The Office of Management and Budget (OMB) has proposed to revise the OMB Guidance for Federal Financial Assistance. The goal of these revisions is to “improve transparency, accountability, and oversight for how Federal taxpayer dollars are used in the context of Federal grantmaking”. These changes would reshape how federal grants, loans, and cooperative agreements are received.
This proposed rule will affect all organizations that pursue and/or receive federal grant funding.
Important changes include the following:
Alignment with Presidential Priorities: Merit reviews will include a “pre-issuance review” to confirm that awards “demonstrably advance” the President’s policy priorities.
Discretionary Terminations & No Appeals: Revisions to grant federal agencies authority to terminate an award if it “no longer effectuates program goals, agency priorities, or the national interest.” Recipients are stripped of administrative hearing rights to challenge these discretionary terminations.
Mandatory E-Verify: Require all grant recipients and subrecipients to use the DHS E-Verify system to confirm employment eligibility for all employees and contractors working under a federal award.
Grants.gov Mandate: Agencies must now publicly announce all discretionary award Notices of Funding Opportunities (NOFOs) on Grants.gov, even if they are not subject to open competition.
Indirect Cost Rate Preferences: While OMB left the actual indirect cost rate negotiation system unchanged, it added a rule stating that, all else being equal, preference for discretionary awards should be given to institutions with lower indirect cost rates.
While these are just a few of the important changes coming from this proposed rule, they highlight the policy and compliance shifts, application and risk screening changes, and additional notable notifications.
How This Will Affect Your Organization
If enacted, following the closure of the comment period on July 13, 2026, this proposed overhaul will shift the landscape for any organization pursuing federal funding, and organizations can no longer view federal grants as purely mission-driven funding. Winning and keeping federal dollars will require heightened political awareness, intensified administrative work, and strict internal compliance protocols to protect against sudden defunding.
The federal funding environment is changing. Oversight is ramping up, but you don’t have to navigate these complex compliance shifts alone.
Is your organization fully prepared for the next era of federal grantmaking?
Let’s talk. Contact McCaulley&Company today.