Proposed Changes to Federal Grant Rules: What Nonprofit Leaders Should Know

Why Is OMB Proposing These Changes? 

According to OMB, the proposed revisions are intended to strengthen oversight of federal funds, improve accountability, create greater consistency across federal agencies, and enhance monitoring of recipients and subrecipients. 

The proposal reflects a broader effort to provide federal agencies with additional tools to oversee federal funding and ensure compliance with award requirements. 

Five Proposed Changes Nonprofit Leaders Should Know

1. Expanded Authority to Suspend or Terminate Awards

Perhaps the most significant proposal would expand federal agencies’ authority to suspend, terminate, or decline continuation of federal awards. 

Historically, award termination has often been associated with noncompliance, misuse of funds, or failure to meet grant requirements. Under the proposal, agencies could have broader discretionary authority to discontinue awards in certain situations, including circumstances where an award no longer aligns with agency priorities, objectives, or other federal interests. 

While the full impact of this proposal remains uncertain, it could create additional funding uncertainty for organizations that rely heavily on federal awards, particularly those with multi-year grants. As a result, nonprofit leaders may want to place greater emphasis on funding diversification, contingency planning, and maintaining adequate financial reserves. 

For many organizations, this proposed expansion of discretionary termination authority may represent the most significant change included in the proposal.

2. Increased Recipient and Subrecipient Monitoring Requirements

The proposal contemplates broader monitoring responsibilities for organizations that pass federal funds to subrecipients. 

In addition to traditional financial and compliance oversight, pass-through entities may be expected to monitor for activities that could create reputational risk for the pass-through entity, awarding agency, or federal government. 

If finalized, organizations issuing subawards may need to expand monitoring procedures, documentation, and risk assessments beyond traditional financial compliance considerations.

3. E-Verify Requirements for Federally Funded Activities

One of the more operationally significant proposals would require recipients and subrecipients to participate in E-Verify for employees and contractors working on federally funded activities in the United States. 

If finalized, organizations may need to modify hiring, onboarding, payroll, and contractor engagement processes to ensure compliance with the new requirements.

4. Elimination of Fixed-Amount Awards

The proposal would significantly restrict or eliminate the use of fixed-amount awards, which currently allow funding based on completion of agreed-upon milestones rather than reimbursement of actual costs. 

If finalized, organizations currently operating under fixed-amount awards could face increased documentation requirements and a greater administrative burden associated with tracking and supporting actual expenditures. Organizations that receive or issue subawards should pay particular attention to this proposal. 

5. Uniform Guidance Becomes the Uniform Grants Regulation

The proposal would rename the Uniform Guidance as the Uniform Grants Regulation (UGR) as part of a broader effort to create a more centralized and standardized framework for federal financial assistance. 

While the name change itself may have little direct impact on daily operations, it reflects OMB’s emphasis on stronger and more consistent administration of federal awards across agencies.

What Organizations Should Do Now 

Although these changes are not yet final, nonprofit organizations may want to: 

1. Monitor developments as the rulemaking process continues and discuss potential impacts with management and the board. 
2. Consider submitting comments to OMB before the July 13, 2026 comment deadline if the proposed changes could significantly affect your organization. 
3. Evaluate your organization’s dependence on federal funding and related risks, particularly if federal awards represent a significant source of revenue. 
4. Review subrecipient monitoring procedures and compliance documentation to assess whether current processes would meet heightened oversight expectations. 
5. Assess whether existing hiring, onboarding, payroll, and contractor engagement processes could support the proposed E-Verify requirements. 

Final Thoughts 

At this stage, nonprofit leaders should view these proposals as an opportunity to understand potential future requirements rather than an immediate compliance obligation. 

The proposed revisions focus less on changing Single Audit requirements and more on strengthening federal oversight, monitoring, and enforcement of federal awards. Organizations that stay informed and proactively evaluate their compliance processes will be better positioned to adapt if these changes ultimately become final. 

At Han Group, we help nonprofit leaders navigate evolving accounting, compliance, and federal grant requirements.