect rates in the future, but the agency is not accepting comments on this topic in this rulemaking.

Domestic Preference

Section 200.322 would require agencies, to the greatest extent practicable, to include terms and conditions in federal financial assistance awards to maximize the use of goods, products and materials produced in the United States. The change seems to depart from the current requirement in 2 C.F.R. Part 184, which contains an aspirational statement encouraging recipients of financial assistance to use domestic products in federally funded projects. However, it remains unclear whether agencies will attempt to impose domestic content requirements on non-infrastructure projects without a legal mandate to do so.

Electronic Records Storage

Changes to section 200.366 state that recipients and subrecipients “are strongly encouraged to utilize domestic storage capabilities for electronic records.”

Federal Payment

Section 200.305 would require Treasury Do Not Pay verification and non-state recipients to provide written justification for each payment request that includes information on the activities or aspects of the federal award that correspond to the payment request. The proposed rule states that examples of the activities include “project milestones, project activities, administrative activities, or other requirements that must be completed under the Federal award.” This change would substantially increase the administrative burden on grant recipients.

Subrecipient and Contractor Determinations

Section 200.311 proposes that pass-through entities cannot avoid subrecipient flow-down requirements by characterizing payments of federal funds to affiliates, subsidiaries or other related but legally distinct entities as internal transfers. This change would likely require formal intra-institutional subawards between entities in the same entity family.

10-Day Timeline for Mandatory Disclosures

Section 200.113 would require agency Office of Inspector General (OIG) to transmit disclosures involving fraud, conflicts of interest, bribery, gratuity violations or False Claims Act to the U.S. Attorney’s Office for D.C. within ten days of receipt by the OIG.

Remedies for Noncompliance

Section 200.339(b) would permit, but not require, federal agencies to cooperate with individuals or organizations pursuing private causes of action or remedies based on recipient or subrecipient noncompliance.

New Conflict of Interest Disclosure

Section 200.112 would require that recipients disclose employees who were employed by the awarding agency in the last two years and worked on the application or will support the federal award. While such individuals do not necessarily have a conflict of interest (COI), OMB proposes gathering this information in order to enhance transparency and make it easier for agencies to assess whether a COI exists based on “recent employment relationships between agency staff and recipient personnel.”

Timeline

OMB’s goal is to issue final rules that are effective by October 1, 2026. Organizations that receive, administer or depend on federal financial assistance should assess the potential impact of these changes immediately. They should begin reviewing their current federal award portfolios and compliance infrastructure and consider whether to submit comments during the public comment period. The 45-day comment period, which closes on July 13, 2026, is relatively short for rulemaking of this magnitude.

¹  The Chief Financial Officers Act of 1990, Sec. 202 authorizes OMB officials to establish governmentwide financial and general management policies for executive agencies and perform specified financial and general management functions.

²  31 U.S.C. § 503; see also Chief Financial Officers Act of 1990, Pub. L. No. 101-576, 104 Stat. 2838.

³  Section 200.1 defines a discretionary award as “an award in which the Federal agency, in keeping with specific statutory authority that enables the agency to exercise judgment (‘discretion’), selects the recipient or the amount of Federal funding awarded through a competitive process or based on merit of proposals. A discretionary award may be selected on a non-competitive basis, as appropriate.”

⁴  Executive Order 14332, Improving Oversight of Federal Grantmaking, 90 Fed. Reg. 38,929 (Aug. 7, 2025) seeks to improve the process of federal grantmaking and directs OMB to revise the Uniform Guidance including to expand termination authority for awards that no longer serve program goals or national interests, and prohibit the use of federal funds for certain specified activities while prioritizing measurable outcomes and “Gold Standard Science.”

⁵  The new termination provision would apply to discretionary awards, but not to statutory entitlements, such as block grants or disaster recovery grants. OMB also proposes to allow agencies to suspend award activities for up to 90 days, modeled on the FAR's stop-work order provisions.

⁶  The proposed rule states that federal agencies should consider the following factors to determine whether to include an international element: “(i) The extent to which the proposed international element is necessary to achieve the scientific or technical objectives of the project and is integral to the scientific rationale of the program. (ii) The extent to which the international element provides access to unique expertise, facilities, data, study populations, environmental conditions, or other resources that are not reasonably available within the United States. (iii) The likelihood that the proposed international element will enhance the scientific enterprise of the United States, including through the development of new knowledge, methodologies, technologies, or collaborative networks that can be applied domestically. (iv) The adequacy of the facilities, equipment, personnel, and administrative capacity at the international site, or of any foreign entities that would perform work, to carry out the proposed scope of work under the Federal award at a level comparable to that of a domestic recipient performing similar activities.”

⁷  Previously, the National Institutes of Health, Department of Energy, National Science Foundation, and the Department of Defense sought to impose a 15% indirect cost rate cap.