Proposed Rule2026-10817
Regulation for Federal Financial Assistance
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 29, 2026
Issuing agencies
Management and Budget OfficeHealth and Human Services DepartmentAgriculture DepartmentState DepartmentAgency for International DevelopmentVeterans Affairs DepartmentEnergy DepartmentTreasury DepartmentDefense DepartmentTransportation DepartmentCommerce DepartmentInterior DepartmentEnvironmental Protection AgencyU.S. International Development Finance CorporationNational Aeronautics and Space AdministrationUnited States Agency for Global MediaNuclear Regulatory CommissionCorporation for National and Community ServiceSocial Security AdministrationHousing and Urban Development DepartmentNational Science FoundationNational Archives and Records AdministrationSmall Business AdministrationJustice DepartmentLabor DepartmentHomeland Security DepartmentNational Foundation on the Arts and the HumanitiesInstitute of Museum and Library ServicesNational Endowment for the ArtsNational Endowment for the HumanitiesEducation DepartmentExport-Import BankExecutive Office of the PresidentOffice of National Drug Control PolicyPeace CorpsElection Assistance CommissionGulf Coast Ecosystem Restoration CouncilFederal Communications CommissionConsumer Product Safety CommissionDelta Regional AuthorityAppraisal Subcommittee of the Federal Financial Institutions Examination CouncilMarine Mammal CommissionMillennium Challenge CorporationNational Credit Union Administration
Abstract
The Office of Management and Budget (OMB) proposes to revise the Guidance for Federal Financial Assistance to improve government- wide policies and requirements related to the management of grants, cooperative agreements, and other forms of assistance. OMB is proposing revisions that would improve transparency, accountability, and oversight for Federal awards across the Federal Government. This includes ensuring that American tax dollars are not wasted or misused, activities performed under Federal awards are consistent with law and policy, and recipients are held accountable when they fail to meet relevant standards. The revisions also aim to ensure that basic American principles of equality and equal opportunity are upheld throughout all stages of the award making process and that unlawful discrimination is no longer permitted. Proposed changes also include providing further clarification on the regulatory status of the OMB requirements and on the process for future updates to the government- wide requirements. Finally, OMB also proposes changes to reduce recipient burden. The listed Federal grant-making agencies propose conforming changes to their respective adopting regulations, or, in the case of some agencies and other entities, establishing new adopting regulations or policies. The proposed changes reflect the administration's commitment to transparency, accountability, and proper oversight for the Federal grantmaking process. The proposed regulations seek to ensure that American tax dollars are ultimately used to serve the needs of the American public.
Full Text
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<title>Federal Register, Volume 91 Issue 103 (Friday, May 29, 2026)</title>
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[Federal Register Volume 91, Number 103 (Friday, May 29, 2026)]
[Proposed Rules]
[Pages 32198-32305]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-10817]
[[Page 32197]]
Vol. 91
Friday,
No. 103
May 29, 2026
Part II
Office of Management and Budget et al.
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2 CFR Parts 1, 25, 170 et al.
Regulation for Federal Financial Assistance; Proposed Rule
Federal Register / Vol. 91, No. 103 / Friday, May 29, 2026 / Proposed
Rules
[[Page 32198]]
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OFFICE OF MANAGEMENT AND BUDGET
2 CFR Parts 1, 25, 170, 175, 176, 180, 182, 183, and 200
DEPARTMENT OF HEALTH AND HUMAN SERVICES
2 CFR Parts 300, 376, and 382
RIN 0991-AC35
DEPARTMENT OF AGRICULTURE
2 CFR Parts 400, 417, and 421
RIN 0505-AA20
DEPARTMENT OF STATE
2 CFR Parts 600 and 601
RIN 1400-AG22
AGENCY FOR INTERNATIONAL DEVELOPMENT
2 CFR Parts 700, 701, 780, and 782
RIN 0412-AB19
DEPARTMENT OF VETERANS AFFAIRS
2 CFR Parts 801 and 802
RIN 2900-AT02
DEPARTMENT OF ENERGY
2 CFR Parts 901, 902, and 910
RIN 1991-AC21
DEPARTMENT OF THE TREASURY
2 CFR Part 1000
RIN 1505-AC92
DEPARTMENT OF DEFENSE
2 CFR Parts 1104, 1120, 1122, 1125, and 1126
RIN 0790-AM03
DEPARTMENT OF TRANSPORTATION
2 CFR Parts 1200 and 1201
RIN 2105-AF44
DEPARTMENT OF COMMERCE
2 CFR Parts 1326, 1327, and 1329
RIN 0605-AA85
DEPARTMENT OF THE INTERIOR
2 CFR Parts 1400, 1401, and 1402
RIN 1090-AB34
ENVIRONMENTAL PROTECTION AGENCY
2 CFR Parts 1500, 1532, and 1536
RIN 2030-AB05
U.S. INTERNATIONAL DEVELOPMENT FINANCE CORPORATION
2 CFR Part 1600
RIN 3015-AA00
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
2 CFR Parts 1800, 1880, and 1882
RIN 2700-AE90
U.S. AGENCY FOR GLOBAL MEDIA
2 CFR Part 1900
RIN 3112-AA07
NUCLEAR REGULATORY COMMISSION
2 CFR Parts 2000 and 2001
RIN 3150-AL41
CORPORATION FOR NATIONAL AND COMMUNITY SERVICE
2 CFR Parts 2200, 2205, and 2245
RIN 3045-AA94
SOCIAL SECURITY ADMINISTRATION
2 CFR Parts 2300, 2336, and 2339
RIN 0960-AJ11
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
2 CFR Parts 2400, 2424, and 2429
RIN 2501-AE01
NATIONAL SCIENCE FOUNDATION
2 CFR Parts 2500 and 2520
RIN 3145-AA75
NATIONAL ARCHIVES AND RECORDS ADMINISTRATION
2 CFR Part 2600
RIN 3095-AC31
SMALL BUSINESS ADMINISTRATION
2 CFR Parts 2700 and 2701
RIN 3245-AI70
DEPARTMENT OF JUSTICE
2 CFR Parts 2800 and 2867
RIN 1105-AB81
DEPARTMENT OF LABOR
2 CFR Parts 2900 and 2998
RIN 1291-AA53
DEPARTMENT OF HOMELAND SECURITY
2 CFR Parts 3000, 3001 and 3002
RIN 1601-AB23
NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES
Institute of Museum and Library Services
2 CFR Parts 3185, 3186, and 3187
RIN 3137-AA31
NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES
National Endowment for the Arts
2 CFR Parts 3254, 3255, and 3256
RIN 3135-AA36
NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES
National Endowment for the Humanities
2 CFR Parts 3369, 3373, and 3374
RIN 3136-AA47
DEPARTMENT OF EDUCATION
2 CFR Parts 3474 and 3485
RIN 1801-AA30
EXPORT IMPORT BANK
2 CFR Part 3513
RIN 3048-AA03
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
2 CFR Part 3603
RIN 3201-AA03
PEACE CORPS
2 CFR Parts 3700 and 3701
RIN 0420-AA37
ELECTION ASSISTANCE COMMISSION
2 CFR Parts 5800 and 5801
RIN 3265-AA00
GULF COAST ECOSYSTEM RESTORATION COUNCIL
2 CFR Part 5900
RIN 3600-AA05
FEDERAL COMMUNICATIONS COMMISSION
2 CFR Part 6000
RIN 3060-AM35
CONSUMER PRODUCT SAFETY COMMISSION
2 CFR Part 6100
RIN 3041-AE26
DELTA REGIONAL AUTHORITY
2 CFR Part 6200
RIN 4718-AA00
APPRAISAL SUBCOMMITTEE OF THE FEDERAL FINANCIAL INSTITUTIONS
EXAMINATION COUNCIL
2 CFR Part 6300
RIN 3139-AA07
MARINE MAMMAL COMMISSION
2 CFR Part 6400
RIN 0415-AA00
MILLENNIUM CHALLENGE CORPORATION
2 CFR Part 6500
RIN 0414-AA00
NATIONAL CREDIT UNION ADMINISTRATION
2 CFR Part 6600
RIN 3133-AG07
Regulation for Federal Financial Assistance
AGENCY: Office of Federal Financial Management, Office of Management
and Budget; Department of Health And Human Services; Department of
Agriculture; Department of State;
[[Page 32199]]
Agency for International Development; Department of Veterans Affairs;
Department of Energy; Department of Treasury; Department of Defense;
Department of Transportation; Department of Commerce; Department of the
Interior; Environmental Protection Agency; U.S. International
Development Finance Corporation; National Aeronautics and Space
Administration; U.S. Agency for Global Media; Nuclear Regulatory
Commission; Corporation for National and Community Service; Social
Security Administration; Department of Housing and Urban Development;
National Science Foundation; National Archives and Records
Administration; Small Business Administration; Department of Justice;
Department of Labor; Department of Homeland Security; Institute of
Museum and Library Services; National Endowment for the Arts; National
Endowment for the Humanities; Department of Education; Export Import
Bank; Executive Office of the President, Office of National Drug
Control Policy; Peace Corps; Election Assistance Commission; Gulf Coast
Ecosystem Restoration Council; Federal Communications Commission;
Consumer Product Safety Commission; Delta Regional Authority; Appraisal
Subcommittee of the Federal Financial Institutions Examination Council;
Marine Mammal Commission; Millennium Challenge Corporation; National
Credit Union Administration.
ACTION: Proposed rule.
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SUMMARY: The Office of Management and Budget (OMB) proposes to revise
the Guidance for Federal Financial Assistance to improve government-
wide policies and requirements related to the management of grants,
cooperative agreements, and other forms of assistance. OMB is proposing
revisions that would improve transparency, accountability, and
oversight for Federal awards across the Federal Government. This
includes ensuring that American tax dollars are not wasted or misused,
activities performed under Federal awards are consistent with law and
policy, and recipients are held accountable when they fail to meet
relevant standards. The revisions also aim to ensure that basic
American principles of equality and equal opportunity are upheld
throughout all stages of the award making process and that unlawful
discrimination is no longer permitted. Proposed changes also include
providing further clarification on the regulatory status of the OMB
requirements and on the process for future updates to the government-
wide requirements. Finally, OMB also proposes changes to reduce
recipient burden. The listed Federal grant-making agencies propose
conforming changes to their respective adopting regulations, or, in the
case of some agencies and other entities, establishing new adopting
regulations or policies. The proposed changes reflect the
administration's commitment to transparency, accountability, and proper
oversight for the Federal grantmaking process. The proposed regulations
seek to ensure that American tax dollars are ultimately used to serve
the needs of the American public.
DATES: Comments are due on or before July 13, 2026. Late comments will
be considered only to the extent practicable.
ADDRESSES: Comments on this proposal must be submitted electronically
before the comment closing date to <a href="http://www.regulations.gov">www.regulations.gov</a>. In submitting
comments, please search for recent submissions by OMB to find docket
OMB-2026-0034, which includes the full text of the proposed revisions
and submit comments there. Please provide clarity as to the section of
the regulation that each comment is referencing by beginning each
comment with the relevant section number in brackets. For example; if
the comment is on 2 CFR 200.414, include the following before the
comment [200.414].
Public comments received by OMB and Federal agencies will be posted
at <a href="http://www.regulations.gov">www.regulations.gov</a> and be a matter of public record. Accordingly,
please do not include any confidential business information or personal
privacy information in your comments.
FOR FURTHER INFORMATION CONTACT: Andrew Reisig or Joel Savary at the
OMB Office of Federal Financial Management via email at
<a href="/cdn-cgi/l/email-protection#e3aea1bbcdacaea1cda491828d9790a3acaea1cd868c93cd848c95"><span class="__cf_email__" data-cfemail="ce838c96e081838ce089bcafa0babd8e81838ce0aba1bee0a9a1b8">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
The Office of Management and Budget (OMB) proposes to revise
several parts of the OMB Guidance for Federal Financial Assistance
located in title 2 of the Code of Federal Regulations (CFR), subtitle
A, to improve and clarify government-wide policies and requirements
related to the management of Federal financial assistance including
grants and cooperative agreements. In 2 CFR subtitle B, the listed
Federal agencies also propose conforming changes to their respective
implementing regulations for the OMB policy requirements in subtitle A.
As explained in further detail below, OMB proposes revising 2 CFR for
reasons including to: (1) improve transparency, accountability, and
oversight for use of Federal taxpayer dollars; (2) clarify the status
of OMB's policies and requirements set forth in the 2 CFR regulatory
text as an OMB regulation; and (3) reduce recipient burden.
Transparency, Accountability, and Oversight. The overarching goal
of OMB's proposed revisions is to improve transparency, accountability,
and oversight for how Federal taxpayer dollars are used in the context
of Federal grantmaking.\1\ It is essential for the Federal Government
to provide more oversight over the design and implementation of Federal
programs to prevent wasteful spending and misuse or mismanagement of
Federal funds.
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\1\ Executive Order (E.O.) 14332, 90 FR 38929, ``Improving
Oversight of Federal Grantmaking'' (Aug. 7, 2025); White House Fact
Sheet of Aug. 7, 2025, ``President Donald J. Trump Stops Wasteful
Grantmaking;'' and White House Fact Sheet of Feb. 18, 2025,
``President Donald J. Trump Requires Transparency for the American
People About Wasteful Spending.''
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Although Federal spending through grants and other types of Federal
financial assistance has grown exponentially since the initial
establishment of OMB's policies in earlier Circulars and 2 CFR,
corresponding policies capable of ensuring transparency,
accountability, and oversight for this increased level of spending
remain deficient in the current regulatory text. As a result, Federal
financial assistance programs, and the activities performed under
Federal awards, have not always remained properly aligned with core
purposes authorized by law, nor served the needs of the American public
as intended.
This lack of transparency, accountability, and proper oversight
became increasingly clear between 2021 and 2024. Federal awards were
often used during those years to promote a ``woke'' policy agenda that
did not reflect the values of the vast majority of the American
public.\2\ For example, Federal programs and funding opportunities were
designed to advance unlawful identity-based ``Diversity, Equity, and
Inclusion'' (DEI) policies and preferences across the country.\3\ These
policies were inconsistent with basic American values and civil rights
laws, including the equal protection principles of the U.S.
Constitution.\4\
[[Page 32200]]
They were also misaligned in many cases with underlying public purposes
authorized by law.\5\ Collectively, these policies wasted a great
amount of taxpayer resources and caused great harm to public trust in
government.
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\2\ E.O. 14332, sec. 1.
