OMB proposes major overhaul of federal grant regulations

The Office of Management and Budget (OMB) has released a proposed rule that would rewrite the government‑wide regulations governing federal grants, cooperative agreements and other financial assistance programs [2]. Published in the Federal Register on May 29, 2026, the proposal seeks to improve transparency, strengthen oversight and reduce the administrative burden on award recipients, while introducing a series of new compliance requirements [2].

Key takeaways

• The “Uniform Guidance” would be renamed the “Uniform Grants Regulation” and designated as an OMB regulation [2].
• Fixed‑amount awards and subawards would be eliminated to increase transparency [2].
• New prohibitions would bar federal funds from supporting DEI initiatives, “discriminatory event services,” and “covered foreign collaborations” with certain countries or entities [2].
• Recipients would face mandatory pre‑issuance review by senior political appointees and must participate in DHS’s E‑Verify and Treasury’s “Do Not Pay” systems [2].
• Streamlined funding notices, a 500‑word limit on executive summaries, and encouragement of multi‑year awards aim to cut applicant workload [2].

Renaming and restructuring the grant framework

The proposal rebrands the existing Uniform Guidance at 2 C.F.R. Part 200 as the “Uniform Grants Regulation” (UGR) and clarifies that the text of 2 C.F.R., subtitle A is an OMB regulation with its own regulatory effect [2]. This change is intended to solidify the rule’s authority and ensure a single set of government‑wide requirements applies to awards made in FY 2027 [2]. Alongside the renaming, the rule would expand OMB’s authority to terminate awards that no longer serve program goals or national interests, mirroring the Federal Acquisition Regulation’s termination‑for‑convenience provisions [2].

New compliance mandates and cost restrictions

Among the most consequential additions are prohibitions on using federal awards to fund, promote, encourage, subsidize, or facilitate diversity, equity and inclusion (DEI) policies, as well as bans on “discriminatory event services” provided by public entities [2]. The rule also extends the “Wolf Amendment” restrictions, prohibiting “covered foreign collaborations” with designated foreign countries or entities [2]. Recipients would be required to obtain senior‑level political approval before issuing discretionary awards, with reviewers applying principles that align awards with the President’s policy priorities [2]. Additional compliance steps include mandatory participation in the Department of Homeland Security’s E‑Verify program and use of Treasury’s “Do Not Pay” system for employee payments [2]. Cost controls would limit allowable expenses for advertising, public relations, publications, conferences and lobbying [2].

Why it matters

If finalized, the rule would reshape the legal status of the federal grant system, imposing new reporting, review and cost‑restriction obligations on thousands of grant‑making agencies and their recipients. The proposed effective date of October 1, 2026 is designed to align the new requirements with the start of FY 2027, ensuring a uniform regulatory baseline for all awards [2]. Stakeholders have until July 13, 2026 to submit comments, and the final rule could significantly affect how federal funds are allocated, monitored and spent across the government [2].