2026 OMB Proposed Revisions to 2 CFR Part 200
What the Proposed Rule Would Change and What Your Organization Should Do Now
On May 29, 2026, the Office of Management and Budget published a proposed rule in the Federal Register that would make the most substantive revisions to 2 CFR Part 200 since the 2024 update. The public comment period closes July 13, 2026. These changes are not final. None of the proposed provisions are currently in effect.
What is true right now is that the proposed rule signals the direction of federal grant oversight policy and gives recipients, subrecipients, and pass-through entities the clearest available picture of what compliance obligations may look like in the near term. Organizations that wait for a final rule before evaluating the implications will be behind.
This analysis covers the proposed changes that are most consequential for K-12 schools, colleges, municipal governments, and nonprofits. It explains what each change would require, how it compares to the current regulation, and what organizations should be thinking about before a final rule is issued.
Any organization can submit a public comment on these changes through the official portal at regulations.gov. The only instruction for comments is to preface the comments about a specific section inside brackets. For example, if an organization desires to comment on a change to 2 CFR 200.303 the comment must follow a header of [2 CFR 200.303].
The Proposed Rule Would Convert 2 CFR Part 200 from Guidance to Binding Regulation
The most structurally significant change in the proposed rule is not a compliance requirement. It is a reclassification of the regulatory text itself.
Currently, 2 CFR Part 200 is published in the Code of Federal Regulations but carries language in Section 1.105 stating that it is guidance and not regulation. OMB proposes to remove that language and to designate the resulting document, which it would rename the Uniform Grants Regulation, as a binding OMB regulation effective on the date OMB's final rule takes effect across all federal agencies simultaneously.
Under the current structure, each federal agency that awards grants technically adopts the Uniform Guidance through its own implementing regulations. In practice, most agencies have not issued separate rulemakings each time OMB has updated Part 200, relying instead on the existing structure to make updates effective through award terms and conditions. The proposed clarification would formalize this approach and streamline future updates so that a single OMB rulemaking applies government-wide without requiring dozens of agency-level rulemakings to follow.
For organizations receiving federal awards, the practical effect of this change is increased clarity about when new requirements take effect and which version of the regulation governs a given award. Future updates to Part 200 would have a single, published government-wide effective date. The current ambiguity about whether a particular agency has implemented a particular amendment would largely disappear.
Organizations should note that this structural change does not reduce compliance obligations. In most cases it increases regulatory certainty, which benefits recipients who have struggled to determine which version of the guidance governs their awards under multi-year grant cycles.
Fixed Amount Awards Would Be Eliminated
OMB proposes to eliminate fixed amount awards from Part 200, revising Section 200.201(b) to prohibit their use unless expressly authorized by a specific federal statute.
Fixed amount awards were introduced in the 2014 Uniform Guidance to reduce administrative burden for certain types of programs. Under a fixed amount award, the recipient is paid a set amount upon achievement of specified milestones or deliverables, without being required to document and report actual costs incurred. No financial reporting is required. Routine monitoring of actual expenditures does not occur.
OMB's stated concern is that this structure limits transparency and hinders oversight. The proposed change would convert any program currently using fixed amount awards to cost-reimbursement awards, which require documentation of actual expenditures, periodic financial reporting, and full compliance with the cost principles in Subpart E.
For organizations currently receiving fixed amount awards, the implications are significant. Cost-reimbursement awards require a financial management system capable of tracking and reporting expenditures by award, written procedures for determining cost allowability, and documentation of each expenditure with source documentation. Organizations that have been operating under fixed amount awards without these systems would need to build them before accepting awards under the new framework.
The proposed change would not affect fixed amount awards issued before the effective date of a final rule. Existing awards would continue under their current terms.
New National Policy Requirements Would Prohibit Specific Award Uses
The proposed revisions to Section 200.300 would add three new prohibitions to the post-award requirements section of Part 200. These are among the most operationally significant proposed changes for organizations managing federally funded programs that involve staff hiring, participant services, or programmatic activities touching on equity, diversity, or gender-related topics.
The proposed prohibitions would require federal agencies and pass-through entities, to the maximum extent permitted by law, to ensure that awards are not used to fund, promote, or facilitate any of the following:
- Diversity, equity, and inclusion policies or practices that violate applicable federal anti-discrimination laws, including any use of race or proxies for race as selection criteria for employment or program participation.
- Gender ideology as defined in Executive Order 14168, which encompasses theories or ideologies that deny the biological reality of sex or endorse the concept that sex is mutable or chosen.