\3\ See, e.g., David Ditch, Mike Gonzalez, Hans von Spakovsky
and Erin Dwinell, ``President Biden's `Equity Action Plans' Reveal
Radical, Divisive Agenda.'' Heritage Foundation Backgrounder No.
3710, May 25, 2022 (hereinafter ``Ditch I'').
\4\ E.O. 14151 of January 20, 2025, ``Ending Radical and
Wasteful Government DEI Programs and Preferencing;'' E.O. 14173 of
January 21, 2025, ``Ending Illegal Discrimination and Restoring
Merit-Based Opportunity;'' E.O. 14281 of April 23, 2025, ``Restoring
Equality of Opportunity and Meritocracy.''
\5\ E.O. 14332, sec. 1; see also, e.g., David Ditch, ``Funding
Leftism, Making Power Grabs: The Biden Administration's Bureaucratic
Radicalism.'' Heritage Foundation, Apr. 18, 2024 (hereinafter
``Ditch II'').
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The White House Fact Sheet of August 7, 2025, describes examples of
the types of wasteful spending that occurred as a result of such
policies. For example, Federal grants funded unlawful DEI practices,\6\
various anti-American ideologies in American education,\7\ non-
replicable and highly misleading studies,\8\ labs engaged in gain-of-
function research,\9\ and AI-powered social media censorship tools.\10\
More recently, another White House Fact Sheet of January 8, 2026
provided examples of the rampant and pervasive problem of fraud in the
United States, including under assistance programs in Minnesota.\11\
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\6\ E.O. 14332, sec. 1.
\7\ E.O. 14332, sec. 1.
\8\ E.O. 14303 of May 23, 2025, ``Restoring Gold Standard
Science.''
\9\ White House Fact Sheet of Aug. 7, 2025. See also E.O. 14292
of May 5, 2025, ``Improving the Safety and Security of Biological
Research;'' and White House Fact Sheet of May 5, 2025, ``President
Donald J. Trump Achieves Improved Safety and Security of Biological
Research.''
\10\ White House Fact Sheet of Aug. 7, 2025. See also E.O. 14149
of Jan. 20, 2025, ``Restoring Freedom of Speech and Ending Federal
Censorship;'' and E.O. 14319 of Jul. 23, 2025, ``Preventing `Woke
AI' in the Federal Government.''
\11\ White House Fact Sheet of Jan. 8, 2026, ``President Donald
J. Trump Establishes New Department of Justice Division for National
Fraud Enforcement.'' See also White House Fact Sheet of Jan. 2,
2026, ``Here's What the Trump Administration Is Doing to Crush
Minnesota's Fraud Epidemic;'' DOJ Press Release of Nov. 24, 2025,
``Feeding Our Future Defendant Sentenced to 10 Years in Prison.''
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Another example of wasteful spending is provided by a 2023 report
from Office of Inspector General for the Department of Homeland
Security (DHS). That report found that recipients of Federal awards
from the Federal Emergency Management Agency (FEMA) potentially misused
funds to provide services for illegal immigrants.\12\ Such potential
abuse of taxpayer funds highlights the need for proper oversight of
taxpayer dollars.
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\12\ DHS Office of Inspector General, ``FEMA Should Increase
Oversight to Prevent Misuse of Humanitarian Relief Funds,'' DHS OIG-
23-20.
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In another prominent example, prior to this administration, far-
left activists hijacked the critical work done by the U.S. President's
Emergency Plan for AIDS Relief (PEPFAR), which was established to
respond to the AIDS crisis in Africa. Due to wasteful spending, PEPFAR
became a left-wing foreign aid entitlement that attempted to promote
abortion and gender ideology. Additionally, an August 2025 report from
the Heritage Foundation noted that, according to the U.S. House Foreign
Affairs Committee, billions of dollars in overhead and program charges
flow to nongovernmental organizations (NGOs) and contractors in
Washington, DC rather than providing direct humanitarian aid; and
insufficient oversight has resulted in significant waste of taxpayer
resources.\13\
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\13\ Max Primorac, PEPFAR: From AIDS Relief to Leftwing Funding
Apparatus,'' Heritage Foundation, Aug. 11, 2025. Available at:
<a href="https://www.heritage.org/global-politics/report/pepfar-aids-relief-leftwing-funding-apparatus">https://www.heritage.org/global-politics/report/pepfar-aids-relief-leftwing-funding-apparatus</a>. See also Tim Meisburger. U.S. Foreign
Aid Used to Push Abortion, Gender Ideology Around the World.
Heritage Foundation. Jun. 8, 2023. Available at: <a href="https://www.heritage.org/global-politics/commentary/us-foreign-aid-used-push-abortion-gender-ideology-around-the-world">https://www.heritage.org/global-politics/commentary/us-foreign-aid-used-push-abortion-gender-ideology-around-the-world</a>.
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An additional example is provided by a 2024 report from the U.S.
Senate Committee on Commerce, Science, and Transportation regarding the
growing failure of objectivity at the National Science Foundation (NSF)
during the previous administration.\14\ That report found that out of a
sample of over three thousand grants, more than ten percent--totaling
over two billion dollars in Federal funding--went to ``questionable
projects that promoted diversity, equity, and inclusion (DEI) tenets or
pushed onto science neo-Marxist perspectives about enduring class
struggle.'' The report also found that, by 2024, over a quarter of new
grants made by NSF (27 percent) directed funding to DEI initiatives and
other far-left perspectives. This marked a huge proportional increase
over the course of only three years from the 0.29 percent of new grants
made by NSF with a similar focus in 2021.\15\ This is just a small
sample of many examples across the Federal Government of wasteful
spending and other misuse and mismanagement of Federal funds.
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\14\ U.S. Senate Committee on Commerce, Science, and
Transportation, ``D.E.I. Diversion. Extremism. Ideology. How the
Biden-Harris NSF Politicized Science.'' (2024). Available at <a href="https://www.commerce.senate.gov/services/files/4BD2D522-2092-4246-91A5-58EEF99750BC#">https://www.commerce.senate.gov/services/files/4BD2D522-2092-4246-91A5-58EEF99750BC#</a>.
\15\ Subsequent to this report, NSF took action during this
Administration to review its award portfolio and, to the extent
permitted by law, ensure alignment with Federal agency priorities.
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Scarce Federal taxpayer dollars should be directed exclusively to
achieving results for the American people. Wasteful and divisive
activities unrelated to core purposes of Federal grant programs should
not be subsidized with taxpayer dollars. Grantmaking practices
resulting in wasteful spending that became prevalent during the
previous administration can only be stopped through adherence to strong
internal controls at Federal agencies and enhanced oversight regarding
how Federal dollars are spent.
The Federal Government must provide more oversight and transparency
regarding how Federal funds are used in grantmaking to avoid the
recurrence of similar issues in the future. Under the proposal
described in this document, Federal agencies must return to designing
assistance programs and award activities to align with essential public
purposes authorized by law. Effective oversight also includes following
Executive Branch policies that eliminate various kinds of wasteful
spending that occurred in previous years, such as unlawful DEI mandates
and other unnecessary add-on activities that increase project costs and
complexity without serving the underlying public purpose of the
award.\16\ The proposed reforms are necessary to ensure greater
accountability for use of public funds, and that every taxpayer dollar
the Federal Government spends either improves American lives or
advances American interests.\17\
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\16\ See, e.g., E.O. 14332; and White House Fact Sheets of Aug.
7, 2025 and Feb. 18, 2025.
\17\ E.O. 14332, sec. 1.
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Clarification of status of regulatory text. A second objective of
this rulemaking is to clarify the status of the 2 CFR regulatory text
as an OMB regulation. The proposed revisions align with OMB's statutory
authority to provide overall direction and leadership to Federal
agencies on financial management matters by establishing financial
management policies and requirements. See 31 U.S.C. 503(a)(2).
Additional authorities for OMB's proposed revisions are set forth
below.
Reducing recipient burden. A third and final objective of this
rulemaking is to reduce recipient burden. For example, rather than
needing to focus extensive efforts and resources on DEI mandates or
other unnecessary add-on requirements frequently included in funding
opportunities in previous years, under the proposed version of the
regulation recipients will be able to restore focus on efficient
project delivery and actually achieving the basic public purposes of
support authorized in law.
OMB also proposes a number of additional revisions throughout
chapters I and II of subtitle A of 2 CFR.
[[Page 32201]]
OMB summarizes the proposed changes in this preamble. In proposing
changes, OMB aimed to maintain the existing structure of the 2 CFR
guidance consistent with earlier iterations, including, for example,
the structure of parts, subparts, and section numbering.
Plain Language Summary: A plain language summary of this rule may
be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
II. Background and Regulatory History
The Office of Management and Budget (OMB) has assisted every modern
President in ensuring that the President's priorities, consistent with
applicable law, are appropriately accounted for in government-wide
grant management policies and agency grant-making decisions. In service
of that goal, in 1958, the Bureau of the Budget, OMB's predecessor,
first issued Circular A-21, ``Cost Principles for Educational
Institutions.'' In 1968, the Bureau of the Budget first issued Circular
A-87, ``Cost Principles for State, Local, and Indian Tribal
Governments.'' In 1976, OMB first issued both Circular A-110, ``Uniform
Administrative Requirements for Grants and Other Agreements with
Institutions of Higher Education, Hospitals and Other Non-Profit
Organizations;'' \18\ and Circular A-122, ``Cost Principles for Non-
Profit Organizations.'' All of these Circulars were repeatedly revised
in the decades following their initial issuance. Other now-superseded
OMB Circulars providing requirements related to grants administration
included Circular A-89, ``Federal Domestic Assistance Program
Information;'' and Circular A-133, ``Audits of States, Local
Governments, and Non-Profit Organizations.'' \19\
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\18\ See, e.g., OMB Circular A-110 (1993). The guidance in
Circular A-110 was relocated to 2 CFR part 215 in 2004. See 69 FR
26281 (May 11, 2004).
\19\ 79 FR 78589 (Dec. 26, 2013).
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Between 2012 and 2013, OMB worked with Federal agencies to revise
and streamline existing OMB guidance and Circulars related to grants
administration to develop the ``Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards'' (Uniform
Guidance) located in part 200 of 2 CFR. 79 FR 78589 (Dec. 26, 2013)
(2013 Final Guidance). See also 77 FR 11778 (Feb. 28, 2012) (2012
Advance Notice of Proposed Guidance); 78 FR 7282 (Feb. 1, 2013) (2013
Proposed Guidance). This effort was designed to assist programs in
delivering better outcomes on behalf of the American people while also
reducing administrative burden and the risk of fraud, waste, and abuse.
The Uniform Guidance, published in 2013, consolidated, streamlined, and
superseded requirements from several earlier OMB Circulars and guidance
documents related to grants management and implementation of the Single
Audit Act. At the time, OMB explained that the guidance was also
intended to improve clarity and accessibility of the requirements
across the Federal Government.
Federal award-making agencies implemented the Uniform Guidance
through an interim final rule, which became effective on December 26,
2014. 79 FR 75867 (Dec. 19, 2014) (2014 Federal Agency Interim Final
Rule). Following the 2014 Federal Agency Interim Final Rule, most
agencies did not reissue implementing regulations each time that the
government-wide policies and requirements contained in 2 CFR subtitle A
were updated by OMB following public notice and comment rulemaking
procedures.\20\ Instead, Federal agencies only occasionally issued or
reissued implementing regulations. This generally occurred when
specific changes were needed in the agency regulations. Because OMB has
exclusive statutory authority under 31 U.S.C. 503(a)(2) to set
government-wide financial management policies and requirements, the
public comment period for the government-wide policies and requirements
has been provided by OMB, not agencies.\21\
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\20\ See 2 CFR 1.230.
\21\ See, e.g., OMB Memorandum M-24-11, Section I
(``Implementation of Title 2 of the CFR'') (Apr. 4, 2024); and
Council on Federal Financial Assistance (COFFA) Memoranda for the
Federal Financial Assistance Community dated January 15, 2025 and
August 15, 2024.
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OMB periodically reviews the Uniform Guidance in accordance with 2
CFR 200.109. Following establishment of the Uniform Guidance in 2013,
OMB made further revisions to the regulatory text in 2020 (85 FR 49506
(Aug. 13, 2020)) and 2024 (89 FR 30046 (Apr. 22, 2024). The 2020
revisions addressed topics including program planning and design,
performance measurement to improve program goals and outcomes, sharing
lessons learned, and adopting promising practices. OMB again revised
the regulatory text in 2024. The objectives of the 2024 update included
incorporating statutory requirements and certain policy priorities of
the previous administration, reducing agency and recipient burden,
clarifying sections that recipients or agencies have interpreted in
different ways, rewriting certain sections of the regulatory text in
plainer language, improving flow, and resolving inconsistent use of
terms.
Since the inception of OMB financial management policies and
requirements under now-superseded Circulars,\22\ and the initial
establishment of the Uniform Guidance in 2013 based on policies
contained in the earlier Circulars, the landscape of Federal financial
assistance funding has changed markedly--including massive growth in
the scale and volume of assistance provided by the Federal Government,
increasing diversification in the purposes and types of assistance, and
increasing responsibilities for executive agency administration of
discretionary programs. A wide array of new Federal financial
assistance programs and statutory responsibilities for executive
agencies have been established by Congress, but the oversight and
stewardship of Federal financial assistance by executive branch
agencies has not always kept pace with or accounted for these changes.
Revisions to OMB's policies in 2 CFR part 200 are now warranted to
improve transparency, accountability, and efficiency of Federal
financial assistance programs.
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\22\ OMB's 2012 Advance Notice of Proposed Guidance explained
that, prior to establishment of 2 CFR part 200, government-wide
audit requirements were contained in OMB Circulars A-133 and A-50;
cost principles were contained in OMB Circulars A-21, A-87, and A-
122; and administrative requirements were contained in the
government-wide Common Rule implementing Circular A-102, Circular A-
110, and Circular A-89. See 77 FR 11778 (Feb. 28, 2012).
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III. Statutory Authority for OMB Regulation for Federal Financial
Assistance
The Deputy Director for Management of OMB is authorized under 31
U.S.C. 503 to, among other things, provide ``overall direction and
leadership to the executive branch on financial management matters by
establishing financial management policies and requirements.'' 31
U.S.C. 503(a)(2). The Director of OMB is authorized under 31 U.S.C.
6307 to ``issue supplementary interpretative guidelines to promote
consistent and efficient use of . . . grant agreements . . . and
cooperative agreements.''
OMB also relies on authorities including the Single Audit Act
Amendments of 1996 (Pub. L. 104-156, as amended, codified at 31 U.S.C.
