Another Administration, Another Rewrite: Proposed Changes to 2 CFR 200

On May 29, 2026, the Office of Management and Budget (OMB) published a proposed rule that would make significant revisions to 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly referred to as the Uniform Guidance). Part 200 is the government-wide framework governing federal financial assistance, including grants and cooperative agreements. Public comments are due July 13, 2026.

Although OMB frames the proposal around transparency, accountability, oversight, regulatory clarity, and reduced recipient burden, the proposed rule would go far beyond updating grant administration procedures. If finalized as drafted, it would give federal agencies broader authority to design, condition, review, fund, suspend, and terminate discretionary grants based on Executive Branch priorities that may not have been in place when the grant was posted, competed, or awarded.

For organizations that depend on federal funding, the question is not simply whether the rule creates new compliance requirements. The more immediate concern is whether it will change the fundamental assumptions recipients rely on when they apply for grants, build budgets, hire staff, enter subawards, and contract with partners. Additionally, the proposed regulations as written may significantly restrict organizational funding flexibilities and efficiencies by imposing new requirements and eliminating certain funding options.

I. A Government-Wide Rule

OMB proposes to clarify that Part 200 is an OMB regulation establishing standard, government-wide requirements, not merely guidance to be implemented agency by agency. OMB also proposes to rename the Uniform Guidance as the "Uniform Grants Regulation" and to replace references to "guidance" throughout the text.

That change would transform Part 200 into a tool for centralizing control over federal financial assistance across agencies. Future OMB amendments would automatically apply to federal agencies without the need for each agency to separately adopt Part 200.

II. More Executive Branch Control

The proposed rule would significantly increase the political influence of the Executive Branch over Congressionally-created and funded programs. Federal agencies would be required to design programs and select awards in a manner consistent not only with statutory purposes but also with agency priorities, Administration policies, and the "national interest." OMB also  proposes mandatory senior-level pre-award review of discretionary grants, including review led by senior political appointees.

That raises a basic separation-of-powers and grants-governance concern. Congress creates and funds grant programs, and agencies administer them. Agency discretion exists, but it exists within statutory limits.

Under the proposed rule, a program authorized by statute and funded by Congress could still be delayed, narrowed, restructured, or terminated if an agency’s political leadership concludes that the work no longer aligns with current administration priorities or view of what is in the national interest. Organizations that rely on discretionary federal grants may need to treat award stability, continuation funding, staffing commitments, and subrecipient obligations as substantially more vulnerable to political and policy shifts within traditionally stable five-year award cycles.

III. Discretionary Award Termination

The termination provisions are among the most consequential parts of the proposed rule. Proposed § 200.340 would clarify that agencies may terminate certain discretionary awards when an award no longer advances program goals, agency priorities, or the national interest, to the extent permitted by law. Agencies could also define additional grounds for termination.

The proposed changes undermine a traditionally reliable source of funding that allows recipients to budget, plan for, and scale longer-term projects. Under the proposed language, a recipient could comply with the statute, follow the award terms, carry out the approved project, and still face termination because the agency later determines that the award no longer aligns with its priorities. The proposal would codify this administration’s approach to non-continuing and terminating grants it deems to be out of step with current policy priorities, which is the subject of ongoing litigation. For organizations operating programs in schools, communities, campuses, or service networks, this could make federal discretionary awards meaningfully less reliable.

The proposal distinguishes between terminations based on noncompliance and discretionary terminations. Recipients would continue to have administrative hearing rights for certain noncompliance-based terminations. For discretionary terminations, however, the practical remedy would be limited to post-termination litigation, including potential claims for money damages. Litigation after the fact does not preserve staff, maintain subrecipient relationships, prevent programming and service disruption, or restore community trust. It also requires a significant expenditure of resources from both the recipient and the agency, particularly as compared to resolution through an administrative process.

IV. Undefined Policy Terms

The proposed rule would add or emphasize restrictions related to diversity, equity, and inclusion (DEI) and diversity, equity, inclusion, and accessibility (DEIA) policies, "gender ideology," disparate-impact theories of discrimination, and certain medical interventions for minors. In keeping with other administration guidance around DEI, some of which has been overturned by courts for being impermissibly vague, the proposed rule and preamble use broad policy language without clearly defining what counts as unlawful DEI or an impermissible preference.