- Procedures associated with transitioning a person under 19 years of age from one sex to another, including chemical or surgical procedures.
Several things are important to understand about these proposed prohibitions.
The qualifier throughout is "to the maximum extent permitted by law." OMB acknowledges in the preamble that specific federal statutes governing particular assistance programs could affect how the prohibition applies to those programs. Organizations with questions about how a proposed prohibition would apply to a specific program should consult legal counsel with expertise in that program's authorizing statute.
The proposed rule also includes new Section 200.218, which would prohibit use of federal awards to promote theories of disparate-impact liability based on federally protected characteristics. Federal agencies and pass-through entities would be directed to ensure awards are administered in a manner that does not advance such theories through award terms, conditions, or guidance.
For organizations with existing DEI programs, equity-focused initiatives, or youth-serving programs touching on gender identity, these proposed requirements demand a careful review of how federal award funds are being used and whether any current activities could be characterized as falling within the proposed prohibitions. Organizations that are reviewing their programs in advance of a final rule should document that review and its conclusions.
Conflict of Interest Disclosures Would Expand to Cover Recent Federal Employment
Proposed revisions to Section 200.112 would add a new disclosure requirement: recipients and subrecipients would need to disclose whether any employees who worked on the grant proposal or will support the resulting award were employed by the awarding federal agency within the two years preceding the application submission.
The proposed revision clarifies that this disclosure does not by itself constitute a conflict of interest and does not create an automatic bar to receiving the award. It creates visibility for the federal agency to identify situations where prior employment relationships might give rise to impartiality concerns and to evaluate them on a case-by-case basis.
For consulting organizations, technical assistance providers, and other entities that regularly hire former federal employees, this disclosure obligation would need to be built into the proposal development process. The disclosure must be made at the application stage. Organizations that fail to make a required disclosure when the obligation existed could face the mandatory disclosure consequences under Section 200.113.
Mandatory Disclosure Obligations Would Be Strengthened
Proposed revisions to Section 200.113 would require any Office of Inspector General that receives a mandatory disclosure under this section to transmit the disclosure to the United States Attorney's Office for the District of Columbia within ten days of receipt.
Currently, mandatory disclosures are made to the federal agency's Inspector General and the awarding agency, but there is no specified timeline for referral to prosecutorial authorities. The proposed ten-day transmission standard is designed to accelerate prosecutorial awareness of potential fraud or criminal misconduct.
For organizations managing large federal award portfolios, this change elevates the stakes of the mandatory disclosure obligation. Organizations should ensure their ethics and compliance programs identify reportable matters promptly and that reporting procedures are designed to meet the new transmission timeline.
Payment Accountability Reforms Would Add Pre-Payment Review Requirements
Proposed changes to Section 200.305 would require federal agencies and pass-through entities to exercise documented due diligence before issuing payments, including requiring justification for payment requests and directing use of Treasury's Do Not Pay system to screen payment recipients before funds are disbursed.
Under the current regulation, advance payment is the default for recipients that maintain adequate financial management systems and demonstrate willingness to minimize the time between fund transfer and disbursement. The proposed change would add an affirmative justification requirement to the payment request process.
For organizations that depend on advance payments to manage cash flow for program operations, this change could introduce friction into the payment cycle. The practical effect would depend on how federal agencies implement the due diligence requirement in their program-specific payment procedures.
Pass-through entities managing multiple subrecipients would also face increased administrative work. Each payment to a subrecipient would need to be evaluated against the proposed due diligence standard before disbursement.
Program Design Standards Would Require Alignment with Administration Priorities
Proposed revisions to Section 200.202 would add several new requirements for how federal agencies design assistance programs. These changes affect how funding opportunities are structured, but they also create downstream compliance implications for organizations that receive awards under those programs.
Proposed Section 200.202(c) would require federal agencies to develop programs in a manner that ensures compliance with all applicable restrictions on the use of federal funds, and would direct that programs not be used to subsidize political activities or initiatives unrelated to authorized public purposes. Organizations should expect this language to appear in award terms and conditions in funding opportunities issued after a final rule, creating explicit conditions that give federal agencies stronger authority to terminate awards for activities deemed inconsistent with program objectives.
Proposed Section 200.202(f) would encourage agencies to design awards as multi-year awards when consistent with program objectives. Multi-year awards reduce the frequency of re-competition and reapplication, which benefits organizations managing complex, long-term programs. For rural organizations in particular, the stability of multi-year funding cycles reduces the administrative burden and uncertainty of annual renewal cycles.