7501-7507); the Federal Funding Accountability and Transparency Act of
2006 (FFATA or the Transparency Act) (Pub. L. 109-282), as amended; the
Digital Accountability and Transparency Act of 2014 (DATA Act of 2014)
(Pub. L. 113-101), as amended; the Federal Program Information Act
(Pub. L. 95-220 and Public Law 98-169, as amended, codified at 31
U.S.C. 6101-6106); the Federal Grant and
[[Page 32202]]
Cooperative Agreement Act of 1977 (Pub. L. 95-224, as amended, codified
at 31 U.S.C. 6301-6309); the Office of Federal Procurement Policy Act
(codified at 41 U.S.C. 1101-1131); the Budget and Accounting Procedures
Act of 1950, as amended (codified at 31 U.S.C. 1101-1126); the Chief
Financial Officers Act of 1990 (codified at 31 U.S.C. 503-504); the
Trafficking Victims Protection Act of 2000 (TVPA), as amended (codified
at 22 U.S.C. 7101-7115); and Executive Order 11541, ``Prescribing the
Duties of the Office of Management and Budget and the Domestic Policy
Council in the Executive Office of the President.''
IV. OMB Objectives for 2026 Proposed Revisions
OMB's objectives for the current proposed revisions to several
parts of subtitle A of 2 CFR include: (1) improving transparency,
accountability, and oversight for use of Federal funds; (2) clarifying
the status of the 2 CFR regulatory text as an OMB regulation; and (3)
reducing recipient burden. The proposed revisions generally support one
or more of these three objectives. The following is a high-level
overview of the proposed rule's three primary objectives, which is
followed by a section-by-section discussion of the proposed changes.
A. Objective 1: Improved Transparency, Accountability, and Oversight
OMB's first objective for the proposed revisions is to improve
transparency, accountability, and oversight for how Federal funds,
including taxpayer dollars, are used in the context of Federal
grantmaking.\23\
---------------------------------------------------------------------------
\23\ See E.O. 14332 of Aug. 7, 2025, ``Improving Oversight of
Federal Grantmaking;'' White House Fact Sheet of Aug. 7, 2025,
``President Donald J. Trump Stops Wasteful Grantmaking;'' and White
House Fact Sheet of Feb. 18, 2025, ``President Donald J. Trump
Requires Transparency for the American People About Wasteful
Spending.''
---------------------------------------------------------------------------
A.1. Background
For too long, the Federal Government has paid insufficient
attention to providing proper oversight for Federal financial
assistance programs. Deficiencies currently exist throughout the
lifecycle of grants--from program design, to award selection, to
project delivery and oversight--that impact the ability of the Federal
Government to prevent wasteful spending and efficiently implement
assistance programs in a manner consistent with law and the needs of
the American public. If finalized, OMB's proposed revisions in 2 CFR
will improve transparency, accountability, and oversight in the
government-wide system of grants administration, including by ensuring
that Federal award programs are properly aligned with law and policy
and that Federal agencies act as responsible stewards of taxpayer
dollars.
Recent years have provided evidence of the need for meaningful
reform in Federal grants administration. Instead of aiming to broadly
serve the needs of all Americans, in 2021 Federal agencies became
increasingly focused on using their award programs to serve a ``woke''
policy agenda that deliberately favored certain identity groups over
others. In seeking to advance this agenda, programs were often designed
to include a long list of ideological terms and conditions with little
connection to the core purpose of public support.\24\ These burdensome
conditions were consistently imposed through funding opportunities and
award agreements regardless of the objective of the assistance program.
This approach contributed to long delays in program implementation as
Federal agencies and recipients focused their efforts and taxpayer
resources on divisive policy requirements that were often unrelated to
or misaligned with core purposes of Federal grant programs. Various
commenters have remarked on how this approach resulted in waste,
inefficiency, long delays in project delivery, and reduced program
effectiveness across a range of activities receiving Federal
support.\25\ In one notorious example, under a $42.5 billion broadband
internet access program, the previous administration failed to connect
a single person to the internet over the course of three years--instead
focusing efforts and attention on imposing a long list of burdensome
policy requirements.\26\
---------------------------------------------------------------------------
\24\ See, e.g., Ditch II (including summary of the ``ideological
terms and conditions bundled into'' funding opportunities for
infrastructure grants by the previous administration.).
\25\ See, e.g., Ezra Klein, ``The Problem with Everything-Bagel
Liberalism,'' The New York Times, April 2, 2023 (describing the
tendency of the previous administration to structure Federal award
programs to address many unrelated policy goals at once, leading to
a dramatic increase in the cost and complexity of projects, long
delays in project delivery, and poor outcomes for American
taxpayers); Ditch II (explaining how the prior administration
structured award programs to simultaneously include a wide array of
``novel and contentious'' policy requirements, which diverted focus
from core public purposes authorized in law and caused ``tremendous
amounts of waste and inefficiency'').
\26\ ``Fact Sheet: Ending Biden's Broadband Burdens,'' National
Telecommunications and Information Administration (NTIA), June 6,
2025; John Thune, ``Broadband Blunders Leave Americans
Disconnected,'' Prairie Pioneer, Oct. 2, 2024; Donald Kimball, ``The
$42 billion internet program that has connected 0 people,''
Washington Policy Center, Sept. 18, 2024.
---------------------------------------------------------------------------
Among various other policy requirements, Federal programs were
frequently designed between 2021 and 2024 to include preferences and
selection criteria aimed at advancing identity-based DEI policies.\27\
This included using a variety of labels, such as promoting DEI, or
using other intentional proxies for race, sex, or sexual identity, to
give priority to certain favored identity characteristics and groups at
the expense of others in the distribution of Federal awards and
associated benefits.\28\ The concerted effort to impose unlawful DEI
policies on Federal award programs began on the very first day of the
previous administration through issuance of Executive Order 13985.\29\
That order instructed Federal agencies to set aside the decision-making
processes used in previous years--which generally aimed to ensure that
all Americans were treated equally--and to instead focus on remaking
the system of grants administration with divisive identity-based DEI
policies imposed throughout.\30\ Following issuance of Executive Order
13985 in January 2021, Federal agencies began attaching these policies
to all aspects of their award programs, including program design, award
selection, and award conditions imposed on recipients. This continued
for the duration of the previous administration.
---------------------------------------------------------------------------
\27\ See E.O. 14151 of Jan. 20, 2025, ``Ending Radical and
Wasteful Government DEI Programs and Preferencing;'' see also Ditch
I; Ditch II.
\28\ See Lisa Friedman, ``White House Takes Aim at Environmental
Racism, But Won't Mention Race,'' The New York Times, Feb. 15, 2022
(explaining how the previous administration used various intentional
proxies for race to continue directing Federal grants and associated
benefits to preferred racial-identity groups); see also Ditch I;
Ditch II.
\29\ E.O. 14151, sec. 1 (Discussing E.O. 13985); E.O. 13985 of
Jan. 20, 2021, ``Advancing Racial Equity and Support for Underserved
Communities Through the Federal Government,'' revoked by E.O. 14148
of Jan. 20, 2025.
\30\ E.O. 13985.
---------------------------------------------------------------------------
Based on these efforts, Federal funding was used between 2021 and
2024 to advance unlawful DEI policies and preferences across the
country.\31\ These and other burdensome policies and requirements
imposed through Federal award programs diverted substantial amounts of
taxpayer funding away from traditional public purposes recognized in
law--such as transportation, infrastructure, scientific research,
public health, and other essential public goods that serve all
Americans--to instead support favored identity groups and left-wing
activists.\32\
[[Page 32203]]
As a result, Federal award programs that once had broad public support
became tied to a divisive policy agenda that unlawfully discriminated
against many of the Americans those programs were intended to serve.
These policies were inconsistent with basic American values and civil
rights laws, including the equal protection principles of the U.S.
Constitution.\33\ They were also misaligned with core purposes of
relevant assistance programs.\34\ All together, these policies wasted a
large amount of American taxpayer resources and significantly
undermined public trust in government across the country.
---------------------------------------------------------------------------
\31\ See, e.g., E.O. 14151, sec. 1.
\32\ See, e.g., U.S. Senate Committee on Commerce, Science, and
Transportation, ``D.E.I. Diversion. Extremism. Ideology. How the
Biden-Harris NSF Politicized Science,'' (2024) (finding an increase
of more than 9,000 percent between 2021 and 2024 of new NSF grants
focused on funding and promoting DEI initiatives); Ditch II
(explaining how the previous administration tied nearly every major
infrastructure program to DEI mandates and other add-on policy
requirements unrelated to, and often conflicting with, the core
objective of delivering needed infrastructure improvements across
the country in a timely and cost-efficient manner); Ditch I
(explaining how ``equity plans'' issued by Federal agencies
including the Departments of Commerce, Defense, Education, Energy,
Justice, and State, and the National Science Foundation, called for
``group-based preferential treatment in grant and research programs
and foreign aid''); U.S. DOT Press Release of Mar. 10, 2025, ``U.S.
Transportation Secretary Sean P. Duffy Rescinds Memos Issued By
Biden Administration That Injected Social Justice, Radical
Environmental Agenda Into Infrastructure Funding Decisions''
(summarizing DOT decision to rescind policies from the last
administration attempting ``to push a radical social and
environmental agenda'' with ``no basis in statute'' on Federal
infrastructure programs); Judge Glock, ``Biden's Progressive
Infrastructure Boondoggle,'' City Journal, Summer 2025 (explaining
that, in working to implement the Infrastructure Investment and Jobs
Act, many in the previous administration were not ``especially
interested in traditional infrastructure'' or advancing ``core
transportation goals--[instead] elevating a host of progressive
priorities in their place''); James B. Meigs, ``The Big Squeeze: How
Biden's Environmental Justice Agenda Hurts the Economy and the
Environment,'' Manhattan Institute, Sep. 7, 2023 (explaining how
``environmental justice'' (EJ) policies diverted ``spending and
administrative resources away from straightforward environmental
goals;'' made ``government programs less focused and less effective
across the board;'' and were ``particularly burdensome for
environmental and infrastructure projects,'' adding ``layers of
bureaucracy and red tape to existing programs'' and making
individual projects ``more time-consuming'' and ``more expensive''
to deliver); James B. Meigs, ``Biden's `Justice40' Is Bad
Environmental Policy,'' National Review, Nov. 9, 2023 (describing EJ
policies as diverting ``spending and administrative resources from
straightforward environmental goals, such as reducing pollution,''
and redirecting ``them toward vague social goals,'' such as
``satisfy[ing] community activists' demands.'').
\33\ E.O. 14151; E.O. 14173 of January 21, 2025, ``Ending
Illegal Discrimination and Restoring Merit-Based Opportunity;'' E.O.
14281 of April 23, 2025, ``Restoring Equality of Opportunity and
Meritocracy.''
\34\ E.O. 14332, sec. 1; see also Ditch II.
---------------------------------------------------------------------------
In January 2025, President Trump announced the end of the
discriminatory DEI policies and requirements that had extended through
virtually all aspects of the Federal Government in the prior
administration.\35\ In the grantmaking context, the President's
Executive orders released Federal programs from the divisive DEI
mandates and other burdensome policy requirements imposed in previous
years. Free of these constraints, Federal programs were able to restore
focus on efficiently supporting core program purposes and public goods
that serve all Americans, including ensuring that scarce public
resources are best used in support of the essential public goods at
which they aim.
---------------------------------------------------------------------------
\35\ See, e.g., E.O. 14151, sec. 1.
---------------------------------------------------------------------------
Among other things, the President's Executive orders announced that
the Federal Government would renew its commitment to serving every
American with equal dignity and respect; \36\ restore its policy of
prohibiting, rather than mandating, illegal discrimination; \37\ and
make necessary changes to ensure that the grant review process is no
longer used to undermine the interests of American taxpayers.\38\ A
subsequent Executive order in August 2025 emphasized that Federal
agencies must ensure that all Americans are treated equally and make
merit-based decisions related to the ability of an applicant or
recipient to produce actual results for the American taxpayer.\39\ On
July 29, 2025, the U.S. Department of Justice (DOJ) also issued new
government-wide guidance intended to ensure that recipients of Federal
funding do not engage in unlawful discrimination.\40\ On December 2,
2025, DOJ's Office of Legal Counsel (OLC) also released an opinion
finding that certain race-based grant programs administered by the
Department of Education violate the Fifth Amendment's equal-protection
component.\41\ That opinion explained that any ``allocation of benefits
and burdens based on a person's race is anathema to the U.S.
Constitution.'' \42\
---------------------------------------------------------------------------
\36\ Id.
\37\ E.O. 14281, sec. 1.
\38\ E.O. 14151.
\39\ E.O. 14332; White House Fact Sheet of Aug. 7, 2025.
\40\ DOJ Memorandum of July 29, 2025, ``Guidance for Recipients
of Federal Funding Regarding Unlawful Discrimination.''
\41\ Constitutionality of Race-Based Dep't of Educ. Programs,
2025 WL 4055305 (Dec. 2, 2025).
\42\ Slip Op. 2.
---------------------------------------------------------------------------
This rulemaking proposes to institutionalize needed reforms in the
Federal grantmaking process to address the unlawful discrimination and
other serious problems that occurred during the previous
administration. The basic values embedded in the Federal Government's
decision-making processes for grants management must be consistent with
law and designed to serve the public good of all Americans. OMB's 2 CFR
regulations are a key instrument for improving the standards,
processes, and requirements that apply to all Federal grant programs.
They are also an important tool for making needed reforms to the
organizational culture within Federal grantmaking agencies. These
agencies are entrusted to make discretionary decisions regarding the
use of many billions of dollars of precious taxpayer resources, and
must remain accountable to the American people when doing so.\43\
Consistent with policies in recent executive orders, taxpayer dollars
must be used to support essential public purposes authorized by law--
not wasted to promote divisive doctrines of the far left.\44\
---------------------------------------------------------------------------
\43\ E.O. 14151, sec. 1; E.O. 14332, sec. 1.
\44\ Id.
---------------------------------------------------------------------------
OMB and Federal agencies now propose to address the problems
summarized above as they impact Federal grantmaking. This includes
removal of any remaining pieces of the old discriminatory policies that
agencies may still apply to decision-making processes in the area of
grants management. It also includes ending government sponsorship of
gender ideology and other radical doctrines the previous administration
sought to impose across the country through Federal funding programs.
