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On 29 May 2026 the OMB (Office of Management and Budget) proposed a set of revisions and updates to the Uniform Guidance (2 C.F.R. § 200), the government-wide framework issued by the Office of Management and Budget (OMB) that establishes administrative requirements, cost principles, and audit requirements for all federal grants, cooperative agreements, and pass-through awards.
The Office of Management and Budget (OMB) proposes to revise the Guidance for Federal Financial Assistance to improve government-wide policies and requirements related to the management of grants, cooperative agreements, and other forms of assistance. OMB is proposing revisions that would improve transparency, accountability, and oversight for Federal awards across the Federal Government. This includes ensuring that American tax dollars are not wasted or misused, activities performed under Federal awards are consistent with law and policy, and recipients are held accountable when they fail to meet relevant standards. The revisions also aim to ensure that basic American principles of equality and equal opportunity are upheld throughout all stages of the award making process and that unlawful discrimination is no longer permitted. Proposed changes also include providing further clarification on the regulatory status of the OMB requirements and on the process for future updates to the government-wide requirements. Finally, OMB also proposes changes to reduce recipient burden. The listed Federal grant-making agencies propose conforming changes to their respective adopting regulations, or, in the case of some agencies and other entities, establishing new adopting regulations or policies. The proposed changes reflect the administration's commitment to transparency, accountability, and proper oversight for the Federal grantmaking process. The proposed regulations seek to ensure that American tax dollars are ultimately used to serve the needs of the American public.
The proposed revisions are open for comments and reactions which may be delivered on or before 13 July 2026. Comments on this proposal must be submitted electronically before the comment closing date to www.regulations.gov. In submitting comments, please search for recent submissions by OMB to find docket OMB-2026-0034, which includes the full text of the proposed revisions and submit comments there.
Institutional academia has not reacted well to the proposals, part of th Trump Administration's efforts to (1) remove the Biden Administration's regulatory efforts to embed their version of diversity, equity and inclusion measures within the grant awarding and administration process; and (2) reduce the aggregate grant payouts, especially to the extent that grant money subsidizes university or institutional operations. A useful summary of the changes and their effects on university fundraising and compliance responsibilities may be found at Key Issues within OMB Uniform Guidance Revision Proposal [Docket OMB-2026-0034], distributed by the Association of Public and Land Grant UIniversities.
It ought to be no surprise that these proposed changes have been met with opposition from grant recipients and their institutional environments.
Although research has bipartisan support in the US Congress, and trust in science is above 75% across the country, the Trump administration seems as determined as ever to mortally wound the nation’s scientific enterprise. After the scientific community persuaded Congress to restore most of the president’s draconian cuts to research funding last year, the White House Office of Management and Budget (OMB), under Russell Vought, has found new ways to circumvent the will of Congress and starve American science.* * * The sweeping new regulations proposed by OMB would subject every federal research funding decision to political review. Peer review has never been formally binding, but this proposal would dramatically expand the power of political appointees to override expert assessments of scientific merit. Agencies could end multiyear grants with no due process. They also could use the vague criteria of Trump’s “gold standard science” to identify institutions for preferential treatment. International collaboration with countries identified solely by the administration would be prohibited under the new rules, but more notably, all research that involves the expenditure of funds outside the US would require case-by-case approval.(Another Red Alert for American Science).
The authors of that opinion piece then raise a call to arms, one that is likely top be met with much sympathy among those adversely impacted:
The scientific community needs to flood OMB with responses during the public comment period, open until 13 July. Universities and associations must speak out as a united front to mobilize Congress and be ready to file lawsuits once the regulations are finalized. I was sympathetic to members of the scientific establishment who played it carefully during last year’s budget negotiations. Getting the budget deal done was crucial. But that was then. The red light is now flashing. All hands, report to stations."! (Another Red Alert for American Science).
Of course they are right to do so. Scientific grants programs, like every other action of the State, are an overtly political action, in the sense that they represent a political conclusion that State intervention (in this case subsidies for private research in aid of national goals and aspirations) serves the interests of the State. That State interests--or in American parlance the public interests--serves the financial, status, business, or status interests of others, including academics, researchers, unioversoities and the like in this case, is good but of secondary interest, even if the state interest is, from time to time, served by sunbsidizing the private interests of those objects and processes that are the object if public polñiocy, in this case the fruits of research that serves State interests. For a long time, those converghing interests were mediated largely through self-regulation--academics presiding over grant decisiopns coordinated with state fiunctiponaries. And the universities got their cut, all nicely justified by whatever justificatory logicv appealed to all parties. But the Trump Admionistraiton serves as a reminder that alignment is neithjer permanent nor non-political. The State interests may shift--and that is a matter for elected officials to determine. That shifting may have significant effects on the financial planning of subsidized enterprises and thier employees, as well as on the busoiness model of knowledge production. Yet those are factors in a political consideraiotn, the discretion for which--within the boundaries of due process and the regulaitons under which such susidy programs are organized--lie with political functionarties and not with the beneficiaries of these programs.
The political nature of these determinations, however do not leave those affected powerless. Politics is a sport that American liberal democracy spreads widely acropss the populaiton. Adverse impacts of political discretionary decisionmaking may always be the subject of a counter politics; ones that may require political counter-responses. The object is to advance one's own interests as against the political intrerests of opponents. And the principal way of doing that in early 21st century Amerioca is to argume virtually anything but politics while denegrationg the opposition as narrowly political. That is fair. In politics. To aid those fforts, of course, one now must play politics in the ocurts, while defending the courts as the last bastion of non-politicalaction. That is also a quintessentially American politics.
And thus, for those interested, or affected. by the proposed revisions, you have a chance to make your voice heard, to the extent that this is possible, through 13 July. After that, one goes back to that now well embedded poliutical strategy --litigation.
Regulation for Federal Financial Assistance
A Proposed Rule by the Management and Budget Office, the Health and Human Services Department, the Agriculture Department, the State Department, the Agency for International Development, the Veterans Affairs Department, the Energy Department, the Treasury Department, the Defense Department, the Transportation Department, the Commerce Department, the Interior Department, the Environmental Protection Agency, the U.S. International Development Finance Corporation, the National Aeronautics and Space Administration, the United States Agency for Global Media, the Nuclear Regulatory Commission, the Corporation for National and Community Service, the Social Security Administration, the Housing and Urban Development Department, the National Science Foundation, the National Archives and Records Administration, the Small Business Administration, the Justice Department, the Labor Department, the Homeland Security Department, the Institute of Museum and Library Services, the National Endowment for the Arts, the National Endowment for the Humanities, the Education Department, the Export-Import Bank, the Office of National Drug Control Policy, the Peace Corps, the Election Assistance Commission, the Gulf Coast Ecosystem Restoration Council, the Federal Communications Commission, the Consumer Product Safety Commission, the Delta Regional Authority, the Appraisal Subcommittee of the Federal Financial Institutions Examination Council, the Marine Mammal Commission, the Millennium Challenge Corporation, and the National Credit Union Administration on 05/29/2026
AGENCY:
Office of Federal Financial Management, Office of Management and Budget; Department of Health And Human Services; Department of Agriculture; Department of State; Agency for International Development; Department of Veterans Affairs; Department of Energy; Department of Treasury; Department of Defense; Department of Transportation; Department of Commerce; Department of the Interior; Environmental Protection Agency; U.S. International Development Finance Corporation; National Aeronautics and Space Administration; U.S. Agency for Global Media; Nuclear Regulatory Commission; Corporation for National and Community Service; Social Security Administration; Department of Housing and Urban Development; National Science Foundation; National Archives and Records Administration; Small Business Administration; Department of Justice; Department of Labor; Department of Homeland Security; Institute of Museum and Library Services; National Endowment for the Arts; National Endowment for the Humanities; Department of Education; Export Import Bank; Executive Office of the President, Office of National Drug Control Policy; Peace Corps; Election Assistance Commission; Gulf Coast Ecosystem Restoration Council; Federal Communications Commission; Consumer Product Safety Commission; Delta Regional Authority; Appraisal Subcommittee of the Federal Financial Institutions Examination Council; Marine Mammal Commission; Millennium Challenge Corporation; National Credit Union Administration.
ACTION:
Proposed rule.
SUMMARY:
The Office of Management and Budget (OMB) proposes to revise the Guidance for Federal Financial Assistance to improve government-wide policies and requirements related to the management of grants, cooperative agreements, and other forms of assistance. OMB is proposing revisions that would improve transparency, accountability, and oversight for Federal awards across the Federal Government. This includes ensuring that American tax dollars are not wasted or misused, activities performed under Federal awards are consistent with law and policy, and recipients are held accountable when they fail to meet relevant standards. The revisions also aim to ensure that basic American principles of equality and equal opportunity are upheld throughout all stages of the award making process and that unlawful discrimination is no longer permitted. Proposed changes also include providing further clarification on the regulatory status of the OMB requirements and on the process for future updates to the government-wide requirements. Finally, OMB also proposes changes to reduce recipient burden. The listed Federal grant-making agencies propose conforming changes to their respective adopting regulations, or, in the case of some agencies and other entities, establishing new adopting regulations or policies. The proposed changes reflect the administration's commitment to transparency, accountability, and proper oversight for the Federal grantmaking process. The proposed regulations seek to ensure that American tax dollars are ultimately used to serve the needs of the American public.
DATES:
Comments are due on or before July 13, 2026. Late comments will be considered only to the extent practicable.
ADDRESSES:
Comments on this proposal must be submitted electronically before the comment closing date to www.regulations.gov. In submitting comments, please search for recent submissions by OMB to find docket OMB-2026-0034, which includes the full text of the proposed revisions and submit comments there. Please provide clarity as to the section of the regulation that each comment is referencing by beginning each comment with the relevant section number in brackets. For example; if the comment is on 2 CFR 200.414, include the following before the comment [200.414].
Public comments received by OMB and Federal agencies will be posted at www.regulations.gov and be a matter of public record. Accordingly, please do not include any confidential business information or personal privacy information in your comments.
FOR FURTHER INFORMATION CONTACT:
Andrew Reisig or Joel Savary at the OMB Office of Federal Financial Management via email at MBX.OMB.Grants@OMB.eop.gov.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
The Office of Management and Budget (OMB) proposes to revise several parts of the OMB Guidance for Federal Financial Assistance located in title 2 of the Code of Federal Regulations (CFR), subtitle A, to improve and clarify government-wide policies and requirements related to the management of Federal financial assistance including grants and cooperative agreements. In 2 CFR subtitle B, the listed Federal agencies also propose conforming changes to their respective implementing regulations for the OMB policy requirements in subtitle A. As explained in further detail below, OMB proposes revising 2 CFR for reasons including 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 the 2 CFR regulatory text as an OMB regulation; and (3) reduce recipient burden.
Transparency, Accountability, and Oversight. The overarching goal of OMB's proposed revisions is to improve transparency, accountability, and oversight for how Federal taxpayer dollars are used in the context of Federal grantmaking.[1] It is essential for the Federal Government to provide more oversight over the design and implementation of Federal programs to prevent wasteful spending and misuse or mismanagement of Federal funds.
Although Federal spending through grants and other types of Federal financial assistance has grown exponentially since the initial establishment of OMB's policies in earlier Circulars and 2 CFR, corresponding policies capable of ensuring transparency, accountability, and oversight for this increased level of spending remain deficient in the current regulatory text. As a result, Federal financial assistance programs, and the activities performed under Federal awards, have not always remained properly aligned with core purposes authorized by law, nor served the needs of the American public as intended.
This lack of transparency, accountability, and proper oversight became increasingly clear between 2021 and 2024. Federal awards were often used during those years to promote a “woke” policy agenda that did not reflect the values of the vast majority of the American public.[2] For example, Federal programs and funding opportunities were designed to advance unlawful identity-based “Diversity, Equity, and Inclusion” (DEI) policies and preferences across the country.[3] These policies were inconsistent with basic American values and civil rights laws, including the equal protection principles of the U.S. Constitution.[4] They were also misaligned in many cases with underlying public purposes authorized by law.[5] Collectively, these policies wasted a great amount of taxpayer resources and caused great harm to public trust in government.
The White House Fact Sheet of August 7, 2025, describes examples of the types of wasteful spending that occurred as a result of such policies. For example, Federal grants funded unlawful DEI practices,[6] various anti-American ideologies in American education,[7] non-replicable and highly misleading studies,[8] labs engaged in gain-of-function research,[9] and AI-powered social media censorship tools.[10] More recently, another White House Fact Sheet of January 8, 2026 provided examples of the rampant and pervasive problem of fraud in the United States, including under assistance programs in Minnesota.[11]
Another example of wasteful spending is provided by a 2023 report from Office of Inspector General for the Department of Homeland Security (DHS). That report found that recipients of Federal awards from the Federal Emergency Management Agency (FEMA) potentially misused funds to provide services for illegal immigrants.[12] Such potential abuse of taxpayer funds highlights the need for proper oversight of taxpayer dollars.
In another prominent example, prior to this administration, far-left activists hijacked the critical work done by the U.S. President's Emergency Plan for AIDS Relief (PEPFAR), which was established to respond to the AIDS crisis in Africa. Due to wasteful spending, PEPFAR became a left-wing foreign aid entitlement that attempted to promote abortion and gender ideology. Additionally, an August 2025 report from the Heritage Foundation noted that, according to the U.S. House Foreign Affairs Committee, billions of dollars in overhead and program charges flow to nongovernmental organizations (NGOs) and contractors in Washington, DC rather than providing direct humanitarian aid; and insufficient oversight has resulted in significant waste of taxpayer resources.[13]
An additional example is provided by a 2024 report from the U.S. Senate Committee on Commerce, Science, and Transportation regarding the growing failure of objectivity at the National Science Foundation (NSF) during the previous administration.[14] That report found that out of a sample of over three thousand grants, more than ten percent—totaling over two billion dollars in Federal funding—went to “questionable projects that promoted diversity, equity, and inclusion (DEI) tenets or pushed onto science neo-Marxist perspectives about enduring class struggle.” The report also found that, by 2024, over a quarter of new grants made by NSF (27 percent) directed funding to DEI initiatives and other far-left perspectives. This marked a huge proportional increase over the course of only three years from the 0.29 percent of new grants made by NSF with a similar focus in 2021.[15] This is just a small sample of many examples across the Federal Government of wasteful spending and other misuse and mismanagement of Federal funds.
Scarce Federal taxpayer dollars should be directed exclusively to achieving results for the American people. Wasteful and divisive activities unrelated to core purposes of Federal grant programs should not be subsidized with taxpayer dollars. Grantmaking practices resulting in wasteful spending that became prevalent during the previous administration can only be stopped through adherence to strong internal controls at Federal agencies and enhanced oversight regarding how Federal dollars are spent.
The Federal Government must provide more oversight and transparency regarding how Federal funds are used in grantmaking to avoid the recurrence of similar issues in the future. Under the proposal described in this document, Federal agencies must return to designing assistance programs and award activities to align with essential public purposes authorized by law. Effective oversight also includes following Executive Branch policies that eliminate various kinds of wasteful spending that occurred in previous years, such as unlawful DEI mandates and other unnecessary add-on activities that increase project costs and complexity without serving the underlying public purpose of the award.[16] The proposed reforms are necessary to ensure greater accountability for use of public funds, and that every taxpayer dollar the Federal Government spends either improves American lives or advances American interests.[17]
Clarification of status of regulatory text. A second objective of this rulemaking is to clarify the status of the 2 CFR regulatory text as an OMB regulation. The proposed revisions align with OMB's statutory authority to provide overall direction and leadership to Federal agencies on financial management matters by establishing financial management policies and requirements. See 31 U.S.C. 503(a)(2). Additional authorities for OMB's proposed revisions are set forth below.
Reducing recipient burden. A third and final objective of this rulemaking is to reduce recipient burden. For example, rather than needing to focus extensive efforts and resources on DEI mandates or other unnecessary add-on requirements frequently included in funding opportunities in previous years, under the proposed version of the regulation recipients will be able to restore focus on efficient project delivery and actually achieving the basic public purposes of support authorized in law.
OMB also proposes a number of additional revisions throughout chapters I and II of subtitle A of 2 CFR. OMB summarizes the proposed changes in this preamble. In proposing changes, OMB aimed to maintain the existing structure of the 2 CFR guidance consistent with earlier iterations, including, for example, the structure of parts, subparts, and section numbering.
Plain Language Summary: A plain language summary of this rule may be found at https://www.regulations.gov/.
II. Background and Regulatory History
The Office of Management and Budget (OMB) has assisted every modern President in ensuring that the President's priorities, consistent with applicable law, are appropriately accounted for in government-wide grant management policies and agency grant-making decisions. In service of that goal, in 1958, the Bureau of the Budget, OMB's predecessor, first issued Circular A-21, “Cost Principles for Educational Institutions.” In 1968, the Bureau of the Budget first issued Circular A-87, “Cost Principles for State, Local, and Indian Tribal Governments.” In 1976, OMB first issued both Circular A-110, “Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations;” [18] and Circular A-122, “Cost Principles for Non-Profit Organizations.” All of these Circulars were repeatedly revised in the decades following their initial issuance. Other now-superseded OMB Circulars providing requirements related to grants administration included Circular A-89, “Federal Domestic Assistance Program Information;” and Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.” [19]
Between 2012 and 2013, OMB worked with Federal agencies to revise and streamline existing OMB guidance and Circulars related to grants administration to develop the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Guidance) located in part 200 of 2 CFR. 79 FR 78589 (Dec. 26, 2013) (2013 Final Guidance). See also 77 FR 11778 (Feb. 28, 2012) (2012 Advance Notice of Proposed Guidance); 78 FR 7282 (Feb. 1, 2013) (2013 Proposed Guidance). This effort was designed to assist programs in delivering better outcomes on behalf of the American people while also reducing administrative burden and the risk of fraud, waste, and abuse. The Uniform Guidance, published in 2013, consolidated, streamlined, and superseded requirements from several earlier OMB Circulars and guidance documents related to grants management and implementation of the Single Audit Act. At the time, OMB explained that the guidance was also intended to improve clarity and accessibility of the requirements across the Federal Government.
Federal award-making agencies implemented the Uniform Guidance through an interim final rule, which became effective on December 26, 2014. 79 FR 75867 (Dec. 19, 2014) (2014 Federal Agency Interim Final Rule). Following the 2014 Federal Agency Interim Final Rule, most agencies did not reissue implementing regulations each time that the government-wide policies and requirements contained in 2 CFR subtitle A were updated by OMB following public notice and comment rulemaking procedures.[20] Instead, Federal agencies only occasionally issued or reissued implementing regulations. This generally occurred when specific changes were needed in the agency regulations. Because OMB has exclusive statutory authority under 31 U.S.C. 503(a)(2) to set government-wide financial management policies and requirements, the public comment period for the government-wide policies and requirements has been provided by OMB, not agencies.[21]
OMB periodically reviews the Uniform Guidance in accordance with 2 CFR 200.109. Following establishment of the Uniform Guidance in 2013, OMB made further revisions to the regulatory text in 2020 (85 FR 49506 (Aug. 13, 2020)) and 2024 (89 FR 30046 (Apr. 22, 2024). The 2020 revisions addressed topics including program planning and design, performance measurement to improve program goals and outcomes, sharing lessons learned, and adopting promising practices. OMB again revised the regulatory text in 2024. The objectives of the 2024 update included incorporating statutory requirements and certain policy priorities of the previous administration, reducing agency and recipient burden, clarifying sections that recipients or agencies have interpreted in different ways, rewriting certain sections of the regulatory text in plainer language, improving flow, and resolving inconsistent use of terms.
Since the inception of OMB financial management policies and requirements under now-superseded Circulars,[22] and the initial establishment of the Uniform Guidance in 2013 based on policies contained in the earlier Circulars, the landscape of Federal financial assistance funding has changed markedly—including massive growth in the scale and volume of assistance provided by the Federal Government, increasing diversification in the purposes and types of assistance, and increasing responsibilities for executive agency administration of discretionary programs. A wide array of new Federal financial assistance programs and statutory responsibilities for executive agencies have been established by Congress, but the oversight and stewardship of Federal financial assistance by executive branch agencies has not always kept pace with or accounted for these changes. Revisions to OMB's policies in 2 CFR part 200 are now warranted to improve transparency, accountability, and efficiency of Federal financial assistance programs.
III. Statutory Authority for OMB Regulation for Federal Financial Assistance
The Deputy Director for Management of OMB is authorized under 31 U.S.C. 503 to, among other things, provide “overall direction and leadership to the executive branch on financial management matters by establishing financial management policies and requirements.” 31 U.S.C. 503(a)(2). The Director of OMB is authorized under 31 U.S.C. 6307 to “issue supplementary interpretative guidelines to promote consistent and efficient use of . . . grant agreements . . . and cooperative agreements.”
OMB also relies on authorities including the Single Audit Act Amendments of 1996 (Pub. L. 104-156, as amended, codified at 31 U.S.C. 7501-7507); the Federal Funding Accountability and Transparency Act of 2006 (FFATA or the Transparency Act) (Pub. L. 109-282), as amended; the Digital Accountability and Transparency Act of 2014 (DATA Act of 2014) (Pub. L. 113-101), as amended; the Federal Program Information Act (Pub. L. 95-220 and Public Law 98-169, as amended, codified at 31 U.S.C. 6101-6106); the Federal Grant and Cooperative Agreement Act of 1977 (Pub. L. 95-224, as amended, codified at 31 U.S.C. 6301-6309); the Office of Federal Procurement Policy Act (codified at 41 U.S.C. 1101-1131); the Budget and Accounting Procedures Act of 1950, as amended (codified at 31 U.S.C. 1101-1126); the Chief Financial Officers Act of 1990 (codified at 31 U.S.C. 503-504); the Trafficking Victims Protection Act of 2000 (TVPA), as amended (codified at 22 U.S.C. 7101-7115); and Executive Order 11541, “Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President.”
IV. OMB Objectives for 2026 Proposed Revisions
OMB's objectives for the current proposed revisions to several parts of subtitle A of 2 CFR include: (1) improving transparency, accountability, and oversight for use of Federal funds; (2) clarifying the status of the 2 CFR regulatory text as an OMB regulation; and (3) reducing recipient burden. The proposed revisions generally support one or more of these three objectives. The following is a high-level overview of the proposed rule's three primary objectives, which is followed by a section-by-section discussion of the proposed changes.
A. Objective 1: Improved Transparency, Accountability, and Oversight
OMB's first objective for the proposed revisions is to improve transparency, accountability, and oversight for how Federal funds, including taxpayer dollars, are used in the context of Federal grantmaking.[23]
A.1. Background
For too long, the Federal Government has paid insufficient attention to providing proper oversight for Federal financial assistance programs. Deficiencies currently exist throughout the lifecycle of grants—from program design, to award selection, to project delivery and oversight—that impact the ability of the Federal Government to prevent wasteful spending and efficiently implement assistance programs in a manner consistent with law and the needs of the American public. If finalized, OMB's proposed revisions in 2 CFR will improve transparency, accountability, and oversight in the government-wide system of grants administration, including by ensuring that Federal award programs are properly aligned with law and policy and that Federal agencies act as responsible stewards of taxpayer dollars.
