News & Insights

On May 29, 2026, the Office of Management and Budget (OMB), together with participating federal agencies, issued a proposed rule to substantially revise 2 CFR Part 200, commonly known as the Uniform Guidance (UG). OMB is seeking to improve transparency, accountability, and oversight; clarify the regulatory status of UG; and reduce recipient burden.   

The proposal is not final, and the implementation timeline remains subject to change. Initially, the implementation deadline was October 1, 2026, but that has been delayed with H.R. 6500 “Continuing Appropriations and Extensions Act, 2027”, signed on September 2, 2026.  

Under this, the rule cannot be finalized before December 11, 2026, and there is additional action that may take place to delay implementation further. While we don’t know a final implementation date, given the scope of the proposed revisions, these changes warrant understanding what might be coming. 

Potential Operational Impact at a Glance 

Proposed or related direction	Operational consideration
Eliminate fixed amount subawards	More detailed financial reporting, expenditure monitoring, documentation, and closeout procedures.
Require payment-request explanations	Updates to drawdown support, review workflows, and coordination between program and finance staff.
Require E-Verify participation	Review employee and contractor onboarding for work performed under federal awards.
Clarify suspension and termination authority	Assessment of award terms, contractual commitments, cash flow exposure, and contingency planning.
Strengthen domestic preference terms	Revisions to procurement language and vendor documentation.
Revise pass-through expectations	Updated subrecipient classifications, agreements, risk assessments, reports, monitoring, and follow-up.

What the Proposal Does Not Appear to Change  

Before getting an understanding of what may be changing, it’s important to understand what isn’t. Based on the proposed rule and the Regulatory Impact Analysis, the proposal does not change the single audit threshold or the general indirect cost rate framework, both of which were modified recently. It also does not eliminate the fundamental requirement that recipients maintain effective internal controls, comply with award terms, and support the allowability of costs. 

Six Areas of Proposed Reform  

The Regulatory Impact Analysis issued by OMB organizes the changes expected to have the most meaningful regulatory or economic effects into six broad areas.   

1. Subrecipient Oversight and Fixed Amount Awards  

The proposal would eliminate fixed-amount awards unless specifically authorized by statute and eliminate fixed-amount subawards.  

For recipients and pass-through entities, the change could mean additional financial reporting, monitoring, documentation, and system requirements. Organizations that use fixed-amount subawards need to evaluate how subawards are structured, how expenditures are reviewed, and how unspent funds are identified and returned.  

2. Payment Accountability  

The proposal would require non-state entities to provide a brief explanation of how the requested funds will be used and to indicate whether each request is for an advance or a reimbursement, typically within the current system recipients use to request funds. The changes presented would also require recipients and subrecipients to participate in E-Verify for employees and contractors performing work under a federal award in the United States.  

These provisions are intended to reduce improper or premature payments and improve the connection between disbursements and program needs. This may require revisions to cash draw procedures, supporting documentation, review responsibilities, human resources processes, contractor onboarding, and coordination between program and finance personnel.  

Extra Note: Electronic Federal Disbursements  

Separate from the proposed UG revisions, but important to consider when it comes to Federal dollars, Executive Order 14247, “Modernizing Payments To and From America’s Bank Account,” directed the U.S. Department of the Treasury to cease issuing paper checks for federal disbursements effective September 30, 2025, to the extent permitted by law and subject to limited exceptions. Agencies must transition recipients to electronic funds transfer methods, including direct deposit, prepaid card accounts, and other digital payment options.  

This change will be especially important for organizations that have historically received grant funds or other federal payments by paper check. Recipients should confirm that the federal payment system they use contains up-to-date electronic payment information and that responsibility for maintaining it is clearly assigned. Organizations should also have an independent verification procedure for requested changes to the bank information to protect against unauthorized or fraudulent changes.    

3. Termination and Suspension of Grants  

The proposal would also restructure and clarify the provisions governing termination and would expand and clarify federal agency authority to suspend awards. This would also revise notice requirements, the effects of suspension or termination, and the availability of appeals.  

This area has received substantial attention because most recipients make hiring, contracting, purchasing, and other commitments in reliance on an award. Recipients should consider how their award terms, contractual commitments, cash reserves, and contingency planning currently in place could address a mid-award suspension or termination.  