By renewing the Federal Government's commitment to basic American
values, and proposing other needed reforms to responsibly manage and
safeguard taxpayer funds used in grantmaking, OMB seeks to prevent the
types of unlawful discrimination, wasteful spending, and other
significant problems that arose in recent years from recurring in the
future. As explained in Executive Order 14332, the Federal Government
holds tax revenue in trust for the American people, and Federal
agencies should treat it accordingly.
A.2. Improved Transparency
Changes are needed to ensure improved transparency for how Federal
funds are used. American taxpayers have a right to know the projects
that their tax dollars are supporting and the entities to which those
dollars are flowing. They should also feel confident that recipients
and subrecipients of Federal awards are engaged in activities
consistent with the basic public purposes of support authorized by law,
that do not unlawfully discriminate against American citizens, that do
not harm the interests or reputation of the
[[Page 32204]]
Federal Government, and that do not threaten the national or economic
security of the United States. For example, Federal grant funds should
not be used to support recipients and subrecipients that work in
partnership with our foreign adversaries. Improved transparency will
shine a light on the full scope of Federal agency activities and the
network of recipients and subrecipients of Federal awards that the
American people are trusting to accomplish public purposes of support
on their behalf.
A 2023 report from the Government Accountability Office (GAO) also
emphasized the benefits of greater transparency in Federal grants
management.\45\ The report explained that ``greater transparency of how
the Federal Government spends its funds offers many potential
benefits,'' which may include ``enabling data-driven decisions about
how to use government resources, opportunities for improving the
efficiency and effectiveness of Federal spending, and improving
government's accountability to the public.'' OMB agrees that certain
reforms are needed to provide greater transparency and accountability
for use of public funds, and greater oversight to ensure that every
taxpayer dollar the Federal Government spends improves Americans' lives
or advances American interests.\46\
---------------------------------------------------------------------------
\45\ Jeff Arkin, ``Grants Management, Observations on Challenges
with Access, Use, and Oversight,'' United States Government
Accountability Office, GAO-23-106797, May 2, 2023.
\46\ E.O. 14332, sec. 1.
---------------------------------------------------------------------------
A.3. Improved Accountability
Proposed revisions related to improved accountability aim to ensure
that recipients are held properly accountable for how Federal award
funds are used. This includes ensuring that recipients only use Federal
award funds for authorized public purposes, and comply with
requirements related to reporting, nondiscrimination, and other topics.
A.4. Improved Oversight
The proposed revisions related to improved oversight aim to ensure
that every discretionary award program is designed by Federal agencies
to effectively achieve its underlying statutory purpose, and to align,
where applicable, with administration policies and priorities set by
the President.\47\ This includes treating every American with equal
dignity and respect, applying the principle of merit-based opportunity
throughout the grant lifecycle, and avoiding unlawful discrimination
when selecting recipients to receive awards.\48\ Improved oversight
refers both to oversight of decision-making processes within Federal
agencies and oversight of recipients using Federal award funding.
---------------------------------------------------------------------------
\47\ E.O. 14332, sec. 4(b)(i).
\48\ See, e.g., E.O. 14151; E.O. 14173 of January 21, 2025,
``Ending Illegal Discrimination and Restoring Merit-Based
Opportunity;'' and E.O. 14281 of April 23, 2025, ``Restoring
Equality of Opportunity and Meritocracy.''
---------------------------------------------------------------------------
A.5. Examples of Proposed Changes Related to First Objective
OMB proposes many changes throughout this document related to
improving transparency, accountability, and oversight for Federal
grants. For example, OMB proposes updated language related to conflicts
of interest (Sec. 200.112) and mandatory disclosures (Sec. 200.113).
In Sec. 200.202 related to program planning and design, OMB proposes a
variety of changes seeking to ensure that programs align with law and
Executive Branch policy.
In Sec. Sec. 200.201 and 200.333, and throughout part 200, OMB
proposes to eliminate the use of fixed amount awards and subawards,
which can limit transparency and hinder effective oversight. For
example, under fixed amount awards there is no expected routine
monitoring of actual costs incurred by the recipient or subrecipient,
and no financial reporting is required.\49\ This proposed change
further ensures that Federal agencies exercise an appropriate level of
oversight on how tax dollars are spent under all types of awards. This
will help to ensure that Federal dollars are not wasted on activities
that may not fully support the achievement of program outcomes. The
American people deserve to know where all Federal tax dollars are
flowing.
---------------------------------------------------------------------------
\49\ See 2 CFR 200.201(b)(1) (existing version).
---------------------------------------------------------------------------
In Sec. Sec. 200.204 through 200.206 related to funding
opportunities, selection of recipients, and reviewing risk of
applicants, OMB proposes a variety of changes designed to ensure and
emphasize the need for merit-based selection of recipients for
discretionary awards.\50\ Other proposed changes seek to align the
regulatory text with requirements in Executive Order 14332 regarding
oversight in grantmaking. In Sec. 200.206, some of the proposed
changes seek to ensure that recipients with a history of questionable
practices or poor financial management are not rewarded with scarce
taxpayer resources.
---------------------------------------------------------------------------
\50\ See, e.g., E.O. 14173 of January 21, 2025, ``Ending Illegal
Discrimination and Restoring Merit-Based Opportunity;'' and E.O.
14281 of April 23, 2025, ``Restoring Equality of Opportunity and
Meritocracy.''
---------------------------------------------------------------------------
In Sec. 200.208, OMB proposes to update the standards for
including specific conditions in Federal awards. In Sec. 200.211, OMB
proposes to clarify information that must be included in Federal
awards. In Sec. Sec. 200.218, 200.219, 200.220, and 200.300, OMB
proposes various changes to ensure that award funds are not used for
unlawful discrimination or other purposes inconsistent with law and
Executive Branch policy.
In Sec. 200.305, proposed changes seek to ensure that both Federal
agencies and pass-through entities exercise appropriate due diligence
before issuing payments of Federal funds, including requiring a
justification for payment requests. Proposed revisions also address use
of Treasury's ``Do Not Pay'' system before issuing payments.
In Sec. Sec. 200.329 through 200.332, OMB proposes changes related
to further ensuring that pass-through entities follow through on their
statutorily-required responsibility to report subawards on <a href="http://SAM.gov">SAM.gov</a>. In
addition to ensuring that required reporting occurs, the proposed
changes seek to ensure that Federal dollars are tracked as subawards in
circumstances in which recipients transfer funds to affiliates,
subsidiaries, or other related organizations. Proposed changes also
emphasize the need for Federal agencies to ensure that their recipients
comply with subrecipient reporting requirements on <a href="http://SAM.gov">SAM.gov</a>. The 2023
GAO report referenced above also identified ``challenges with the
completeness and accuracy of subaward data displayed on
<a href="http://USAspending.gov">USAspending.gov</a>.'' OMB is proposing several revisions in 2 CFR to
ensure that pass-through entities meet this reporting obligation and
that Federal agencies exercise appropriate monitoring and oversight
over the responsibilities of the recipients they decide to partner with
under their programs.
In Sec. 200.340, OMB proposes to further clarify the existing
regulatory text related to award termination and further ensure that
Federal agencies provide clear notice to all recipients of the Federal
Government's ability to terminate discretionary awards for
discretionary reasons in a manner consistent with law.\51\ This
proposed clarification is similar to the existing authority at Sec.
200.340(a)(4) to terminate awards found to be inconsistent with program
goals or agency priorities. It would also be similar to the long-
standing authority to terminate Federal contracts for convenience at 48
CFR 49.502 and 52.249-2. If finalized, this revision will further
ensure that Federal agencies retain ongoing programmatic
[[Page 32205]]
discretion after an award is made, consistent with law, to terminate a
discretionary award that is not effective at achieving program goals or
Federal agency priorities, or that an agency otherwise determines is no
longer in the Federal Government's interest. In the same section, OMB
also proposes similar changes related to award suspension.
---------------------------------------------------------------------------
\51\ E.O. 14332, sec. 5 and 6.
---------------------------------------------------------------------------
In addition, OMB proposes additional changes in subpart E (cost
principles at Sec. Sec. 200.400 through 200.476) related to improving
transparency, accountability, and oversight. For example, OMB proposes
various changes to further distinguish between allowable and
unallowable costs.
B. Objective 2: Clarification of Regulatory Structure
OMB's second objective for the current proposed revisions is to
clarify the status of OMB's government-wide financial management
policies and requirements contained in 2 CFR subtitle A, as an OMB
regulation. In support of this objective, OMB and the grantmaking
agencies joining this rulemaking collectively propose revisions in 2
CFR to clarify the regulatory status of OMB's government-wide policies
and requirements. This change is intended to establish a standardized
framework across all Federal grantmaking agencies--now including those
that did not join the 2014 Federal Agency Interim Final Rule--and to
promote predictability, transparency, and consistency across the
Federal Government. This proposal would modernize and streamline
Federal grants management consistent with OMB's statutory authority to
enhance financial management across the Executive Branch.
The current framework in which each agency issues a brief
regulation to adopt OMB's requirements will generally be preserved
through this interagency rulemaking, but OMB proposes to make minor
adjustments in the regulatory text to clarify that OMB's requirements
in subtitle A carry regulatory effect in their own right. Agencies will
participate in this one-time joint interagency rulemaking to implement
the clarified regulatory structure and amend their adopting regulations
accordingly. Thereafter--in rulemakings following the current one--when
OMB amends the regulatory text of 2 CFR through a government-wide
notice-and-comment (N&C) rulemaking, those changes will apply
government-wide on the effective date of OMB's final rule. This
distinction is less relevant for the present rulemaking because
relevant grantmaking agencies are joining OMB in proposing these
changes.\52\ In the future, the public will continue to have a full and
meaningful opportunity to comment during OMB's N&C rulemakings, and
agencies will continue providing input to OMB during interagency review
periods and implementing the requirements. As discussed below, this
proposal is generally consistent with the way that most agencies have
implemented OMB amendments of the 2 CFR regulatory text since 2013.
---------------------------------------------------------------------------
\52\ All, or nearly all, grantmaking agencies in the Executive
Branch have joined this proposed rulemaking and plan to actively
adopt the specific policy changes in tandem with OMB through the
joint interagency final rule. Thus, the proposed clarifications in
this document regarding the process that OMB will follow for 2 CFR
amendments will primarily affect future OMB amendments of the
government-wide requirements in which other agencies are not
directly participating. Although OMB and agencies are currently
undertaking a joint interagency rulemaking process through this
document, it would be inefficient to repeat this process of
assembling every grantmaking agency in the Federal Government to
directly join all future OMB rulemakings. As discussed in this
document, OMB is authorized by law to set government-wide policies
and requirements for grants management. Moreover, as also discussed
in this document, the proposed process for 2 CFR amendments is very
similar to how the existing process for such amendments has already
worked for the last decade.
---------------------------------------------------------------------------
This proposal maintains the familiar structure of 2 CFR, but will
increase predictability, transparency, and uniformity regarding how OMB
amendments are implemented following future N&C rulemakings. Consistent
with OMB's government-wide authorities, the proposal will allow for
timely amendments of administrative requirements, cost principles, and
audit requirements for grants and other Federal awards across the
Federal Government.
B.1. Current Regulatory Structure
In 2013, OMB combined previously separate OMB circulars and
guidance documents into one centralized guidance document published in
2 CFR subtitle A. 2 CFR part 200 is commonly referred to as OMB's
``Uniform Guidance'' or ``Uniform Grants Guidance.'' Following
establishment of the guidance by OMB in 2013, most Federal grantmaking
agencies initially adopted the guidance in 2014 through implementing
regulations in 2 CFR subtitle B.\53\ The guidance currently provides
that ``[p]ublication of the OMB guidance in the CFR does not change its
nature--it is guidance, not regulation.'' \54\
---------------------------------------------------------------------------
\53\ 78 FR 78590; (Dec. 26, 2013); 79 FR 75871 (Dec. 26, 2014).
\54\ 2 CFR 1.105.
---------------------------------------------------------------------------
The existing structure of 2 CFR--including its classification as
guidance--has tended to result in questions and uncertainty in the
Federal grants community regarding the process for agency
implementation of OMB amendments of the government-wide requirements in
the regulatory text of subtitle A.\55\ The existing version of 2 CFR
200.110(a) already provides that part 200's requirements become
effective for the ``administration of Federal awards by Federal
agencies'' either ``once implemented by Federal agencies [under the
process described at 200.106 (existing version)] or when any future
[OMB] amendment to . . . part [200] becomes final.'' 2 CFR 200.110(a)
(existing version) (emphasis added). As explained below, OMB proposes
to retain the quoted regulatory text without change, but further
clarify its meaning to address recurring questions regarding the effect
of OMB amendments.
---------------------------------------------------------------------------
\55\ See, e.g., OMB Memorandum M-24-11, Section I
(``Implementation of Title 2 of the CFR'') (Apr. 4, 2024); and COFFA
Memoranda for the Federal Financial Assistance Community dated
January 15, 2025 and August 15, 2024.
---------------------------------------------------------------------------
After the initial agency adoption of part 200 in 2014, secondary or
follow-on rulemakings by Federal agencies to implement OMB amendments
of part 200 or other parts have generally either not occurred at all
\56\ or not been initiated by agencies in a timely manner. The sporadic
secondary rulemakings that have occurred following 2014 have generally
only been initiated in circumstances in which an agency had something
specific to add or modify in its own adopting regulations. In most
cases, consistent with 2 CFR 200.110(a) (existing version), agencies
have simply implemented OMB amendments of the 2 CFR regulatory text
based on the text of their existing adopting regulations, and through
the terms and conditions of Federal awards issued following the
government-wide effective date of the OMB amendments.\57\
---------------------------------------------------------------------------
\56\ Following initial agency adoption, implementing revisions
on the effective date provided in OMB's final rulemaking is
consistent with the information provided to the public in 2 CFR
200.110(a) (existing version) regarding the process for implementing
future amendments.
\57\ See 2 CFR 200.105(b) (existing version).
---------------------------------------------------------------------------
There are many practical reasons why agencies have not generally
completed secondary rulemakings to readopt OMB amendments following
2014. Beginning dozens of secondary agency N&C rulemakings only after
OMB has already completed a year-long government-wide N&C rulemaking
process--including extensive interagency coordination before the formal
rulemaking process even begins--would generally be
[[Page 32206]]
redundant, create long administrative delays, constitute a major drain
on agency resources, and frustrate the objective of government-wide
uniformity for OMB policy changes. For example--as with the Federal
Acquisition Regulation (FAR) that applies to Federal procurement
contracts--it is sometimes necessary for OMB to amend the regulatory
text to align with legislative changes on specific government-wide
effective dates. Secondary agency rulemakings could result in staggered
and sometimes wildly inconsistent effective dates for OMB's amendments
and associated policies across the Federal Government--with agency
rules only being proposed and finalized as agency resources allow. This
would effectively delay implementation of OMB's government-wide
requirements by an extended period of time. Such delays would create
confusion for recipients, auditors, and the entire Federal grants
community, and be inconsistent with OMB's statutory authority to set
government-wide requirements for grants administration that agencies
must follow. Moreover, agencies would generally have little of
substance to say in response to public comments on government-wide
policy requirements already settled by OMB pursuant to its own
statutory authorities and firmly established in the regulatory text of
subtitle A.