Recent years have provided evidence of the need for meaningful reform in Federal grants administration. Instead of aiming to broadly serve the needs of all Americans, in 2021 Federal agencies became increasingly focused on using their award programs to serve a “woke” policy agenda that deliberately favored certain identity groups over others. In seeking to advance this agenda, programs were often designed to include a long list of ideological terms and conditions with little connection to the core purpose of public support.[24] These burdensome conditions were consistently imposed through funding opportunities and award agreements regardless of the objective of the assistance program. This approach contributed to long delays in program implementation as Federal agencies and recipients focused their efforts and taxpayer resources on divisive policy requirements that were often unrelated to or misaligned with core purposes of Federal grant programs. Various commenters have remarked on how this approach resulted in waste, inefficiency, long delays in project delivery, and reduced program effectiveness across a range of activities receiving Federal support.[25] In one notorious example, under a $42.5 billion broadband internet access program, the previous administration failed to connect a single person to the internet over the course of three years—instead focusing efforts and attention on imposing a long list of burdensome policy requirements.[26]
Among various other policy requirements, Federal programs were frequently designed between 2021 and 2024 to include preferences and selection criteria aimed at advancing identity-based DEI policies.[27] This included using a variety of labels, such as promoting DEI, or using other intentional proxies for race, sex, or sexual identity, to give priority to certain favored identity characteristics and groups at the expense of others in the distribution of Federal awards and associated benefits.[28] The concerted effort to impose unlawful DEI policies on Federal award programs began on the very first day of the previous administration through issuance of Executive Order 13985.[29] That order instructed Federal agencies to set aside the decision-making processes used in previous years—which generally aimed to ensure that all Americans were treated equally—and to instead focus on remaking the system of grants administration with divisive identity-based DEI policies imposed throughout.[30] Following issuance of Executive Order 13985 in January 2021, Federal agencies began attaching these policies to all aspects of their award programs, including program design, award selection, and award conditions imposed on recipients. This continued for the duration of the previous administration.
Based on these efforts, Federal funding was used between 2021 and 2024 to advance unlawful DEI policies and preferences across the country.[31] These and other burdensome policies and requirements imposed through Federal award programs diverted substantial amounts of taxpayer funding away from traditional public purposes recognized in law—such as transportation, infrastructure, scientific research, public health, and other essential public goods that serve all Americans—to instead support favored identity groups and left-wing activists.[32] As a result, Federal award programs that once had broad public support became tied to a divisive policy agenda that unlawfully discriminated against many of the Americans those programs were intended to serve. These policies were inconsistent with basic American values and civil rights laws, including the equal protection principles of the U.S. Constitution.[33] They were also misaligned with core purposes of relevant assistance programs.[34] All together, these policies wasted a large amount of American taxpayer resources and significantly undermined public trust in government across the country.
In January 2025, President Trump announced the end of the discriminatory DEI policies and requirements that had extended through virtually all aspects of the Federal Government in the prior administration.[35] In the grantmaking context, the President's Executive orders released Federal programs from the divisive DEI mandates and other burdensome policy requirements imposed in previous years. Free of these constraints, Federal programs were able to restore focus on efficiently supporting core program purposes and public goods that serve all Americans, including ensuring that scarce public resources are best used in support of the essential public goods at which they aim.
Among other things, the President's Executive orders announced that the Federal Government would renew its commitment to serving every American with equal dignity and respect; [36] restore its policy of prohibiting, rather than mandating, illegal discrimination; [37] and make necessary changes to ensure that the grant review process is no longer used to undermine the interests of American taxpayers.[38] A subsequent Executive order in August 2025 emphasized that Federal agencies must ensure that all Americans are treated equally and make merit-based decisions related to the ability of an applicant or recipient to produce actual results for the American taxpayer.[39] On July 29, 2025, the U.S. Department of Justice (DOJ) also issued new government-wide guidance intended to ensure that recipients of Federal funding do not engage in unlawful discrimination.[40] On December 2, 2025, DOJ's Office of Legal Counsel (OLC) also released an opinion finding that certain race-based grant programs administered by the Department of Education violate the Fifth Amendment's equal-protection component.[41] That opinion explained that any “allocation of benefits and burdens based on a person's race is anathema to the U.S. Constitution.” [42]
This rulemaking proposes to institutionalize needed reforms in the Federal grantmaking process to address the unlawful discrimination and other serious problems that occurred during the previous administration. The basic values embedded in the Federal Government's decision-making processes for grants management must be consistent with law and designed to serve the public good of all Americans. OMB's 2 CFR regulations are a key instrument for improving the standards, processes, and requirements that apply to all Federal grant programs. They are also an important tool for making needed reforms to the organizational culture within Federal grantmaking agencies. These agencies are entrusted to make discretionary decisions regarding the use of many billions of dollars of precious taxpayer resources, and must remain accountable to the American people when doing so.[43] Consistent with policies in recent executive orders, taxpayer dollars must be used to support essential public purposes authorized by law—not wasted to promote divisive doctrines of the far left.[44]
OMB and Federal agencies now propose to address the problems summarized above as they impact Federal grantmaking. This includes removal of any remaining pieces of the old discriminatory policies that agencies may still apply to decision-making processes in the area of grants management. It also includes ending government sponsorship of gender ideology and other radical doctrines the previous administration sought to impose across the country through Federal funding programs. By renewing the Federal Government's commitment to basic American values, and proposing other needed reforms to responsibly manage and safeguard taxpayer funds used in grantmaking, OMB seeks to prevent the types of unlawful discrimination, wasteful spending, and other significant problems that arose in recent years from recurring in the future. As explained in Executive Order 14332, the Federal Government holds tax revenue in trust for the American people, and Federal agencies should treat it accordingly.
A.2. Improved Transparency
Changes are needed to ensure improved transparency for how Federal funds are used. American taxpayers have a right to know the projects that their tax dollars are supporting and the entities to which those dollars are flowing. They should also feel confident that recipients and subrecipients of Federal awards are engaged in activities consistent with the basic public purposes of support authorized by law, that do not unlawfully discriminate against American citizens, that do not harm the interests or reputation of the Federal Government, and that do not threaten the national or economic security of the United States. For example, Federal grant funds should not be used to support recipients and subrecipients that work in partnership with our foreign adversaries. Improved transparency will shine a light on the full scope of Federal agency activities and the network of recipients and subrecipients of Federal awards that the American people are trusting to accomplish public purposes of support on their behalf.
A 2023 report from the Government Accountability Office (GAO) also emphasized the benefits of greater transparency in Federal grants management.[45] The report explained that “greater transparency of how the Federal Government spends its funds offers many potential benefits,” which may include “enabling data-driven decisions about how to use government resources, opportunities for improving the efficiency and effectiveness of Federal spending, and improving government's accountability to the public.” OMB agrees that certain reforms are needed to provide greater transparency and accountability for use of public funds, and greater oversight to ensure that every taxpayer dollar the Federal Government spends improves Americans' lives or advances American interests.[46]
A.3. Improved Accountability
Proposed revisions related to improved accountability aim to ensure that recipients are held properly accountable for how Federal award funds are used. This includes ensuring that recipients only use Federal award funds for authorized public purposes, and comply with requirements related to reporting, nondiscrimination, and other topics.
A.4. Improved Oversight
The proposed revisions related to improved oversight aim to ensure that every discretionary award program is designed by Federal agencies to effectively achieve its underlying statutory purpose, and to align, where applicable, with administration policies and priorities set by the President.[47] This includes treating every American with equal dignity and respect, applying the principle of merit-based opportunity throughout the grant lifecycle, and avoiding unlawful discrimination when selecting recipients to receive awards.[48] Improved oversight refers both to oversight of decision-making processes within Federal agencies and oversight of recipients using Federal award funding.
A.5. Examples of Proposed Changes Related to First Objective
OMB proposes many changes throughout this document related to improving transparency, accountability, and oversight for Federal grants. For example, OMB proposes updated language related to conflicts of interest (§ 200.112) and mandatory disclosures (§ 200.113). In § 200.202 related to program planning and design, OMB proposes a variety of changes seeking to ensure that programs align with law and Executive Branch policy.
In §§ 200.201 and 200.333, and throughout part 200, OMB proposes to eliminate the use of fixed amount awards and subawards, which can limit transparency and hinder effective oversight. For example, under fixed amount awards there is no expected routine monitoring of actual costs incurred by the recipient or subrecipient, and no financial reporting is required.[49] This proposed change further ensures that Federal agencies exercise an appropriate level of oversight on how tax dollars are spent under all types of awards. This will help to ensure that Federal dollars are not wasted on activities that may not fully support the achievement of program outcomes. The American people deserve to know where all Federal tax dollars are flowing.
In §§ 200.204 through 200.206 related to funding opportunities, selection of recipients, and reviewing risk of applicants, OMB proposes a variety of changes designed to ensure and emphasize the need for merit-based selection of recipients for discretionary awards.[50] Other proposed changes seek to align the regulatory text with requirements in Executive Order 14332 regarding oversight in grantmaking. In § 200.206, some of the proposed changes seek to ensure that recipients with a history of questionable practices or poor financial management are not rewarded with scarce taxpayer resources.
In § 200.208, OMB proposes to update the standards for including specific conditions in Federal awards. In § 200.211, OMB proposes to clarify information that must be included in Federal awards. In §§ 200.218, 200.219, 200.220, and 200.300, OMB proposes various changes to ensure that award funds are not used for unlawful discrimination or other purposes inconsistent with law and Executive Branch policy.
In § 200.305, proposed changes seek to ensure that both Federal agencies and pass-through entities exercise appropriate due diligence before issuing payments of Federal funds, including requiring a justification for payment requests. Proposed revisions also address use of Treasury's “Do Not Pay” system before issuing payments.
In §§ 200.329 through 200.332, OMB proposes changes related to further ensuring that pass-through entities follow through on their statutorily-required responsibility to report subawards on SAM.gov. In addition to ensuring that required reporting occurs, the proposed changes seek to ensure that Federal dollars are tracked as subawards in circumstances in which recipients transfer funds to affiliates, subsidiaries, or other related organizations. Proposed changes also emphasize the need for Federal agencies to ensure that their recipients comply with subrecipient reporting requirements on SAM.gov. The 2023 GAO report referenced above also identified “challenges with the completeness and accuracy of subaward data displayed on USAspending.gov.” OMB is proposing several revisions in 2 CFR to ensure that pass-through entities meet this reporting obligation and that Federal agencies exercise appropriate monitoring and oversight over the responsibilities of the recipients they decide to partner with under their programs.
In § 200.340, OMB proposes to further clarify the existing regulatory text related to award termination and further ensure that Federal agencies provide clear notice to all recipients of the Federal Government's ability to terminate discretionary awards for discretionary reasons in a manner consistent with law.[51] This proposed clarification is similar to the existing authority at § 200.340(a)(4) to terminate awards found to be inconsistent with program goals or agency priorities. It would also be similar to the long-standing authority to terminate Federal contracts for convenience at 48 CFR 49.502 and 52.249-2. If finalized, this revision will further ensure that Federal agencies retain ongoing programmatic discretion after an award is made, consistent with law, to terminate a discretionary award that is not effective at achieving program goals or Federal agency priorities, or that an agency otherwise determines is no longer in the Federal Government's interest. In the same section, OMB also proposes similar changes related to award suspension.
In addition, OMB proposes additional changes in subpart E (cost principles at §§ 200.400 through 200.476) related to improving transparency, accountability, and oversight. For example, OMB proposes various changes to further distinguish between allowable and unallowable costs.
B. Objective 2: Clarification of Regulatory Structure
OMB's second objective for the current proposed revisions is to clarify the status of OMB's government-wide financial management policies and requirements contained in 2 CFR subtitle A, as an OMB regulation. In support of this objective, OMB and the grantmaking agencies joining this rulemaking collectively propose revisions in 2 CFR to clarify the regulatory status of OMB's government-wide policies and requirements. This change is intended to establish a standardized framework across all Federal grantmaking agencies—now including those that did not join the 2014 Federal Agency Interim Final Rule—and to promote predictability, transparency, and consistency across the Federal Government. This proposal would modernize and streamline Federal grants management consistent with OMB's statutory authority to enhance financial management across the Executive Branch.
The current framework in which each agency issues a brief regulation to adopt OMB's requirements will generally be preserved through this interagency rulemaking, but OMB proposes to make minor adjustments in the regulatory text to clarify that OMB's requirements in subtitle A carry regulatory effect in their own right. Agencies will participate in this one-time joint interagency rulemaking to implement the clarified regulatory structure and amend their adopting regulations accordingly. Thereafter—in rulemakings following the current one—when OMB amends the regulatory text of 2 CFR through a government-wide notice-and-comment (N&C) rulemaking, those changes will apply government-wide on the effective date of OMB's final rule. This distinction is less relevant for the present rulemaking because relevant grantmaking agencies are joining OMB in proposing these changes.[52] In the future, the public will continue to have a full and meaningful opportunity to comment during OMB's N&C rulemakings, and agencies will continue providing input to OMB during interagency review periods and implementing the requirements. As discussed below, this proposal is generally consistent with the way that most agencies have implemented OMB amendments of the 2 CFR regulatory text since 2013.
This proposal maintains the familiar structure of 2 CFR, but will increase predictability, transparency, and uniformity regarding how OMB amendments are implemented following future N&C rulemakings. Consistent with OMB's government-wide authorities, the proposal will allow for timely amendments of administrative requirements, cost principles, and audit requirements for grants and other Federal awards across the Federal Government.
B.1. Current Regulatory Structure
In 2013, OMB combined previously separate OMB circulars and guidance documents into one centralized guidance document published in 2 CFR subtitle A. 2 CFR part 200 is commonly referred to as OMB's “Uniform Guidance” or “Uniform Grants Guidance.” Following establishment of the guidance by OMB in 2013, most Federal grantmaking agencies initially adopted the guidance in 2014 through implementing regulations in 2 CFR subtitle B.[53] The guidance currently provides that “[p]ublication of the OMB guidance in the CFR does not change its nature—it is guidance, not regulation.” [54]
The existing structure of 2 CFR—including its classification as guidance—has tended to result in questions and uncertainty in the Federal grants community regarding the process for agency implementation of OMB amendments of the government-wide requirements in the regulatory text of subtitle A.[55] The existing version of 2 CFR 200.110(a) already provides that part 200's requirements become effective for the “administration of Federal awards by Federal agencies” either “once implemented by Federal agencies [under the process described at 200.106 (existing version)] or when any future [OMB] amendment to . . . part [200] becomes final.” 2 CFR 200.110(a) (existing version) (emphasis added). As explained below, OMB proposes to retain the quoted regulatory text without change, but further clarify its meaning to address recurring questions regarding the effect of OMB amendments.
After the initial agency adoption of part 200 in 2014, secondary or follow-on rulemakings by Federal agencies to implement OMB amendments of part 200 or other parts have generally either not occurred at all [56] or not been initiated by agencies in a timely manner. The sporadic secondary rulemakings that have occurred following 2014 have generally only been initiated in circumstances in which an agency had something specific to add or modify in its own adopting regulations. In most cases, consistent with 2 CFR 200.110(a) (existing version), agencies have simply implemented OMB amendments of the 2 CFR regulatory text based on the text of their existing adopting regulations, and through the terms and conditions of Federal awards issued following the government-wide effective date of the OMB amendments.[57]
There are many practical reasons why agencies have not generally completed secondary rulemakings to readopt OMB amendments following 2014. Beginning dozens of secondary agency N&C rulemakings only after OMB has already completed a year-long government-wide N&C rulemaking process—including extensive interagency coordination before the formal rulemaking process even begins—would generally be redundant, create long administrative delays, constitute a major drain on agency resources, and frustrate the objective of government-wide uniformity for OMB policy changes. For example—as with the Federal Acquisition Regulation (FAR) that applies to Federal procurement contracts—it is sometimes necessary for OMB to amend the regulatory text to align with legislative changes on specific government-wide effective dates. Secondary agency rulemakings could result in staggered and sometimes wildly inconsistent effective dates for OMB's amendments and associated policies across the Federal Government—with agency rules only being proposed and finalized as agency resources allow. This would effectively delay implementation of OMB's government-wide requirements by an extended period of time. Such delays would create confusion for recipients, auditors, and the entire Federal grants community, and be inconsistent with OMB's statutory authority to set government-wide requirements for grants administration that agencies must follow. Moreover, agencies would generally have little of substance to say in response to public comments on government-wide policy requirements already settled by OMB pursuant to its own statutory authorities and firmly established in the regulatory text of subtitle A.
B.2. Proposed Clarification of Regulatory Structure
a. In general. Through this rulemaking, OMB and Federal grantmaking agencies seek to collectively clarify how government-wide “financial management policies and requirements” codified in OMB's 2 CFR regulatory text in subtitle A will be implemented by Federal agencies in the future.[58] The current classification of the OMB regulatory text as “guidance, not regulation” is confusing for award recipients, is generally inconsistent with the history of agency implementation of OMB amendments since 2014, and fails to provide adequate predictability and transparency for the Federal grants community regarding how future OMB amendments of the regulatory text of subtitle A will be implemented by agencies. To promote predictability, transparency, uniformity, efficiency, and other objectives described in this document, OMB seeks to provide further clarity regarding the regulatory structure and status of 2 CFR through this rulemaking.
b. Similar to existing frameworks. The proposed clarification in this document is similar to the already existing process for agency implementation of OMB amendments of the regulatory text in part 200. Information on the existing process is provided at 2 CFR 200.110(a) and discussed in this document above. Thus, at least for agencies that have already implemented the OMB requirements, OMB's proposed amendments related to this objective are primarily intended to clarify the status of the regulatory text in subtitle A, rather than constituting a fundamentally new approach or change in direction. As discussed above, the approach described in this document is consistent with how most agencies have implemented OMB amendments of the regulatory text of 2 CFR subtitle A since the Uniform Guidance was first adopted by agencies in 2014.
The proposed clarification is also procedurally similar to the long-standing “adoptable guidance” model for the suspension and debarment requirements in 2 CFR part 180.[59] In the 2005 preamble establishing part 180, OMB observed the need to “[s]treamline the process for updating the government-wide requirements” by centralizing the process for substantive updates to the rule at OMB—with agencies only needing to complete one initial adoption. The “adoptable guidance” approach allowed OMB to “publish proposed changes to the [government-wide requirements] in the Federal Register , with an opportunity for the public to comment.” Once agencies had completed the initial step of adopting the part 180 guidance in agency regulations, “the process for future updates [would] be complete [each time that] OMB issues . . . final guidance” amending the regulatory text. In other words, agencies would “not need to amend their regulations adopting the guidance” through dozens of separate agency rulemakings following future OMB amendments. That regulatory structure has remained the status quo for 2 CFR part 180 for the past 20 years.
Like part 180, OMB also issued part 200 for agency adoption in 2013, which represented a major improvement from the older patchwork of OMB Circulars and agency-specific regulations. However, despite the information provided at 2 CFR 200.110(a), questions regarding the process for agency implementation of OMB amendments of part 200 have lingered, which has impacted the predictability, transparency, and consistency of government-wide implementation of the OMB requirements.
Consistent with the approach described in the preamble for part 180 and the existing regulatory text at § 200.110(a), this document proposes to further clarify how agency adopting regulations in subtitle B apply to future amendments of subtitle A. The proposal will also clarify the status of OMB's regulatory text throughout subtitle A as an OMB regulation. Agencies will remain partners with OMB in the process for future amendments by participating in OMB's development of proposed policy changes and continuing to implement the effective requirements. However, OMB proposes to clarify that the legal mechanism for futures updates will be streamlined to a single Federal Register document issued by OMB following public N&C, rather than dozens of rulemakings across the Federal Government with generally identical requirements but inconsistent effective dates. For the reasons discussed above, beginning dozens of agency N&C rulemakings after OMB has completed its own N&C rulemaking process would be impractical, inefficient, and impede OMB's ability to timely exercise its own statutory authorities to set government-wide requirements for grants management.
c. OMB government-wide authorities related to grants administration. Congress authorized OMB at 31 U.S.C. 503 to set government-wide requirements for grants administration, and agencies must follow the OMB requirements in their award programs. Congress also authorized OMB under the Federal Grant and Cooperative Agreement Act of 1977, codified in relevant part at 31 U.S.C. 6307, to issue interpretative guidelines to Federal agencies to promote consistent and efficient use of Federal financial assistance awards. Congress also authorized OMB at 31 U.S.C. 7505 to provide government-wide requirements for Single Audits of recipients, and agencies must also follow those requirements. Congress also authorized OMB under the Transparency Act (Pub. L. 109-282), as amended, to provide instructions to agencies related to ensuring public transparency of their assistance programs—including with respect to award recipients, award amounts, unique entity identifiers, subawards, and various other information—which agencies are also required to follow. At 31 U.S.C. 6105, Congress also assigned oversight responsibility to OMB for the exercise of all authorities and responsibilities related to Federal program information. At 41 U.S.C. 1125, Congress authorized OMB to prescribe government-wide requirements that agencies must follow in providing for the procurement of property or services by recipients of Federal grants or other forms of financial assistance. Pursuant to all of these authorities, and others described in this document, the proposed rule clarifies that 2 CFR subtitle A is OMB's issuance of government-wide requirements under Federal law that agencies must carry out.
d. Summary of proposed Uniform Grants Regulation (UGR). Under the proposed rule, OMB will issue the “Uniform Grants Regulation” as an OMB regulation with one government-wide effective date, pursuant to OMB's statutory authority described above, to provide government-wide grants management requirements. The text of 2 CFR subtitle A will be revised to reflect its status as an OMB regulation, especially in key provisions in parts 1 and 200. OMB proposes to remove the statement in 2 CFR 1.05 that the regulatory text is only guidance and “not regulation.” Otherwise, the structure of title 2 of the CFR will generally remain the same, with OMB requirements in subtitle A and agency “adopting” chapters in subtitle B. Federal agencies join this proposal, and plan to issue the final rule as a joint rulemaking with a common preamble to implement this structure.
The proposed changes will provide regulatory clarity to the entire Federal grants community regarding the effective date and binding effect of OMB's policies and requirements, and their application to agencies and recipients for new awards issued after the effective date of OMB's amendments. The “Uniform Grants Regulation” framework will avoid the need for dozens of secondary agency rulemakings merely to reaffirm identical requirements that apply government-wide—which OMB is authorized by statute to determine. Following 2014, such secondary agency rulemakings have generally not occurred under the existing structure. Advantages of the clarifications provided through the “Uniform Grants Regulation” proposal include: (1) uniform, transparent requirements; (2) reduced redundancy and regulatory volume; and (3) a streamlined approach allowing for efficient updates and responsive government-wide policy changes. The proposed approach will also maintain public participation.
(i) Uniformity, transparency, and regulatory clarity. The “Uniform Grants Regulation” framework will make it easier for recipients and auditors to find and understand the rules that apply to Federal awards, and the date on which those rules become effective. The modified regulatory text would resolve recurring questions on these topics, and reinforce that OMB's government-wide requirements are legally binding pursuant to OMB's statutory authorities for future updates on the effective date of OMB's amendments of the regulatory text. OMB's authorities contemplate OMB setting binding policy related to financial assistance for all agencies—which is effectively what the Uniform Guidance already does today. This proposal will simply clarify the regulatory status of subtitle A, and ensure that OMB policies apply uniformly across all agencies on the effective date intended by OMB without the need for redundant and open-ended agency rulemaking processes to implement them. From a recipient's perspective, OMB's requirements in 2 CFR will still generally carry the same weight as before, but calling them OMB regulations will further emphasize and clarify their binding effect across the Federal Government.
(ii) Reduced redundancy. The proposed clarification will promote efficiency and save government resources by preventing the need for dozens of secondary agency rulemakings. Agencies may still undertake such rulemakings as appropriate to make adjustments in their own chapters, but will not be required to in the case of every OMB amendment. Existing provisions in the regulatory text, which OMB proposes to retain, also provide mechanisms for exceptions and otherwise maintaining alignment with agency program statutes in the case of conflict.[60]
Moreover, agencies will not be entirely removed from the process of 2 CFR updates, but will remain involved as partners in OMB's regulatory process, and through participation in interagency workgroups such as the Council on Federal Financial Assistance. Although, in general, agencies will not need to directly join future OMB rulemakings, they will remain engaged in the interagency review processes, ensuring that agency grant experts have appropriate input on legal and practical considerations for their agencies before rules are proposed or finalized by OMB.[61]
(iii) Efficiency and responsiveness. The “Uniform Grants Regulation” framework recognizes the practical reality of needing to ensure that OMB is able to efficiently exercise its statutory authority to provide government-wide grants management requirements in a timely and responsive manner. Given that updates to OMB's requirements in subtitle A may already take upwards of a year to complete prior to any secondary agency rulemakings—from initial policy development at OMB to inter-agency coordination, drafting and obtaining clearance for proposed rulemaking documents, completing N&C procedures, responding to comments, drafting and obtaining clearance for final rulemaking documents, additional inter-agency coordination, and typically, but not necessarily, providing some gap between issuance of the final rule and its effective date—the proposal will ensure that OMB can actually establish government-wide requirements within a reasonable timeframe. The proposal will clarify that agencies do not need to initiate another lengthy N&C rulemaking process just to implement OMB amendments for which OMB already followed robust public N&C procedures. The framework will ensure that OMB remains able to efficiently respond to emerging compliance issues or implement new statutory requirements in a timely manner across all agencies.