4. Policy Requirements  

Proposed revisions to the statutory and national policy areas of UG would align federal awards with applicable law and Executive Branch priorities. It includes language addressing unlawful discrimination, equal treatment of faith-based organizations, and restrictions on the use of federal funds for certain activities.  

For recipients, the operational impact will depend on the nature of the award, applicable statutes, agency-specific terms, and the programs being funded. Organizations should review award conditions, policies, subaward agreements, solicitations, and training materials.  

5. Domestic Preference Requirements in Procurement  

Under the current UG, recipients and subrecipients should generally prefer U.S.-produced goods and materials. The proposal would require agencies to include domestic preference terms in awards where practicable and consistent with law, with those requirements flowing down to subawards and contracts.  

To prepare for this, recipients should review current procurement documents and purchasing procedures, determine how domestic preference terms apply to particular awards, and retain documentation supporting purchasing decisions.   

6. Program Integrity  

The proposal includes several measures intended to address national security and program integrity, and the relevance of these provisions will vary greatly depending on the type of organization and award.  

Research institutions and organizations with international activities will see the greatest impact. Other recipients should still consider whether award-funded collaborations, vendors, publications, or communications could be affected and whether prior approval procedures would need to change.  

Other Changes Worth Watching  

Internal Control References 

The proposal would remove language stating that recipient and subrecipient internal controls must align with standards issued by the U.S. Government Accountability Office or the Committee of Sponsoring Organizations of the Treadway Commission. The removal does not eliminate the obligation to establish and maintain effective internal controls over federal awards, but creates more flexibility in what standards to follow.  

Applicant Risk Assessments 

The proposed changes would add timing and risk factors to federal agency reviews of applicants, including financial capacity, prior practices, memberships and affiliations, and foreign gift and contract reporting. This may make the low-risk auditee status particularly important in receiving and retaining awards.   

Procurement 

The proposal would strongly discourage, but not prohibit, cost-reimbursement contracts and would add expectations for notice and justification when those contracts are used.  

Prior Approvals for Selected Costs 

Proposed changes revise the treatment of several cost categories, including conferences, fundraising and investment management, memberships and professional activities, publication and printing, and selling and marketing costs.  

Pass-Through Entity Responsibilities 

The proposal would add language addressing subaward reporting, classification of payments to affiliates or related legal entities, compliance with award terms, and potential reputational harm to the federal government. 

What Can You Do Now to Prepare?  

Because the UG rule is still proposed, policy overhauls are premature. Organizations should, however, use the proposal and related federal payment developments as a readiness assessment and:  

1. Review your inventory of federal awards and identify any programs that use subawards, fixed amount arrangements, advance payments, international collaborations, or significant federally funded procurement.  

2. Confirm how each federal award payment is received, verify current electronic payment enrollment and banking information, and assign responsibility for maintaining those records.  

3. Use independent verification and appropriate access controls when adding or changing banking or payment instructions.  

4. Map responsibility for grant administration across all areas of the organization.  

5. Assess whether payment requests are supported by clear documentation of timing, purpose, allowability, and financial need. Make modifications to the current requests format, if needed.   

6. Evaluate subrecipient classification, risk assessment, agreement terms, reporting, monitoring, follow-up, and closeout practices. Determine what, if anything, needs to change in the subrecipient agreements and reporting requested from the subrecipients.   

7. Monitor the final rule, Treasury and awarding-agency implementation guidance, effective dates, available payment exceptions, and award-specific terms before changing formal policies.   

Looking Ahead  

While the final rule may look different from the version released in May 2026, the best response today isn’t alarm, but it’s also not inaction. All recipients and sub-recipients should understand the key points of the proposal, identify the provisions most relevant to their programs, and strengthen current practices that will remain valuable regardless of the outcome.  

Effective internal controls, reliable documentation, subrecipient oversight, and active monitoring of award requirements will always be the foundation of effective federal grant administration, regardless of any changes to the final rule.   

If you have questions about the proposed changes, want to review your current policies, or want to strategize on organizational changes, the Maner team is here to help.