OMB's Proposed Overhaul Of The Uniform Guidance: What Nonprofit Boards Need To Know

Sweeping federal rule could reshape how nonprofits apply for, manage, and report on federal grants. Here's what's in it and what comes next.

If your nonprofit receives federal grants, cooperative agreements, or pass-through funding from a state or local government, a major regulatory change is underway that warrants board-level attention.

On May 29, 2026, the Office of Management and Budget (OMB) published a proposed rule that would substantially rework the existing Uniform Guidance (2 CFR Part 200), which governs nearly every federal award in the country. The proposal would recast the Uniform Guidance in 2 CFR Part 200 as a formal ‘Uniform Grants Regulation,’ explicitly recognizing it as an OMB regulation that carries the force of law rather than informal guidance. The proposed overhaul is one of the most significant rewrites of federal grants policy since the Uniform Guidance was first created in 2013, and it’s arriving less than two years after the last major revision took effect. For nonprofit boards and executives who rely on federal dollars to deliver programs, understanding what is proposed - and what to do about it - is a governance priority.

What OMB Is Proposing

The proposed rule touches nearly every stage of the grant lifecycle, from how programs are designed to how awards can be terminated. A few of the changes most relevant to nonprofits include:

• More agency discretion over funding decisions. Federal agencies would be required to design programs that align with the administration's policy priorities in place at the time, and senior political appointees would review discretionary awards before they are issued.
• New restrictions on award content. The proposal would bar certain uses of federal funds, including new prohibitions on using awards to fund, promote, or facilitate specified diversity, equity, and inclusion (DEI) initiatives, with potential implications for programs touching on gender, identity, or political advocacy.
• Broader termination and suspension authority. Agencies could end or pause an award if it no longer serves the "national interest" as defined by the current administration, with limited appeal rights for many terminations.
• Elimination of fixed-amount awards  and fixed‑amount subawards as currently permitted under 2 CFR Part 200, which currently let smaller nonprofits operate under lighter reporting requirements.
• New verification steps, including participation in the Department of Homeland Security's E-Verify system and use of the Treasury Department's Do Not Pay system before funds are disbursed.
• Some burden-reducing measures, such as a push toward multi-year awards, plain-language funding notices capped in length, and Statements of Interest to screen applicants before a full proposal is required.

Because the proposal reopens dozens of individual sections of Part 200, the practical effect on any single organization depends heavily on which federal agency, program, and award type is involved.

Why OMB Says These Changes Are Needed

OMB frames the rewrite around three goals:

• Improving transparency and oversight of how federal dollars are spent.
• Clarifying that the Uniform Guidance carries the force of regulation rather than informal guidance.
• Reducing paperwork burden where it can.

The agency points to concerns about wasteful spending, inconsistent oversight of subrecipients, and a desire to ensure taxpayer-funded programs stay tied to the purposes Congress authorized.

Even so, nonprofit sector groups, including the National Council of Nonprofits, have raised concerns about how some provisions, particularly expanded termination authority and new restrictions tied to program content, would be applied in practice. That tension between strengthening oversight and preserving predictability for grantees is likely to shape the final rule.

When Will The Final Rule Come Out?

The public comment period closed on July 13, 2026, after drawing well over 300,000 submissions to Regulations.gov. OMB will now review those comments and decide which provisions to keep, revise, or drop before issuing a final rule.

The OMB has proposed an October 1, 2026 effective date, but has not yet issued the final rule or confirmed the publication timeline. Past Uniform Guidance updates have taken several months to more than a year to move from comment period to final publication, so nonprofits should plan for a similar timeline while watching for updates.

What Nonprofit Leaders & Boards Should Do Now

Even though the comment window has closed, there is still work to do:

• Inventory your federal exposure. List direct awards, subawards, and pass-through arrangements your organization holds, along with the awarding agency.
• Flag high-risk provisions. Termination authority, E-Verify participation, and changes to indirect cost treatment are among the areas most likely to affect budgets and staffing.
• Loop in your board and audit committee. Governance bodies should understand the potential effect on program delivery, internal controls, and Single Audit requirements before the rule is finalized.
• Watch for the final rule and any transition period. Agencies typically need to update their own implementing regulations after OMB finalizes Part 200, which can create a lag between the federal effective date and how it reaches your specific grant.

The scope of this proposal means most federal grant recipients will need to revisit internal controls, subrecipient monitoring, and budget assumptions once a final rule is published. GBQ's nonprofit and audit & assurance teams are tracking this rulemaking closely and can help your organization assess exposure under the current proposal and help you prepare for what comes next.

Contact GBQ to talk through what these changes could mean for your grants and your next audit cycle.