OMB Proposes Sweeping Changes to Federal Grant Regulations

In a proposed rule issued on May 29, 2026, the Office of Management & Budget (OMB) issued a proposed rule that would significantly revise OMB’s “Guidance for Federal Financial Assistance,” codified in title 2, subtitle A of the Code of Federal Regulations. The “Uniform Guidance,” as it is known, is the federal government’s rulebook for the award and management of federal financial assistance agreements, such as grants and cooperative agreements. According to OMB, the revisions to the Uniform Guidance are intended to “(1) improve transparency, accountability, and oversight for use of Federal taxpayer dollars; (2) clarify the status of OMB’s policies and requirements set forth in 2 CFR regulatory text as an OMB regulation; and (3) reduce recipient burden.”

Regarding the first goal, OMB proposes stronger pre-award controls for federal financial assistance, including senior-level merit review requirements before funding decisions are finalized. It also introduces new expectations around payment justification, meaning recipients may need to explain why funds are being drawn down—not just how they were spent after the fact. Perhaps most notably, the rule expands agencies’ ability to terminate awards for convenience, even absent traditional noncompliance by recipients. With these changes, federal agencies will have more tools to actively manage and redirect funding throughout the lifecycle of an award.

Through the proposed rule, OMB also seeks to eliminate any lingering ambiguity about the legal effect of the Uniform Guidance by reframing it as a formal “Uniform Grants Regulation.” The proposed rule reinforces that the provisions found in 2 CFR Subtitle A articulate binding government-wide requirements, not flexible guidance that agencies can interpret independently. For recipients, this should reduce inconsistencies between agencies making awards of federal financial assistance—but it also means less room for negotiation or alternative interpretations of the governing rules.

Finally, the proposed rule also includes changes aimed at reducing administrative burden on recipients of federal financial assistance. For example, the proposed regulation encourages the use of multi-year assistance awards, “thereby reducing the frequency of applications”; emphasizes the importance of drafting notices of funding opportunities (NOFOs) “in plain language so that completing the application generally does not require the applicant to employ technical or legal experts”; and provides for the submission of “statements of interest,” a shorter pre-application used for initial screening, for NOFOs where many proposals are expected.

However, the proposed rule adds regulatory burdens as well. For example, it requires all recipients and subrecipients to participate in the Department of Homeland Security’s E-Verify Program for confirming employment eligibility.

For the federal grant community, the takeaway is straightforward: applying for grants and other forms of financial assistance may get easier—but managing them will require greater discipline, documentation, and responsiveness to increased federal oversight (at least in certain areas).