Both the Federal Government and American public will benefit from such timely adjustments. This may include, for example, faster incorporation of legislative changes from Congress. This is far more workable and efficient than an alternative model in which dozens of agency rulemakings to implement new requirements would only begin after OMB has already completed a year-long process to propose and make amendments. Such an alternative model would effectively prevent timely implementation of needed government-wide policy reforms related to grants management, and frustrate OMB's ability to efficiently perform its own statutory functions.
(iv) Note regarding proposed names for title 2 and part 200. This document proposes to use “Uniform Grants Regulation” (UGR) as a plain language name or designation for 2 CFR part 200 following issuance of a final rule. See § 1.100 (proposed version). OMB does not propose a change to the existing header for Title 2, which would remain “Federal Financial Assistance.” Thus, the various parts of Title 2 would collectively constitute the Federal Government's “Regulation for Federal Financial Assistance” (RFFA), while part 200 would constitute the UGR. OMB also does not propose a change to the (formal) header for part 200, which would remain “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (UAR). Thus, the name UGR, as referred to in § 1.100 (proposed version), would be used in a way similar to how “Uniform Guidance” is currently used as a plain language way of referring to part 200—despite its formal header. The acronym UAR would also remain acceptable and accurate, as would simply referring to “part 200.”
The proposed name of UGR for part 200 would not have any impact on the part's broader applicability to cooperative agreements and other forms of financial assistance, which remain subject to part 200 under the proposed regulatory text. See 2 CFR 200.1 and 200.101 (proposed versions). Grants are a common and widely used form of Federal financial assistance. See 2 CFR 200.1. Outside of its technical meaning, the term “grant” is also generally understood and used in ordinary speech by the general public in a way that more technical terms may not be. OMB proposes to refer to part 200 as the UGR to retain a name that will be widely understood, easy to say, and still similar to the existing name for part 200—the “Uniform Guidance”—which is widely known and used throughout the Federal financial assistance community. Under the existing structure, “Uniform Guidance on Grants” and “Uniform Grants Guidance” (UGG) are also frequently used to refer to part 200, which are also similar to the name proposed in this document.
In selecting a proposed plain language name and acronym, OMB also considered “Financial Assistance Regulation,” but determined that the acronym for this name would conflict with the acronym that is already used for, and widely known as applying to, the Federal Acquisition Regulation (FAR). Creating a second FAR that applies to Federal financial assistance instead of Federal procurement contracts would cause confusion and be unworkable. OMB believes that UGR will be a simple and clear way to refer to part 200 following issuance of the final rule and easily distinguishable from the FAR. As is currently the case, the regulatory text of 2 CFR part 200 may also be referred to as the UAR (based on the formal header) or simply as “part 200.”
e. Continued public and agency participation. Finally, the proposed “Uniform Grants Regulation” framework will also maintain public and agency participation in the development of policies. OMB will continue to follow public N&C rulemaking procedures for substantive updates, and all stakeholders will have the ability to comment on any changes proposed by OMB. Thus, interested parties can focus on a single unified proposal rather than tracking and commenting on dozens of separate agency proposals. Agencies will still be involved during the development stage for OMB policy amendments and various interagency review periods, and still have the ability to raise agency-specific issues with OMB before amendments are proposed or finalized. After OMB's final determination, secondary public N&C periods at each agency would serve little practical purpose, as the key policy decisions would already have been made by OMB with input from both public commenters and Federal agencies.[62]
B.3. Proposed Changes to Agency Chapters in Subtitle B of 2 CFR
Through this proposed rulemaking, certain Federal grantmaking agencies that currently lack an existing chapter in 2 CFR subtitle B propose to add chapters, which is intended to streamline implementation and reduce variability across the Federal Government. Federal agencies that have existing chapters in 2 CFR subtitle B propose certain targeted and conforming changes to support OMB's broader rulemaking effort. Following this rulemaking, subtitle B will provide a complete list of all grantmaking Federal agencies,[63] including certain agency-specific policies and procedures. This proposed change will make OMB's policies and requirements in 2 CFR truly “uniform” across the Federal Government for first time since OMB's “Uniform Guidance” was established in 2013.
C. Objective 3: Reducing Recipient Burden
The third and final objective of this rulemaking is to reduce recipient burden. The proposed revisions in support of this objective are aimed at ensuring that the requirements contained in 2 CFR are only those that OMB finds necessary for the efficient implementation and oversight of assistance programs authorized by law.
Some of the changes related to this objective are aimed at ensuring that recipients can focus on timely and efficient delivery of core program purposes. As discussed under the first objective in this document, in previous years Federal agencies often required award recipients to spend great amounts of time, effort, and financial resources to implement unlawful DEI mandates and other unnecessary add-on requirements that increased project costs, complexity, and completion timelines, but did not serve the underlying public purpose of support of the relevant assistance program. By contrast, under the proposed version of the regulation, OMB seeks to ensure that Federal agencies will appropriately reduce the scope of award activities to only what is necessary to achieve the objectives identified in law consistent with Executive Branch policy. If finalized, recipients should be able to restore focus on achieving core public purposes in a cost-efficient and timely manner.
In seeking to reduce recipient burden, OMB also reviewed the guidance to look for other opportunities to further standardize and streamline the grantmaking process where feasible. For example, in § 200.202, the proposed regulation encourages the use of multi-year awards, thereby reducing the frequency of applications and individual awards that are generated each year. In § 200.204, OMB encourages Federal agencies to adopt more efficient Notice of Funding Opportunities and application practices, including the use of statements of interest, which will simplify the process for thousands of prospective applicants. In addition, the proposal would require that all Federal funding opportunities be posted on Grants.gov ensuring agencies use a single, consistent platform that reduces duplicative processes and increases transparency for award applicants. Under the proposed regulation, agencies are not prohibited from announcing opportunities on their websites or in other locations in addition to Grants.gov. Federal agency heads (or designees) may approve exceptions to this requirement when the agency determines that publicly announcing an opportunity would pose a national security risk or is in the national interest of the United States. The removal of superfluous policy requirements reduces costs and complexity without undermining accountability for Federal financial assistance awards.
OMB is also committed to continuing to support this objective following the current rulemaking process. For example, efforts to address this objective may also involve longer-term initiatives to: (i) review and streamline existing government-wide forms to ensure that only necessary data is being collected a single time; and (ii) work with Federal grantmaking agencies to eliminate or reduce burdensome program regulations and requirements.
V. Regulatory Impact Analysis
The attached Regulatory Impact Analysis (RIA) evaluates the benefits, costs, and transfers associated with the proposed rule. For example, the RIA evaluates the proposed elimination of fixed amount awards and fixed amount subawards; proposed payment accountability reforms, including requirements for Federal payment requests; proposed reforms related to subrecipient oversight; proposed clarifications of authority for termination and suspension of Federal awards; proposed changes to national policy provisions; and proposed changes related to eligibility restrictions for research and development awards. The draft RIA finds that the proposed rule is expected to generate qualitative benefits, modest administrative costs, and minimal transfer effects. OMB invites comments on the analysis provided in the attached RIA.
VI. Section-By-Section Discussion of the Proposed Revisions to Subtitle A of 2 CFR
OMB invites comments on the proposed revisions throughout subtitle A of 2 CFR.
Part 1—About Title 2 of the Code of Federal Regulations and Subtitle A
OMB proposes to revise various sections of 2 CFR part 1 to replace references to “guidance” with “regulation” to reflect that the OMB policies contained in 2 CFR subtitle A constitute an OMB regulation. Additional analysis related to this change is provided in this document above.
OMB proposes to add a new § 1.221 to explain that certain listed Federal agencies received approval from OMB to implement the OMB regulations in subtitle A as policy applicable to their Federal awards without establishing agency regulations in subtitle B. Approval of this alternative implementation method is generally based on the limited rulemaking authorities of these agencies.
Parts 25, 170, 175, 180, 182, and 183
OMB proposes limited revisions in parts 25, 170, 175, 180, 182, and 183. As throughout the regulatory text, OMB proposes to replace the term “guidance” with “regulation” or “policy,” as appropriate, for the reasons set forth above. In some cases, depending on the context, the use of the word “guidance” is maintained, such as instances in which the term does not refer to the regulatory text of 2 CFR. OMB also proposes various grammatical changes in these parts.
In part 170, OMB proposes certain revisions to reflect that, as of March 8, 2025, FSRS.gov was retired, and all subaward reporting data and functionality are now on SAM.gov. Thus, certain references to FSRS are replaced with references to SAM.gov.
In part 180, consistent with other changes throughout the regulatory text, OMB proposes to remove the statement in § 180.15 that the policy contained in the regulatory text “is guidance not regulation.” OMB also proposes to revise § 180.25 to clarify that agencies must not deviate from the requirements of this part on matters for which discretion is not provided.
OMB proposes to revise §§ 180.745 and 180.840 to require agencies to provide entities or individuals with a transcribed record of fact-finding proceedings for suspensions and debarments within five business days. Under this proposal, the entity or individual requesting the transcript would remain responsible for purchasing it and paying applicable costs. Although not addressed directly in either the existing or proposed regulatory text, in some cases it is possible that other laws may restrict what information may be provided in this context, such as classified information.
In § 180.915, OMB proposes to update the reference to the Program Fraud Civil Remedies Act (PFCRA) of 1986 to reflect that, on December 23, 2024, Congress amended the PFCRA, including changing its name to the Administrative False Claims Act (AFCA).[64]
Similarly, in part 182, OMB proposes to remove the statement in § 182.15 that the policy contained in the regulatory text “is guidance not regulation.” In § 182.25, OMB also proposes to clarify that Federal agencies must not deviate from the requirements of this part on matters for which discretion is not provided.
OMB also proposes to revise part 183 to replace the term “guidance” with “regulation.” Finally, OMB proposes to update the definition of “covered combatant command” in § 183.35 to simply reference the definition existing in law.
Part 176—Award Terms for Assistance Agreements That Include Funds Under the American Recovery and Reinvestment Act of 2009
OMB proposes to remove the guidance in part 176 related to the American Recovery and Reinvestment Act of 2009 (ARRA). Part 176 was initially issued to govern the use of funds appropriated under ARRA as part of the Nation's economic recovery efforts following the 2008 financial crisis. The regulations in part 176 are no longer needed because awards are no longer being made under ARRA. The removal of part 176 aligns with OMB's broader objective of streamlining Federal financial assistance regulations by eliminating outdated or unnecessary provisions that no longer serve a practical function.
Part 200—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
Throughout part 200, consistent with changes discussed above, OMB proposes to replace the term “guidance” with “regulation” when referring to the regulatory text of 2 CFR. In some cases, OMB also proposes to replace the term “guidance” with “policy” or other terms that fit within the context of the regulatory text.
Subpart A—Acronyms and Definitions
Section 200.1—Definitions
OMB proposes to revise § 200.1 to align with the proposed policy changes and to be consistent with Federal law. These changes include revisions to the definitions for “Federal award date,” “improper payment,” “personally identifiable information (PII),” and “unobligated balance.” Other proposed changes include removing definitions for “fixed amount awards” and “protected personally identifiable information (Protected PII).” The existing definition of Protected PII is not necessarily consistent with other OMB guidance, which does not distinguish between PII and Protected PII. Other conforming changes were proposed in other sections of the regulatory text that use the term Protected PII.
OMB also proposes to revise the definition of “compliance supplement” to delete the words “annually updated.” OMB is in the process of reevaluating the appropriate frequency for issuing the compliance supplement. Pursuant to the Financial Management Risk Reduction Act (Pub. L. 118-207), OMB and the Office of Inspector General for the Department of Health and Human Services (HHS) are currently analyzing the single audit process. OMB plans to engage stakeholders ahead of any substantial changes.
Subpart B—General Provisions
Section 200.101—Applicability
OMB proposes to revise § 200.101(b)(4) to remove references to fixed amount awards. OMB proposes to remove the reference to fixed amount awards for consistency with other changes proposed in this document, which eliminate the use of both fixed amount awards and subawards, which can limit transparency and hinder effective oversight. OMB also proposes to include a reference to the FAR in § 200.101(c)(2).
OMB also proposes to make certain clarifying edits regarding which provisions govern in the case of conflict in paragraph (d) of § 200.101. OMB now proposes to address statutory and regulatory conflicts in separate paragraphs. Paragraph (d)(1) regarding statutory conflicts remains substantially unchanged except for the proposed deletion of the reference to regulations. OMB proposes a new paragraph (d)(2) under § 200.101 addressing non-statutory conflicts with agency regulations. OMB proposes to specify that the following provisions of part 200 will govern in any circumstances where they conflict with a regulatory provision not required by Federal statute: all sections in subpart F and § 200.340 in subpart D. For other non-statutory conflicts with an agency's regulatory provision, the proposed regulatory text would encourage Federal agencies to apply the government-wide policies in part 200 to the greatest extent permitted by law. OMB also proposes to recommend that Federal agencies clarify which provisions govern in funding opportunities and Federal award documents. The proposed text explains that the default presumption would generally be for the Federal agency to apply the government-wide policies in this part if it can do so consistent with law. Finally, the proposed revision recommends that Federal agencies also work to resolve such non-statutory conflicts consistent with their rulemaking authorities; applicable provisions in part 200, such as §§ 200.102, 200.106, and 200.110; or both. For example, this may involve amending an agency regulation outside of 2 CFR to eliminate the conflict or codifying an exception to the government-wide policy in the agency's implementing regulations in subtitle B.
It should be recognized that § 200.101(d)—under both the existing and proposed versions—only applies to Federal programs to which part 200 applies. The proposed policy regarding program applicability in this section remains generally unchanged. The proposed edits regarding regulatory conflicts seek to increase uniformity and transparency regarding management and administration of Federal financial assistance across the Federal Government. Recipients, subrecipients, and auditors should not have to speculate or guess regarding which regulatory provisions govern a Federal program or specific Federal award.
Section 200.102—Exceptions
OMB proposes to revise § 200.102(b) regarding “statutory and regulatory exceptions” to include reference to the proposed change at § 200.101(d)(2) discussed above. OMB also proposes to revise § 200.102(c) regarding “Federal agency exceptions” to remove reference to fixed amount awards for reasons discussed elsewhere in this document. Additionally, OMB proposes to revise the authority for case-by-case exceptions made by a Federal agency to highlight examples of sections in which other approval by OMB is expressly required by this part, such as at § 200.340.
Section 200.106—Agency Implementation and Responsibilities
OMB proposes to revise § 200.106 to add a new paragraph (b) regarding agency responsibilities. The proposed paragraph references the responsibilities of Federal agencies under other parts of OMB's grants administration policies in the regulatory text of 2 CFR. This proposed change will further clarify that Federal agencies are responsible for adhering not only to part 200, but also to the other existing parts contained in subtitle A, including parts 25, 170, 175, 180, 182, 183, and 184.
Section 200.110—Effective Date
OMB proposes to revise § 200.110 to clarify and supplement the existing policy in paragraph (a). The proposed changes to paragraph (a) are discussed in further detail in section IV.C of this preamble regarding the proposed clarification of the regulatory structure of 2 CFR. As discussed above, the proposed changes to paragraph (a) are generally consistent with the existing regulatory text, but provide further clarity and context regarding its meaning.
Section 200.111—English Language
OMB proposes to revise § 200.111 to focus only on the basic requirement that all Federal announcements, applications, and Federal award information must be in the English language and must be in terms of U.S. dollars. This revision is intended to highlight the importance of recipients being able to understand Federal award requirements and program information in English to effectively meet program objectives and communicate with Federal officials about program and Federal financial assistance matters.
Section 200.112—Conflict of Interest
OMB proposes to revise § 200.112 to require, in the interest of transparency, that a recipient or subrecipient must disclose whether any employees who worked on the proposal or will support the resulting Federal award were employed by the awarding Federal agency within the preceding two years prior to application submission. OMB further clarifies that this information is for informational purposes and does not by itself represent a conflict of interest. This revision is intended to enhance transparency and allow Federal agencies to identify potential conflicts of interest arising from recent employment relationships between agency staff and recipient personnel. While the disclosure does not create a prohibition or automatic bar to participation, it provides awarding Federal agencies with visibility into situations where prior employment could give rise to questions about impartiality, preferential treatment, or insider knowledge. This change strengthens integrity standards in the award-making process while limiting burdens by requiring only disclosure, not additional approval or review.
Section 200.113—Mandatory Disclosures
OMB proposes to revise § 200.113 to require an Office of Inspector General to transmit any disclosures it receives under this section to the United States Attorney's Office for the District of Columbia within ten days of receipt. The purpose of this revision is to strengthen enforcement and accountability by ensuring that credible allegations of fraud or misconduct are promptly transmitted to prosecutorial authorities. This 10-day transmission standard would reduce delays and accelerate prosecutorial awareness, thereby reducing the risk that criminal (or civil) misconduct continues without the initiation of appropriate remedies if warranted.
Subpart C—Pre-Federal Award Requirements and Contents of Federal Awards
Section 200.201—Use of Grants, Cooperative Agreements, and Contracts
OMB proposes to revise § 200.201(b) to eliminate the use of fixed amount awards unless otherwise authorized by Federal statute. Fixed amount awards were introduced in 2014 with the initial release of the Uniform Guidance. Extensive standards and guardrails regarding the use of fixed amount awards were never established in the regulatory text of part 200, sometimes resulting in inconsistent use or application of this type of award across Federal agencies. In response to public comments on the 2024 rulemaking, OMB attempted to establish additional standards and provisions related to fixed amount awards in the 2024 revisions. OMB now proposes to change course, and eliminate this type of award from part 200. OMB is concerned that use of this type of award can limit transparency and hinder effective oversight, and believes the limited standards for fixed amount awards in part 200 remain inadequate to address these concerns. The existing regulatory text also remains ambiguous with respect to application of the cost principles and certain other requirements to fixed amount awards, with important context, in some cases, only provided in the 2024 preamble. This proposed change will ensure increased consistency across Federal agencies in the execution and implementation of Federal financial assistance and promote greater transparency and oversight. OMB proposes to relocate the definition of “fixed amount awards” to this section. This proposed change is not intended to impact any existing fixed amount awards or subawards issued prior to the effective date of the proposed rule.
OMB also proposes a minor revision to § 200.201(a) to make Federal agencies the exclusive focus. OMB proposes to add a cross-reference to § 200.331, which more directly addresses how pass-through entities determine the appropriate type of agreement for a subaward or contract.
Section 200.202—Program Planning and Design
OMB proposes to revise § 200.202(a) to further clarify the elements of program design. As “goals and objectives” do not directly “provide” meaningful results, OMB proposes to clarify that the goals and objectives must “aim to achieve meaningful results.” OMB also proposes to clarify that goals and objectives must be consistent with the public purpose of Federal authorizing legislation and aligned with administration policies and priorities.
OMB also proposes to add five new paragraphs. In § 200.202(c), OMB proposes to clarify that Federal agencies must develop Federal programs and implement activities under those programs in a manner that ensures compliance with all applicable restrictions on the use of Federal funds, including ensuring that Federal program funds are only used for public purposes of support authorized by law. This proposed addition reiterates what has long been a foundational principle of Federal financial assistance: funding must only be used to “carry out a public purpose of support or stimulation authorized by law,” [65] not for other extraneous activities or initiatives of recipient organizations. This proposed revision increases transparency and predictability for applicants and recipients by ensuring that program announcements are aligned with statutory authority from the outset. OMB proposes to include an example related to ensuring that program funds are not used to subsidize political activities or initiatives unrelated to authorized public purposes.
In § 200.202(d), OMB proposes to add a paragraph explaining that Federal agencies may, to the extent permitted by law, restrict eligibility among different types of nonprofit organizations. This proposed revision promotes transparency by ensuring applicants can determine eligibility without guessing or interpreting agency intent. In addition, the proposed revision ensures that such restrictions are not applied in a manner inconsistent with law. As a result, applicants will have greater clarity and confidence about eligibility requirements before spending time and resources on preparing applications.
In § 200.202(e), OMB proposes to add a paragraph to establish a government-wide policy governing eligibility and the use of international elements in Federal research and development awards. Through this proposed change, OMB seeks to strengthen alignment between Federal research and development funding and national priorities, enhance consistency across grant-making agencies, and clarify expectations for applicants, while preserving appropriate flexibility to support international engagement that demonstrably advances the interests of the United States. Consistent with OMB's authorities discussed above, which authorize the establishment of uniform policies governing the management of Federal financial assistance, this proposed change is intended to ensure consistent application of eligibility limitations applicable to research and development awards. OMB and the participating agencies seek to ensure that such awards remain aligned with the national interest of the United States. As with other sections of the regulatory text, the policy must be implemented consistent with relevant appropriations and authorizing statues.
In § 200.202(f), OMB proposes to add a paragraph that encourages agencies to design awards as multi-year award when consistent with program objectives and subject to restrictions in law. Under this approach, awards would use budget periods longer than one year instead of requiring annual re-competition. Such awards must be structured to avoid Antideficiency Act violations. This proposed revision promotes efficiency and reduces unnecessary administrative burden on both agencies and recipients. In addition, the proposed revision provides greater funding stability for recipients, enabling long-term planning and execution of complex projects.
Lastly, in § 200.202(g), OMB proposes to add a paragraph that would require agencies that issue Federal financial assistance for scientific research to categorize those awards as basic research, applied research, and experimental development consistent with the definitions in OMB Circular A-11. This categorization would need to be communicated to the recipient and included in the terms and conditions of the award.
Section 200.204—Notices of Funding Opportunities
OMB proposes to revise in § 200.204 to clarify, supplement, and revise the government-wide policy regarding notices of funding opportunity, commonly referred to as NOFOs. OMB proposes to require that Federal agencies must publicly announce funding opportunities for all discretionary awards—not just those that will be openly competed. Consistent with the definition of discretionary award and longstanding practice, OMB also proposes to clarify that, as appropriate and consistent with authorizing law, funding opportunities may allow for open competition, limited competition, or selection on a non-competitive basis. In addition, OMB also proposes to require that applicants apply for awards using Grants.gov unless a program specific exception is expressly authorized by Federal statute or approved by the Federal agency head (or designee). OMB also highlights the importance of drafting NOFOs in plain language so that completing the application generally does not require the applicant to employ technical or legal experts. These proposed revisions streamline and standardize the policies for Federal funding opportunities, while also promoting transparency regarding the use of Federal tax dollars. In addition, the proposed revisions reduce barriers for participation by promoting greater accessibility for eligible applicants.
OMB also proposes to revise this section by adding a new paragraph (c) regarding use of Statements of Interest (SOI). The proposed paragraph encourages agencies to use SOIs as part of their NOFOs when high application volume or lengthy proposals are expected. These revisions are intended to reduce burden on applicants who would otherwise prepare lengthy, resource-intensive proposals with little chance of being selected for funding in some cases. The proposed revision would also improve efficiency by focusing agency review on the most competitive applicants.
OMB also proposes to revise the existing best practice that executive summaries should not exceed 500 words. OMB proposes to make this a requirement, but allow Federal agency heads (or their designee) to authorize exceptions. This proposed revision would more consistently provide applicants with a clear, concise overview of NOFOs while maintaining agency flexibility when needed to communicate complex opportunities. As a result, applicants will more often be able to quickly assess whether a program is relevant before reading the entire funding opportunity.
OMB also proposes to revise the requirement that opportunities be posted for no less than 30 days unless the agency determines that exigent circumstances exist. Under the proposed revision, agencies would be required to include such a determination in the NOFO. This proposed revision is intended to prevent unreasonably short application windows that disadvantage certain applicants. The proposed revision also promotes fairness, accountability by Federal agencies, and adequate preparation time for applicants. As a result, applicants will have a more predictable timeframe to prepare strong applications.
