Grants Overhauled: What the Proposed Rewrite of 2 CFR Part 200 Means for Federal Financial Assistance Award Recipients

The Office of Management and Budget issued on May 29, 2026 a Proposed Rule that would significantly revise the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) at 2 C.F.R. Part 200, potentially impacting the full lifecycle of federal grants, cooperative agreements and other forms of financial assistance, from pre-award merit review through post-award administration and termination. These proposed changes are designed to implement the President’s policy priorities, executive actions related to diversity, equity and inclusion (DEI) activities, and Executive Order No. 14332, Improving Oversight of Federal Grantmaking (EO 14332).

Comments to the Proposed Rule are due July 13, 2026. OMB signaled an intent to act quickly, proposing to issue the final rule effective October 1, 2026.

OMB Control and Agency Priorities

The Proposed Rule would convert the Uniform Guidance to regulatory status as the “Uniform Grants Regulation.”  The Proposed Rule would simultaneously revise 2 C.F.R. Part 200 and prior agency adoptions of the Uniform Guidance.  Similarly, future OMB amendments would have government-wide effect, giving the OMB significantly more control.  Agencies would be permitted to issue agency-specific requirements, as appropriate.

OMB also proposes to assert more control over the award and termination processes.  Pre-award, the Proposed Rule would implement pre-issuance reviews by political appointees, codifying the merit review requirements in EO 14332, to confirm that proposed awards align with the law, agency priorities, and national interest. The Proposed Rule would also keep peer review as advisory only, consistent with EO 14332.

On the other end of the grant life cycle—termination—the Proposed Rule would significantly broaden agency termination authority, allowing agencies significant leeway to terminate or suspend performance, and providing recipients more consistent processes for potential relief.  The Proposed Rule also appears to respond to litigation and lessons-learned in the first part of the current Administration, because the Proposed Rule would:

• Require agencies to include the core termination grounds in all awards.
• Permit discretionary termination “in the interest” of the agency, including where an award no longer effectuates program goals, federal agency priorities, or the national interest as they exist at the time of termination.
• Standardize termination notices.
• Allow for submission of termination costs resulting from a discretionary termination, which the agency may allow in its reasonable discretion considering competing policy concerns. 
• Provide a temporary 90-day suspension term.

Policy Changes

The Proposed Rule would implement new requirements targeting the President’s priorities related to DEI, research security, and award review, including:

• DEI Changes
  • Disparate-Impact Liability (Proposed § 200.218) – would prohibit the use of federal financial assistance to promote or support theories of disparate-impact liability. A narrow exception would permit internal analysis that is not applied to award activities.
  • Discriminatory Event Services (Proposed § 200.219) – would prohibit grant recipients that are public entities from using federal funding to engage in viewpoint, content, or subject-matter discrimination in event services.  This requirement would apply to events that occur on property under control of a public entity, regardless of whether the event is funded by the federal award, which would particularly impact public universities that may have controversial speakers on campuses.  Non-public entities are also covered within the scope of federally funded program activities, to the extent the activities are funded by a federal award.
  • Statutory and National Policy Requirements (Revised § 200.300) – would expressly prohibit use of federal funds for unlawful DEI/DEIA practices, “gender ideology” as defined in Executive Order 14168, and transition procedures for minors prohibited under Executive Order 14187. The proposed text also adds protections for faith-based organizations, prohibiting discrimination against or in favor of such organizations based on religious character, affiliation, or exercise.
• Research Security, and Foreign Involvement and Access
  • Covered Foreign Collaborations (Proposed § 200.220) – would bar grant recipients from using federal funds to support certain foreign collaborations with “foreign entities of concern” (defined as foreign adversary nations China, Russia, Iran, and Cuba), unless authorized by statute or approved by the agency head or designee as being in the national interest and posing no national security risk.  This prohibition would apply regardless of whether the federal funds were used for direct programmatic activities or indirect costs allocable to such collaborations.
  • Domestic Records Storage (Revised § 200.336) – would require all grant recipients to store electronic records of performance domestically.
  • Risk Review Factors Expanded (Revised § 200.206) – would implement new risk factors for agency review to include compliance with foreign gift reporting under § 117 of the Higher Education Act, and affiliations that may undermine national security or public safety. Risk review would also consider financial capacity and a history of plagiarism or non-replicable studies.
• Transparency Changes
  • Expanded SAM.gov Subaward Reporting (Revised § 200.329 and 2 C.F.R. Part 170) – would require grant recipients to report their subawards in SAM.gov and confirm the reported subawards are included in performance reports.
  • Conflict of Interest Disclosure (Revised § 200.112) – would require grant recipients to disclose whether personnel working on a grant proposal or award were employed by the awarding agency within the preceding two years. The Proposed Rule does clarify, however, that previous government employment is not necessarily a conflict of interest.
  • Referral of Mandatory Disclosures (Revised § 200.113) – would require agency Offices of the Inspector General that receive disclosures under this section to transmit them to the U.S. Attorney’s Office for D.C. within ten days of receipt. 
• Cost Allowability and Audit Changes and Clarifications
  • Clarification of allowability (Revised Subpart E) – would clarify that certain costs are unallowable, including advertising, commencement and convocation, publication, elective abortions, and voter registration/issue advocacy.
  • Require Prior Approval for Certain Costs (Revised Subpart E) – would require prior approval for costs associated with conference attendance, fundraising & investment costs, memberships, or publication costs.

Conclusion

For recipients of federal financial assistance (including recipients or subrecipients of federal grants, loans, or cooperative agreements), the practical impact of the Proposed Rules is that compliance will need to begin earlier, consider programs that do not receive federal funding, highlight subrecipient and affiliate compliance, and account for agencies’ expanded ability to terminate if it determines a program no longer advances agency priorities.  In the event of noncompliance, the Proposed Rule would create the potential for more severe consequences if a recipient used the mandatory disclosure process.  Recipients should consider submitting comments on the Proposed Rule to indicate their support for, or concern about, any of the proposed changes. As currently written, the changes in the Proposed Rule would significantly affect hospitals, colleges, universities, academic medical centers and other research-intensive recipients are especially likely to be affected because the Proposed Rule directly addresses topics including research eligibility, foreign collaborations, compliance with disclosure requirements under Section 117 of the Higher Education Act, payment controls, cost allowability and affiliate relationships.