B.2. Proposed Clarification of Regulatory Structure
a. In general. Through this rulemaking, OMB and Federal grantmaking
agencies seek to collectively clarify how government-wide ``financial
management policies and requirements'' codified in OMB's 2 CFR
regulatory text in subtitle A will be implemented by Federal agencies
in the future.\58\ The current classification of the OMB regulatory
text as ``guidance, not regulation'' is confusing for award recipients,
is generally inconsistent with the history of agency implementation of
OMB amendments since 2014, and fails to provide adequate predictability
and transparency for the Federal grants community regarding how future
OMB amendments of the regulatory text of subtitle A will be implemented
by agencies. To promote predictability, transparency, uniformity,
efficiency, and other objectives described in this document, OMB seeks
to provide further clarity regarding the regulatory structure and
status of 2 CFR through this rulemaking.
---------------------------------------------------------------------------
\58\ 31 U.S.C. 503(a)(2).
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b. Similar to existing frameworks. The proposed clarification in
this document is similar to the already existing process for agency
implementation of OMB amendments of the regulatory text in part 200.
Information on the existing process is provided at 2 CFR 200.110(a) and
discussed in this document above. Thus, at least for agencies that have
already implemented the OMB requirements, OMB's proposed amendments
related to this objective are primarily intended to clarify the status
of the regulatory text in subtitle A, rather than constituting a
fundamentally new approach or change in direction. As discussed above,
the approach described in this document is consistent with how most
agencies have implemented OMB amendments of the regulatory text of 2
CFR subtitle A since the Uniform Guidance was first adopted by agencies
in 2014.
The proposed clarification is also procedurally similar to the
long-standing ``adoptable guidance'' model for the suspension and
debarment requirements in 2 CFR part 180.\59\ In the 2005 preamble
establishing part 180, OMB observed the need to ``[s]treamline the
process for updating the government-wide requirements'' by centralizing
the process for substantive updates to the rule at OMB--with agencies
only needing to complete one initial adoption. The ``adoptable
guidance'' approach allowed OMB to ``publish proposed changes to the
[government-wide requirements] in the Federal Register, with an
opportunity for the public to comment.'' Once agencies had completed
the initial step of adopting the part 180 guidance in agency
regulations, ``the process for future updates [would] be complete [each
time that] OMB issues . . . final guidance'' amending the regulatory
text. In other words, agencies would ``not need to amend their
regulations adopting the guidance'' through dozens of separate agency
rulemakings following future OMB amendments. That regulatory structure
has remained the status quo for 2 CFR part 180 for the past 20 years.
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\59\ 70 FR 51863, 51864 (Aug. 31, 2005).
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Like part 180, OMB also issued part 200 for agency adoption in
2013, which represented a major improvement from the older patchwork of
OMB Circulars and agency-specific regulations. However, despite the
information provided at 2 CFR 200.110(a), questions regarding the
process for agency implementation of OMB amendments of part 200 have
lingered, which has impacted the predictability, transparency, and
consistency of government-wide implementation of the OMB requirements.
Consistent with the approach described in the preamble for part 180
and the existing regulatory text at Sec. 200.110(a), this document
proposes to further clarify how agency adopting regulations in subtitle
B apply to future amendments of subtitle A. The proposal will also
clarify the status of OMB's regulatory text throughout subtitle A as an
OMB regulation. Agencies will remain partners with OMB in the process
for future amendments by participating in OMB's development of proposed
policy changes and continuing to implement the effective requirements.
However, OMB proposes to clarify that the legal mechanism for futures
updates will be streamlined to a single Federal Register document
issued by OMB following public N&C, rather than dozens of rulemakings
across the Federal Government with generally identical requirements but
inconsistent effective dates. For the reasons discussed above,
beginning dozens of agency N&C rulemakings after OMB has completed its
own N&C rulemaking process would be impractical, inefficient, and
impede OMB's ability to timely exercise its own statutory authorities
to set government-wide requirements for grants management.
c. OMB government-wide authorities related to grants
administration. Congress authorized OMB at 31 U.S.C. 503 to set
government-wide requirements for grants administration, and agencies
must follow the OMB requirements in their award programs. Congress also
authorized OMB under the Federal Grant and Cooperative Agreement Act of
1977, codified in relevant part at 31 U.S.C. 6307, to issue
interpretative guidelines to Federal agencies to promote consistent and
efficient use of Federal financial assistance awards. Congress also
authorized OMB at 31 U.S.C. 7505 to provide government-wide
requirements for Single Audits of recipients, and agencies must also
follow those requirements. Congress also authorized OMB under the
Transparency Act (Pub. L. 109-282), as amended, to provide instructions
to agencies related to ensuring public transparency of their assistance
programs--including with respect to award recipients, award amounts,
unique entity identifiers, subawards, and various other information--
which agencies are also required to follow. At 31 U.S.C. 6105, Congress
also assigned oversight responsibility to OMB for the exercise of all
authorities and responsibilities related to Federal program
information. At 41 U.S.C. 1125, Congress authorized
[[Page 32207]]
OMB to prescribe government-wide requirements that agencies must follow
in providing for the procurement of property or services by recipients
of Federal grants or other forms of financial assistance. Pursuant to
all of these authorities, and others described in this document, the
proposed rule clarifies that 2 CFR subtitle A is OMB's issuance of
government-wide requirements under Federal law that agencies must carry
out.
d. Summary of proposed Uniform Grants Regulation (UGR). Under the
proposed rule, OMB will issue the ``Uniform Grants Regulation'' as an
OMB regulation with one government-wide effective date, pursuant to
OMB's statutory authority described above, to provide government-wide
grants management requirements. The text of 2 CFR subtitle A will be
revised to reflect its status as an OMB regulation, especially in key
provisions in parts 1 and 200. OMB proposes to remove the statement in
2 CFR 1.05 that the regulatory text is only guidance and ``not
regulation.'' Otherwise, the structure of title 2 of the CFR will
generally remain the same, with OMB requirements in subtitle A and
agency ``adopting'' chapters in subtitle B. Federal agencies join this
proposal, and plan to issue the final rule as a joint rulemaking with a
common preamble to implement this structure.
The proposed changes will provide regulatory clarity to the entire
Federal grants community regarding the effective date and binding
effect of OMB's policies and requirements, and their application to
agencies and recipients for new awards issued after the effective date
of OMB's amendments. The ``Uniform Grants Regulation'' framework will
avoid the need for dozens of secondary agency rulemakings merely to
reaffirm identical requirements that apply government-wide--which OMB
is authorized by statute to determine. Following 2014, such secondary
agency rulemakings have generally not occurred under the existing
structure. Advantages of the clarifications provided through the
``Uniform Grants Regulation'' proposal include: (1) uniform,
transparent requirements; (2) reduced redundancy and regulatory volume;
and (3) a streamlined approach allowing for efficient updates and
responsive government-wide policy changes. The proposed approach will
also maintain public participation.
(i) Uniformity, transparency, and regulatory clarity. The ``Uniform
Grants Regulation'' framework will make it easier for recipients and
auditors to find and understand the rules that apply to Federal awards,
and the date on which those rules become effective. The modified
regulatory text would resolve recurring questions on these topics, and
reinforce that OMB's government-wide requirements are legally binding
pursuant to OMB's statutory authorities for future updates on the
effective date of OMB's amendments of the regulatory text. OMB's
authorities contemplate OMB setting binding policy related to financial
assistance for all agencies--which is effectively what the Uniform
Guidance already does today. This proposal will simply clarify the
regulatory status of subtitle A, and ensure that OMB policies apply
uniformly across all agencies on the effective date intended by OMB
without the need for redundant and open-ended agency rulemaking
processes to implement them. From a recipient's perspective, OMB's
requirements in 2 CFR will still generally carry the same weight as
before, but calling them OMB regulations will further emphasize and
clarify their binding effect across the Federal Government.
(ii) Reduced redundancy. The proposed clarification will promote
efficiency and save government resources by preventing the need for
dozens of secondary agency rulemakings. Agencies may still undertake
such rulemakings as appropriate to make adjustments in their own
chapters, but will not be required to in the case of every OMB
amendment. Existing provisions in the regulatory text, which OMB
proposes to retain, also provide mechanisms for exceptions and
otherwise maintaining alignment with agency program statutes in the
case of conflict.\60\
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\60\ See 2 CFR 200.100(a)(1), 200.101(a)(2) and (d), 200.102,
200.105, and 200.106.
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Moreover, agencies will not be entirely removed from the process of
2 CFR updates, but will remain involved as partners in OMB's regulatory
process, and through participation in interagency workgroups such as
the Council on Federal Financial Assistance. Although, in general,
agencies will not need to directly join future OMB rulemakings, they
will remain engaged in the interagency review processes, ensuring that
agency grant experts have appropriate input on legal and practical
considerations for their agencies before rules are proposed or
finalized by OMB.\61\
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\61\ See also section IV.C.2.g of this preamble regarding
``continued public and agency participation.''
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(iii) Efficiency and responsiveness. The ``Uniform Grants
Regulation'' framework recognizes the practical reality of needing to
ensure that OMB is able to efficiently exercise its statutory authority
to provide government-wide grants management requirements in a timely
and responsive manner. Given that updates to OMB's requirements in
subtitle A may already take upwards of a year to complete prior to any
secondary agency rulemakings--from initial policy development at OMB to
inter-agency coordination, drafting and obtaining clearance for
proposed rulemaking documents, completing N&C procedures, responding to
comments, drafting and obtaining clearance for final rulemaking
documents, additional inter-agency coordination, and typically, but not
necessarily, providing some gap between issuance of the final rule and
its effective date--the proposal will ensure that OMB can actually
establish government-wide requirements within a reasonable timeframe.
The proposal will clarify that agencies do not need to initiate another
lengthy N&C rulemaking process just to implement OMB amendments for
which OMB already followed robust public N&C procedures. The framework
will ensure that OMB remains able to efficiently respond to emerging
compliance issues or implement new statutory requirements in a timely
manner across all agencies.
Both the Federal Government and American public will benefit from
such timely adjustments. This may include, for example, faster
incorporation of legislative changes from Congress. This is far more
workable and efficient than an alternative model in which dozens of
agency rulemakings to implement new requirements would only begin after
OMB has already completed a year-long process to propose and make
amendments. Such an alternative model would effectively prevent timely
implementation of needed government-wide policy reforms related to
grants management, and frustrate OMB's ability to efficiently perform
its own statutory functions.
(iv) Note regarding proposed names for title 2 and part 200. This
document proposes to use ``Uniform Grants Regulation'' (UGR) as a plain
language name or designation for 2 CFR part 200 following issuance of a
final rule. See Sec. 1.100 (proposed version). OMB does not propose a
change to the existing header for Title 2, which would remain ``Federal
Financial Assistance.'' Thus, the various parts of Title 2 would
collectively constitute the Federal Government's ``Regulation for
Federal Financial Assistance'' (RFFA), while part 200 would constitute
the UGR. OMB also does not propose a change to the (formal) header for
part 200, which
[[Page 32208]]
would remain ``Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards'' (UAR). Thus, the name UGR,
as referred to in Sec. 1.100 (proposed version), would be used in a
way similar to how ``Uniform Guidance'' is currently used as a plain
language way of referring to part 200--despite its formal header. The
acronym UAR would also remain acceptable and accurate, as would simply
referring to ``part 200.''
The proposed name of UGR for part 200 would not have any impact on
the part's broader applicability to cooperative agreements and other
forms of financial assistance, which remain subject to part 200 under
the proposed regulatory text. See 2 CFR 200.1 and 200.101 (proposed
versions). Grants are a common and widely used form of Federal
financial assistance. See 2 CFR 200.1. Outside of its technical
meaning, the term ``grant'' is also generally understood and used in
ordinary speech by the general public in a way that more technical
terms may not be. OMB proposes to refer to part 200 as the UGR to
retain a name that will be widely understood, easy to say, and still
similar to the existing name for part 200--the ``Uniform Guidance''--
which is widely known and used throughout the Federal financial
assistance community. Under the existing structure, ``Uniform Guidance
on Grants'' and ``Uniform Grants Guidance'' (UGG) are also frequently
used to refer to part 200, which are also similar to the name proposed
in this document.
In selecting a proposed plain language name and acronym, OMB also
considered ``Financial Assistance Regulation,'' but determined that the
acronym for this name would conflict with the acronym that is already
used for, and widely known as applying to, the Federal Acquisition
Regulation (FAR). Creating a second FAR that applies to Federal
financial assistance instead of Federal procurement contracts would
cause confusion and be unworkable. OMB believes that UGR will be a
simple and clear way to refer to part 200 following issuance of the
final rule and easily distinguishable from the FAR. As is currently the
case, the regulatory text of 2 CFR part 200 may also be referred to as
the UAR (based on the formal header) or simply as ``part 200.''
e. Continued public and agency participation. Finally, the proposed
``Uniform Grants Regulation'' framework will also maintain public and
agency participation in the development of policies. OMB will continue
to follow public N&C rulemaking procedures for substantive updates, and
all stakeholders will have the ability to comment on any changes
proposed by OMB. Thus, interested parties can focus on a single unified
proposal rather than tracking and commenting on dozens of separate
agency proposals. Agencies will still be involved during the
development stage for OMB policy amendments and various interagency
review periods, and still have the ability to raise agency-specific
issues with OMB before amendments are proposed or finalized. After
OMB's final determination, secondary public N&C periods at each agency
would serve little practical purpose, as the key policy decisions would
already have been made by OMB with input from both public commenters
and Federal agencies.\62\
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\62\ A Federal agency would still be permitted to engage in such
secondary rulemaking procedures if it determines that codified
exceptions are needed and consistent with procedures and basic
parameters for codified exceptions set forth in the regulatory text
of subtitle A. As under the existing regulatory text, an agency
could immediately implement any exceptions required by statute in
advance of a secondary rulemaking and without the need for
additional approval from OMB under 2 CFR. See 200.101(d)(1) and
200.102(b) (proposed version).