Lastly, OMB proposes several revisions related to the full text of funding opportunities. Specifically, OMB proposes that Federal agencies, when feasible, should strive to ensure that NOFOs are accessible to a broad range of applicants, including those that have not previously received Federal awards. In addition, OMB proposes a new requirement that Federal agencies may be required to submit a report to OMB detailing the specific recipients or types of recipients that received Federal awards from the Federal agency over a specific time period. These proposed revisions strengthen clarity and accessibility obligations for agencies and provide OMB with oversight tools to ensure funding is not inappropriately concentrated among a narrow set of recipients.
Section 200.205—Federal Agency Review of Merit of Proposals
OMB proposes to revise § 200.205 to strengthen requirements for agency merit review and to establish a new pre-issuance review process consistent with Executive Order 14332. Under the proposed requirements for pre-issuance review, as part of the broader merit review process, agencies must ensure that proposals selected for funding are consistent with applicable law, Federal agency priorities, and the national interest. Consistent with the Executive order, senior appointees must conduct these reviews and apply specific principles when evaluating proposals. These principles include ensuring that discretionary awards advance the President's policy priorities, prohibit the use of funds for discriminatory or otherwise impermissible purposes, and emphasize ensuring compliance with applicable law. Additionally, the proposed revisions encourage agencies to broaden the range of recipients, prioritize institutions demonstrating rigorous and reproducible scholarship, incorporate benchmarks for measuring performance of “Gold Standard Science,” and direct agencies to weigh institutional commitment to research integrity when making award decisions. Proposed revisions in this section also clarify that peer review remains advisory and does not replace agency discretion. Finally, the proposed revisions clarify that agencies are not required to issue awards solely as a result of issuing a NOFO. These proposed updates are intended to enhance consistency across agencies, accountability, and alignment of Federal awards with administration priorities, while also reducing the risk of award being made contrary to statutory or policy requirements.
Section 200.206—Federal Agency Review of Risk Posed by Applicants
OMB proposes to revise § 200.206(b)(2) to expand the list of factors that agencies may consider when evaluating applicant risk. The changes clarify that agencies may assess an applicant's financial capacity to manage high-dollar awards, in addition to overall financial stability. The revisions also clarify that prior performance must be evaluated against the goals of the funding opportunity, and that both positive and negative outcomes must be given equal weight. OMB also proposes to add a provision that agencies may consider an applicant's history of questionable practices based on publicly available and verifiable information. In addition, OMB proposes to add a provision that agencies may consider an applicant's compliance with foreign gift and contract disclosure requirements, as applicable. Additionally, OMB proposes a new provision that agencies may consider an applicant's affiliations with organizations engaged in activities that violate Federal law, undermine public safety or national security, or advocate for the overthrow of the United States Government. Lastly, OMB proposes a new provision that agencies should consider, as applicable, an applicant's compliance with foreign gift and contract disclosure requirements under section 117 of the Higher Education Act of 1965 (Pub. L. 89-329, as amended, codified at 20 U.S.C. 1011f). The proposed revisions are intended to provide agencies with clearer authority to evaluate financial and organizational capacity, integrity, and institutional affiliations in order to mitigate risks and protect the integrity of Federal programs.
Section 200.207—Standard Application Requirements
OMB proposes to revise § 200.207 to clarify that Federal agencies must periodically review programmatic and administrative requirements specific to the agency, program, or award(s) to determine whether such requirements are unnecessary and not required by this part. Federal agencies should also update OMB annually on any such requirements that have been removed.
Section 200.208—Specific Conditions
OMB proposes to revise § 200.208 to clarify how agencies may apply, adjust, and remove specific conditions under Federal awards. OMB proposes to authorize agencies, subject to applicable law, to add or remove specific conditions throughout the period of performance based on the risk factors identified in paragraph (c) or other factors associated with a recipient or program.
A new requirement is proposed to require that any such adjustments based on any of the factors listed in paragraph (c) must occur within 15 calendar days after the agency's determination. The existing regulatory text already preserves the right of agencies to impose specific conditions based on these enumerated factors, which recipients knowingly accept when they agree to receive awards. OMB also proposes to clarify that specific conditions not based on factors in paragraph (c) may be added or removed during the period of performance only with the agreement of the recipient.
In § 200.208(d), OMB also proposes to expand the list of examples of specific conditions to include requiring information on payments to contractors or vendors, or financial integrity-related site visits. These examples are intended to provide agencies with more practical tools to address risk identified during the administration of Federal awards.
At § 200.208(f), OMB also proposes a new paragraph recognizing that agencies may impose program-level specific conditions when elevated programmatic risks are identified across a Federal program. The proposed text explains that agencies may remove such conditions once the underlying risks have been resolved, thereby allowing the use of program-level conditions to remain tied to ongoing risk management rather than continuing indefinitely. Collectively, these proposed changes provide agencies with greater flexibility to manage risk during award administration while establishing safeguards related to transparency and fairness.
Section 200.211—Information Contained in the Federal Award
OMB proposes to revise § 200.211 to clarify that Federal agencies must always include the termination provisions under § 200.340 in each Federal award or expressly incorporate them by reference, and must inform recipients of any additional termination provisions that apply to the award. This revision is intended to ensure recipients are always clearly and unambiguously informed of the potential for termination under § 200.340, including termination based on discretion of the Federal agency. OMB also proposes deleting the reference to providing “a copy of the terms and conditions” to the recipient upon request. This requirement is outdated given the access that applicants and recipients now have to general terms and conditions on the internet. To the extent that applicable general term and conditions are not available on the internet, agencies would be responsible for providing them to the recipient—typically in electronic form—with the Federal award instrument. Federal agencies would still be permitted to mail a hard copy of the terms and conditions to recipients upon request even with removal of this provision, but would not be required to provided that the recipient has electronic access.
Section 200.216—Prohibition of Certain Equipment, Services, and Systems
OMB proposes to revise § 200.216 to incorporate a new legal requirement related to the use of unmanned aircraft systems procured with Federal financial assistance. First, OMB proposes amending the section header to reflect a broader scope that continues to include, but is no longer limited to, telecommunications and video surveillance. A new paragraph (a) is proposed to appropriately frame the existing prohibition on certain telecommunications and video surveillance equipment or services. OMB also proposes removing the existing paragraph (d). Although still technically a legal requirement, considering that the statute has been in effect since 2020 and Federal agencies are unlikely to still be funding a transition to different systems, OMB considers this language to be outdated and no longer necessary for express inclusion in 2 CFR.
OMB proposes to add a new paragraph (b) in § 200.216 under the header: “Prohibition on procurement and operation of prohibited unmanned aircraft systems.” This paragraph will implement the requirements of section 1825 of the American Security Drone Act of 2023 (Pub. L. 118-31). This statute prohibits Federal agencies from issuing Federal financial assistance that results in the procurement of unmanned aircraft systems prohibited by the Federal Acquisition Security Council (FASC), and requires recipients and subrecipients to implement specific safeguards and compliance measures for these systems. The statutory requirements became effective on December 22, 2025. Thus, agencies, recipients, and subrecipients should be aware that the statute already applies even before the proposed revision of this section becomes final. See OMB Memorandum M-26-02 dated November 21, 2025, “Ensuring Government Use of Secure Unmanned Aircraft Systems and Supporting United States Producers.”
Section 200.218—Prohibition of Using Federal Awards To Promote or Support Theories of Disparate-Impact Liability
OMB proposes a new § 200.218 related to Executive Order 14281, “Restoring Equality of Opportunity and Meritocracy.” Consistent with the Executive order, this section proposes to establish a government-wide policy in 2 CFR regarding use of Federal financial assistance to promote or support theories that impose disparate-impact liability based on federally protected characteristics such as race, sex, or age. OMB proposes to direct agencies and pass-through entities, to the maximum extent permitted by law, to ensure that awards are administered in a manner that does not promote or support theories of disparate-impact liability, including by not issuing terms, conditions, or guidance that would advance theories of disparate-impact liability. Recipients and subrecipients are also directed to avoid using Federal award funds for this purpose unless expressly required by law. OMB proposes to recognize an exception related to analysis for internal use if the activities are not funded by the Federal award and not used in connection with activities under the award. OMB proposes a definition of disparate-impact liability to ensure clarity and consistency. The proposed definition is generally consistent with the Executive order. These proposed revisions are intended to align government-wide administration of Federal financial assistance with administration policy and to reinforce the principle that merit-based opportunity—rather than theories of disparate-impact liability or other forms of unlawful discrimination based on race or other protected characteristics—will govern the administration of Federal awards.
The legal authority for this section (hereinafter referred to as the “Disparate-Impact Provision”) is similar to the authority for including the unlawful DEI provision in § 200.300, as both are generally intended to prevent discrimination on the basis of federally protected characteristics. To limit repetition in this preamble, OMB includes further analysis of the Disparate-Impact Provision under § 200.300 in connection with the unlawful DEI provision, including analysis of legal authority and related considerations.[66]
Section 200.219—Prohibition of Discriminatory Event Services
To ensure that Federal funds are not used, directly or indirectly, to subsidize violations of the First Amendment of the U.S. Constitution involving suppression of free speech of disfavored groups, OMB proposes a new § 200.219. The proposed provision would establish in the regulatory text that public entities that are a recipient or subrecipient of Federal financial assistance must not discriminate on the basis of the viewpoint, content, or subject matter of speech—including on the basis of political, ideological, or religious affiliation or perspective—in providing services for events, meetings, or other expressive activities. This requirement would ensure that public entities do not improperly use control over facilities or services to disadvantage or suppress the speech of disfavored groups. The proposed text further provides that it applies regardless of whether an event is directly funded by the Federal award if it occurs on property or facilities under the control of the public entity. As public entities are subject to the First Amendment in their own right, this broad application is constitutionally permissible.[67]
The proposed additions are intended to prevent public entities from using Federal funds—including indirect costs used for buildings and facilities—in a discriminatory manner. This requirement would further ensure that public entities receiving Federal awards do not use their control over facilities or services to disadvantage disfavored groups, such as colleges and universities charging additional fees—sometimes referred to as “heckler's fees”—to provide security for conservative speakers.[68] Consistent with the First Amendment, the proposed language should not be construed to prohibit public entities from enforcing content- and viewpoint-neutral time, place, and manner restrictions, or from applying reasonable, viewpoint-neutral restrictions in nonpublic forms. If finalized, public entities must not seek to evade these requirements through pretextual or post hoc forum classifications.
The proposed language in § 200.219 is not intended to alter the allowability of costs under subpart E, including costs associated with speakers or events. Rather, it would require that any fees, security costs, or other charges imposed in connection with events be applied in a viewpoint-neutral and consistent manner.
OMB also proposes to clarify application to non-public entities. To ensure that Federal funds are not used in a manner inconsistent with the First Amendment, OMB proposes to apply the requirements of paragraph (a) to non-public entities to the extent that the relevant activities are within the scope of a Federal program under which the non-public entity accepts a Federal award. Applying the prohibition to activities within the scope of a Federal program does not present constitutional concerns under the First Amendment, provided that the Federal agency does not seek to leverage funding to regulate speech outside the contours of the Federal program.[69] By knowingly accepting such a Federal award, the recipient or subrecipient acknowledges its ability to perform the federally funded activities in a manner consistent with law and its own constitutional rights. For example, if a non-public recipient or subrecipient agrees to accept a Federal award that includes hosting a public forum, it must comply with the terms and conditions of the Federal award in a viewpoint-neutral manner.
Proposed paragraph (b) must be implemented in full accordance with the U.S. Constitution. Outside of performance of award activities, the proposed revision must not be construed to require a non-public entity to make its property, facilities, or services available for speech, expression, or events in a manner that would either directly violate its First Amendment rights or otherwise require access or association that would constitute compelled speech or association under the U.S. Constitution. Consistent with law, a Federal agency may consider adjusting the terms and conditions of a Federal award to a non-public entity to clarify the application of this provision and to ensure that performance of required award activities can proceed consistent with law.
Section 200.220—Prohibition of Using Federal Funds for Covered Foreign Collaborations
To protect the national security interests of the United States and to ensure consistent implementation of longstanding statutory restrictions, OMB proposes a new § 200.220 to prohibit the obligation or expenditure of Federal funds to support certain foreign collaborations involving covered foreign countries or covered foreign entities.
Some Federal statutes direct Federal agencies to restrict the use of appropriated funds for bilateral or multilateral activities with foreign adversaries and entities affiliated with foreign military or intelligence services. Most notably, section 1340 (a) of the “Department of Defense and Full-Year Continuing Appropriations Act” for fiscal year 2011 (Pub. L. 112-10) (commonly referred to as the “Wolf Amendment”) prohibited the National Aeronautics and Space Administration and the Office of Science and Technology Policy from using appropriated funds to develop, design, plan, promulgate, implement, or execute any bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally with China or any Chinese-owned company, absent specific statutory authorization. The Wolf Amendment has continued to apply as a rider in subsequent annual appropriations acts.[70]
Federal financial assistance is frequently awarded through grants, cooperative agreements, and subawards that may support collaborative research, technical assistance, or programmatic activities involving foreign entities. While the Wolf Amendment only applies directly to specific agencies and appropriations, OMB proposes to find that a uniform regulatory standard, providing consistent application of these restrictions across Federal assistance programs, would reduce risk related to national security and program integrity for all agencies and the Federal Government as a whole.
The proposed § 200.220 establishes a government-wide baseline rule prohibiting recipients and subrecipients from using Federal funds to support bilateral or multilateral collaborations, agreements, programs, or activities with covered foreign countries or covered foreign entities, unless expressly authorized by Federal statute or approved by the Federal agency in accordance with the proposed exception authority and applicable law. This provision is intended to ensure that Federal financial assistance is not used, directly or indirectly, to support activities that may pose a risk to U.S. national security, defense, or intelligence interests. Congress has expressly determined that such a risk exists in the case of some agencies.
The prohibition would apply regardless of whether Federal funds are used for direct programmatic activities, research, technical assistance, travel, or indirect costs allocable to such collaborations. This approach would ensure that restrictions on foreign collaboration—including those expressly required by law—are not circumvented through the structure of funding mechanisms or cost allocation practices.
The proposed rule also provides for limited exceptions where expressly authorized by Federal statute or where the head of the Federal agency (or designee) determines that the activity does not pose a risk to national security and is in the national interest of the United States. These exceptions are intended to preserve necessary agency discretion while ensuring that any departure from the general prohibition is subject to appropriate senior level review and accountability at grantmaking agencies. This provision does not prohibit recipients from engaging in foreign collaborations using non-Federal funds.
Subpart D—Post Federal Award Requirements
Section 200.300—Statutory and National Policy Requirements
OMB proposes to revise § 200.300 to streamline existing references to legal and policy obligations. OMB also proposes to supplement § 200.300 to reflect key administration policies and priorities.
1. Executive orders and Executive Branch guidance. In January 2025, President Trump issued a series of Executive orders (EOs) establishing a government-wide policies to, consistent with applicable law, end Federal funding for unlawful DEI programs, promotion of “gender ideology,” and the so-called “transition” of a child under 19 years of age from one sex to another. These include Executive Order 14151 of January 20, 2025, “Ending Radical and Wasteful Government DEI Programs and Preferencing” (DEI Executive Order); [71] Executive Order 14173 of January 21, 2025, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (Ending Discrimination Executive Order); [72] Executive Order 14168 of January 20, 2025, “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government” (Gender Ideology Executive Order); [73] and Executive Order 14187 of January 28, 2025, “Protecting Children from Chemical and Surgical Mutilation” (Protecting Children Executive Order). The President later issued Executive Order 14281 of April 23, 2025, “Restoring Equality of Opportunity and Meritocracy” (Restoring Equality Executive Order).
On March 21, 2025, the Department of Justice (DOJ) issued guidance to all Federal agencies regarding implementation of EOs 14151 and 14173 (March 2025 DOJ Guidance).[74] Subsequently, on July 29, 2025, DOJ issued additional guidance regarding unlawful discrimination (July 2025 DOJ Guidance).[75] The July 2025 DOJ Guidance was intended to ensure that recipients of Federal funding do not engage in unlawful discrimination.[76] In particular, it clarified that Federal antidiscrimination laws apply to programs or initiatives that involve discriminatory practices, including those labeled as DEI programs. Entities that receive Federal funds, like all other entities subject to Federal antidiscrimination laws, must ensure that their programs and activities comply with Federal law and do not discriminate on the basis of race, color, national origin, sex, religion, or other protected characteristics—no matter the program's labels, objectives, or intentions. DOJ's guidance emphasized the significant legal risks of initiatives that involve discrimination based on protected characteristics and offered non-binding best practices to help entities that receive Federal funds avoid the risk of violations and the revocation of Federal grant funding.[77] On September 12, 2025, OMB issued Memorandum M-25-33, which instructed agencies to follow the July 2025 DOJ Guidance when managing Federal programs and overseeing recipients of Federal funding. Most recently, on December 2, 2025, DOJ's OLC released an opinion finding that certain race-based grant programs administered by the Department of Education violate the Fifth Amendment's equal-protection component.[78]
2. Proposed revisions. OMB, in consultation with DOJ and other agencies, proposes to amend paragraph (b) of § 200.300, to provide that, in administering Federal awards, to the maximum extent permitted by law, the Federal agency or pass-through entity must ensure that the Federal award is not used to fund, promote, encourage, subsidize, or facilitate:
- “Diversity, equity, and inclusion” (DEI) or “diversity, equity, inclusion, and accessibility” (DEIA) policies, principles, or practices that violate any applicable Federal anti-discrimination laws. This includes racial preferences or other forms of racial discrimination used by the recipient or subrecipient that violate any applicable Federal anti-discrimination laws, including activities where race or intentional proxies for race will be used as a selection criterion for employment or program participation (the “Unlawful DEI Provision”);
- Gender ideology as defined inExecutive Order 14168. Gender ideology includes theories or ideologies that deny the biological reality of sex or the sex binary in humans, or endorse or advocate for the notion that sex is a chosen or mutable characteristic (the “Gender Ideology Provision”); or
- The so-called “transition” of a child under 19 years of age from one sex to another, including the chemical and surgical mutilation of children. The term “chemical and surgical mutilation” has the meaning provided inExecutive Order 14187 (the “Protecting Children Provision”).
The qualifier “to the maximum extent permitted by law” is intended to ensure that Federal agencies give due consideration to applicable authorizing legislation for their programs when applying this provision. As discussed above, OMB also proposes a related provision at § 200.218 (the “Disparate-Impact Provision”).
The existing language in paragraph (a) of § 200.300 already provides that the Federal agency or pass-through entity “must manage and administer the Federal award in a manner so as to ensure that Federal funding is expended and associated programs are implemented in full accordance with the U.S. Constitution” and “applicable Federal statutes and regulations,” including “those prohibiting discrimination.” The proposed amendments would clarify and emphasize specific applications of that principle consistent with direction in the President's EOs and recent DOJ guidance. In addition, the proposed revisions would also reinforce that use of Federal funds must remain properly aligned with core public purposes authorized by law, not diverted to subsidizing radical political ideologies, harmful experimentation on American children,[79] or unlawful discrimination.
OMB also proposes to add revised language in § 200.300(a) clarifying that, in managing and administering Federal awards, no person otherwise eligible will be excluded from participation in, unlawfully denied the benefits of, or otherwise subjection to unlawful discrimination in the administration of Federal programs, activities, projects, assistance, and services. Such non-discrimination language would encompass requirements, as applicable, not to discriminate on various bases, including race, color, national origin, disability, sex, religion, or conscience.
OMB also proposes to amend paragraphs (b) and (c) of the 2024 version of § 200.300 to remove commentary on the Supreme Court's decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020). OMB proposes to find that this commentary is unnecessary within the government-wide regulatory text, and no longer consistent with Administration policy. The Gender Ideology Executive Order explained at section (3)(f) that the prior Administration's position regarding Bostock v. Clayton County is legally untenable and has harmed women. The order also directed the Attorney General to issue guidance to agencies to correct the misapplication of the Supreme Court's decision, and to assist agencies in protecting sex-based distinctions. The Acting Associate Attorney General issued guidance to the DOJ Civil Rights Division on February 12, 2025 clarifying DOJ's position regarding Bostock v. Clayton County (“February 2025 Bostock Memo”). Consistent with the February 2025 Bostock Memo and the July 2025 DOJ Guidance, Federal agencies may decide what additional guidance, if any, to provide recipients of Federal financial assistance regarding the Supreme Court's decision in Bostock v. Clayton County. To the extent additional government-wide guidance regarding the decision is provided in the future, it would most likely come from the Attorney General or the Civil Rights Division at DOJ.
Finally, OMB proposes to add a new paragraph (c) regarding non-discrimination against faith-based organizations. The proposed paragraph (c) provides that Federal agencies and pass-through entities may not discriminate against or in favor of an applicant on the basis of the organization's religious character, affiliation, exercise, or lack thereof, nor on the basis of conduct that would not be considered ground to favor or disfavor a similarly situated secular organization. It also provides that faith-based organizations are eligible to apply for Federal financial assistance on the same basis as any other organization. It also explains that applicants that meet all eligibility requirements may be considered for a Federal award under a notice of funding opportunity.
In both the existing and proposed versions of § 200.300(a), the examples of laws applicable to Federal awards include “religious liberty [laws] . . . and those [laws] prohibiting discrimination.” All Federal agencies must comply with the Religious Freedom Restoration Act (RFRA) (42 U.S.C. 2000bb, et seq. ) and any applicable statutes prohibiting discrimination on the basis of religion or protecting the exercise of conscience. The First Amendment, RFRA, and applicable statutes prohibiting discrimination based on religion or protecting the exercise of conscience require Federal agencies, pass-through entities, recipients, and subrecipients to respect the exercise of religion. This includes considering and providing reasonable accommodations or exemptions for religious or conscience-based objections as required by law.[80] Where such legal protections apply, Federal agencies, pass-through entities, recipients, and subrecipients should not structure internal procedures in a way that would require discretionary case-by-case approval of requests for an accommodation or exemption.[81] Federal agencies, pass-through entities, recipients, and subrecipients should be aware of their ongoing statutory obligations regarding religious liberty and conscience. The proposed revision of § 200.300 is intended to clarify that conscience and religious liberty are protected under multiple statutes and the Federal Government will enforce such statutes as applicable.
Recent and ongoing litigation regarding some of the topics addressed in § 200.300 indicates the need for a clear regulatory framework reflecting administration policy that can be uniformly applied by Federal agencies to recipients of Federal financial assistance. By engaging in N&C rulemaking, OMB seeks to provide clarity regarding government-wide policies, consider public input, and arrive at a final policy that is consistent with law, including longstanding legal principles applicable to Federal financial assistance.
3. Authorities of OMB and agencies. OMB's legal authorities for this rulemaking are discussed in various sections of this preamble, and need not be repeated here at length. Generally, OMB relies on authorities including 31 U.S.C. 503 and 31 U.S.C. 6307 to establish government-wide policies and requirements related to the management of Federal financial assistance across all Federal agencies. These provisions authorize OMB to set uniform conditions on Federal awards to ensure that Federal funds are expended in accordance with U.S. law and policy.
In addition, Congress has broadly authorized Federal agencies—including those participating in this rulemaking—to enforce Federal nondiscrimination laws in their assistance programs. Recipient of Federal financial assistance must comply with applicable civil rights laws, including Title VI of the Civil Rights Act of 1964, Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, and the Equal Protection Clause of the Fourteenth Amendment.[82] OMB's statutory authority includes coordinating such cross-cutting requirements as applied to administration of Federal financial assistance.
