On May 29, 2026, the Office of Management and Budget (OMB) proposed revisions to Uniform Guidance that are more than a routine update to federal grant rules. If implemented, it would mark one of the biggest changes to federal financial assistance since the Uniform Guidance took effect in 2014.
Although much of the discussion has centered on specific regulatory changes, the proposed updates point to a broader shift: federal agencies want more flexibility, stronger oversight authority, and greater control over how federal funds are managed throughout the award lifecycle.
For recipients, subrecipients, and organizations that support federally funded programs, the proposed updates could indicate meaningful changes in both compliance expectations and funding risk.
1. From compliance oversight to strategic oversight
The current Uniform Guidance was built on a core goal: protecting taxpayer dollars while reducing administrative burden for recipients. Over the past decade, organizations have developed compliance programs centered on internal controls, cost allowability, audit readiness, and performance reporting. OMB’s proposed Uniform Grant Regulation (UGR) expands that framework.
Instead of evaluating organizations only on financial and administrative compliance, federal agencies would have greater authority to evaluate them based on organizational conduct, alignment with agency priorities, foreign ties, and other considerations linked to government goals.
Soon, success under federal awards may not only depend on meeting compliance requirements, but also on demonstrating alignment with evolving agency priorities and national interests.
The clarification of regulatory structure
Beyond the specific compliance and oversight changes, the proposed Uniform Grants Regulation (UGR) would also change how government-wide grant requirements are issued and applied. OMB would shift the Uniform Guidance from guidance to a government-wide regulation, clarifying that 2 CFR Subtitle A is binding across federal agencies. Future updates would be issued through a single OMB rulemaking process with one government-wide effective date, rather than being administered through separate agency rulemaking processes. This change reflects OMB’s broader effort to centralize grants policy, improve consistency across agencies, and expedite future reforms. For recipients, subrecipients, and pass-through entities, the implication is clear: changes may come faster, more uniformly, and with a greater need to monitor OMB developments proactively. This structural change also helps explain many of the other proposed revisions, making it an important part of the broader narrative.
The introduction of funding uncertainty
One of the UGR’s most significant changes is the expansion of agency authority to suspend, stop work on, or terminate awards. Historically, federal financial assistance awards were considered as relatively stable once awarded, as long as performance and compliance requirements were met. The proposed regulation challenges that assumption. Broader termination powers and temporary stop-work provisions introduce a level of uncertainty more commonly associated with federal contracting. Organizations may need to plan for funding interruptions even when no traditional noncompliance has occurred.
For executive leadership teams, that raises key questions:
- How reliant is the organization on federal funding?
- Which operations would be affected by a funding pause?
- Are staffing and subcontracting commitments aligned with that risk?
- What contingency plans are in place if an award is suspended or terminated?
Organizations that assess these risks now will likely be better prepared than those still operating under assumptions formed during the last decade of federal award performance under Uniform Guidance.
Removal of DEI-related activities
One of the most significant changes is the proposed updates to directly incorporate the policies of the current Administration prohibiting diversity, equity, and inclusion (DEI) activities. Under the proposed updates, federal financial assistance could not be used to fund, promote, encourage, subsidize, or support activities that the current Administration classifies as DEI initiatives, gender ideology programs, gender transition activities, or efforts tied to disparate-impact liability theories.
The ruling also reinforces federal civil rights requirements and stresses that recipients must administer federally funded activities in line with federal anti-discrimination laws. Organizations whose grant-funded programs include DEI-related elements could face major operational changes, including program redesign, budget revisions, and closer legal review.
In addition, alongside other federal initiatives, recipients may need to certify compliance with federal anti-discrimination laws and confirm that federally funded activities do not involve prohibited discriminatory practices.
Pass-through entities face higher expectations
For pass-through entities, the proposed UGR reinforces a trend that has been building for some time, greater accountability for subrecipient oversight.
Federal agencies continue to emphasize risk-based monitoring and performance management. The proposed framework suggests that pass-through entities are expected to act as active agents of federal funds, not merely administrators of subawards.
As a result, organizations may need to revisit:
- Subaward agreement language;
- Subaward reporting procedures;
- Subrecipient risk assessment methods;
- Monitoring practices and procedures; and
- Documentation and record retention standards.
The line between compliance monitoring and program oversight is likely to matter more over time. Pass-through entities that have a better understanding of subrecipient management today may be better positioned for future regulatory demands.
Elimination of fixed amount subawards
The proposed changes would eliminate fixed amount subawards, with OMB citing inconsistent implementation and weaker transparency and oversight than other award types. Under the current rule, fixed amount subawards are permitted with prior written approval from the federal agency. Pass-through entities who historically utilized fixed amount subawards as a means for minimizing the risk and administrative burden associated with subaward administration, now must implement risk assessment and monitoring procedures that are adequate for managing subawards issued on a cost-reimbursement basis. This expansion of responsibility can present challenges and risk of noncompliance if this shift is not appropriately planned for by pass-through entities.
Major revisions to cost principles
The proposed updates would narrow the scope of costs that may be charged to federal awards without prior agency approval, especially in areas tied to publication, public communications, events, and external engagement. For organizations that have long treated these expenses as routine award costs, the shift could require tighter budgeting controls.
Some of the most consequential changes would require prior approval for costs such as:
- Publication costs, including certain activities related to disseminating project results
- Conference expenses and related event costs
- Certain outreach, public communications, and engagement activities
- Fundraising-related costs and similar external-facing expenditures
- Other categories that many recipients have historically treated as allowable under existing guidance
The proposed updates would also treat certain advertising costs as unallowable unless specifically approved. In practice, that means recipients may need to revise budget assumptions, strengthen internal cost review procedures, and seek agency approval earlier in the award lifecycle before charging these expenses to federal funds.
2. Who is most affected
The proposed changes are especially significant for universities, research institutions, nonprofits, state and local governments, healthcare and education entities, and pass-through organizations responsible for subrecipient oversight. Contractors and vendors that support grant-funded work may also feel the effects as recipients tighten procurement controls, documentation standards, and approval requirements.
3. What organizations should do now
Even though the rule is still proposed, organizations do not need to wait to begin preparing. Practical next steps include:
- Reviewing your organization’s federal financial assistance environment, internal controls, and oversight practices;
- Reassessing subrecipient monitoring, documentation, and subaward terms;
- Evaluating exposure to funding interruption and concentration risk;
- Revisiting budgeting, cost approval, and procurement policies and procedures; and
- Monitoring OMB rulemaking and agency implementation closely.
Organizations that act early will be better positioned to adjust if the final rule preserves the proposal’s overall direction.
