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By Henry Flood
The federal Office of Management and Budget (OMB) together with the federal awarding agencies released a set of proposed rule changes to several parts of Title 2 Code of Federal Regulations (CFR) concerning grants. In total, there are 323 separate proposed changes throughout Title 2 CFR Parts, 1,25,170,175,176,180,182,183 and 200.
The Uniform Guidance would become a regulation jointly issued and periodically updated by OMB and the awarding agencies. Comments on the proposed changes are due on or before July 13, 2026, with a projected effective date of October 1, 2026.
With the clock ticking and now roughly a month to get your comments submitted through regulations.gov, how do you digest, understand and react coherently to a proposed rule that exceeds 100 pages and affects all sectors of the grants community? In this article of first impression, the most important initial analysis to undertake is at the macro level. Who is affected and what will be the impacts if this proposed rule were to be adopted as is? Most importantly, how will grant-seekers and recipients be impacted by these proposed changes?
To put it bluntly, the proposed changes viewed collectively are a stick of dynamite to what has been an otherwise evolving but stable grants management system, first under the old circular management system (1972-2013) and now under the Uniform Guidance (2013-2024). During this span of 52 years grants policy and management remained relatively stable despite change, expansion and policy preferences articulated by administrations that came and went.
Despite conflicting needs among agencies, grant-seekers, grant recipients and the oversight community, there existed a broad consensus that grant policy and management should be professional, as non-partisan as possible and operated for the common good.
If you are a grant-seeker or recipient of federal grant funding the proposed changes to 2 CFR 200 will:
- Make it much harder for small nonprofits and communities to access, compete for and secure federal funding with the proposed elimination of fixed amount awards and sub-awards. (See 200.201(b).
- Preference must be given to proposals whose indirect cost rates are lower (See 200.205(b)(3). This is but another OMB and some agency desires to drive down the indirect rates merely to save money independently of the merit of the proposal or whether the reviewing agency understands the rate structure they are reviewing.
- Grant awards and especially multi-year awards have always been subject to the availability of Congressional funding. But the proposed changes make it possible to terminate awarded grants for convenience, for default, or because OMB or the agency decides that the awarded funds are no longer needed or in the best interest of the administration. (See 200.340 (a)(2) and (5). Suddenly, your funds can vanish and this risk is real. Hearing protections are modest at best. Some agencies have no procedures for appeal and worse yet, agencies do not have to allow for objections, hearings and appeals concerning any termination decision except for noncompliance terminations. (See 200.342, last sentence).
- Grant-seekers and grant recipients will find that the review and award of grants are now overtly political as an over-reach where no others have dared to go. (See 200.205 (b) generally and (b)(1) and (c).
Impact On Awarding Agencies
Awarding agencies will find that objective consideration by program experts and the intrinsic merit of proposals can be ignored at the whim of political appointees who will have the final say as to who gets funded and who will lose their funding for virtually any reason, absent judicial intervention. Remember, discretionary grant decisions are not subject to the Administrative Procedure Act. Outside and agency panel reviews will be treated as advisory and not binding on award decisions. (See 200.205 (c) and(d).
Agency program management experts will have far less say in how their respective assistance program designs are created. Program designs must “align where applicable with administration policies and priorities set by the President.” (See Executive Order 14332 Sec. 4(b)(i)). Professional expertise and judgment will count much less than political preference.
Suppose the awarding agencies does not like the proposal it has received from a notice of funding opportunity (NOFO)? At its discretion, the agency can reject all proposals and make no awards. (See 200.205(e).
Burden Relief?
Recipients and awarding agencies will not see any burden relief under the proposed rules despite claims to the contrary. Just one example illustrates what I mean. Each payment request under a federal award must have some form of justification to support each request. (see 200.305 (c)(2) More work for agencies and recipients. Imagine what can happen if some bleary-eyed or incompetent bureaucrat decides that your payment should be delayed or withheld.
Some Final Thoughts
I am not arguing that this or any prior or future administration cannot shape certain features of its grant programs and policies in one direction or another. As a grant administration professional, I am saying that the proposed changes — especially in 2 CFR Part 1 and 200 are an imprudent over-reach that cause harm to the practice of grant administration, to grant-seekers, grant recipients and to awarding agency professionals who wish to operate and manage their programs based on professional skill rather than overt partisanship.
The recipient community should carefully review the proposed rule and participate in this notice and comment rulemaking. Your core interests are impacted by this proposed rule. A quick initial response to this massive set of proposed changes is just that. It is my intention to issue a more extended follow-up article that further addresses the rationale proffered by the Trump Administration to make these changes.
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Henry Flood is the CEO of the newly created Grant Policy Network, LLC. He is a former senior advisor to the Grantsmanship Center and a lifetime member of the National Grant Management Association. His email is HenryFlood1@Gmail.Com