In designing assistance programs and making new Federal awards, it is both permissible and required for Federal agencies to review proposed uses of funds to ensure they remain aligned with Congressional intent, and are not improperly diverted to subsidizing activities that fall outside of public purposes authorized by law—especially if those activities conflict with key administration policies expressed in EOs. The use of Federal funds must always remain consistent with the purpose of appropriations and the authorizing program statutes of the Federal agency. See, for example, 31 U.S.C. 1301(a) (commonly referred to as the “Purpose Statute”). The Federal Grants and Cooperative Agreements Act of 1977—which authorizes OMB to provide government-wide guidelines “to promote consistent and efficient use” of grants and cooperative agreements—also recognizes that Federal awards must be used to “carry out a public purpose of support or stimulation authorized by law.” 31 U.S.C. 6304, 6305, and 6307. Federal agencies are not required to subsidize activities that fall outside of the core public purposes of the programs they administer. OMB is not aware of Federal laws that expressly require funding the relevant activities referenced in the proposed regulatory text of § 200.300. Multiple Federal statutes, however, support not funding them, including Federal nondiscrimination laws and other laws referenced in relevant EOs and the July 2025 DOJ Guidance.
The EOs discussed above also provide further indication of Executive Branch policy relevant to these proposals to be implemented consistent with law. While EOs themselves do not supersede statutes, they guide Executive Branch polices and actions where discretion exists under statute. Here, OMB and the participating agencies are using their discretion to shape financial assistance policy consistent with applicable law and the clear direction from the President provided in the recent EOs. Similar to the EOs, the proposed rule expressly includes the qualifier “to the maximum extent permitted by law” to recognize that particular assistance programs could have purposes, requirements, or limitations affecting application of this provision—although, as discussed below, that generally should not occur based on the way OMB has designed the proposed regulatory text.
The proposed revisions in § 200.300 are consistent with relevant authorizing laws. By defining public purposes for particular assistance programs, Congress certainly afforded executive agencies with authority to condition Federal awards to only be used for those congressionally-sanctioned purposes, and not for extraneous ideological activities inconsistent with anti-discrimination laws or Executive Branch policy. Discretion to attach award conditions can be analyzed by reference to both authorizing legislation for particular assistance programs and other government-wide legislation that applies to all assistance programs, such as Federal anti-discrimination laws and OMB's authorities related to providing coordinated requirements for the management and administration of Federal financial assistance across the Federal Government.
Based on the authorities of OMB and agencies summarized above, Congress has afforded the Executive Branch discretion to establish the proposed provisions, which ensure that award funds are used solely for authorized public purposes and not for other extraneous activities that conflict with anti-discrimination laws or Executive Branch policy. Unlike a hypothetical award condition designed to induce recipients to undertake activities unrelated to the underlying purposes of a particular Federal award program, these provisions are designed to ensure that Federal funds are only used for authorized public purposes—not ideological side missions that are misaligned with Federal law and policy, including program goals and objectives as designed by Federal agencies in accordance with law. Activities performed under Federal awards must be aligned with both relevant legislation for assistance programs and the discretionary design of those programs by Federal agencies within legislative bounds. Under the proposed text, OMB will clarify that award funds must not be used in support of activities that violate Federal anti-discrimination laws, promote divisive ideologies unrelated to program goals and objectives, or are otherwise unrelated to Federal agency's discretionary design of programs to satisfy core public purposes authorized by law.
4. Clear and unambiguous incorporation in award agreements. By codifying the provisions in 2 CFR, and incorporating them in new award agreements, applicants and recipients will be provided with clear and unambiguous notice of their applicability. The Supreme Court has explained that if “Congress intends to impose a condition on the grant of federal [funds], it must do so unambiguously.” Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17 (1981). The Court has further explained that “Congress must express clearly its intent to impose conditions on the grant of federal funds so that the States can knowingly decide whether or not to accept those funds.” Id. at 24. The Pennhurst notice principle also generally applies to an executive agency's discretionary decision to impose conditions on awards based on its discretion available under law. By defining these parameters in the regulatory text of 2 CFR based on the statutory authorities outlined above, OMB and the participating agencies will further ensure that such conditions are unambiguously incorporated by the Federal agencies in award agreements.
The formal codification of the principles in regulation will eliminate any ambiguity for the Federal grants community regarding what conditions apply to Federal awards on these topics. Following issuance of a final rule, a recipient will have no basis to claim that it was unaware that, for example, DEI practices that violate Federal anti-discrimination laws, such as disparate treatment on the basis of race or sex, would jeopardize its Federal funding. Even under the existing version of OMB's guidance, there is already little or no basis for such claims considering that the relevant principles arise under long-standing anti-discrimination statues already referenced in the regulatory text, governing constitutional principles, and binding Supreme Court precedent. See, for example, Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll., 600 U.S. 181 (2023) (“ Students for Fair Admissions”). The principles were also recently highlighted and reinforced by a series of high-profile Presidential EOs and guidance documents from DOJ. Following formal codification of these principles in 2 CFR through issuance of a final rule, OMB will make these conditions even more clear and unambiguous to all applicants for and recipients of financial assistance. This promotes fairness, as all applicants will know the rules upfront when applying for and accepting new awards. It will also avoid the “unfair surprise” concerns discussed in Pennhurst and similar cases.
5. Spending Clause framework. The proposed revisions are also consistent with established jurisprudence related to the Spending Clause. In South Dakota v. Dole, the Supreme Court outlined the framework governing the authority of Congress under the Spending Clause to attach funding conditions to Federal award programs. 483 U.S. 203 (1987). Under this framework, a funding condition must: (1) promote “the general welfare;” (2) be clear and unambiguous so that recipients can “knowingly” accept the term; (3) be reasonably related “to the federal interest in particular national projects or programs” at issue (or “reasonably calculated” to support “a purpose for which the funds are expended”); (4) not induce recipients to engage in activities “that would themselves be unconstitutional;” and (5) not be unduly coercive such that “pressure turns into compulsion.” Id., at 207-11 (quotations omitted). Because executive authority to attach funding conditions to assistance awards is derived from the enactment of legislation by Congress, evaluating executive authority to attach such conditions also generally involves consideration of this framework. The proposed amendment of § 200.300 is well within the bounds of the framework provided in Dole.
First, the proposed revision promotes the general welfare by ensuring that Federal funds are not used to undermine the U.S. Constitution or Federal anti-discrimination laws, to support divisive ideologies misaligned with core purposes of discretionary assistance programs and Executive Branch policy, or to harm minors. Ensuring that Federal tax dollars are only used for purposes authorized by the Federal Government—and not for extraneous ideological missions unrelated to Federal awards—certainly promotes the general welfare.
Second, the proposed rule is designed to clearly define the prohibited activities in the regulatory text of 2 CFR and Federal awards made after its effective date. This satisfies the requirement to allow recipients to “knowingly” accept the provisions. See also Pennhurst, 451 U.S., at 17. Further discussion of the Pennhurst notice principle as applied to § 200.300 is provided in the immediately preceding section of this analysis.
Third, the amended provision is designed to ensure that activities preformed under a Federal award remain aligned with the “federal interest” in particular appropriations and program statutes. See also New York v. United States, 505 U.S. 144, 167 (1992) (grant “conditions must (among other requirements) bear some relationship to the purpose of the federal spending”). In other words, the provision seeks to ensure that Federal funds are only used for the core public purposes for which the funds are expended, and not for illegal discrimination or promoting divisive ideologies or harmful practices. The provision would further ensure that activities carried out under Federal awards are reasonably related to the Federal interest in the project or program at issue, and not improperly diverted to other activities or ideological initiatives unrelated to the purposes authorized by Congress and implemented by discretion of the Executive Branch. There is a strong Federal interest in ensuring that award activities do not drift away from authorized public purposes into activities that conflict with key Executive Branch policies expressed in Presidential Executive orders and reflected in program design by agencies. Thus, preventing violations of nondiscrimination laws, avoiding circumstances in which Federal award funds are improperly used to support divisive ideologies misaligned with core public purposes authorized by law, and protecting the health and safety of children are all Federal interests applicable to all discretionary assistance programs.
To the extent that some as-yet unidentified assistance program expressly required performance of such activities without violating the U.S. Constitution, the proposed qualifier “to the maximum extent permitted by law” could apply in those circumstances. The government-wide presumption, however, would be that Federal financial assistance programs will not be designed or administered by Federal agencies to support such activities, which are not expressly authorized by Congress and conflict with Executive Branch policy. All statutes must be administered in accordance with the U.S. Constitution and Federal anti-discrimination laws, and OMB is not aware of legislation establishing an entitlement to funds for the purposes of unlawful discrimination, promoting “gender ideology” as defined by Executive Order 14168, or assisting in the so-called “transition” of a child from one sex to another as discussed in Executive Order 14187.
Fourth, the proposed revisions do not induce unconstitutional conduct. On the contrary, the Unlawful DEI Provision and related Disparate-Impact Provision at § 200.218 align with the Constitution's equal protection principles by clarifying that Federal awards may not be used to support activities involving unlawful discrimination based on protected characteristics—as discussed in more detail in section 8.a below. Regarding the Protecting Children Provision, no court has recognized a constitutional entitlement to such procedures, and certainly not at the public expense. Moreover, with regard to all provisions, the proposed regulatory text for this rulemaking merely says that Federal award funds may not be used for certain defined activities—which will generally fall outside of the authorized public purposes a particular award program is intended to support—without attempting to more broadly regulate other activities beyond the scope of the Federal award.
Fifth and finally, the proposed revision is not unduly coercive. An applicant or prospective recipient may simply opt out of particular Federal award or program if it cannot manage to design its project or program in a way that does not violate Federal anti-discrimination laws or use Federal funds to promote gender ideology or assist in sex-transition procedures for minors.
6. Permissibility under the First Amendment. The proposed revisions also do not implicate free speech concerns under the First Amendment. All of OMB's proposed revisions related to national policy are merely providing clear notice to applicants for, and recipients of, Federal awards that, unless expressly required by law, executive agencies do not intend to use their discretionary authority to fund these categories of activities. As such, the proposed provisions do not infringe on protected speech—they merely set parameters for Federal funding or subsidization of speech, clarifying that the Federal Government will not subsidize certain categories of ideological activities. All executive agencies have received clear policy direction through the President's Executive orders and other executive actions, which they will follow in their administration of discretionary award programs. The proposed provisions only apply to activities performed under the federally funded award programs, and do not penalize or scrutinize recipients' speech outside of the Federal award.
The Supreme Court has long been clear that the First Amendment provides the government significant flexibility when it acts as patron to subsidize speech under Federal spending programs, as opposed to when it acts as sovereign to regulate speech beyond the scope of such programs. The distinction that has emerged from the Supreme Court regarding whether a funding condition may result in an unconstitutional burden on First Amendment rights is between: (i) conditions that define the limits of the government spending program by specifying the activities the Federal Government wants to subsidize; and (ii) conditions that seek to leverage funding to regulate speech outside the contours of the Federal program itself. Agency for Int'l Dev. v. All. for Open Soc'y Int'l, Inc., 570 U.S. 205, 206, 215-15 (2013). The “decision not to subsidize the exercise of a fundamental right does not infringe the right.” Regan v. Taxation with Representation of Washington, 461 U.S. 540, 549 (1983). The government is permitted to make a value judgment regarding the public interest and “implement that [value] judgment by the allocation of public funds.'” Rust v. Sullivan, 500 U.S. 173, 192-93 (1991) (quoting Maher v. Roe, 432 U.S. 464, 474 (1977)). Thus, when acting as a patron to subsidize speech—using discretion to fund certain activities under a Federal program and not others—the government can choose which activities to fund without implicating concerns under the First Amendment. “[C]ho[osing] to fund one activity to the exclusion of the other” is permissible. National Endowment for the Arts v. Finley, 524 U.S. 569, 588 (1988) (citation omitted). The “Government can, without violating the Constitution, selectively fund a program to encourage certain activities it believes to be in the public interest.” Rust at 193. Conversely, the government is not required to subsidize activities that it does not wish to promote. Id. Constitutional concerns arise only when the Federal Government is using the funding to affect speech beyond the scope of the federally-funded spending program. See also California ex rel. Becerra v. Azar, 950 F.3d 1067, 1093 n.24 (9th Cir. 2020) (“The Supreme Court has repeatedly reaffirmed . . . that the government may constitutionally preclude recipients of federal funds from addressing specified subjects so long as the limitation does not interfere with a recipient's conduct outside the scope of the federally funded program.”).
The proposed revisions to § 200.300 are focused on activities within the scope of federally-funded programs. In the previous administration, executive agencies frequently chose to subsidize and expressly prioritize projects based on their ideological alignment with the categories of activities discussed in the proposed version of § 200.300. See, for example, E.O. 13985, sec. 1, 86 FR 7009, 7009 (Jan. 25, 2021) (“It is therefore the policy of [the Biden] Administration that the Federal Government should pursue a comprehensive approach to advancing equity . . . .”). In this administration, executive agencies will continue to use their discretionary authorities in a manner consistent with current Executive Branch policy. If executive agencies were entitled to subsidize those types of activities during the previous administration, there is no constitutional basis to prevent the government from reaching a different policy determination regarding which activities to fund during this administration. For the purposes of the proposed regulatory text for this rulemaking—which is all that is relevant to this analysis—the government does not propose to deny recipients the right to pursue such activities outside of activities performed under their Federal awards. In the context of Federal grants administration, OMB and Federal agencies propose to make a constitutionally permissible decision not to subsidize those activities with Federal funds unless expressly required by law. The First Amendment does not require providing taxpayer resources to support, promote, or advocate for policies that the government finds are not in the public interest. Selective government funding that leaves private entities free to express themselves as they wish outside of Federal award activities, and using their own resources, does not implicate concerns under the First Amendment.
7. Permissibility under equal protection principles. The proposed revisions are permissible under the equal protection component of Fifth Amendment's Due Process Clause. The revisions provide clear notice that the government will not fund these categories of activities, but do not direct agencies to take actions that discriminate on the basis of protected characteristics such as race or sex.
First, the Unlawful DEI and Disparate-Impact Provisions seek to ensure that unlawful discrimination is not permitted to continue in the future. For example, the Equal Protection doctrine rejects the notion that the Constitution permits—let alone requires—the Government to “intentionally allocate preference to those who may have little in common with one another but the color of their skin.” See Students for Fair Admissions, 600 U.S. 181, 200 (2023) (citation and quotation omitted). OMB's intent in proposing these provisions is to prevent unlawful discrimination from occurring under federally-funded programs. Further discussion of the Unlawful DEI provision is provided in section 8.a below.
Second, the Gender Ideology and Protecting Children provisions distinguish between the concept of biological “sex” and other amorphous concepts associated with gender ideology. These provisions give notice that executive branch agencies will no longer use their discretionary authorities to subsidize projects or activities promoting gender ideology, including those seeking to replace the concept of biological “sex” with a divisive, unstable, and subjective concept of “gender identity.” The previous administration attempted to impose this contentious concept on all members of the American public through various funding streams, including by reinterpreting Federal sex-discrimination statutes for this purpose.[83] In doing so, it promoted and subsidized activities that diminished the rights, dignity, safety, and well-being of women; infringed on fundamental religious liberties; and caused life-long harm to vulnerable children. See Gender Ideology Executive Order, secs. 1 and 2; Protecting Children Executive Order, sec. 1. Pursuant to the President's Executive orders, the Executive Branch no longer wishes to endorse the ideological doctrine that “sex” and self-assessed “gender identity” are interchangeable. The proposed revisions direct agencies to ensure that, to the extent permitted by law, Federal money is no longer used to fund programs or projects that violate Federal antidiscrimination laws or promote gender ideology.
The Supreme Court's recent decision in United States v. Skrmetti, 605 U.S. 495 (2025) is instructive in relation to the Gender Ideology and Protecting Children provisions. The Supreme Court evaluated a Tennessee law prohibiting medical interventions for “gender dysphoria, gender identity disorder, or gender incongruence” in minors. Id. at 495-7. The Skrmetti plaintiffs argued that the law “discriminates on the basis of sex and transgender status” and could not withstand intermediate scrutiny. Id. at 520. The Supreme Court rejected these arguments and upheld Tennessee's law on rational-basis review. It first held that Tennessee's law does not classify based on sex because it “does not prohibit conduct for one sex that it permits for the other.” Id. at 497. Rather, the prohibition turns on the treatment of “gender dysphoria” and “applies regardless of a minor's sex.” Id. at 511.
The same principle holds true for the proposed 2 CFR revisions. The proposed regulatory text gives notice that Federal funding will no longer be used to subsidize or promote the doctrine that sex and “gender identity” are interchangeable concepts—or other activities based on that doctrine such as harmful medical procedures performed on children. The notice regarding the Executive Branch's funding priorities does not discriminate on the basis of the sex of any group or individual. Rather, it applies equally to all.
8. Analysis of specific national policy provisions.
a. Unlawful DEI Provision (and related Disparate-Impact Provision). The proposed restriction on funding for unlawful DEI activities is based on the obligation of every Federal grant recipient to comply with Federal anti-discrimination laws as a condition of receiving Federal funds. See July 2025 DOJ Memorandum. Expressly stating this condition at § 200.300—and the related provision at § 200.218—is consistent with Federal law and well within OMB's authority to clarify and coordinate award conditions used by the Federal Government.
Government-wide coordination is needed to ensure that recipients of Federal awards do not continue to engage in unlawful discrimination. In recent years, the Federal Government has “turned a blind eye toward, or even encouraged, various discriminatory practices.” [84] For example, some recipients have adopted unlawful DEI initiatives or practices that include providing benefits or opportunities based on race or sex; imposing race-conscious quotas or objectives under a variety of names, labels, or proxies; or conducting training sessions that endorse and encourage racial stereotyping and scapegoating, promote unlawful discrimination, or create a hostile environment.[85]
The Supreme Court's decision in Students for Fair Admissions reaffirmed that racially discriminatory practices are unlawful even if labeled as promoting “diversity” or “equity.” 600 U.S. 181 (2023).[86] Executive Order 14173 explains that “the Federal Government is charged with enforcing our civil-rights laws” and states plainly that the purpose of the order is to ensure that the Federal Government now fulfills that responsibility “by ending illegal preferences and discrimination.” Consistent with Supreme Court precedent interpreting civil-rights statutes, protecting and enforcing civil rights includes ensuring that Federal funds are not used to support unlawful discrimination based on protected characteristics.[87] This rule reflects that principle and is intended to promote equal treatment consistent with the purposes of Federal civil-rights law. Similar principles are reaffirmed in the July 2025 DOJ Guidance and the OLC opinion dated December 2, 2025.[88]
The proposed provisions at §§ 200.300 and 200.218 are consistent with the Federal Government's commitment to treat every American with equal dignity and respect discussed in Executive Order 14151, the principle of merit-based opportunity discussed in Executive Order 14173, and the principles regarding unlawful discrimination discussed in the July 2025 DOJ Guidance. The proposed provisions will provide clear notice to all recipients of the need to ensure that their programs and activities comply with Federal law and do not discriminate on the basis of race, color, national origin, sex, religion, or other protected characteristics—no matter the program's labels, objectives, or intentions. The proposed provisions benefit both recipients and the Federal Government by promoting consistency, transparency, and fairness through a uniform award condition. The provisions will put recipients on clear notice that such practices constitute a material breach of the Federal award, and further strengthen the government's rights to recover misused funds or terminate awards based on noncompliance.[89]
Based on other public comments, OMB anticipates that some commenters for this rulemaking may contend that the Unlawful DEI Provision is excessively vague or open to misinterpretation, including by suggesting that it could be read to prohibit lawful activities under Federal awards that do not discriminate based on protected characteristics such as race or sex. Commenters should focus their attention on the regulatory text proposed in this document, which would prohibit Federal agencies from using Federal awards to “fund, promote, encourage, subsidize, or facilitate . . . policies, principles, or practices that violate any applicable Federal anti-discrimination laws.” This proposed text does not expand the scope of applicable statutes. Rather, consistent with OMB's authorities to establish government-wide policies for the administration of Federal financial assistance, the proposed text clarifies how those requirements apply in the context of Federal awards and the responsibilities of agencies and recipients under part 200. It also reflects the established function of implementing regulations and the terms and conditions of Federal awards in ensuring that Federal financial assistance is administered and used in a manner consistent with statutory requirements and governing constitutional principles.
The July 2025 DOJ Guidance provides illustrative examples of practices that may violate underlying anti-discrimination statutes depending on the facts and circumstances of particular matters. The guidance reflects the longstanding Executive Branch practice of issuing interpretive guidance regarding the application of Federal anti-discrimination statutes in specific contexts. Whether a violation exists in any particular case would continue to be determined by reference to the governing legal standards under applicable anti-discrimination laws as interpreted in light of controlling Supreme Court precedent.
Consistent with longstanding Executive Branch practice, OMB's interpretation of Federal anti-discrimination laws in the context of this proposed rulemaking is informed in part by guidance issued by DOJ regarding the application of those laws. The principles and illustrative examples discussed in the July 2025 DOJ Guidance provide additional context regarding the application of those laws in certain circumstances. OMB's interpretation is also informed by the Supreme Court's decision in Students for Fair Admissions, which addresses the application of Federal anti-discrimination statutes in light of constitutional equal protection principles, and by the December 2, 2025 OLC opinion addressing the administration of Federal programs consistent with statutory requirements and governing limitations under the U.S. Constitution. Thus, commenters may also review those sources in reviewing and responding to this document.
OMB believes the regulatory text provides sufficient clarity regarding prohibited forms of discrimination, but seeks comment on whether the final rule should include additional discussion or elaboration in the regulatory text or preamble. The proposed regulatory text explains that unlawful DEI would include, for example, racial preferences or other forms of racial discrimination used by the recipient or subrecipient that violate any applicable Federal anti-discrimination laws, including circumstances in which race or intentional proxies for race are used as a selection criterion for employment or program participation. This example is not exhaustive, but reflects a major category of conduct addressed by the Supreme Court in Students for Fair Admissions. Thus, the proposed regulatory text clarifies that Federal awards may not be used to support activities involving disparate treatment based on protected characteristics under applicable law, including race or intentional proxies for race. Commenters may also consider the definitions and model contract clause set forth in E.O. 14398 of March 26, 2026, “Addressing DEI Discrimination by Federal Contractors,” and provide input regarding whether any similar language would be appropriate or informative in the context of this rulemaking, such as language further clarifying the application of disparate treatment standards in connection with activities under Federal awards.[90] OMB also seeks comment on whether such additional discussion or elaboration would be helpful to recipients and subrecipients in meeting their obligations under part 200 for activities carried out under Federal awards, including their internal control responsibilities under § 200.303. In addition, OMB seeks comment on whether further clarification would be helpful regarding the relationship between § 200.300 and other provisions of part 200—including § 200.204, § 200.211, § 200.303, and § 200.403—as well as the relationship between those provisions and the terms and conditions of Federal awards issued by Federal agencies pursuant to this proposed rulemaking.
Executive Branch agencies have long issued government-wide and program-specific regulations and guidance interpreting Federal civil rights requirements as applied to recipients of Federal financial assistance. This proposed rulemaking continues that established practice by clarifying how existing nondiscrimination requirements apply within the scope of Federally-funded activities. Consistent with longstanding Executive Branch practice, OMB seeks to ensure that Federal financial assistance is not used by recipients or subrecipients for discriminatory policies or practices, including those that discriminate based on a person's protected characteristics.
Although DOJ's guidance is described as non-binding, OMB and Federal agencies intend to clarify through this N&C rulemaking process how applicable anti-discrimination laws apply to Federal financial assistance programs. Recipients and subrecipients should be aware that discriminatory practices already present compliance risks under existing anti-discrimination laws enforced by the Executive Branch.[91] In light of the clarification provided through recent Executive Branch guidance—which would be given regulatory effect through this N&C rulemaking—recipients and subrecipients should not assume that practices previously viewed as consistent with prior Executive Branch guidance will necessarily satisfy applicable Federal anti-discrimination requirements as applied to Federal awards. Recipients and subrecipients should evaluate existing policies and practices in reference to the legal standards reflected in this rulemaking and the applicable anti-discrimination laws discussed above. Following issuance of a final rule, the policy proposed in this document will have regulatory effect as part of the government-wide regulations for Federal financial assistance set forth in 2 CFR.
b. Gender Ideology Provision. The proposed restriction on funding the promotion of gender ideology is based on ensuring that Federal awards are only used for public purposes authorized by law. Within legislative bounds, Federal agencies must also design their assistance programs and funding opportunities to be consistent with Executive Branch policy.