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B.3. Proposed Changes to Agency Chapters in Subtitle B of 2 CFR
Through this proposed rulemaking, certain Federal grantmaking
agencies that currently lack an existing chapter in 2 CFR subtitle B
propose to add chapters, which is intended to streamline implementation
and reduce variability across the Federal Government. Federal agencies
that have existing chapters in 2 CFR subtitle B propose certain
targeted and conforming changes to support OMB's broader rulemaking
effort. Following this rulemaking, subtitle B will provide a complete
list of all grantmaking Federal agencies,\63\ including certain agency-
specific policies and procedures. This proposed change will make OMB's
policies and requirements in 2 CFR truly ``uniform'' across the Federal
Government for first time since OMB's ``Uniform Guidance'' was
established in 2013.
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\63\ Limited exceptions are noted at 2 CFR 1.221 (proposed
version) for agencies with limited, if any, rulemaking authorities.
Like all other agencies, the listed agencies at 2 CFR 1.221
(proposed version) would be required to implement OMB's government-
wide requirements in 2 CFR subtitle A, but would not be required to
issue regulations due to the limited nature of their authorities.
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C. Objective 3: Reducing Recipient Burden
The third and final objective of this rulemaking is to reduce
recipient burden. The proposed revisions in support of this objective
are aimed at ensuring that the requirements contained in 2 CFR are only
those that OMB finds necessary for the efficient implementation and
oversight of assistance programs authorized by law.
Some of the changes related to this objective are aimed at ensuring
that recipients can focus on timely and efficient delivery of core
program purposes. As discussed under the first objective in this
document, in previous years Federal agencies often required award
recipients to spend great amounts of time, effort, and financial
resources to implement unlawful DEI mandates and other unnecessary add-
on requirements that increased project costs, complexity, and
completion timelines, but did not serve the underlying public purpose
of support of the relevant assistance program. By contrast, under the
proposed version of the regulation, OMB seeks to ensure that Federal
agencies will appropriately reduce the scope of award activities to
only what is necessary to achieve the objectives identified in law
consistent with Executive Branch policy. If finalized, recipients
should be able to restore focus on achieving core public purposes in a
cost-efficient and timely manner.
In seeking to reduce recipient burden, OMB also reviewed the
guidance to look for other opportunities to further standardize and
streamline the grantmaking process where feasible. For example, in
Sec. 200.202, the proposed regulation encourages the use of multi-year
awards, thereby reducing the frequency of applications and individual
awards that are generated each year. In Sec. 200.204, OMB encourages
Federal agencies to adopt more efficient Notice of Funding
Opportunities and application practices, including the use of
statements of interest, which will simplify the process for thousands
of prospective applicants. In addition, the proposal would require that
all Federal funding opportunities be posted on <a href="http://Grants.gov">Grants.gov</a> ensuring
agencies use a single, consistent platform that reduces duplicative
processes and increases transparency for award applicants. Under the
proposed regulation, agencies are not prohibited from announcing
opportunities on their websites or in other locations in addition to
<a href="http://Grants.gov">Grants.gov</a>. Federal agency heads (or designees) may approve exceptions
to this requirement when the agency determines that publicly announcing
an opportunity would pose a national security risk or is in the
national interest of the United States. The removal of superfluous
policy requirements reduces costs and complexity without undermining
[[Page 32209]]
accountability for Federal financial assistance awards.
OMB is also committed to continuing to support this objective
following the current rulemaking process. For example, efforts to
address this objective may also involve longer-term initiatives to: (i)
review and streamline existing government-wide forms to ensure that
only necessary data is being collected a single time; and (ii) work
with Federal grantmaking agencies to eliminate or reduce burdensome
program regulations and requirements.
V. Regulatory Impact Analysis
The attached Regulatory Impact Analysis (RIA) evaluates the
benefits, costs, and transfers associated with the proposed rule. For
example, the RIA evaluates the proposed elimination of fixed amount
awards and fixed amount subawards; proposed payment accountability
reforms, including requirements for Federal payment requests; proposed
reforms related to subrecipient oversight; proposed clarifications of
authority for termination and suspension of Federal awards; proposed
changes to national policy provisions; and proposed changes related to
eligibility restrictions for research and development awards. The draft
RIA finds that the proposed rule is expected to generate qualitative
benefits, modest administrative costs, and minimal transfer effects.
OMB invites comments on the analysis provided in the attached RIA.
VI. Section-By-Section Discussion of the Proposed Revisions to Subtitle
A of 2 CFR
OMB invites comments on the proposed revisions throughout subtitle
A of 2 CFR.
Part 1--About Title 2 of the Code of Federal Regulations and Subtitle A
OMB proposes to revise various sections of 2 CFR part 1 to replace
references to ``guidance'' with ``regulation'' to reflect that the OMB
policies contained in 2 CFR subtitle A constitute an OMB regulation.
Additional analysis related to this change is provided in this document
above.
OMB proposes to add a new Sec. 1.221 to explain that certain
listed Federal agencies received approval from OMB to implement the OMB
regulations in subtitle A as policy applicable to their Federal awards
without establishing agency regulations in subtitle B. Approval of this
alternative implementation method is generally based on the limited
rulemaking authorities of these agencies.
Parts 25, 170, 175, 180, 182, and 183
OMB proposes limited revisions in parts 25, 170, 175, 180, 182, and
183. As throughout the regulatory text, OMB proposes to replace the
term ``guidance'' with ``regulation'' or ``policy,'' as appropriate,
for the reasons set forth above. In some cases, depending on the
context, the use of the word ``guidance'' is maintained, such as
instances in which the term does not refer to the regulatory text of 2
CFR. OMB also proposes various grammatical changes in these parts.
In part 170, OMB proposes certain revisions to reflect that, as of
March 8, 2025, <a href="http://FSRS.gov">FSRS.gov</a> was retired, and all subaward reporting data
and functionality are now on <a href="http://SAM.gov">SAM.gov</a>. Thus, certain references to FSRS
are replaced with references to <a href="http://SAM.gov">SAM.gov</a>.
In part 180, consistent with other changes throughout the
regulatory text, OMB proposes to remove the statement in Sec. 180.15
that the policy contained in the regulatory text ``is guidance not
regulation.'' OMB also proposes to revise Sec. 180.25 to clarify that
agencies must not deviate from the requirements of this part on matters
for which discretion is not provided.
OMB proposes to revise Sec. Sec. 180.745 and 180.840 to require
agencies to provide entities or individuals with a transcribed record
of fact-finding proceedings for suspensions and debarments within five
business days. Under this proposal, the entity or individual requesting
the transcript would remain responsible for purchasing it and paying
applicable costs. Although not addressed directly in either the
existing or proposed regulatory text, in some cases it is possible that
other laws may restrict what information may be provided in this
context, such as classified information.
In Sec. 180.915, OMB proposes to update the reference to the
Program Fraud Civil Remedies Act (PFCRA) of 1986 to reflect that, on
December 23, 2024, Congress amended the PFCRA, including changing its
name to the Administrative False Claims Act (AFCA).\64\
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\64\ Public Law 118-159, sec. 5203(a).
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Similarly, in part 182, OMB proposes to remove the statement in
Sec. 182.15 that the policy contained in the regulatory text ``is
guidance not regulation.'' In Sec. 182.25, OMB also proposes to
clarify that Federal agencies must not deviate from the requirements of
this part on matters for which discretion is not provided.
OMB also proposes to revise part 183 to replace the term
``guidance'' with ``regulation.'' Finally, OMB proposes to update the
definition of ``covered combatant command'' in Sec. 183.35 to simply
reference the definition existing in law.
Part 176--Award Terms for Assistance Agreements That Include Funds
Under the American Recovery and Reinvestment Act of 2009
OMB proposes to remove the guidance in part 176 related to the
American Recovery and Reinvestment Act of 2009 (ARRA). Part 176 was
initially issued to govern the use of funds appropriated under ARRA as
part of the Nation's economic recovery efforts following the 2008
financial crisis. The regulations in part 176 are no longer needed
because awards are no longer being made under ARRA. The removal of part
176 aligns with OMB's broader objective of streamlining Federal
financial assistance regulations by eliminating outdated or unnecessary
provisions that no longer serve a practical function.
Part 200--Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards
Throughout part 200, consistent with changes discussed above, OMB
proposes to replace the term ``guidance'' with ``regulation'' when
referring to the regulatory text of 2 CFR. In some cases, OMB also
proposes to replace the term ``guidance'' with ``policy'' or other
terms that fit within the context of the regulatory text.
Subpart A--Acronyms and Definitions
Section 200.1--Definitions
OMB proposes to revise Sec. 200.1 to align with the proposed
policy changes and to be consistent with Federal law. These changes
include revisions to the definitions for ``Federal award date,''
``improper payment,'' ``personally identifiable information (PII),''
and ``unobligated balance.'' Other proposed changes include removing
definitions for ``fixed amount awards'' and ``protected personally
identifiable information (Protected PII).'' The existing definition of
Protected PII is not necessarily consistent with other OMB guidance,
which does not distinguish between PII and Protected PII. Other
conforming changes were proposed in other sections of the regulatory
text that use the term Protected PII.
OMB also proposes to revise the definition of ``compliance
supplement'' to delete the words ``annually updated.'' OMB is in the
process of reevaluating the appropriate frequency for issuing the
compliance supplement. Pursuant to the Financial Management Risk
[[Page 32210]]
Reduction Act (Pub. L. 118-207), OMB and the Office of Inspector
General for the Department of Health and Human Services (HHS) are
currently analyzing the single audit process. OMB plans to engage
stakeholders ahead of any substantial changes.
Subpart B--General Provisions
Section 200.101--Applicability
OMB proposes to revise Sec. 200.101(b)(4) to remove references to
fixed amount awards. OMB proposes to remove the reference to fixed
amount awards for consistency with other changes proposed in this
document, which eliminate the use of both fixed amount awards and
subawards, which can limit transparency and hinder effective oversight.
OMB also proposes to include a reference to the FAR in Sec.
200.101(c)(2).
OMB also proposes to make certain clarifying edits regarding which
provisions govern in the case of conflict in paragraph (d) of Sec.
200.101. OMB now proposes to address statutory and regulatory conflicts
in separate paragraphs. Paragraph (d)(1) regarding statutory conflicts
remains substantially unchanged except for the proposed deletion of the
reference to regulations. OMB proposes a new paragraph (d)(2) under
Sec. 200.101 addressing non-statutory conflicts with agency
regulations. OMB proposes to specify that the following provisions of
part 200 will govern in any circumstances where they conflict with a
regulatory provision not required by Federal statute: all sections in
subpart F and Sec. 200.340 in subpart D. For other non-statutory
conflicts with an agency's regulatory provision, the proposed
regulatory text would encourage Federal agencies to apply the
government-wide policies in part 200 to the greatest extent permitted
by law. OMB also proposes to recommend that Federal agencies clarify
which provisions govern in funding opportunities and Federal award
documents. The proposed text explains that the default presumption
would generally be for the Federal agency to apply the government-wide
policies in this part if it can do so consistent with law. Finally, the
proposed revision recommends that Federal agencies also work to resolve
such non-statutory conflicts consistent with their rulemaking
authorities; applicable provisions in part 200, such as Sec. Sec.
200.102, 200.106, and 200.110; or both. For example, this may involve
amending an agency regulation outside of 2 CFR to eliminate the
conflict or codifying an exception to the government-wide policy in the
agency's implementing regulations in subtitle B.
It should be recognized that Sec. 200.101(d)--under both the
existing and proposed versions--only applies to Federal programs to
which part 200 applies. The proposed policy regarding program
applicability in this section remains generally unchanged. The proposed
edits regarding regulatory conflicts seek to increase uniformity and
transparency regarding management and administration of Federal
financial assistance across the Federal Government. Recipients,
subrecipients, and auditors should not have to speculate or guess
regarding which regulatory provisions govern a Federal program or
specific Federal award.
Section 200.102--Exceptions
OMB proposes to revise Sec. 200.102(b) regarding ``statutory and
regulatory exceptions'' to include reference to the proposed change at
Sec. 200.101(d)(2) discussed above. OMB also proposes to revise Sec.
200.102(c) regarding ``Federal agency exceptions'' to remove reference
to fixed amount awards for reasons discussed elsewhere in this
document. Additionally, OMB proposes to revise the authority for case-
by-case exceptions made by a Federal agency to highlight examples of
sections in which other approval by OMB is expressly required by this
part, such as at Sec. 200.340.
Section 200.106--Agency Implementation and Responsibilities
OMB proposes to revise Sec. 200.106 to add a new paragraph (b)
regarding agency responsibilities. The proposed paragraph references
the responsibilities of Federal agencies under other parts of OMB's
grants administration policies in the regulatory text of 2 CFR. This
proposed change will further clarify that Federal agencies are
responsible for adhering not only to part 200, but also to the other
existing parts contained in subtitle A, including parts 25, 170, 175,
180, 182, 183, and 184.
Section 200.110--Effective Date
OMB proposes to revise Sec. 200.110 to clarify and supplement the
existing policy in paragraph (a). The proposed changes to paragraph (a)
are discussed in further detail in section IV.C of this preamble
regarding the proposed clarification of the regulatory structure of 2
CFR. As discussed above, the proposed changes to paragraph (a) are
generally consistent with the existing regulatory text, but provide
further clarity and context regarding its meaning.
Section 200.111--English Language
OMB proposes to revise Sec. 200.111 to focus only on the basic
requirement that all Federal announcements, applications, and Federal
award information must be in the English language and must be in terms
of U.S. dollars. This revision is intended to highlight the importance
of recipients being able to understand Federal award requirements and
program information in English to effectively meet program objectives
and communicate with Federal officials about program and Federal
financial assistance matters.
Section 200.112--Conflict of Interest
OMB proposes to revise Sec. 200.112 to require, in the interest of
transparency, that a recipient or subrecipient must disclose whether
any employees who worked on the proposal or will support the resulting
Federal award were employed by the awarding Federal agency within the
preceding two years prior to application submission. OMB further
clarifies that this information is for informational purposes and does
not by itself represent a conflict of interest. This revision is
intended to enhance transparency and allow Federal agencies to identify
potential conflicts of interest arising from recent employment
relationships between agency staff and recipient personnel. While the
disclosure does not create a prohibition or automatic bar to
participation, it provides awarding Federal agencies with visibility
into situations where prior employment could give rise to questions
about impartiality, preferential treatment, or insider knowledge. This
change strengthens integrity standards in the award-making process
while limiting burdens by requiring only disclosure, not additional
approval or review.
