14 Sep OMB’s Proposed Uniform Guidance Changes: What Nonprofits Need to Know
For nonprofit organizations that receive federal funding, changes to the Uniform Guidance can have a significant impact on everything from grant administration and internal controls to subrecipient monitoring and audit preparation.
The Office of Management and Budget (OMB) has proposed broad revisions to the federal financial assistance regulations in 2 CFR Part 200, commonly known as the Uniform Guidance. The proposal is intended to strengthen transparency, accountability, and oversight of federal awards while also addressing how federal agencies administer and monitor funding.
The proposal has generated an unusually high level of public response from organizations and individuals across the federal financial assistance community. The comment period has now closed, but the rulemaking remains in the proposal stage, meaning the final requirements could look significantly different from what has been proposed.
For nonprofits, the key right now is understanding where changes could have the greatest impact and making sure your organization is prepared to respond.
Greater Uncertainty Around Federal Awards
One of the most significant proposed changes involves when federal awards may be terminated.
OMB has proposed expanding and clarifying agencies’ ability to terminate certain discretionary awards when they no longer advance program goals, federal agency priorities, or the national interest. The proposal would generally require federal awards to include specified termination provisions unless an exception applies.
For nonprofits, this could introduce additional uncertainty when planning around multiyear federal funding.
Organizations frequently make commitments based on an awarded grant, such as hiring employees, entering into contracts, engaging subrecipients, purchasing equipment, or expanding programs. If an award is later reduced or terminated, the organization may need to respond quickly to both the financial and operational effects.
The proposal does include procedures addressing termination notices and certain costs associated with terminated awards. However, nonprofit leaders may still want to consider how greater funding uncertainty could affect budgeting, staffing, contracts, and cash flow.
Changes Could Affect How Awards Are Reviewed
The proposal also addresses how federal agencies evaluate awards before funding is issued.
Under the proposed revisions, agencies would be required to conduct pre-issuance reviews to determine whether discretionary awards are consistent with applicable law, federal agency priorities, and the national interest. Senior agency appointees would play a role in that review process.
For organizations that rely heavily on federal grants, changes to how funding decisions are evaluated could affect both new applications and longer-term funding strategies.
This makes it increasingly important for nonprofits to understand not only the requirements of individual funding opportunities but also broader developments at the agencies supporting their programs.
Subrecipient Monitoring Remains an Important Focus
Nonprofits that pass federal funding through to other organizations should also pay close attention to potential changes involving subrecipients.
OMB’s proposal emphasizes federal agency oversight of subrecipient reporting, including monitoring reporting in SAM.gov and taking corrective action when recipients do not comply with applicable requirements.
For nonprofits serving as pass-through entities, this is a good reminder to evaluate whether current subrecipient processes are sufficiently documented and consistently followed.
Consider questions such as:
- Are we clearly identifying whether an organization is a subrecipient or contractor?
- Are our subrecipient agreements complete and current?
- Are required reports being collected and reviewed on time?
- Are monitoring activities documented?
- Do we have a process for identifying and following up on compliance concerns?
Even if the final rule changes from the current proposal, strong subrecipient oversight remains an important part of managing federal funding.
Consider the Impact on Internal Controls and Audit Readiness
Many of the concerns raised during the public comment process center on how new or revised requirements would be implemented in practice.
For nonprofit finance teams, that makes internal controls particularly important. Organizations need processes that can adapt as requirements change while still producing clear documentation showing how federal funds were managed.
This is especially relevant for organizations subject to a Single Audit. If federal requirements, award terms, reporting expectations, or monitoring responsibilities change, organizations may need to update policies, procedures, documentation, and staff training accordingly.
Rather than waiting until audit preparation begins, nonprofit leaders should consider how potential changes could affect compliance throughout the year.
What Should Nonprofits Be Doing Now?
Because the rule is still proposed, organizations should be careful not to make significant operational changes based on requirements that may ultimately be revised.
However, waiting until a final rule is issued to think about the potential impact could also leave organizations with limited time to prepare.
Now is a good time to take inventory of your organization’s federal funding and consider:
- Which programs rely most heavily on federal awards?
- What long-term commitments have been made based on that funding?
- Could contracts or other obligations create financial exposure if funding changes?
- Are grant policies and internal controls current and consistently followed?
- Are subrecipient monitoring responsibilities clearly assigned and documented?
- Are finance, grants management, program leadership, and the board communicating about federal funding risks?
- Who within the organization is responsible for monitoring future OMB and agency guidance?
OMB stated in the proposal that it was targeting an October 1, 2026 effective date for a final rule. Given the scope of the proposal and the significant public response, nonprofits should continue monitoring developments rather than assuming the proposed provisions or timeline will remain unchanged.
Preparation Without Overreacting
The proposed revisions are significant, but they are not final.
For nonprofit leaders, the goal should not be to rewrite every grant policy today. Instead, this is an opportunity to identify where your organization may be vulnerable if federal funding requirements change.
Understanding your awards, strengthening documentation, evaluating subrecipient oversight, and making sure internal controls are working as intended can help your organization respond more effectively regardless of what the final rule contains.
How Blackman & Sloop Can Help
Federal grant compliance can be complex, particularly when requirements are changing.
Blackman & Sloop’s nonprofit specialists work with organizations of all sizes to help strengthen financial processes, evaluate internal controls, prepare for Single Audits, and navigate complex compliance requirements.
If your organization receives federal funding and is concerned about how potential Uniform Guidance changes could affect your financial reporting, compliance responsibilities, or audit preparation, our team is here to help you evaluate your current processes and prepare for what may come next.