The Federal Government has no obligation to provide taxpayer funds to promote divisive and harmful ideologies. On the contrary, it has compelling reasons not to do so. As explained in Executive Order 14168, government-sponsored efforts “to eradicate the biological reality of sex” harm women by “depriving them of their dignity, safety, and well-being.” Various commenters have explained how such efforts also do significant harm to public trust in government.[92] Rather than continuing to waste Federal funds in support of divisive gender ideologies, which harm women, have a corrosive effect on public trust in Federal grantmaking agencies, infringe on religious liberties, and fall outside of specifically enumerated purposes of authorizing legislation, the Federal Government should instead refocus its efforts more squarely on using Federal awards for core purposes authorized by law. Discretionary awards must also be channeled through an agency's careful design of programs and funding opportunities for consistency with both law and, where applicable, administration policy priorities.[93] Ending government-sponsored promotion of divisive gender ideology is critical to scientific inquiry, public safety, and trust in government.[94]
Consistent with the principles outlined in Executive Order 14168, the proposed provision will provide clear notice to recipients that promoting gender ideology is not something that the Federal Government wishes to fund as part of any Federal program. The proposed rule ensures that federally appropriated award funds—which are intended for purposes like education, research, and health—are not improperly diverted to purposes outside of the program's approved scope as designed by Federal agencies consistent with authorizing law. Again, the proposal benefits both recipients and the Federal Government by establishing government-wide consistency through a uniform and transparent provision. Recipients will receive clear notice that using Federal award funds for unauthorized purposes related to promoting gender ideology will constitute a material breach of the Federal award, and the government's rights to recover misused funds or terminate awards based on noncompliance will be further strengthened.[95]
c. Protecting Children Provision. The proposed restriction on funding the so-called “transition” of a child under 19 years of age from one sex to another is also based on ensuring that Federal awards are only used for authorized public purposes. Within legislative bounds, Federal agencies must also design their assistance programs and funding opportunities to align with administration policy priorities.
This provision is also based on a compelling public welfare justification. As discussed in Executive Order 14187, “maiming and sterilizing a growing number of impressionable children under the radical and false claim that adults can change a child's sex through a series of irreversible medical interventions” is a practice with “destructive and life-altering” consequences that “will be a stain on our Nation's history.” The Federal Government has an obligation to avoid subsidizing what it considers to be unethical and unsafe practices with profound consequences on the lives and well-being of American children. Sex-rejecting procedures performed on children with profound and life-altering consequences fall in this category. Executive Order 14187 explained that a growing number of minors soon regret that they have undergone such procedures and begin to recognize the physical, financial, and psychological consequences that will follow them for the rest of their lives. The Executive Order labeled these interventions “chemical and surgical mutilation” of children, which reflects the administration's conclusion that such activities are not legitimate healthcare warranting government financial support, but rather harmful experimentation on minors, which must end.
The legal basis for the prohibition is straightforward: there is no right or entitlement to receive these procedures at the public expense under Federal law, and the Federal Government will not—and has no legal obligation to—provide funding for them. The proposed rule does not deny any person a constitutional or statutory right because there is no such right under Federal law. For all of the reasons set forth in Executive Order 14187, the Federal Government has determined that providing assistance for such sex-rejecting procedures on children is not in the public interest—and it will not do so.[96]
Consistent with the principles outlined in Executive Order 14187, the proposed provision will provide clear notice to recipients that the Federal Government will not provide funding for these practices. Once again, the proposal benefits both recipients and the Federal Government by establishing government-wide consistency through a uniform and transparent provision. Recipients will receive clear notice that using Federal award funds for these purposes will constitute a material breach of the Federal award, and the government's rights to recover misused funds or terminate awards based on noncompliance will be further strengthened.[97]
9. Conclusion. OMB is aware that it is changing existing policy in §§ 200.300 and 200.218, but proposes to find that these changes are warranted for all of the reasons described in this document. The existing language in paragraph (a) of § 200.300 already provides that the Federal awarding agency must manage and administer Federal awards in full accordance with U.S. law. OMB's proposed revisions related to unlawful discrimination clarify and emphasize specific applications of that principle consistent with underlying statutory authorities and recent policy direction from the Executive Branch regarding implementation and enforcement of those statutes. OMB's proposed changes in this section are also designed to ensure that Federal funds are only used for core public purposes authorized by law and the terms and conditions of Federal awards, and not for other extraneous activities that conflict with key Executive Branch policies and priorities.
OMB recognizes that the factual findings in this document are inconsistent with certain factual findings and policy positions that it offered to support revisions of § 200.300 in 2024. OMB has provided a reasoned explanation above regarding its rationale for the new policies. OMB invites comments on the rationale provided in this document in relation to reasons that supported OMB policies in 2024 or earlier years. OMB will respond to such comments in the final rule.
Section 200.303—Internal Controls
OMB proposes a clarification in § 200.303(e) regarding confidential business information. Specifically, OMB proposes to include confidential business information as a type of information that a recipient or subrecipient must take reasonable cybersecurity and other measures to safeguard.
In § 200.303(a), OMB also proposes to delete the statement that internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The U.S. Government Accountability Office (GAO)—under the Direction of the Comptroller General—is a legislative branch agency; its views regarding internal controls are not binding on Executive Branch regulations applicable to recipients and subrecipients of Federal awards. COSO is a private-sector organization. Directing recipients and subrecipients to follow dynamic standards issued by organizations outside of the Executive Branch is inconsistent with Administration policy and the longstanding notice and comment procedures used by OMB for updates to 2 CFR. See2 CFR 1.230. OMB cannot—and does not desire to—delegate rulemaking authority to GAO or COSO regarding standards for internal control used by recipients and subrecipients of Federal financial assistance. This revision will clarify that the GAO and COSO frameworks do not apply to recipients or subrecipients as binding or expressly recommended standards. Federal agencies, auditors, recipients, and subrecipients may continue to consider these or other widely recognized frameworks as general reference points when evaluating the adequacy of internal controls.[98] OMB is only proposing to clarify that recipients and subrecipients have some degree of reasonable discretion regarding how to establish, document, and maintain effective internal control in ways that may not be fully consistent with the GAO or COSO frameworks. Recipients and subrecipients would not be required to adopt or follow any specific framework issued by these external organizations.
OMB proposes to add § 200.303(f) to require all recipients and subrecipients of Federal financial assistance to participate in the Department of Homeland Security's E-verify program to confirm the employment eligibility of employees and contractors hired in or performing work in the United States under a Federal award. This additional safeguard would be implemented as part of the internal control responsibilities of the recipient or subrecipient. The Federal Government has applied the E- verify program to Federal contractors for over 15 years.[99] OMB is now proposing to expand the application of the E-verify program to Federal financial assistance programs based on its government-wide financial management authorities discussed above. Although OMB is proposing to expand application of the program, the requirements under the program would otherwise apply in accordance with applicable Federal law and DHS program requirements. For entities and activities to which the E-Verify participation program is applied, OMB does not propose to alter existing exceptions or limitations recognized in DHS program requirements based on DHS authorities. OMB also does not propose to apply the program to activities unrelated to Federal awards. Consistent with the Immigration and Nationality Act (8 U.S.C. 1324a), which prohibits employers from knowingly hiring or continuing to employ unauthorized aliens and requires employers to verify employment eligibility, this provision is intended to strengthen compliance with Federal employment eligibility requirements for individuals performing work under Federal awards.
Lastly, OMB proposes to add § 200.303(g) to clarify that States must conduct pre-payment verification checks prior to disbursing Federal funds. Specifically, States that are recipients of Federal financial assistance must review available data sources with relevant information to verify the eligibility of payees and prevent improper payments. Such reviews may be conducted through the Department of the Treasury's Do Not Pay (DNP) system, or through an alternative payment screening process that provides protection against improper payments. This proposed revision would not require States to adopt specific payment systems or technologies. The requirement to conduct eligibility reviews for payees is not intended to substitute or replace any required program specific requirements. Consistent with the Payment Integrity Information Act of 2019 (31 U.S.C. 3351-3356), which establishes government-wide requirements to prevent and reduce improper payments, and the Do Not Pay Initiative under 31 U.S.C. 3354, this provision is intended to strengthen internal controls over Federal funds by requiring States, as recipients of Federal financial assistance, to review available data sources prior to disbursing payments made with Federal funds.
Section 200.305—Federal Payment
OMB proposes to revise § 200.305 to require Federal agencies to verify recipient eligibility through Treasury's Do Not Pay (DNP) system before making any disbursement of any Federal payment. Consistent with the Payment Integrity Information Act of 20194 (PIIA),[100] this addition is intended to strengthen oversight and prevent improper payments.
Consistent with section 3 of Executive Order 14222, “Implementing the President's `Department of Government Efficiency' Cost Efficiency Initiative,” OMB also proposes language that requires payment requests from recipients and subrecipients other than States to include justifications describing the purpose of the payment and the specific award-related work it supports. Under the proposed text, agencies must collect this information once appropriate systems are in place. These proposed changes would increase accountability for Federal disbursements while ensuring funds are tied to measurable award activities and outcomes.
Section 200.306—Cost Sharing
OMB proposes to revise § 200.306 to relocate paragraph (a) on voluntary committed cost sharing to paragraph (j). This policy fits better next to paragraph (k), which addresses voluntary uncommitted cost sharing for institutions of higher education (IHE).
Section 200.318—General Procurement Standards
OMB proposes to revise § 200.318 to strengthen accountability for time-and-materials type contracts and to streamline other procurement requirements. The proposed revisions add requirements that material costs under time-and-materials contracts must be supported by documentation and priced consistently with market rates. These additions are intended to ensure recipients apply effective cost controls and maintain transparency in contract pricing. OMB also proposes to revise this section by deleting a prior list of examples of labor and employment practices that do not reflect common procurement approaches or otherwise do not align with administration policy or Federal agency priorities. The proposed text continues to recognize that recipients and subrecipients may use project labor agreements or other types of pre-hire collective bargaining agreements, but only if the use of such agreements will advance the interest of the Federal Government associated with the applicable Federal financial assistance program, including consideration of practicability and cost effectiveness. OMB also proposes language to clarify that part 200 does not prohibit recipients or subrecipients from communicating a requirement that individuals be authorized to work in the United States under applicable law. OMB also proposes to clarify that recipients and subrecipients are also responsible for ensuring consistency with applicable law, and that employment practices should be consistent with the foundational principles of recognizing merit and the ability of employees to fulfill the requirements of the contract. Collectively, these proposed revisions streamline the requirements by removing extraneous, unnecessary, or inappropriate examples, while reinforcing lawful flexibility and cost accountability in procurement practices.
Section 200.320—Procurement Methods
OMB proposes to revise § 200.320 to include language regarding how cost-reimbursement contracts may be used. The proposed language strongly discourages recipients from using cost reimbursement contracts. Under the proposed text, when using cost-reimbursement contracts, the recipient must notify the awarding Federal agency of its use of this mechanism and maintain a written justification in its records. OMB also proposes flexibility for Federal agencies, at their discretion, to require prior approval of such contracts in the terms and conditions of the award. These changes are intended to reflect that cost-reimbursement contracts are inherently higher risk, as they reduce incentives for contractors to control costs, require more intensive oversight, and present greater risk of improper or excessive payments of Federal funds. By discouraging their use while preserving agency authority to require prior approval, the revision strikes a balance between limiting risk and allowing flexibility in circumstances where no other contract type is feasible.
Section 200.321—Contracting With Small Businesses
OMB proposes to streamline § 200.321 to simplify direct recipients and subrecipients to ensure that small businesses, including subcategories enumerated in Federal statute, are considered for contracting opportunities. These proposed changes are intended to streamline the policy, reduce administrative burden, and ensure that contracting preferences remain consistent with law and other principles discussed in this document, including merit-based opportunity.
Section 200.322—Domestic Preferences for Procurements
OMB proposes to revise § 200.322 to clarify the policy related to domestic preferences for procurements under Federal awards. The text of § 200.322(c) (existing version) refers to mandatory requirements at 2 CFR part 184 for infrastructure awards. The text of § 200.322(a) and (b) (existing version) provides an aspirational standard that applies more broadly to all awards. OMB proposes to delete the existing aspirational standard at paragraphs (a) and (b) and replace it with a new paragraph (a) (proposed version) directing agencies, to the greatest extent practicable and consistent with law, to include terms and conditions in Federal financial assistance awards to maximize the use of goods, products, and materials produced in the United States. At paragraph (b) (proposed version), in the case of infrastructure projects, OMB proposes to preserve the existing requirement at paragraph (c) for agencies to implement the mandatory Buy America preferences set forth in 2 CFR part 184.
Based on the Build America, Buy America Act (BABA), which was included in the Infrastructure Investment and Jobs Act (IIJA), OMB has broad statutory authority to require inclusion of mandatory Buy America requirements for all Federal infrastructure assistance programs. OMB implemented these mandatory standards for infrastructure at 2 CFR part 184 and § 200.322(c) (existing version). BABA is the most relevant government-wide source of authority to impose mandatory grant conditions on non-Federal entities specifically related to Buy America requirements under financial assistance awards. There are also various agency-specific statutes that do the same.
The authority of Federal agencies to impose domestic purchasing requirements for non-infrastructure awards will generally depend on appropriations and authorizing statutes for individual award programs. OMB, through the Administrator of the Office of Federal Procurement Policy (OFPP), also has authority under 41 U.S.C. 1125 to “prescribe Government-wide policies, regulations, procedures, and forms that the Administrator considers appropriate and that executive agencies shall follow in providing for the procurement, to the extent required under those programs, of property or services referred to in . . . [41 U.S.C.] 1121(c)(1) . . . by recipients of Federal grants or assistance under the programs.” That authority must be exercised with “due regard to applicable laws and the program activities of the executive agencies administering Federal programs of grants or assistance.” Id.
Consistent with the above authorities, proposed paragraph (a) would only be required “to the greatest extent practicable and consistent with law.” Thus, agencies would be responsible for evaluating both the practicability and legal availability of imposing such conditions. OMB is not directly imposing this requirement on award recipients, but requiring agencies to evaluate its practicability and the legal authorities that apply to non-infrastructure financial assistance programs. The agency discretion to evaluate “practicability” leaves considerable flexibility for implementation. In addition to evaluating practicability, agencies would need to identify statutory authority prior to imposing such conditions. For example, some authorizing statutes may broadly authorize an agency to impose any conditions that the agency head finds warranted, while others may narrowly define the types of conditions that may be imposed. Generally, to impose substantive conditions on Federal grants, an agency must identify statutory authority providing the agency with discretion to impose such conditions. As such, before imposing Buy America award conditions on non-infrastructure awards, agencies must evaluate their appropriations and authorizing statutes on a case-by-case basis to determine whether they have the legal discretion to impose such conditions. The proposed language would provide that, if agencies identify the necessary legal authority, and determine that imposing conditions would be practicable under the relevant program, they must include grant terms and conditions to maximize domestic content. Unlike § 200.322(a)-(b) (existing version), if a requirement is included in the terms and conditions of an award, it could be made a legal requirement subject to audit instead of merely an aspirational standard. If such a requirement is included for a non-infrastructure award, the agency would need to define the applicable Buy America standard it is imposing, which could be based on existing standards required by law in other contexts, such as the BABA standard in part 184 or others.
OMB recognizes that the proposed policy at paragraph (a) (proposed version) does not exist under the existing version of 2 CFR. OMB proposes to find that establishing this policy is legally available based on the discretion left to agencies for implementation. Under the current 2 CFR regulatory text, agencies only impose mandatory Buy America requirements for infrastructure grants. If statutory authority is determined to be available, and the agency determines that imposing conditions would be practicable for the relevant program, this newly proposed provision could require agencies to apply domestic manufacturing requirements for a broader range of grant activities.
Section 200.323—Procurement of Recovered Materials
OMB proposes to remove § 200.323(b) in its entirety. The Executive order that provided the foundation for this policy was rescinded. Moreover, the policy was only an encouraged practice and not a requirement.
Section 200.324—Contract and Cost Price
OMB proposes to streamline § 200.324, including removing an example related to considering potential workforce impacts if a procurement transaction will displace public sector employees. The proposed changes are not intended to prohibit the consideration of such impacts, only to remove the example. This streamlined text removes a potential burden on recipients that is not statutorily required.
Section 200.329—Monitoring and Reporting Program Performance
OMB proposes to revise § 200.329 to require recipients to confirm in their performance reports that all subawards issued during a reporting period have been reported to SAM.gov. This proposed addition is intended to strengthen transparency and ensure subaward data is current and accurate. OMB also proposes a new paragraph (h) to emphasize the importance of subrecipient reporting. Specially, OMB emphasizes that Federal agencies are responsible for providing oversight regarding subrecipient reporting, such as reviewing and monitoring subrecipient reporting in SAM.gov, and taking corrective actions when recipients are not in compliance.
In addition, in existing paragraph (g) (proposed paragraph (i)), OMB proposes to require Federal agencies to justify and maintain documentation of any decision to waive any performance report. This proposed revision balances accountability with flexibility, reinforcing oversight of performances, including subrecipient reporting, while allowing agencies to reduce unnecessary reporting burdens where appropriate.
Lastly, OMB proposes a new paragraph (e) regarding performance reports for scientific research. For awards categorized by a Federal agency in accordance with § 200.202(f), the recipient must identify and include the categorization provided in the terms and conditions of the award in the performance report.
Section 200.331—Subrecipient and Contractor Determinations
OMB proposes to revise § 200.331 by adding a new paragraph (c). This paragraph addresses transfers of Federal funds to related entities. This proposed addition makes clarifies that pass-through entities cannot treat such transfers as internal allocations exempt from a determination required by this section. Instead, consistent with the requirements of this section, related entity transactions must be reviewed and classified as either a subaward or contract. This would ensure accountability and transparency in circumstances involving related parties and prevent circumvention of Federal reporting requirements.
Section 200.332—Requirements for Pass-Through Entities
OMB proposes to revise § 200.332 to add three new paragraphs to this section. In proposed paragraph (g), OMB again highlights the requirement that pass-through entities must report subawards to SAM.gov in accordance with the requirements of 2 CFR part 170. In proposed paragraph (h), OMB reiterates the requirement in § 200.331 that pass-through entities must make subrecipient and contractor determinations for all downstream entities, including affiliates, subsidiaries, and related organizations. This proposed change would clarify that internal organization affiliations do not exempt pass-through entities from classifying subawards and contracts. Lastly, in proposed paragraph (i), OMB specifies that pass-through entities must ensure that subrecipients do not take actions that could significantly damage the reputation of the pass-through entity, awarding Federal agency, or the Federal Government. Where such actions occur, the proposed text indicates that the pass-through entity must consult with the Federal agency to determine whether termination of the award is warranted. This proposed addition would ensure accountability for reputational risk that may undermine public trust in Federal award programs.
Section 200.333—Fixed Amount Subawards
OMB proposes to revise § 200.333 to remove the policy allowing recipients to issue fixed amount subawards. Fixed amount subawards have been implemented inconsistently across programs, agencies, and recipients, and existing standards for this type of award do not provide for transparency, accountability, and oversight as compared to other award types. OMB proposes to eliminate fixed amount subawards consistent with the changes made to § 200.201.
Section 200.336—Methods for Collection, Transmission, and Storage of Information
OMB proposes to revise § 200.336 by adding a statement encouraging recipients and subrecipients to use domestic storage capabilities for electronic records. This addition is intended to strengthen data security, reduce exposure to potential foreign data vulnerabilities, and support greater assurance that Federal award records remain accessible and protected within U.S. jurisdiction. While framed as a strong encouragement rather than a mandate, this change promotes best practices for safeguarding sensitive Federal award information.
Section 200.338—Restrictions on Public Access to Records
OMB proposes a clarification to § 200.338. Specifically, confidential business information is included as a type of information that Federal agencies may not place restrictions on the recipient or subrecipient from limiting public access to such information.
Section 200.339—Remedies for Noncompliance
OMB proposes to add a new paragraph to § 200.339 to clarify that, if applicable and consistent with law, a Federal agency may, at its discretion, cooperate with individuals or organizations in pursuing their own private cause of action or remedies. This addition would not impose an affirmative duty on agencies to assist in private litigation. The proposed revision is only intended to affirm that agencies may, at their discretion, cooperate with persons in pursuit of private remedies in circumstances consistent with law.
For the avoidance of doubt, the decision of whether an agency will cooperate with individuals or organizations in their pursuit of private causes of action and civil remedies, and decisions regarding the extent of any cooperation, will be made solely in the discretion of that agency. The proposed subsection (b) is not intended to, and would not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person. Nothing in the proposed subsection (b) should be construed to impair or otherwise affect the authority granted by law to an executive department or agency, or the head thereof. A Federal agency should only cooperate with a private cause of action if it determines that such cooperation is in the interest of the United States
Section 200.340—Termination and Suspension
1.a. Summary of proposed revisions regarding termination. OMB proposes to revise § 200.340(a) to provide additional clarity regarding reasons available to Federal agencies for discretionary terminations of Federal awards, and also to add new provisions regarding temporary suspension of Federal awards. These proposals are similar to parallel procedures for procurement contracts under the FAR. The proposed revisions regarding discretionary termination are also consistent with section 5(a) of Executive Order 14332 of Aug. 7, 2025, “Improving Oversight of Federal Grantmaking,” which instructs OMB to revise 2 CFR to further clarify and require all discretionary grants to permit termination for discretionary reasons, “including when the award no longer advances [Federal] agency priorities or the national interest, but subject to appropriate exceptions,” including certain exceptions set forth in the Executive Order.
In developing the proposed rule, OMB considered alternatives to the discretionary termination provision, such as stricter up-front screening during the award selection process or enhanced monitoring. While these are also important tools to ensure oversight of the Federal grantmaking process, OMB found that they do not remove the need for mid-award termination mechanism. The discretionary termination provision is similar to the already existing authority at § 200.340(a)(4) in the 2024 regulatory text and § 200.340(a)(2) in the 2020 regulatory text.[101]
By preserving the policy flexibility provided to agencies from Congress for discretionary award programs through clear upfront notice to recipients, agencies can best ensure the responsible management and safeguarding of taxpayer resources throughout the award lifecycle. Federal agencies—and ultimately, the American taxpayer—should not remain obligated to continue funding discretionary awards that do not best or most effectively serve the authorized public purposes of the particular program.
The benefits of this proposal include increased flexibility for agencies to respond to changing circumstances, priorities, or knowledge. By aligning grant management with well-established contract management practices, the Federal Government can ensure greater and more responsible oversight regarding how taxpayer resources are used and managed.
Like the 2020 version, and as remained permitted under the 2024 version, the proposed version of § 200.340 expressly contemplates that sometimes Federal agency program goals or priorities may change after an award is initially made, or that the Federal agency may reassess whether a particular recipient remains the best available choice to achieve the public purposes authorized by law on behalf of the American taxpayer. Like the earlier versions, the proposed text also recognizes that sometimes program goals or Federal agency priorities may change in response to new direction from politically accountable leadership. As is already the case, the proposed version of 200.340 contemplates that an agency may exercise those types of discretion as a responsible steward of public resources.
Accordingly, OMB proposes to add the updated discretionary termination provision, which further clarifies the government-wide authority already available to agencies under § 200.340(a)(4) (existing 2024 version). OMB proposes the new discretionary termination provision to provide that the Federal agency or pass-through entity, to the extent permitted by law, may terminate a Federal award in part or its entirety if the Federal agency or pass-through entity determines that a termination is in the interest of the Federal agency or pass-through entity. The proposed regulation specifies that this includes if a Federal award no longer effectuates program goals, Federal agency priorities, or the national interest as they exist at the time of the termination.