Section 200.113--Mandatory Disclosures
OMB proposes to revise Sec. 200.113 to require an Office of
Inspector General to transmit any disclosures it receives under this
section to the United States Attorney's Office for the District of
Columbia within ten days of receipt. The purpose of this revision is to
strengthen enforcement and accountability by ensuring that credible
allegations of fraud or misconduct are promptly transmitted to
prosecutorial authorities. This 10-day transmission standard would
reduce delays and accelerate prosecutorial awareness, thereby reducing
the risk that criminal (or civil) misconduct continues without the
initiation of appropriate remedies if warranted.
[[Page 32211]]
Subpart C--Pre-Federal Award Requirements and Contents of Federal
Awards
Section 200.201--Use of Grants, Cooperative Agreements, and Contracts
OMB proposes to revise Sec. 200.201(b) to eliminate the use of
fixed amount awards unless otherwise authorized by Federal statute.
Fixed amount awards were introduced in 2014 with the initial release of
the Uniform Guidance. Extensive standards and guardrails regarding the
use of fixed amount awards were never established in the regulatory
text of part 200, sometimes resulting in inconsistent use or
application of this type of award across Federal agencies. In response
to public comments on the 2024 rulemaking, OMB attempted to establish
additional standards and provisions related to fixed amount awards in
the 2024 revisions. OMB now proposes to change course, and eliminate
this type of award from part 200. OMB is concerned that use of this
type of award can limit transparency and hinder effective oversight,
and believes the limited standards for fixed amount awards in part 200
remain inadequate to address these concerns. The existing regulatory
text also remains ambiguous with respect to application of the cost
principles and certain other requirements to fixed amount awards, with
important context, in some cases, only provided in the 2024 preamble.
This proposed change will ensure increased consistency across Federal
agencies in the execution and implementation of Federal financial
assistance and promote greater transparency and oversight. OMB proposes
to relocate the definition of ``fixed amount awards'' to this section.
This proposed change is not intended to impact any existing fixed
amount awards or subawards issued prior to the effective date of the
proposed rule.
OMB also proposes a minor revision to Sec. 200.201(a) to make
Federal agencies the exclusive focus. OMB proposes to add a cross-
reference to Sec. 200.331, which more directly addresses how pass-
through entities determine the appropriate type of agreement for a
subaward or contract.
Section 200.202--Program Planning and Design
OMB proposes to revise Sec. 200.202(a) to further clarify the
elements of program design. As ``goals and objectives'' do not directly
``provide'' meaningful results, OMB proposes to clarify that the goals
and objectives must ``aim to achieve meaningful results.'' OMB also
proposes to clarify that goals and objectives must be consistent with
the public purpose of Federal authorizing legislation and aligned with
administration policies and priorities.
OMB also proposes to add five new paragraphs. In Sec. 200.202(c),
OMB proposes to clarify that Federal agencies must develop Federal
programs and implement activities under those programs in a manner that
ensures compliance with all applicable restrictions on the use of
Federal funds, including ensuring that Federal program funds are only
used for public purposes of support authorized by law. This proposed
addition reiterates what has long been a foundational principle of
Federal financial assistance: funding must only be used to ``carry out
a public purpose of support or stimulation authorized by law,'' \65\
not for other extraneous activities or initiatives of recipient
organizations. This proposed revision increases transparency and
predictability for applicants and recipients by ensuring that program
announcements are aligned with statutory authority from the outset. OMB
proposes to include an example related to ensuring that program funds
are not used to subsidize political activities or initiatives unrelated
to authorized public purposes.
---------------------------------------------------------------------------
\65\ See 31 U.S.C. 6304, 6305, and 6307.
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In Sec. 200.202(d), OMB proposes to add a paragraph explaining
that Federal agencies may, to the extent permitted by law, restrict
eligibility among different types of nonprofit organizations. This
proposed revision promotes transparency by ensuring applicants can
determine eligibility without guessing or interpreting agency intent.
In addition, the proposed revision ensures that such restrictions are
not applied in a manner inconsistent with law. As a result, applicants
will have greater clarity and confidence about eligibility requirements
before spending time and resources on preparing applications.
In Sec. 200.202(e), OMB proposes to add a paragraph to establish a
government-wide policy governing eligibility and the use of
international elements in Federal research and development awards.
Through this proposed change, OMB seeks to strengthen alignment between
Federal research and development funding and national priorities,
enhance consistency across grant-making agencies, and clarify
expectations for applicants, while preserving appropriate flexibility
to support international engagement that demonstrably advances the
interests of the United States. Consistent with OMB's authorities
discussed above, which authorize the establishment of uniform policies
governing the management of Federal financial assistance, this proposed
change is intended to ensure consistent application of eligibility
limitations applicable to research and development awards. OMB and the
participating agencies seek to ensure that such awards remain aligned
with the national interest of the United States. As with other sections
of the regulatory text, the policy must be implemented consistent with
relevant appropriations and authorizing statues.
In Sec. 200.202(f), OMB proposes to add a paragraph that
encourages agencies to design awards as multi-year award when
consistent with program objectives and subject to restrictions in law.
Under this approach, awards would use budget periods longer than one
year instead of requiring annual re-competition. Such awards must be
structured to avoid Antideficiency Act violations. This proposed
revision promotes efficiency and reduces unnecessary administrative
burden on both agencies and recipients. In addition, the proposed
revision provides greater funding stability for recipients, enabling
long-term planning and execution of complex projects.
Lastly, in Sec. 200.202(g), OMB proposes to add a paragraph that
would require agencies that issue Federal financial assistance for
scientific research to categorize those awards as basic research,
applied research, and experimental development consistent with the
definitions in OMB Circular A-11. This categorization would need to be
communicated to the recipient and included in the terms and conditions
of the award.
Section 200.204--Notices of Funding Opportunities
OMB proposes to revise in Sec. 200.204 to clarify, supplement, and
revise the government-wide policy regarding notices of funding
opportunity, commonly referred to as NOFOs. OMB proposes to require
that Federal agencies must publicly announce funding opportunities for
all discretionary awards--not just those that will be openly competed.
Consistent with the definition of discretionary award and longstanding
practice, OMB also proposes to clarify that, as appropriate and
consistent with authorizing law, funding opportunities may allow for
open competition, limited competition, or selection on a non-
competitive basis. In addition, OMB also proposes to require that
applicants apply for awards using <a href="http://Grants.gov">Grants.gov</a> unless a program specific
exception is
[[Page 32212]]
expressly authorized by Federal statute or approved by the Federal
agency head (or designee). OMB also highlights the importance of
drafting NOFOs in plain language so that completing the application
generally does not require the applicant to employ technical or legal
experts. These proposed revisions streamline and standardize the
policies for Federal funding opportunities, while also promoting
transparency regarding the use of Federal tax dollars. In addition, the
proposed revisions reduce barriers for participation by promoting
greater accessibility for eligible applicants.
OMB also proposes to revise this section by adding a new paragraph
(c) regarding use of Statements of Interest (SOI). The proposed
paragraph encourages agencies to use SOIs as part of their NOFOs when
high application volume or lengthy proposals are expected. These
revisions are intended to reduce burden on applicants who would
otherwise prepare lengthy, resource-intensive proposals with little
chance of being selected for funding in some cases. The proposed
revision would also improve efficiency by focusing agency review on the
most competitive applicants.
OMB also proposes to revise the existing best practice that
executive summaries should not exceed 500 words. OMB proposes to make
this a requirement, but allow Federal agency heads (or their designee)
to authorize exceptions. This proposed revision would more consistently
provide applicants with a clear, concise overview of NOFOs while
maintaining agency flexibility when needed to communicate complex
opportunities. As a result, applicants will more often be able to
quickly assess whether a program is relevant before reading the entire
funding opportunity.
OMB also proposes to revise the requirement that opportunities be
posted for no less than 30 days unless the agency determines that
exigent circumstances exist. Under the proposed revision, agencies
would be required to include such a determination in the NOFO. This
proposed revision is intended to prevent unreasonably short application
windows that disadvantage certain applicants. The proposed revision
also promotes fairness, accountability by Federal agencies, and
adequate preparation time for applicants. As a result, applicants will
have a more predictable timeframe to prepare strong applications.
Lastly, OMB proposes several revisions related to the full text of
funding opportunities. Specifically, OMB proposes that Federal
agencies, when feasible, should strive to ensure that NOFOs are
accessible to a broad range of applicants, including those that have
not previously received Federal awards. In addition, OMB proposes a new
requirement that Federal agencies may be required to submit a report to
OMB detailing the specific recipients or types of recipients that
received Federal awards from the Federal agency over a specific time
period. These proposed revisions strengthen clarity and accessibility
obligations for agencies and provide OMB with oversight tools to ensure
funding is not inappropriately concentrated among a narrow set of
recipients.
Section 200.205--Federal Agency Review of Merit of Proposals
OMB proposes to revise Sec. 200.205 to strengthen requirements for
agency merit review and to establish a new pre-issuance review process
consistent with Executive Order 14332. Under the proposed requirements
for pre-issuance review, as part of the broader merit review process,
agencies must ensure that proposals selected for funding are consistent
with applicable law, Federal agency priorities, and the national
interest. Consistent with the Executive order, senior appointees must
conduct these reviews and apply specific principles when evaluating
proposals. These principles include ensuring that discretionary awards
advance the President's policy priorities, prohibit the use of funds
for discriminatory or otherwise impermissible purposes, and emphasize
ensuring compliance with applicable law. Additionally, the proposed
revisions encourage agencies to broaden the range of recipients,
prioritize institutions demonstrating rigorous and reproducible
scholarship, incorporate benchmarks for measuring performance of ``Gold
Standard Science,'' and direct agencies to weigh institutional
commitment to research integrity when making award decisions. Proposed
revisions in this section also clarify that peer review remains
advisory and does not replace agency discretion. Finally, the proposed
revisions clarify that agencies are not required to issue awards solely
as a result of issuing a NOFO. These proposed updates are intended to
enhance consistency across agencies, accountability, and alignment of
Federal awards with administration priorities, while also reducing the
risk of award being made contrary to statutory or policy requirements.
Section 200.206--Federal Agency Review of Risk Posed by Applicants
OMB proposes to revise Sec. 200.206(b)(2) to expand the list of
factors that agencies may consider when evaluating applicant risk. The
changes clarify that agencies may assess an applicant's financial
capacity to manage high-dollar awards, in addition to overall financial
stability. The revisions also clarify that prior performance must be
evaluated against the goals of the funding opportunity, and that both
positive and negative outcomes must be given equal weight. OMB also
proposes to add a provision that agencies may consider an applicant's
history of questionable practices based on publicly available and
verifiable information. In addition, OMB proposes to add a provision
that agencies may consider an applicant's compliance with foreign gift
and contract disclosure requirements, as applicable. Additionally, OMB
proposes a new provision that agencies may consider an applicant's
affiliations with organizations engaged in activities that violate
Federal law, undermine public safety or national security, or advocate
for the overthrow of the United States Government. Lastly, OMB proposes
a new provision that agencies should consider, as applicable, an
applicant's compliance with foreign gift and contract disclosure
requirements under section 117 of the Higher Education Act of 1965
(Pub. L. 89-329, as amended, codified at 20 U.S.C. 1011f). The proposed
revisions are intended to provide agencies with clearer authority to
evaluate financial and organizational capacity, integrity, and
institutional affiliations in order to mitigate risks and protect the
integrity of Federal programs.
Section 200.207--Standard Application Requirements
OMB proposes to revise Sec. 200.207 to clarify that Federal
agencies must periodically review programmatic and administrative
requirements specific to the agency, program, or award(s) to determine
whether such requirements are unnecessary and not required by this
part. Federal agencies should also update OMB annually on any such
requirements that have been removed.
Section 200.208--Specific Conditions
OMB proposes to revise Sec. 200.208 to clarify how agencies may
apply, adjust, and remove specific conditions under Federal awards. OMB
proposes to authorize agencies, subject to applicable law, to add or
remove specific conditions throughout the period of performance based
on the risk factors
[[Page 32213]]
identified in paragraph (c) or other factors associated with a
recipient or program.
A new requirement is proposed to require that any such adjustments
based on any of the factors listed in paragraph (c) must occur within
15 calendar days after the agency's determination. The existing
regulatory text already preserves the right of agencies to impose
specific conditions based on these enumerated factors, which recipients
knowingly accept when they agree to receive awards. OMB also proposes
to clarify that specific conditions not based on factors in paragraph
(c) may be added or removed during the period of performance only with
the agreement of the recipient.
In Sec. 200.208(d), OMB also proposes to expand the list of
examples of specific conditions to include requiring information on
payments to contractors or vendors, or financial integrity-related site
visits. These examples are intended to provide agencies with more
practical tools to address risk identified during the administration of
Federal awards.
At Sec. 200.208(f), OMB also proposes a new paragraph recognizing
that agencies may impose program-level specific conditions when
elevated programmatic risks are identified across a Federal program.
The proposed text explains that agencies may remove such conditions
once the underlying risks have been resolved, thereby allowing the use
of program-level conditions to remain tied to ongoing risk management
rather than continuing indefinitely. Collectively, these proposed
changes provide agencies with greater flexibility to manage risk during
award administration while establishing safeguards related to
transparency and fairness.
Section 200.211--Information Contained in the Federal Award
OMB proposes to revise Sec. 200.211 to clarify that Federal
agencies must always include the termination provisions under Sec.
200.340 in each Federal award or expressly incorporate them by
reference, and must inform recipients of any additional termination
provisions that apply to the award. This revision is intended to ensure
recipients are always clearly and unambiguously informed of the
potential for termination under Sec. 200.340, including termination
based on discretion of the Federal agency. OMB also proposes deleting
the reference to providing ``a copy of the terms and conditions'' to
the recipient upon request. This requirement is outdated given the
access that applicants and recipients now have to general terms and
conditions on the internet. To the extent that applicable general term
and conditions are not available on the internet, agencies would be
responsible for providing them to the recipient--typically in
electronic form--with the Federal award instrument. Federal agencies
would still be permitted to mail a hard copy of the terms and
conditions to recipients upon request even with removal of this
provision, but would not be required to provided that the recipient has
electronic access.
Section 200.216--Prohibition of Certain Equipment, Services, and
Systems
OMB proposes to revise Sec. 200.216 to incorporate a new legal
requirement related to the use of unmanned aircraft systems procured
with Federal financial assistance. First, OMB proposes amending the
section header to reflect a broader scope that continues to include,
but is no longer limited to, telecommunications and video surveillance.