Award Termination Authority Would Explicitly Include Discretionary Termination
Proposed revisions to Section 200.340 would clarify that federal agencies may terminate discretionary awards based on agency discretion, meaning a determination that the award is not effectively achieving program goals or that continuation is no longer in the federal interest, in addition to termination for cause based on noncompliance.
This is analogous to the termination for convenience authority that exists under FAR-based federal contracts. Under the current regulation, the authority for discretionary termination exists but has been interpreted inconsistently across agencies.
For organizations accepting new discretionary awards after a final rule, this clarification means that award agreements will include explicit termination provisions that agencies may invoke without a finding of noncompliance. Organizations should read new award terms and conditions carefully and understand what termination provisions apply to their specific awards.
The proposed change also includes similar clarifications related to award suspension, establishing parallel authority for agencies to suspend awards pending resolution of compliance or performance concerns.
Subrecipient Reporting and Monitoring Requirements Would Be Strengthened
Proposed changes to Sections 200.329 through 200.332 would strengthen requirements for pass-through entities to report subawards in SAM.gov and to track whether funds transferred to related organizations, affiliates, or subsidiaries are properly characterized as subawards subject to reporting requirements.
The proposed changes also emphasize federal agency responsibility to monitor whether their prime recipients are fulfilling subrecipient reporting obligations. Pass-through entities that have not been diligently reporting subawards to SAM.gov should expect increased scrutiny under the proposed framework.
For organizations operating in both roles, as a recipient of direct federal awards and as a pass-through entity distributing subawards, these proposed changes reinforce the importance of maintaining complete subaward files and staying current with SAM.gov reporting obligations.
Research and Development Awards Would Face New Eligibility and Foreign Collaboration Restrictions
Proposed Section 200.202(e) would establish a government-wide policy governing eligibility and international elements in federal research and development awards. Federal agencies would be able to restrict eligibility among different types of nonprofit organizations and would be required to ensure that international collaborations do not pose national security risks.
Proposed Section 200.220 would prohibit the obligation or expenditure of federal funds to support bilateral or multilateral collaborations with covered foreign countries or covered foreign entities, unless expressly authorized by federal statute or approved by the federal agency head. The prohibition would apply regardless of whether federal funds are used for direct programmatic activities, research, travel, or indirect costs allocable to the collaboration.
For institutions of higher education and research-focused nonprofits with international partnerships, this proposed provision requires a careful review of current awards to determine whether any activities could be characterized as covered collaborations. The proposed exception authority, requiring agency head approval, suggests these determinations will require advance coordination with program officers rather than self-certification.
What Organizations Should Be Doing Before a Final Rule Is Issued
The comment period closes July 13, 2026. OMB will review public comments and issue a final rule at a subsequent date. The timeline between proposed and final rules varies considerably. Organizations should plan for a final rule within twelve months but should not assume the proposals will be adopted exactly as written.
In the interim, several actions are prudent regardless of the final rule's content.
Review your organization's programs and activities funded with federal awards against the proposed Section 200.300 prohibitions. Document what you find. If any current activities could be characterized as falling within the proposed prohibitions, consult legal counsel about how to structure those activities so that federal and non-federal funding are clearly delineated.
Review your conflict of interest procedures to determine whether they would capture the proposed Section 200.112 disclosure requirement. If your organization regularly engages former federal employees, build the two-year employment check into your proposal development workflow now.
If your organization currently receives fixed amount awards, begin assessing what a conversion to cost-reimbursement requirements would mean for your accounting systems, staffing, and administrative capacity. Organizations that are already building toward Part 200-compliant financial management systems will have a much easier transition if fixed amount awards are eliminated.
Monitor the rulemaking at regulations.gov using docket number OMB-2026-0034. Comments submitted during the comment period will be publicly available and often provide useful insight into how other organizations are interpreting proposed changes.
Work With The Rural Impact Group
The Rural Impact Group monitors regulatory developments affecting federal grant recipients and provides timely guidance to clients navigating changes in the compliance landscape. If your organization needs help evaluating how the proposed 2026 revisions would affect your current programs and practices, a Rural Capacity Diagnostic is the right place to start.
If your organization needs to establish or maintain a SAM.gov registration, we provide free support for that process.
This analysis reflects the proposed rule published at 91 FR 32198 on May 29, 2026. It is informational in nature and does not constitute legal advice. Proposed rules are subject to change before finalization. Organizations should consult qualified compliance professionals when making compliance determinations for specific awards.