OMB proposes to clarify that the relevant “agency priorities” would be those of the Federal agency that is politically accountable at the national level for implementing the Federal program under which the award was made. In some situations, pass-through entities may interpret the term “agency priorities” under the existing provision to include State or local government priorities, which may be inconsistent or even conflict with Federal priorities or the national interest. To clarify intent, OMB proposes to add the word “Federal” before “agency priorities.” In the final rule, OMB is also considering others revisions to clarify this point. The interest of a pass-through entity in implementing a Federal award should remain consistent with the interest of the Federal agency responsible for implementing the Federal program on the national level. If this is not adequately clear or implied under the proposed text, OMB may consider revising the proposed standard in the final rule from “in the interest of the Federal agency or pass-through entity” to only include “in the interest of the Federal agency.” In any case, terminations by pass-through entities should remain consistent with the interest of the Federal agency, which is responsible for setting program goals and priorities for the Federal program. A termination by a pass-through entity should not conflict with the Federal interest. In some cases, it may be appropriate for a pass-through entity to coordinate with a Federal agency before making such a discretionary termination under this provision.
Like the 2020 provision, the proposal recognizes that Federal agency priorities may change after an award is initially made. This proposal creates greater alignment between Federal financial assistance and the long-standing termination for convenience provision applicable to Federal procurement contracts. The goals of this proposal include ensuring that Federal funds are not wasted, projects remain aligned with Federal agency priorities, and recipients remain accountable for delivering projects consistent with public purposes authorized by law.
OMB does not intend the proposed list of reasons for discretionary terminations to necessarily be exhaustive. If the rule is finalized, Federal agencies must include all of the listed reasons, but may also include supplemental reasons, as appropriate, based on the authority at § 200.340(a)(5). For example, agencies may also specify that discretionary terminations may occur in circumstances in which a Federal award is no longer in the “public interest.” The “public interest” and the “national interest” should generally have similar and broadly overlapping meanings, but agencies may include this or other additional reasons for discretionary terminations if useful for clarity or avoidance of doubt.
Other clarifying edits are proposed in paragraph (a) regarding the other reasons for termination, including for noncompliance, by mutual agreement, upon notification by the recipient or subrecipient, and pursuant to additional terms and conditions included in the Federal award. For readability, sub-headings are added for all authorized reasons for termination. In the noncompliance paragraph, OMB proposes to mention that failure of the recipient to report subawards on SAM.gov pursuant to the award term required by part 170 can constitute grounds for termination for noncompliance. Under the final paragraph for “additional terms and conditions,” OMB also proposes to recognize that Federal agencies may only include terms and conditions that are permitted by law. For example, as with termination for discretionary reasons, certain non-discretionary programs may not permit expanded termination provisions based on agency discretion.
Paragraph (b)(1) of the proposed text provides that, to the extent authorized by law, and except as provided in paragraph (b)(2), the Federal agency and pass-through entity must ensure that all Federal awards allow termination for the reasons described in paragraphs (a)(1) through (4) of the section. The proposed paragraph (b)(2) explains exceptions to this requirement. Specifically, the requirement to include the discretionary termination provision does not apply to any Federal award in which inclusion of such a discretionary termination provision would conflict with a Federal statute. Consistent with the distinction recognized in Executive Order 14332 between discretionary awards and statutory entitlements, the proposed text explains that the discretionary termination “provision is generally applicable to discretionary awards, but not to Federal awards made under programs where legislation establishes an entitlement to the funds on the part of the recipient, such as block grants, those awarded based on a statutory formula, or disaster recovery grants.” Statutory entitlements are the only categorical exception recognized in the proposed rule, but certain other statutory requirements imposed on Federal agencies related to obligation or use of Federal funds may also impose limits on the application of this provision in some circumstances. Consistent with Executive Order 14332, the discretionary termination provision also “does not apply to agreements entered into in furtherance of international trade agreements or those awarded by the Department of Commerce under title XCIX of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-283), the CHIPS Act of 2022 (Pub. L. 117-167), or division F of the Infrastructure Investment and Jobs Act (Pub. L. 117-58).”
The proposed paragraph (b)(2) also explains that if questions arise regarding applicability of the discretionary termination provision to specific programs or awards, Federal agencies are strongly encouraged to consult with OMB. Federal agencies must seek approval from OMB prior to allowing any class exceptions not otherwise required by statute or recognized in paragraph (b)(2).
Thus, with limited exceptions, the proposed text requires inclusion of four standard reasons for termination, including the discretionary termination provision, in all Federal awards, rather than a “pick and choose” approach among the available options. The existing provision has sometimes led to inconsistent termination provisions across the Federal Government and confusion regarding which termination provisions actually are or should be included in specific Federal awards. The proposed revisions emphasize, at paragraph (b)(1), that the Federal agency is always required to include the four standard termination provisions unless an exception applies.
In addition to the four standard termination provisions, OMB also proposes adding a fifth potential reason for termination, allowing a Federal agency or pass-through to define additional grounds for termination in the terms and conditions of the Federal award, providing that doing so is consistent with authorizing law. OMB proposes certain clarifying edits and to add subsection headers for clarity.
1.b. Summary of proposed revisions regarding temporary suspension. OMB proposes to add a new paragraph (d) regarding temporary suspension of awards. Similar to a parallel provision in the FAR applicable to procurement contracts, this paragraph would provide Federal agencies and pass-through entities with authority to provide a written order to stop work. The proposed revisions address the contents of such orders and how they must be handled by the Federal agency or pass-through entity. These revisions are intended to ensure that Federal agencies and pass-through entities have all the necessary resources available to provide effective monitoring and oversight of Federal awards. Temporary suspensions of activities are sometimes necessary to protect the Federal interest, but may also potentially create administrative or financial challenges for recipients. The proposed policy requires agencies to account for the potential budgetary and scheduling impacts and seeks to maintain fairness and transparency in managing such disruptions. As a result, the proposed revisions would promote communication and accountability between agencies and recipients in the event of temporary suspensions. They would also support more effective program oversight and minimize the risk of extended downtime or misaligned expectations following a work stoppage.
Proposed paragraph (b)(4) addresses the circumstances in which temporary suspensions provisions must be included in the terms and conditions of a Federal award. Similar to the discretionary termination provision, the Federal agency or pass-through entity must clearly and unambiguously include the suspension provision in the terms and conditions of the Federal award unless doing so would conflict with a Federal statute. The proposed text explains that the suspension provision is generally applicable to discretionary awards, but not to Federal awards made under programs where legislation establishes an entitlement to the funds on the part of the recipient, such as block grants, those awarded based on a statutory formula, or disaster recovery grants. If questions arise regarding applicability of the suspension provision to specific Federal programs or types of Federal awards, Federal agencies are also strongly encouraged to consult with OMB.
2. Need for policy flexibility and ongoing stewardship of Federal funds. Consistent with the first objective of this rulemaking, the proposed discretionary termination and suspension provisions provide essential tools for ensuring ongoing stewardship and responsible management and oversight by Federal agencies of taxpayer resources throughout the award lifecycle. The discretionary termination provision preserves policy flexibility, consistent with law, for an agency to reconsider whether a particular Federal award effectively serves the Federal Government's interest in carrying out public purposes or objectives authorized by law. Agency program goals and priorities related to such public purposes may evolve over time, the agency's best judgment regarding the national interest may also change and evolve, and facts and circumstances may change in ways that were not anticipated by the Federal agency at the time the award was initially made. Provided that the Federal agency provides clear notice of the discretionary termination provision to recipients at the time the award is made, which will allow recipients to appropriately calibrate and manage reliance interests, it is appropriate for Federal agencies, and the Executive Branch more broadly, to retain the policy flexibility to terminate awards that are no longer in the Federal Government's interest. Federal agencies should not be forced to continue funding projects that do not best serve program goals, Federal agency priorities, or the public interest more broadly. The suspension provides similar flexibility for temporary stoppages.
3. Similar existing authority applicable to Federal contracts. In the Federal procurement context, executive agencies have long included termination for convenience clauses in contracts. The Federal Acquisition Regulation (FAR) permits an agency to terminate a contract “for convenience” whenever it determines that termination is in the government's interest. See, for example, 48 CFR 49.502 and 52.249-2. This longstanding tool allows Federal agencies to terminate contractual obligations that have become unnecessary or contrary to new policy direction, while allowing appropriate cost recovery for work already performed. Federal courts have upheld these terminations as a legitimate means of preserving flexibility to protect taxpayer resources and respond to changing circumstances.
By applying a parallel principle to discretionary assistance programs, such as discretionary grants and cooperative agreements, the proposed rule further harmonizes Federal grant management with longstanding procurement practices, while also tailoring the provision for use under OMB's requirements in 2 CFR. A 2020 revision of the Uniform Guidance already introduced a comparable basis for termination “if an award no longer effectuates program goals or agency priorities.” This proposed revision will ensure that Federal agencies have broad authority for termination for discretionary reasons that is similar to the authority under the FAR in purpose and general effect, while also accounting for the unique context of grants.
The proposed provision is necessary to safeguard the ability of executive agencies to supervise executive branch spending. The Federal Government's responsibility for stewardship of taxpayer funds does not diminish merely because the award is a grant and not a contract. If a project funded by a grant is failing to meet underlying public purposes, program objectives, Federal agency priorities, or the national interest, the government should have a comparable ability to discontinue funding as it would for a similarly misaligned contract. The proposed rule generalizes this best practice across the Federal Government, ensuring consistency and transparency.
Similarly, executive agencies have also long included clauses in contracts allowing for temporary work stoppages or suspensions. The FAR permits an agency to, at any time, by written order to the contractor, require the contractor to stop all, or any part, of the work called for by the contract for a period of 90 days after the order is delivered to the contractor, and for any further period to which the parties may agree. See, for example, 48 CFR 42.1303 and 52.242-15. This longstanding tool allows Federal agencies to temporarily suspend contractual obligations to ensure effective oversight and accountability and for other purposes.
4. Executive authority applicable to discretionary award programs. For discretionary award programs, the proposed discretionary termination and suspension provisions operate within the framework of Congressional authorization and appropriation. Congress provides agencies with discretionary authority to make awards for certain program purposes, leaving agencies with broad discretion as to which projects to fund. The discretionary termination and suspension provisions are merely an exercise of that discretionary authority—allowing agencies, consistent with law, to retain discretion regarding how Federal funds are expended in service of the program's objectives. The proposed provisions do not contravene statutory requirements or otherwise assert any authority for discretionary programs that is not already provided to agencies in the statutes authorizing those programs.
To recognize these limits, the text of the discretionary termination provision recognizes that it may only be exercised “to the maximum extent authorized by law.” If a particular program statute expressly entitles a recipient to certain funding or expressly prohibits termination in certain circumstances, those statutory limits would control. These statutory limits are also recognized in the proposed exception paragraph, which corresponds with language in section 5(a) of Executive Order 14332. Similar limitations are provided for the proposed suspension provision.
Consistent with the termination provisions in 2020 and 2024, the proposed discretionary termination provision continues to recognize that Federal agencies cannot terminate grants when doing so would be inconsistent with a Federal statute. The legality of any particular grant termination will necessarily turn on the specific Federal statutes governing the agency program at issue, and various other award-specific, agency-specific, and other considerations that can only be decided by a court at a more granular level. The OMB discretionary termination provision merely creates the legal framework for terminations when otherwise consistent with law. A framework that only permits terminations to the extent consistent with law does not conflict with any statute. To the extent a grant recipient believes that a particular termination is unlawful, it could raise that concern in the U.S. Court of Federal Claims.
For discretionary award programs, to which the proposed discretionary termination and suspension provisions will apply, Congress has generally provided Federal agencies with broad discretion to determine how to select recipients and administer awards to serve public purposes recognized in law. Certain legislative boundaries frequently apply to agency authority under those programs, such as statutory requirements related to eligible recipients, projects, or activities. The authority to make discretionary awards within those boundaries, however, necessarily includes the ability to revisit earlier decisions and re-exercise agency judgment in light of changing circumstances, at least provided that: (i) the particular program statute does not expressly limit or control the agency's discretion to reconsider its earlier award determinations; and (ii) the recipient receives clear and unambiguous notice of the discretionary termination provision in the award instrument.
The statutory authority provided by Congress allowing executive agencies to administer discretionary award programs—including deciding which entities receive awards and the amount of those awards—necessarily includes the implied or inherent authority for agencies to reconsider earlier decisions made about awards. Provided that clear and timely notice of the discretionary termination and suspension provisions is included by the Federal agency in the award instrument—either at the time of award or through an amendment made consistent with law—and that a program statute does not limit or control the process for terminations or reconsideration of award decisions, these provisions can be applied by agencies in a manner consistent with their authority under law. For programs in which an agency has lawful discretion to make an award, the discretionary termination and suspension provisions provide clear notice to recipients that the agency retains the discretion to withdraw, terminate, or temporarily suspend that award consistent with law.
The proposed discretionary termination and suspension provisions merely ensure that the government retains appropriate authority to course correct, consistent with the discretion provided by law, if circumstances warrant. These provisions are an important safeguard, providing policy flexibility if an agency determines that a project is contrary to the Federal interest, or that a work stoppage is necessary for reasons including evaluating whether a project is aligned with the Federal interest.
Similar analysis regarding executive authority for discretionary award programs applies to both the discretionary termination and temporary suspension provisions. To limit repetition in the preamble for this proposed rule, OMB does not recite the basis for that authority separately, but proposes to find that the same general principles apply.
OMB and the participating agencies rely on this discretionary authority, where it applies, for the proposed discretionary termination and suspension provisions, in addition to OMB's authorities for government-wide grants management. The proposed discretionary termination and suspension provisions are a legitimate and reasonable exercise of the authority for discretionary grant programs provided to executive agencies.
5. Spending clause framework. The Spending Clause framework discussed above regarding proposed revision to § 200.300 does not directly apply to the proposed revisions to § 200.340 regrading termination and suspension. The discretionary termination and suspension provisions are merely administrative features of the OMB requirements for grants administration that, where applicable, preserve discretionary authority provided to agencies by Congress throughout the award lifecycle. The discretionary termination and suspension provisions are not substantive conditions imposed on particular awards in exchange for Federal funds. But even if the Spending Clause framework were found to apply to the proposed revisions to § 200.340, it does not present an obstacle to including this term. See Dole, 483 U.S., at 207-11.
First, as discussed above, the determination of Congress to provide agencies with discretionary authority to administer award programs promotes the general welfare. For example, this discretionary authority ensures that programs are administered in a way that protects taxpayer resources, is responsive to the needs Americans within legislative bounds, and provides ongoing stewardship and oversight of Federal funds throughout the award lifecycle. The general welfare is served by allowing the Federal Government to discontinue funding for projects that prove ineffective or harmful, and to appropriately allocate resources to projects that would better serve the public good. The general welfare is also served by allowing temporary suspensions as appropriate in the discretion of the awarding agency.
Second, the proposed discretionary termination and suspension provisions are designed to provide clear, unambiguous, and timely notice of the award condition to applicants and recipients before the Federal award is made. This will provide up-front transparency regarding the process for terminating or suspending awards for discretionary reasons. Applicants and recipients will enter into awards with full knowledge of the risks and conditions associated with accepting the Federal award. This clear notice will permit them to make informed decisions regarding acceptance of Federal awards and appropriately mitigate reliance concerns. By agreeing to the award conditions, recipients accept the risk of an early termination or temporary suspension, which satisfies the clear notice standard under relevant case law. If a recipient is unaware of the discretionary termination or suspension provisions included in its award, the only explanation will be its failure to read the government-wide regulations, the award instrument, or both.
Third, the exercise of agency discretion in general for discretionary awards, and the discretionary termination provision in particular, are inherently related to the “federal interest” in particular assistance programs for discretionary awards. The provision seeks to ensure that Federal agencies have and retain the ability to exercise judgment in determining how discretionary funds are best used to serve the Federal Government's interest in the public purposes authorized by law for particular programs. It is a procedural term providing the agency a right to terminate an award that an agency determines is no longer in the Federal interest as it relates to underlying program objectives. This right is rooted in the established legal authority of OMB and agencies to establish conditions related to grants administration and the efficient use of Federal funds for authorized purposes. As such, it is also inherently related to the effective administration of the Federal interest in particular discretionary award programs. Building on the existing discretionary termination provision, the revised version would be an important tool to ensure that Federal awards continue to be used in furtherance of programs goals, Federal agency priorities, and the national interest as it relates to the particular program. The condition helps to reinforce the relatedness of government spending to authorized public purposes throughout the award lifecycle. If an awarded project, in the agency's judgment, ceases to be an effective use of government resources in achieving those purposes, the agency may discontinue funding. Similar analysis applies to the suspension provision, which further ensures that the Federal agency retains effective oversight tools throughout the award lifecycle.
Fourth, the discretionary termination and suspension provisions are merely extensions of a Federal agency's general authority to exercise discretion over Federal award programs consistent with law. The discretionary termination and suspension provisions preserve the right for agencies to retain and exercise ongoing discretion over how Federal funds are used to serve statutory purposes. This aligns with discretion long exercised by Federal agencies in the context of Federal contracting. Like the parallel FAR provisions, the discretionary termination and suspension provisions are just a procedural or mechanical features of the regulation that do not directly signal that any specific termination or suspension will occur or otherwise induce unconstitutional conduct.
Finally, the proposed discretionary termination and suspension provisions are not unduly coercive. Again, these are just procedural or mechanical features of the regulation corresponding to similar FAR provisions. The proposal extends the discretionary authority provided to agencies by Congress further into the award lifecycle. An applicant or prospective recipient remains free to opt out of particular Federal award or program if it finds the provisions unacceptable. Such decision would not affect other awards to which the discretionary termination or suspension provisions do not apply, and for which the agency does not have comparable discretionary authority, such as entitlement programs.
6. Termination costs. OMB has carefully considered reliance interests that may be implicated by the proposed discretionary termination provision. Three features of the proposed rule are designed to address these concerns: (1) the clear and unambiguous notice of discretionary termination provision discussed above; (2) compensation for work performed consistent with existing termination procedures and cost principles; and (3) procedures related to notices of a discretionary termination, an opportunity for recipients to explain terminations costs, and case-by-case discretion for agencies to consider additional terminations costs and weigh them against competing policy concerns.
The proposal generally preserves existing post-termination procedures and cost principles, but includes additional clarifying text applicable to discretionary terminations. Generally, when a grant is terminated, grant recipients are entitled to reimbursement for all allowable costs incurred up to the effective date of termination. This ensures that a recipient will not be left uncompensated for legitimate expenses made in reliance on the award prior to the effective date of the termination.
The proposed rule also clarifies notice requirements for terminations and provides agencies with case-by-case discretion to consider costs associated with a terminated award and weigh them appropriately against competing policy concerns. While not identical, this structure has certain similarities to the treatment of termination costs in Federal contracts, where contractors terminated for convenience can recover costs for completed work and reasonable termination expenses. Compare 48 CFR 52.249-2. By ensuring that recipients can submit information related to termination costs, the rule provides appropriate discretion to agencies to consider and respond to these concerns upon award termination. The proposed provisions balance the need for Federal flexibility with fairness to recipients. Additional discussion regarding termination costs is provided in this document under §§ 200.341 and 200.343.
Section 200.341—Notification of Termination Requirement
At § 200.341(b), OMB proposes to provide additional information regarding notifications of terminations for noncompliance.
At § 200.341(c), OMB proposes to add a paragraph regarding notifications of discretionary terminations. While the proposed discretionary termination provision reserves broad authority for terminations that are in the interest of the Federal Government (or pass-through entity, as applicable), that authority is not unlimited. As with all exercise of agency discretion, Federal agencies (or pass-through entity, as applicable) must provide a reason for individual termination decisions, which may serve as part of the administrative record upon judicial review, if applicable. To ensure such reasons will be provided, at § 200.341(c), OMB proposes to expressly require termination notices issued under the discretionary termination provision to include a brief summary of the reason or reasons why an agency decided to terminate an award or class of awards. That summary would not be required to provide a detailed or exhaustive analysis, but only to ensure that the recipient or subrecipient is provided information regarding the reason for termination. The summary should do more than merely citing the discretionary termination provision; it should provide a reason why the termination was found to be interest of the Federal agency or pass-through entity. Ensuring the adequacy of the notification will help to ensure that recipients understand why termination decisions have been made and reduce risk to the Federal Government.Thus, the decision to terminate a Federal award for discretionary reasons under § 200.340(a)(2) (proposed version) would still require a basic rationale regarding why the Federal award does not effectuate program goals, Federal agency priorities, or the national interest as they exist at the time of the termination. As in the context of parallel terminations for convenience in the context of Federal procurement, provided that recipient was given upfront notice of the discretionary termination provision, the requirement to provide a reason for award termination is not an exceptionally high bar. By providing a reasoned explanation for the exercise of authority under the discretionary termination provision based on programmatic or policy reasons, as they exist at the time of the termination, agencies will remain accountable for review in the U.S. Court of Federal Claims, as appropriate and authorized by law, for their termination decisions.
The proposed revisions also specify that the notification must include instructions to the recipient or subrecipient to stop work, make no additional financial obligations, and, to the extent authorized by law, terminate all subawards and contracts related to the terminated portion of the Federal award. The notification must also provide an opportunity for the recipient or subrecipient to submit a brief written statement regarding any termination costs it believes are relevant.
The proposed provision at § 200.341(d)(1), which is cross-referenced at the discretionary termination provision at § 200.340(a)(2), is intended to ensure that agencies provide a reasoned explanation, consistent with law, for specific termination decisions. For example, the Federal agency may explain why it determined that a particular award or class of awards would no longer effectuate program goals, Federal agency priorities, or the national interest. Or the Federal agency may prove an explanation of why an award or class of awards no longer best serves the authorized public purposes of the relevant program. Or an agency may explain, more generally, why it determined that an award or class of awards is no longer in the public interest, or will no longer best serve the public interest, as it relates to relevant program objectives in statute. Or an agency may explain why reallocating funds from an award or class of awards to other existing or new awards would better serve the public purpose of the program set forth in statute. Or any agency explanation may include some combination of the above reasons or other alternative reasons, consistent with law, for why it decided that terminating the award was in the government's interest.
The proposed provisions at § 200.341(c)—and additional proposed revisions at § 200.343(b)—will allow agencies to consider what terminations are warranted under the circumstances. This will include weighting circumstances that may warrant allowing the recipient to incur additional termination costs after the notice against competing policy concerns such as responsible stewardship of Federal funds and effective delivery of statutory objectives.
Section 200.342—Opportunities To Object, Hearings, and Appeals
OMB only proposes minor clarifying revisions to § 200.342. Like the existing version of § 200.342, the proposed version would continue to require Federal agencies to provide administrative hearing rights upon initiating a remedy for noncompliance. As under the existing version, such administrative hearing procedures would not be required for other types of terminations unless expressly required by other law. Such administrative procedures—which are generally intended to allow a Federal agency to make findings of fact and conclusions of law related to a recipient's alleged misconduct or noncompliance under a Federal award—would have less purpose or need for terminations based on the discretionary reasons of the Federal agency. For example, recipients would not generally be in the best position to present facts or information related to the agency's priorities as they exist at the time the termination decision is made. Moreover, unlike compliance-based terminations, discretionary terminations would not require reporting in SAM.gov (§ 200.340(c) (proposed version)), which is an important reason for the administrative hearing rights provided to recipients for compliance-based terminations.
In the case of discretionary terminations or suspensions, Federal agencies would be required to follow other procedures described in the regulatory text, including procedures related to notice and allowable costs. An agency, in its discretion, may elect to engage with recipients through some form of administrative review process before or after a discretionary termination or suspension, but would not be required to except as necessary to provide notice, determine allowable costs, and implement other sections of the regulatory text. In some cases, engaging with recipients on discretionary terminations or suspensions may serve to reduce risk to the Federal Government or minimize impacts to Federal programs or Federal awards, while in other cases the agency may decide to limit engagement to only required procedures, such as providing appropriate notice and making a determination of allowable costs.