That ambiguity is especially concerning for programs that Congress specifically designed to serve particular populations or needs. Congress, responding to clear evidence of disparate need, often directs funds based on poverty, disability, homelessness, English learner status, rural location, first-generation status, institutional mission, or other statutory criteria. Those programs are not unlawful merely because they are targeted, but recipients may still be left guessing how agencies will interpret program language, outreach strategies, eligibility criteria, or services that address unequal access to education.

Grant applications are carefully crafted to be responsive to statutory objectives and the absolute, competitive preference, and invitation priorities identified in agency notices soliciting application based on priorities in place at the time the grant competition is announced. For applicants and recipients, vague terminology becomes operational risk. It may affect how organizations draft applications, describe program goals, design outreach, support subrecipients, train staff, or evaluate whether existing programs could be vulnerable under future agency interpretation.

V. Downstream Funding Relationships

The proposal would increase scrutiny of subrecipient, contractor, affiliate, and related-entity relationships. OMB proposes new language addressing transfers of federal funds to affiliates, subsidiaries, and related legal entities. Those transfers could no longer be treated as internal allocations that avoid classification.

This could affect nonprofit networks, university systems, fiscal sponsors, related foundations, charter networks, national organizations with state affiliates, research centers, intermediary organizations, and other entities that move federal funds through related organizations. If implemented, the regulations could reduce flexibilities and efficiencies for these organizations while increasing their administrative costs.

The proposed rule does not make every related-entity payment a subaward, but it does require classification. If the related entity is carrying out part of the federal award, subrecipient rules may apply. If the related entity is providing goods or services for the recipient's own use, procurement rules may apply. Those classifications affect written agreements, monitoring, audit requirements, procurement documentation, conflicts of interest, and SAM.gov reporting.

VI. Payment, Documentation, and Cost Rules

The proposed rule would strengthen payment controls, including additional due diligence before federal funds are paid and documentation supporting payment requests. For recipients and pass-through entities, that could mean more scrutiny of drawdowns, reimbursement requests, advance payments, and subrecipient payment reviews.

Payment controls may sound technical, but they can quickly become operational. Organizations that operate reimbursement-based programs, pass funds through to community partners, or depend on predictable cash flow may face disruption if new documentation requirements slow payment or create uncertainty.

OMB also proposes stricter standards and documentation expectations for several cost categories, including advertising and public relations, conferences, fundraising and investment management, lobbying, memberships and subscriptions, publication and printing, selling and marketing, and abortion-related costs. These categories can include routine program activities, including outreach, training, convenings, dissemination, recruitment, communications, technical assistance, and professional participation.

OMB further proposes to eliminate fixed amount awards and fixed amount subawards unless specifically authorized by statute. That could significantly restrict programs’ ability to reduce administrative burden and focus on outcomes by using mini-grants, stipends, milestone payments, fellowships, or performance-based subawards.

VII. Why Organizations May Want to Engage Now

The proposed rule could affect much more than grants-office procedures. It could significantly alter award stability, program design, payment timing, allowable costs, subrecipient relationships, reporting systems, and the link between Congressional program purposes and Executive Branch priorities.

The highest-impact comment areas include discretionary termination authority, multi-year and continuation awards, reliance interests and termination costs, lawful programs serving targeted populations, the meaning of prohibited DEI-related activity, related-entity classification, payment documentation, and cost allowability for outreach, conferences, communications, training, and technical assistance.

VIII. How Sligo Law Group Can Help

Sligo Law Group helps organizations navigate federal education, grants, and administrative law. We work with recipients, pass-through entities, institutions, nonprofits, associations, and coalitions to identify which parts of the proposed rule are most likely to affect their programs and to prepare targeted comments before the July 13, 2026, deadline.

We can review your current grant structure, identify provisions that may affect your operations, draft comments, support coalition strategy, and translate technical grant concerns into concrete examples OMB can use.

If your organization receives, administers, or passes through federal funds, contact Sligo Law Group to discuss how the proposed Part 200 revisions may affect your funding, compliance obligations, subrecipient relationships, or ability to carry out Congressionally authorized programs.