What Federal Grant Recipients Need to Know: Proposed Changes to Uniform Guidance (2 CFR Part 200)

The Office of Management and Budget (OMB) recently issued a proposed rule that could significantly reshape the Uniform Guidance (2 CFR Part 200), which governs federal grants.

At a high level, the proposal is intended to strengthen transparency, accountability, and alignment with federal policy priorities. OMB seeks to formalize existing “guidance” as regulation, update outdated references (such as replacing FSRS.gov with SAM.gov), and remove obsolete provisions, including those related to the American Recovery and Reinvestment Act. While some changes aim to reduce administrative burden, the proposal also reinforces that federal funds must be used strictly for authorized public purposes.

A key theme is increased federal oversight of how grants are awarded and managed. Federal agencies would be expected to ensure that funded projects align not only with statutory requirements, but also with current administration priorities and the national interest. Proposed changes include stricter merit review expectations, enhanced risk assessments of applicants (such as financial capacity and compliance history), and new conflict-of-interest disclosures for individuals with recent federal employment.

The rule would also strengthen requirements around subrecipient monitoring, SAM.gov reporting, and eligibility verification using systems like the Treasury’s Do Not Pay database. In addition, the proposal clarifies when agencies may suspend or terminate awards, including when a grant no longer aligns with federal agency priorities or the national interest.

The proposed changes to federal grant rules also include significant updates to cost principles and compliance requirements. Among the most notable proposed changes are:

• Several types of costs such as advertising, public relations, publication, and marketing would generally be unallowable unless specifically required by law or approved in advance.
• Conference costs would require prior approval from the federal awarding agency.
• Fixed-amount awards and subawards would be eliminated unless specifically authorized by statute.
• Cost-reimbursement contracts would be discouraged due to their higher risk profile.
• Internal control requirements would become more flexible, allowing organizations to tailor controls to their operations.
• Organizations would no longer be expected to follow or rely on specific internal control frameworks such as GAO or COSO.

Overall, the proposed rule places greater emphasis on disciplined use of federal funds, increased accountability, and alignment with legal and policy requirements.

The comment period for the proposed rule closed on July 13, 2026. OMB received over 496,000 comments received in response to the proposed rule, largely due to concerns over the short timeline, expansion of suspension and termination language, changes to the grant award review process, and expected impacts to how federal resources are allocated. Every public comment submitted must be reviewed before making comments viewable to the public. As of July 15, 2026, approximately 53,200 of these comments have been made available to read at regulations.gov.

The rule is expected to take effect on October 1, 2026, and would apply to federal awards made or amended in fiscal year 2027. However, the OMB must review and address all significant feedback received before releasing the final rule. Once feedback is addressed, the rule will go through a final review by the Office of Information and Regulatory Affairs (OIRA) prior to being published in the Federal Register.

What This Means for Your Organization

Although these changes are still in the proposal stage, organizations that receive or administer federal funding should begin evaluating how the proposed requirements could affect their grant management processes, internal controls, procurement practices, and compliance responsibilities. Understanding what may be changing now can help reduce surprises later and position your organization for a smoother transition if the rule is finalized.

If you have questions about how the proposed Uniform Guidance updates could affect your organization, the team at Redpath can help you understand the changes, assess potential impacts, and prepare for what's ahead with clarity and confidence.