Section 200.343—Effects of Suspension and Termination
At § 200.343(a), OMB proposes to provide further clarity regarding the allowability of costs during suspension or after termination. For costs resulting from financial obligations properly incurred by the recipient or subrecipient before the effective date of suspension or termination, and not in anticipation of it, the existing regulation provides that allowability should be evaluated based on whether the costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the termination takes effect. OMB proposes to clarify that the recipient or subrecipient must make all reasonable efforts to discontinue, cancel, mitigate, or otherwise reduce such financial obligations and provides documentation of those efforts to the Federal agency upon request. Sometimes it may not be possible to discontinue or cancel properly incurred financial obligations, but the regulatory text should better reflect the actual policy on such costs provided in the cost principles under subpart E. OMB also proposes to include an express cross-reference to the policy on termination and standard closeout costs provided in the cost principles at § 200.472(a). The existing version of OMB's policy in that section already provides that recipients and subrecipients must make all reasonable efforts to discontinue costs immediately after the effective termination date.
At § 200.343(c), to ensure that Federal agencies are appropriately empowered to consider costs resulting from discretionary terminations, OMB also proposes to add a provision expressly addressing such costs. The proposed paragraph would expand on the existing standard for which costs agencies may allow, in their discretion and consistent with law, following a termination notice. The proposed notice provision at § 200.341(c) also instructs agencies to provide the recipient of the terminated award with an opportunity to provide information related to terminations costs.
Subpart E—Cost Principles
Section 200.400—Policy Guide
OMB proposes to revise § 200.400 to clarify in paragraph (e) that the restrictions proposed in §§ 200.413 through 200.414 must be considered where wide variations exist in the treatment of costs. In addition, OMB proposes to remove the reference to fixed amount awards for reasons discussed elsewhere in this document.
Section 200.401—Application
OMB proposes to revise § 200.401 to remove references to fixed amount awards and Federal awards to hospitals.
OMB also proposes to revise the exemption under § 200.401(c), which allows operation under the Federal cost principles that apply to for-profit organizations at 48 CFR 31.2. OMB proposes to apply this exemption only to nonprofit organizations that receive 90 percent or more of their Federal funding in the form of contracts or operate a Federally Funded Research and Development Center (FFRDC). This proposed revision is further discussed in the section-by-section discussion covering appendix VIII.
Section 200.421—Advertising and Public Relations
OMB proposes to revise § 200.421 to specify that all advertising and public relations costs are unallowable with limited exceptions. The only exception for public relations costs are those required by statute. Advertising costs are allowable if required by statute or if they are for the procurement of goods and services for the Federal award; the disposal of certain scrap or surplus materials; or program outreach and other specific purposes necessary to meet the Federal award requirements. These proposed revisions would clarify that advertising and public relations costs that do not benefit the Federal award are not allowable.
Section 200.429—Commencement and Convocation Costs
OMB proposes to revise § 200.429 to remove the reference to IHEs. OMB proposes that the restriction should apply to all entities and not only IHEs. This proposed change is intended to ensure that the cost principles are streamlined and apply fairly to all entity types.
Section 200.432—Conferences
OMB proposes to expand § 200.432 to add a requirement that costs for attending conferences are allowable only if participation in the conference is expressly approved by the agency and included in the terms and conditions of the award. The revision would clarify that recipients are not authorized to attend conferences using Federal funds that do not serve to advance program outcomes.
Section 200.438—Entertainment and Prizes
OMB proposes to revise § 200.438 to remove reference to an outdated OMB memorandum.
Section 200.442—Fundraising and Investment Management Costs
OMB proposes to revise § 200.442 to propose that costs for fundraising and investment activities are only allowable with the prior written approval of the Federal agency.
Section 200.444—General Costs of Government
OMB proposes to revise § 200.444 to add a new paragraph (b) clarifying that general costs of government are those costs related to the general activities of the executive, legislative, or judicial branches of government, including general activities related to public safety, public information, citizenship, enrollment, or taxation that are not related to a specific Federal award. OMB also proposes to strike Councils of Government (COGs) from the existing paragraph (b) (proposed paragraph (c)) to align this section with other proposed policies.
Section 200.450—Lobbying
OMB proposes to revise § 200.450 to consolidate references to OMB memoranda. OMB also proposes to add three new paragraphs under this section. Paragraph (c)(1)(iii) would expressly prohibit funding any voter registration campaigns, drives, or related activities under Federal awards.
Paragraph (c)(1)(iv) would prohibit using Federal funds to engage in issue advocacy or public messaging that promotes or opposes a particular social, political, or public policy position unrelated to the statutory objectives or performance requirements of the Federal award, including messaging designed to influence public attitudes on matters not necessary to accomplish the purpose of the Federal award. The authority for this change is similar to other provisions discussed above, which are focused on aligning use of Federal award funds with core authorized purposes only, not extraneous activities on divisive policy matters or issue advocacy.
Paragraph (c)(1)(v) would prohibit using Federal funds to influence the executive branch of any State government on matters unrelated to the objectives or performance requirements of the Federal award, including attempts to affect State agency policymaking, rulemaking, or administrative actions for purposes other than carrying out objectives of the Federal award.
Section 200.454—Memberships, Subscriptions, and Professional Activity Costs
OMB proposes to revise § 200.454 to clarify that the only allowable costs under this section are those necessary to fulfill the award requirements. OMB also proposes to add a requirement for prior approval of the Federal agency. Under the proposal, all other costs, including the costs of subscriptions or memberships in country clubs or organizations whose primary purpose is lobbying or issue advocacy, are unallowable.
Section 200.455—Organization Costs
OMB proposes to revise § 200.455 to clarify that data costs related to integrated data systems should align with the finalized Federal grants data standards as published on Grants.gov. This effort is in support of the GREAT Act, Public Law 116-103. Additional information on these standards may be found at https://www.grants.gov/data-standards.
Section 200.461—Publication and Printing Costs
OMB proposes to revise § 200.461 related to publication and printing costs to make plain language revisions, including removing the word “promotion,” which is not the specific subject of this section. As § 200.421 provides the policy for “advertising and public relations” costs, OMB wants to ensure that the term “promotion” does not create an independent basis for allowing such costs under this section. To extent that advertising and public relations costs are not permitted under § 200.421, that section would govern. Furthermore, OMB is revising the section to make publication costs unallowable unless such costs are expressly required by statute or approved in advance by the Federal agency on a case-by-case basis. This change reflects OMB's objective to strengthen stewardship of Federal funds and ensure that Federal financial assistance is directed toward achieving the programmatic objectives of the award. Publication costs are not inherently necessary to carry out the core programmatic objectives of most Federal awards. In many cases, such activities are discretionary, vary widely in scope and costs, and may serve institutional, professional, or reputational interests rather than the specific objectives of the Federal program. Absent statutory authority or award-specific requirement, allowing publication costs as a charge to Federal awards creates inconsistent charging practices and increases the risk that Federal funds are used for activities that are ancillary to program performance. By limiting allowability to circumstances in which publication is required by statute or explicitly incorporated into the award, this change would ensure that such costs are incurred only when they are directly tied to a statutory or programmatic requirement.
Section 200.467—Selling and Marketing Costs
OMB proposes to revise § 200.467 to clarify that the costs of selling and marketing products or services of the recipient or subrecipient are unallowable unless expressly included in the Federal award and necessary to meet the requirements of the Federal award.
Section 200.477—Abortion
OMB proposes adding § 200.477 to provide that costs associated with elective abortions are unallowable under Federal awards except as expressly authorized by Federal law. This addition is consistent with Executive Order 14182, Enforcing the Hyde Amendment (January 24, 2025), and reflects longstanding appropriations restrictions prohibiting the use of Federal funds for elective abortion except in limited circumstances. By incorporating this limitation as a selected item of cost, this rule promotes uniform application of existing statutory funding restrictions across Federal financial assistance programs while maintaining consistency with governing Federal law.
Subpart F—Audit Requirements
Section 200.503—Relation to Other Audit Requirements
OMB proposes to revise § 200.503 to clarify that a Federal agency, Inspector General, or GAO may only impose additional audits when authorized by statute. This proposed revision is intended to reduce audit burden by requiring a statutory foundation and prevent agencies from layering on additional audit requirements by regulation if not required by law. This revision balances proper oversight with limiting administrative burden, ensuring that core audit authority is preserved while constraining discretionary authority to expand audit requirements beyond the Single Audit Act requirements addressed in the part.
For avoidance of doubt, this provision would not preclude Federal agencies from conducting compliance reviews as necessary to implement other sections of this part and provide effective oversight of Federal awards, including to determine whether a recipient or subrecipient is in compliance with substantive programmatic or other legal requirements. For example, such compliance reviews may be necessary to determine whether a recipient of Federal financial assistance is in compliance with Federal civil rights laws or conscience protection laws.
Section 200.513—Responsibilities
OMB proposes to revise § 200.513(c)(4) to delete the word “annual” before compliance supplement. OMB is in the process of reevaluating the appropriate frequency for issuing the compliance supplement. As previously discussed in this document, OMB and the Office of Inspector General for HHS are currently analyzing the single audit process. OMB plans to engage stakeholders ahead of any substantial changes.
Section 200.514—Standards and Scope of Audit
OMB proposes to delete some of the language in § 200.514(c)(1). Specifically, OMB proposes to delete the reference to guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by COSO. The reasons for this proposed change are discussed in § 200.303 of this document above.
Appendix I to Part 200—Full Text of Notice of Funding Opportunity
OMB proposes limited changes to appendix I. The proposed changes include changing “program description” to “funding opportunity description,” and other conforming changes to align with the proposed policies in this document. For example, references to paper application submissions have been removed. Agencies would be required to inform applicants to submit proposals via Grants.gov and provide instructions for doing so, unless a program specific exception is expressly authorized by Federal statute or approved by the Federal agency head (or designee). OMB also proposes to add references to Statements of Interests (SOIs) as discussed above in this preamble.
Appendix II to Part 200—Contract Provisions for Non-Federal Entity Contracts Under Federal Awards
OMB proposes limited changes to appendix II. The proposed changes include removing the reference to rescinded Executive Orders in paragraph (C).
Appendix VIII to Part 200—Nonprofit Organizations Exempted From Subpart E of Part 200
OMB proposes to remove appendix VIII in its entirety. Consistent with the revisions to § 200.401, only those nonprofit organizations that receive 90 percent or more of their Federal funding in the form of contracts, or operate a Federally Funded Research and Development Center (FFRDC), will continue to operate under the Federal cost principles that apply to for-profit organizations.
The prior guidance created uncertainty by suggesting that agencies could expand the list of exemptions, which undermined the uniform application of cost principles across the Federal Government. The proposed revisions resolve these issues by clarifying that the exemption applies only to the narrow category of nonprofits receiving 90 percent or more of their Federal funding in contracts. This threshold reflects that such organizations operate more like for-profit entities in terms of their funding streams and cost structures. For all other nonprofit organizations, the cost principles in subpart E will apply.
This proposed revision promotes consistency across agencies by ensuring more uniform treatment of nonprofit organizations. In addition, the revision improves oversight and enhances transparency by applying a clear, objective standard, and preventing agencies from unilaterally granting broad exemptions.
Appendix IX to Part 200—Hospital Cost Principles
OMB proposes a technical change to appendix IX to reflect the new location of the Hospital cost Principles in appendix IX to part 300.
VII. Discussion of Proposed Revisions to Subtitle B of 2 CFR by Federal Agencies
Through this proposed rulemaking, certain Federal grantmaking agencies that currently lack an existing chapter in 2 CFR subtitle B propose to add chapters, which are intended to streamline implementation and reduce variability across the Federal Government. Federal agencies that have existing chapters in 2 CFR subtitle B propose certain targeted and conforming changes to support OMB's broader rulemaking effort. All participating agencies adopt the common preamble above. A few agencies have provided supplemental preamble text that follows.
Health and Human Services (HHS)
OMB has included statutory and national policy requirements in section 200.300(a), including requirements related to “religious liberty, and those prohibiting discrimination.” All Federal agencies must comply with RFRA (42 U.S.C. 2000bb, et seq.) and any applicable statutes prohibiting discrimination on the basis of religion or protecting the exercise of conscience. Federal agencies, pass-through entities, recipients, and subrecipients are required under the First Amendment, RFRA, and applicable statutes prohibiting discrimination based on religion or protecting the exercise of conscience, to consider and provide religious or conscience-based exemptions as required by law, and may not require application of particular provisions or requirements to specific contexts, procedures, or services where such protections apply.
Federal agencies, pass-through entities, recipients, and subrecipients should be aware of their ongoing statutory obligations regarding religious liberty and conscience irrespective of the removal of language in 2 CFR 300.300(d) which provided for an assurance process to ensure the applicability of exemptions based on Federal protections for religious liberty and conscience. The proposed removal of such language should not be misconstrued as reduced Federal Government support for protections based on religion or conscience. The proposed revision to 2 CFR 200.300 is intended to clarify that conscience and religious liberty are protected under multiple statutes and the Federal Government will enforce such statutes as applicable. Further, § 200.300(a), as proposed, contains revised language similar to § 300.300(d), which clarifies that in managing and administering Federal awards, no person otherwise eligible will be excluded from participation in, unlawfully denied the benefits of, or otherwise subjected to unlawful discrimination in the administration of Federal programs, activities, projects, assistance, and services. Such non-discrimination language would encompass requirements, as applicable, not to discriminate on various bases, including race, color, national origin, disability, sex, religion or conscience.
Department of Homeland Security (DHS)
The Department of Homeland Security (DHS) has included in this proposed rule a potential change in delegation of authority in 2 CFR 3000.137. That section describes who within DHS may grant an exception to let an excluded person participate in a covered transaction. Currently, that section provides that the Secretary of Homeland Security has delegated the authority to grant such an exception to the Head of the Contracting Activity for each DHS component.
Because 2 CFR 3000.137 relates to non-procurement debarment and suspension, the Chief Financial Officer, rather than the Head of the Contracting Activity, is the more appropriate delegee. DHS intends to revise the regulatory accordingly. This proposal is consistent with DHS Instruction 146-01-001, Rev. 02, under which the DHS Chief Financial Officer grants waivers or limited exceptions to let an excluded party participate in covered non-procurement transactions including prime and subcontracts, grants, and direct loans.
Environmental Protection Agency (EPA)
This regulatory action proposes to revise text at 2 CFR 1500.1(a)(2) to remove the term regulation.
This regulatory action also proposes to revise text at 2 CFR 1500.4, Exceptions, to correct the citation from 2 CFR 200.102(b) to 2 CFR 200.102(c) and replace non-Federal entities with recipients.
Finally, this regulatory action proposes to revise text at 2 CFR 1532.1125, 1532.1130(a), 1532.1200, and 1532.1500 to replace references to an obsolete system (Excluded Parties List System), acronym (EPLS), and website ( http://www.EPLS.gov) with the current system (System for Award Management), acronym ( SAM.gov Exclusions), and website ( SAM.gov); these proposed changes also align with recent changes to 2 CFR part 180, which also reference the System for Award Management. Additionally, the proposed revisions to 2 CFR 1532.1200 include specific citations to referenced statutes to provide greater clarity.
Delta Regional Authority (DRA)
The Delta Regional Authority (DRA), established by Congress through the Delta Regional Authority Act of 2000 (7 U.S.C. 2009aa-1 et seq.), serves as a Federal-state partnership to address economic development needs in the Mississippi River Delta and Alabama Black Belt regions. This regulatory text proposes to formally adopt OMB's uniform administrative requirements to provide consistency and transparency in the administration of Federal financial assistance awarded by DRA.
This proposed action would not impose new grantmaking authority but would codify DRA's participation in the government-wide regulatory framework for financial assistance. DRA currently operates in substantial alignment with 2 CFR part 200, and this rulemaking would ensure ongoing compliance while allowing the agency to clarify or supplement OMB's guidance in the future if required by statute or regional conditions.
Federal Permitting Improvement Steering Council (FPISC)
The Federal Permitting Improvement Steering Council does not have independent authority to issue regulations specific to Federal financial assistance programs. It has therefore received approval from OMB to implement 2 CFR part 200 as a policy of the Federal Permitting Improvement Steering Council applicable to Federal awards made by the Federal Permitting Improvement Steering Council, rather than as a regulation.
Agency for International Development (USAID)
Through this rulemaking, the U.S. Agency for International Development (USAID) proposes to remove chapter VII from 2 CFR Subtitle B. This change reflects recent Executive Branch actions to realign foreign assistance functions and responsibilities.[102] Therefore, this document proposes to remove chapter VII to reflect the current administration of Federal foreign assistance programs.
VIII. Severability
In 2024, OMB added § 1.231 to the 2 CFR text addressing severability.[103] That section—which OMB does not propose to substantially modify through this rulemaking—explains that the provisions of OMB's regulatory text are separate and severable from one another. It further explains that if any provision of the regulatory text is held to be invalid or unenforceable as applied to a particular person or circumstance, the provision should be construed so as to continue to give the maximum effect permitted by law as applied to other persons not similarly situated or to dissimilar circumstances. If any provision is determined to be wholly invalid and unenforceable, it should be severed from the remaining provisions of the 2 CFR regulatory text, which should remain in effect.
In the revised regulations proposed through this document, OMB proposes a unified regulatory scheme addressing how Federal agencies will manage Federal financial assistance to improve transparency, accountability, and oversight for Federal awards across the Federal Government. While the revised regulations would best serve OMB's objectives for this rulemaking if left intact as proposed by OMB, the benefits of the guidance related to coordination across the Federal Government and improved transparency, accountability, and oversight do not hinge on any single provision. Accordingly, OMB considers individual provisions to be separate and severable from one another.
In the event of a stay or invalidation of any provision, or any provision as it applies to a particular person or circumstance, OMB's intent is to otherwise preserve the 2 CFR regulatory text to the fullest possible extent. The provisions that remain in effect will continue to provide government-wide policies applicable to Federal agencies to improve transparency, accountability, and oversight for Federal awards across the Federal Government. OMB believes that it is in the interest of Federal agencies, recipients and subrecipients of Federal awards, contractors, and other stakeholders in the Federal financial assistance community to leave the final regulatory text in place to the fullest extent possible and permitted by law.
IX. Indirect Cost Rates
On August 7, 2025, Executive Order 14332, Improving Oversight of Federal Grantmaking, directed OMB to revise the government-wide requirements related to indirect cost recovery to appropriately limit the use of discretionary grant funds for costs related to facilities and administration. Over the course of decades, reports from Congress, the oversight community, and various other organizations and commenters have expressed concerns regarding the Federal Government's spending on overhead associated with grants and other forms of financial assistance.[104] Reports have identified numerous flaws of the existing system, including its complexity, inefficiency, administrative burden, lack of public transparency, unfairness for smaller recipients, lack of oversight and public accountability, and lack of a policy mechanism to control excessive overhead costs.[105]
In January 2026, legislative language related to indirect costs was included within appropriations for fiscal year 2026. For example, some of these provisions: (i) required specified agencies to continue applying the negotiated indirect cost rates in § 200.414 to the same extent and in the same manner as such negotiated indirect cost rates were applied in fiscal year 2024; and (ii) prohibited specified agencies from using funds appropriated for fiscal year 2026 to develop, modify, or implement changes to fiscal year 2024 negotiated indirect cost rates. Report language accompanying these provisions recognized “room for improvement in the system used to identify and recover indirect cost rates under the Uniform Guidance, particularly with respect to the need for greater transparency into these costs.” The report language also recognized various models suggested to achieve improvements to the existing system, including a model proposed by officials from the Joint Associations Group on Indirect Costs (JAG). Some have criticized the proposed JAG model for reasons including that it may increase overhead payments to large organizations and fail to resolve significant problems of the existing system, including complexity, inefficiency, and excessive overhead spending by the Federal Government.[106] The JAG model appears to focus only on research awards, which are a subset of those awards subject to indirect cost requirements under 2 CFR part 200.
In consideration of this legislative and report language, OMB is not proposing updates to the indirect cost rate negotiation system through this document. OMB may consider issuing a request for information on this topic in the future, but commenters should not submit comments on the indirect cost rate negotiation system in response to this document. As no changes are proposed on that topic, OMB does not intend to consider or respond to any such comments in the final rule.
X. Request for Comments
OMB and the participating agencies request comments on all aspects of the proposed regulation in this document, including on any reliance interests that commenters may have based on the existing text of 2 CFR that proposed revisions may affect, and that OMB and agencies should consider in deciding whether or how to finalize this regulation. OMB is also requesting information from recipients on requirements in 2 CFR that increase administrative burden—and particularly those that increase administrative costs. OMB also welcomes comments related to policies contained in 2 CFR that are not required by statute that OMB may consider removing.
The Federal agencies participating in this rulemaking also request comment on all aspects of their proposed regulations in this document, including on any reliance interests that commenters may have based on the existing text of 2 CFR subtitle B that the Federal agencies' respective proposals may affect, and that Federal agencies should consider in deciding whether or how to finalize this regulation.
XI. Proposed Effective Date and Length of Comment Period
OMB proposes to issue a final rule that is effective by October 1, 2026. The proposed effective date is important to ensure that only a single set of government-wide requirements apply to Federal awards made during fiscal year 2027. An effective date of October 1 is useful for the audit process and other reasons, including ensuring government-wide uniformity and transparency regarding which requirements apply to Federal awards made and amended during fiscal year 2027.
OMB is providing a 45-day comment period on the proposed rule. Before issuing this document, OMB also considered a shorter comment period of 30 days or a longer period of 60 days. The 45-day comment period is intended to balance providing a path to issuing a final rule that is effective by October 1 with providing sufficient time for the public to comment on the proposed revisions in this document. Late comments will be considered only to the extent practicable.
Executive Order 12866 (Regulatory Planning and Review) and Executive Order 13563 (Improving Regulation and Regulatory Review)
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives, and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). The OMB Regulation for Grants and Agreements published in subtitle A of 2 CFR is a regulation applicable to Federal agencies. 2 CFR 1.100(b) (proposed version). The Office of Information and Regulatory Affairs within OMB has determined that the proposed amendments to 2 CFR are a significant regulatory action under section 3(f) of E.O. 12866. This rule is not expected to be considered a regulatory action under Executive Order 14192 because OMB has determined that it is exempt under that Executive Order.
Regulatory Impact Assessment
The Regulatory Impact Assessment (RIA) is included as a separate document.
Regulatory Flexibility Act
The Initial Regulatory Flexibility Analysis (IRFA) is included as a separate document. OMB also provides the following information related to the attached IRFA. For a rule subject to the notice-and-comment provisions of the APA, the Regulatory Flexibility Act 5 U.S.C. 601, et seq., requires that an agency provide a final regulatory flexibility analysis or to certify that the rule will not have a significant economic impact on a substantial number of small entities. Based on the nature of the revisions proposed in this notice, OMB does not expect this guidance to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act.
Courts have explained that the requirement under the RFA to analyze effects on small entities only applies to direct effects. Small entities that may be impacted indirectly, but not directly, are not subject to analysis under the RFA. See Nat'l Women, Infants, & Child. Grocers Ass'n v. Food & Nutrition Serv., 416 F. Supp. 2d 92, 109-10 (D.D.C. 2006). Certain small entities that could be impacted by OMB's revised policies will only be impacted indirectly by agency-specific implementation of the requirements or through their interactions with recipients of Federal awards.
Unfunded Mandates Reform Act of 1995
The proposed revisions would not impose unfunded mandates as defined by the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48). The proposed guidance would not result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $168 million or more in any one year (2 U.S.C. 1532). In addition, the definition of “Federal Mandate” in the Unfunded Mandates Reform Act excludes financial assistance of the type in which State, local, or Tribal governments have authority to adjust their participation in the program in accordance with changes made in the program by the Federal Government. Federal financial assistance programs subject to 2 CFR generally permit this type of flexibility.
Executive Order 13132 (Federalism Assessment)
This proposed regulation has been analyzed in accordance with the principles and criteria contained in E.O. 13132, “Federalism,” 64 FR 43255 (Aug. 10, 1999). OMB has determined that this proposed regulation would not have sufficient federalism implications to warrant the preparation of a federalism assessment. The regulation in 2 CFR is inherently national in scope and significance.
Paperwork Reduction Act
This regulation does not contain a new requirement for information collection. Rather, it streamlines requirements in specific sections. Thus, the Paperwork Reduction Act does not apply.
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