Proposed Uniform Grant Regulations Signal a Major Shift in Federal Grants Management6 Min Read

On Friday, May 29, 2026, the Office of Management and Budget (OMB) released draft changes to the Uniform Grant Guidance (2CFR 200) for a 45-day public comment period.  The newly styled Uniform Grant Regulations (UGR) marks a significant turn in the responsibilities of all parties involved in the grants management process, from the U.S. Government, to states, to all the various pass-through entities along the funding chain.

If finalized, the proposed regulations would affect how awards are evaluated, approved, monitored, paid, reimbursed, and potentially terminated. They would also expand expectations around pre-award risk assessment, fraud prevention, subrecipient oversight, cybersecurity safeguards, workforce verification, cost allowability, and documentation.

For organizations that receive, administer, or pass through federal funds, the proposed changes could have meaningful operational, compliance, and budget implications.

A more centralized and immediate regulatory framework

One of the most significant structural changes is the shift from Uniform Grant Guidance to Uniform Grant Regulations. This change would make OMB updates immediately applicable government-wide, reducing the delay that previously occurred when individual agencies adopted updates on different timelines.

That may create greater consistency across agencies, but it also reduces flexibility for implementation. Recipients and pass-through entities may have less time to adjust policies, procedures, systems, and internal controls once final rules are issued.

Expanded pre-award and pre-payment scrutiny

The proposed regulations place greater emphasis on knowing the recipient before an award is made and before payments are issued. Grantors would be expected to evaluate grantee capacity, performance history, compliance risk, and payment eligibility more thoroughly.

This includes expanded pre-award and pre-payment screening, such as Do Not Pay checks and other federal risk indicators. As a result, organizations could experience delayed or withheld payments based on risk signals or verification issues, even before a finding of noncompliance has been established.

For recipients, this makes documentation, entity registration, internal controls, and compliance readiness more important before funding is awarded or drawn down.

Greater responsibility for pass-through entities

UGR would also heighten expectations for pass-through entities. Subrecipient oversight would extend beyond basic reporting and include more active monitoring of compliance, performance, reputational risk, and downstream controls.

This could increase exposure for organizations that distribute federal funds to other entities. Pass-through entities may need stronger procedures for subrecipient selection, risk assessment, award documentation, monitoring, issue escalation, and corrective action.

Tighter treatment of costs and reimbursement structures

Updates indicate a more restrictive approach to certain cost categories and reimbursement mechanisms. Areas such as conferences, professional services, public relations, publications, legal costs, and other program-support expenses may face greater scrutiny or require additional approval.

The draft framework also appears to discourage certain cost-reimbursement structures and complex indirect cost recovery approaches. This could reduce flexibility for recipients and potentially limit the recovery of administrative or overhead costs, particularly for nonprofit organizations and entities with complex federal funding portfolios.

Organizations should evaluate how proposed changes could affect budget assumptions, reimbursement timing, indirect cost recovery, and cash flow planning.

New compliance layers for recipients

UGR would introduce or expand several operational compliance obligations. These include cybersecurity safeguards, E-Verify requirements, certification of subawards in SAM.gov, disclosure of certain grantor-grantee relationships, consideration of related-party transactions, independent cost estimates, and fraud notification obligations.

It also includes provisions related to discriminatory practices, diversity programs, First Amendment considerations for public entities, foreign collaboration, and national security restrictions.

Together, these changes would require organizations to look beyond traditional grant accounting and reporting. Compliance may need to involve finance, legal, human resources, IT, procurement, program leadership, and executive management.

Increased funding and program continuity risk

The shift from UGG to UGR would also expand termination authority. Federal awarding agencies may have greater discretion to terminate awards when continuing the program is determined to be inconsistent with agency priorities, administration policy objectives, or national interest considerations.

This introduces additional uncertainty into federal funding streams. Grant recipients may need to evaluate whether awarded programs remain aligned with current federal priorities, particularly during periods of administrative transition.

From a planning perspective, organizations may need to account for increased funding volatility, delayed payments, reduced reimbursement flexibility, and potential program interruptions.

Three themes organizations should watch

After analysis of the draft changes, we recommend monitoring these three components of the regulations:

First, grantors are expected to take a more active role in fraud prevention, not just fraud detection, which may lead to more rigorous pre-award and pre-payment screening.

Second, federal agencies may have broader discretion to reassess or terminate funding based on policy alignment, introducing greater uncertainty for recipients.

Third, reimbursement structures may become less flexible, potentially limiting cost recovery and increasing financial pressure on grant-funded operations.

Preparing for what comes next

The proposed Uniform Grant Regulations could have far-reaching implications for organizations that receive, administer, or pass through federal funds. While the rules are still in the comment period, organizations should begin assessing how their current grant management processes align with the direction of the proposed changes.

Key areas to evaluate include pre-award readiness, internal controls, payment verification, subrecipient monitoring, cybersecurity, procurement, cost allowability, indirect cost recovery, cash flow planning, and termination risk.

UHY can help organizations understand the potential impact of the proposed guidance, identify areas of exposure, and prepare for changes that may affect federal grant compliance, reimbursement, and program administration.