A new paragraph (a) is proposed to appropriately frame the existing
prohibition on certain telecommunications and video surveillance
equipment or services. OMB also proposes removing the existing
paragraph (d). Although still technically a legal requirement,
considering that the statute has been in effect since 2020 and Federal
agencies are unlikely to still be funding a transition to different
systems, OMB considers this language to be outdated and no longer
necessary for express inclusion in 2 CFR.
OMB proposes to add a new paragraph (b) in Sec. 200.216 under the
header: ``Prohibition on procurement and operation of prohibited
unmanned aircraft systems.'' This paragraph will implement the
requirements of section 1825 of the American Security Drone Act of 2023
(Pub. L. 118-31). This statute prohibits Federal agencies from issuing
Federal financial assistance that results in the procurement of
unmanned aircraft systems prohibited by the Federal Acquisition
Security Council (FASC), and requires recipients and subrecipients to
implement specific safeguards and compliance measures for these
systems. The statutory requirements became effective on December 22,
2025. Thus, agencies, recipients, and subrecipients should be aware
that the statute already applies even before the proposed revision of
this section becomes final. See OMB Memorandum M-26-02 dated November
21, 2025, ``Ensuring Government Use of Secure Unmanned Aircraft Systems
and Supporting United States Producers.''
Section 200.218--Prohibition of Using Federal Awards To Promote or
Support Theories of Disparate-Impact Liability
OMB proposes a new Sec. 200.218 related to Executive Order 14281,
``Restoring Equality of Opportunity and Meritocracy.'' Consistent with
the Executive order, this section proposes to establish a government-
wide policy in 2 CFR regarding use of Federal financial assistance to
promote or support theories that impose disparate-impact liability
based on federally protected characteristics such as race, sex, or age.
OMB proposes to direct agencies and pass-through entities, to the
maximum extent permitted by law, to ensure that awards are administered
in a manner that does not promote or support theories of disparate-
impact liability, including by not issuing terms, conditions, or
guidance that would advance theories of disparate-impact liability.
Recipients and subrecipients are also directed to avoid using Federal
award funds for this purpose unless expressly required by law. OMB
proposes to recognize an exception related to analysis for internal use
if the activities are not funded by the Federal award and not used in
connection with activities under the award. OMB proposes a definition
of disparate-impact liability to ensure clarity and consistency. The
proposed definition is generally consistent with the Executive order.
These proposed revisions are intended to align government-wide
administration of Federal financial assistance with administration
policy and to reinforce the principle that merit-based opportunity--
rather than theories of disparate-impact liability or other forms of
unlawful discrimination based on race or other protected
characteristics--will govern the administration of Federal awards.
The legal authority for this section (hereinafter referred to as
the ``Disparate-Impact Provision'') is similar to the authority for
including the unlawful DEI provision in Sec. 200.300, as both are
generally intended to prevent discrimination on the basis of federally
protected characteristics. To limit repetition in this preamble, OMB
includes further analysis of the Disparate-Impact Provision under Sec.
200.300 in connection with the unlawful DEI provision, including
analysis of legal authority and related considerations.\66\
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\66\ See also 90 FR 57141 (Dec. 10, 2025) (rule amending DOJ's
implementing regulations for Title VI of the Civil Rights Act of
1964 to remove disparate-impact provisions); DOJ Press Release of
Dec. 9, 2025, ``Department of Justice Rule Restores Equal Protection
for All in Civil Rights Enforcement.''
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[[Page 32214]]
Section 200.219--Prohibition of Discriminatory Event Services
To ensure that Federal funds are not used, directly or indirectly,
to subsidize violations of the First Amendment of the U.S. Constitution
involving suppression of free speech of disfavored groups, OMB proposes
a new Sec. 200.219. The proposed provision would establish in the
regulatory text that public entities that are a recipient or
subrecipient of Federal financial assistance must not discriminate on
the basis of the viewpoint, content, or subject matter of speech--
including on the basis of political, ideological, or religious
affiliation or perspective--in providing services for events, meetings,
or other expressive activities. This requirement would ensure that
public entities do not improperly use control over facilities or
services to disadvantage or suppress the speech of disfavored groups.
The proposed text further provides that it applies regardless of
whether an event is directly funded by the Federal award if it occurs
on property or facilities under the control of the public entity. As
public entities are subject to the First Amendment in their own right,
this broad application is constitutionally permissible.\67\
---------------------------------------------------------------------------
\67\ See, e.g., Christian Legal Soc. Chapter of the Univ. of
California, Hastings Coll. of the L. v. Martinez, 561 U.S. 661
(2010) (holding that public universities may adopt neutral,
generally applicable access rules but cannot invoke their own
expressive autonomy to exclude disfavored viewpoints); Bd. of
Regents of Univ. of Wisconsin Sys. v. Southworth, 529 U.S. 217
(2000) (holding that viewpoint neutrality is mandatory when
distributing student activity funds).
---------------------------------------------------------------------------
The proposed additions are intended to prevent public entities from
using Federal funds--including indirect costs used for buildings and
facilities--in a discriminatory manner. This requirement would further
ensure that public entities receiving Federal awards do not use their
control over facilities or services to disadvantage disfavored groups,
such as colleges and universities charging additional fees--sometimes
referred to as ``heckler's fees''--to provide security for conservative
speakers.\68\ Consistent with the First Amendment, the proposed
language should not be construed to prohibit public entities from
enforcing content- and viewpoint-neutral time, place, and manner
restrictions, or from applying reasonable, viewpoint-neutral
restrictions in nonpublic forms. If finalized, public entities must not
seek to evade these requirements through pretextual or post hoc forum
classifications.
---------------------------------------------------------------------------
\68\ See, e.g., Young America's Foundation Press Release, ``YAF
Wins Landmark Free Speech Lawsuit, UC Berkeley To Pay $70,000 And
Rescind Unconstitutional Policies,'' Dec. 3, 2018.
---------------------------------------------------------------------------
The proposed language in Sec. 200.219 is not intended to alter the
allowability of costs under subpart E, including costs associated with
speakers or events. Rather, it would require that any fees, security
costs, or other charges imposed in connection with events be applied in
a viewpoint-neutral and consistent manner.
OMB also proposes to clarify application to non-public entities. To
ensure that Federal funds are not used in a manner inconsistent with
the First Amendment, OMB proposes to apply the requirements of
paragraph (a) to non-public entities to the extent that the relevant
activities are within the scope of a Federal program under which the
non-public entity accepts a Federal award. Applying the prohibition to
activities within the scope of a Federal program does not present
constitutional concerns under the First Amendment, provided that the
Federal agency does not seek to leverage funding to regulate speech
outside the contours of the Federal program.\69\ By knowingly accepting
such a Federal award, the recipient or subrecipient acknowledges its
ability to perform the federally funded activities in a manner
consistent with law and its own constitutional rights. For example, if
a non-public recipient or subrecipient agrees to accept a Federal award
that includes hosting a public forum, it must comply with the terms and
conditions of the Federal award in a viewpoint-neutral manner.
---------------------------------------------------------------------------
\69\ See, e.g., Agency for Int'l Dev. v. All. for Open Soc'y
Int'l, Inc., 570 U.S. 205 (2013) (holding that, as a general matter,
if a party objects to limits imposed by a grant, its recourse is to
decline the funds).
---------------------------------------------------------------------------
Proposed paragraph (b) must be implemented in full accordance with
the U.S. Constitution. Outside of performance of award activities, the
proposed revision must not be construed to require a non-public entity
to make its property, facilities, or services available for speech,
expression, or events in a manner that would either directly violate
its First Amendment rights or otherwise require access or association
that would constitute compelled speech or association under the U.S.
Constitution. Consistent with law, a Federal agency may consider
adjusting the terms and conditions of a Federal award to a non-public
entity to clarify the application of this provision and to ensure that
performance of required award activities can proceed consistent with
law.
Section 200.220--Prohibition of Using Federal Funds for Covered Foreign
Collaborations
To protect the national security interests of the United States and
to ensure consistent implementation of longstanding statutory
restrictions, OMB proposes a new Sec. 200.220 to prohibit the
obligation or expenditure of Federal funds to support certain foreign
collaborations involving covered foreign countries or covered foreign
entities.
Some Federal statutes direct Federal agencies to restrict the use
of appropriated funds for bilateral or multilateral activities with
foreign adversaries and entities affiliated with foreign military or
intelligence services. Most notably, section 1340 (a) of the
``Department of Defense and Full-Year Continuing Appropriations Act''
for fiscal year 2011 (Pub. L. 112-10) (commonly referred to as the
``Wolf Amendment'') prohibited the National Aeronautics and Space
Administration and the Office of Science and Technology Policy from
using appropriated funds to develop, design, plan, promulgate,
implement, or execute any bilateral policy, program, order, or contract
of any kind to participate, collaborate, or coordinate bilaterally with
China or any Chinese-owned company, absent specific statutory
authorization. The Wolf Amendment has continued to apply as a rider in
subsequent annual appropriations acts.\70\
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\70\ See, e.g., Public Law 117-103, sec. 526, which applied to
the National Aeronautics and Space Administration (NASA), the Office
of Science and Technology Policy (OSTP), and the National Space
Council (NSC).
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Federal financial assistance is frequently awarded through grants,
cooperative agreements, and subawards that may support collaborative
research, technical assistance, or programmatic activities involving
foreign entities. While the Wolf Amendment only applies directly to
specific agencies and appropriations, OMB proposes to find that a
uniform regulatory standard, providing consistent application of these
restrictions across Federal assistance programs, would reduce risk
related to national security and program integrity for all agencies and
the Federal Government as a whole.
The proposed Sec. 200.220 establishes a government-wide baseline
rule prohibiting recipients and subrecipients from using Federal funds
to support bilateral or multilateral collaborations, agreements,
programs, or activities with covered foreign countries or covered
foreign entities, unless expressly authorized by Federal statute or
[[Page 32215]]
approved by the Federal agency in accordance with the proposed
exception authority and applicable law. This provision is intended to
ensure that Federal financial assistance is not used, directly or
indirectly, to support activities that may pose a risk to U.S. national
security, defense, or intelligence interests. Congress has expressly
determined that such a risk exists in the case of some agencies.
The prohibition would apply regardless of whether Federal funds are
used for direct programmatic activities, research, technical
assistance, travel, or indirect costs allocable to such collaborations.
This approach would ensure that restrictions on foreign collaboration--
including those expressly required by law--are not circumvented through
the structure of funding mechanisms or cost allocation practices.
The proposed rule also provides for limited exceptions where
expressly authorized by Federal statute or where the head of the
Federal agency (or designee) determines that the activity does not pose
a risk to national security and is in the national interest of the
United States. These exceptions are intended to preserve necessary
agency discretion while ensuring that any departure from the general
prohibition is subject to appropriate senior level review and
accountability at grantmaking agencies. This provision does not
prohibit recipients from engaging in foreign collaborations using non-
Federal funds.
Subpart D--Post Federal Award Requirements
Section 200.300--Statutory and National Policy Requirements
OMB proposes to revise Sec. 200.300 to streamline existing
references to legal and policy obligations. OMB also proposes to
supplement Sec. 200.300 to reflect key administration policies and
priorities.
1. Executive orders and Executive Branch guidance. In January 2025,
President Trump issued a series of Executive orders (EOs) establishing
a government-wide policies to, consistent with applicable law, end
Federal funding for unlawful DEI programs, promotion of ``gender
ideology,'' and the so-called ``transition'' of a child under 19 years
of age from one sex to another. These include Executive Order 14151 of
January 20, 2025, ``Ending Radical and Wasteful Government DEI Programs
and Preferencing'' (DEI Executive Order); \71\ Executive Order 14173 of
January 21, 2025, ``Ending Illegal Discrimination and Restoring Merit-
Based Opportunity'' (Ending Discrimination Executive Order); \72\
Executive Order 14168 of January 20, 2025, ``Defending Women from
Gender Ideology Extremism and Restoring Biological Truth to the Federal
Government'' (Gender Ideology Executive Order); \73\ and Executive
Order 14187 of January 28, 2025, ``Protecting Children from Chemical
and Surgical Mutilation'' (Protecting Children Executive Order). The
President later issued Executive Order 14281 of April 23, 2025,
``Restoring Equality of Opportunity and Meritocracy'' (Restoring
Equality Executive Order).
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\71\ 90 FR 8339.
\72\ 90 FR 8633.
\73\ 90 FR 8650.
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On March 21, 2025, the Department of Justice (DOJ) issued guidance
to all Federal agencies regarding implementation of EOs 14151 and 14173
(March 2025 DOJ Guidance).\74\ Subsequently, on July 29, 2025, DOJ
issued additional guidance regarding unlawful discrimination (July 2025
DOJ Guidance).\75\ The July 2025 DOJ Guidance was intended to ensure
that recipients of Federal funding do not engage in unlawful
discrimination.\76\ In particular, it clarified that Federal
antidiscrimination laws apply to programs or initiatives that involve
discriminatory practices, including those labeled as DEI programs.
Entities that receive Federal funds, like all other entities subject to
Federal antidiscrimination laws, must ensure that their programs and
activities comply with Federal law and do not discriminate on the basis
of race, color, national origin, sex, religion, or other protected
characteristics--no matter the program's labels, objectives, or
intentions. DOJ's guidance emphasized the significant legal risks of
initiatives that involve discrimination based on protected
characteristics and offered non-binding best practices to help entities
that receive Federal funds avoid the risk of violations and the
revocation of Federal grant funding.\77\ On September 12, 2025, OMB
issued Memorandum M-25-33, which instructed agencies to follow the July
2025 DOJ Guidance when managing Federal programs and overseeing
recipients of Federal funding. Most recently, on December 2, 2025,
DOJ's OLC released an opinion finding that certain race-based grant
programs administered by the Department of Education violate the Fifth
Amendment's equal-protection component.\78\
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\74\ DOJ Memorandum of March 21, 2025, ``Implementation of
Executive Orders 14151 And 14173: Eliminating Unlawful DEI Programs
in Federal Operations.''
\75\ DOJ Memorandum of July 29, 2025, ``Guidance for Recipients
of Federal Funding Regarding Unlawful Discrimination'' (``July 2025
DOJ Guidance'').
\76\ DOJ Press Release of Jul. 30, 2025, ``Justice Department
Releases Guidance for Recipients of Federal Funding Regarding
Unlawful Discrimination.''
\77\ For additional Executive Branch guidance regarding
application of Federal anti-discrimination laws, see also U.S. Equal
Employment Opportunity Commission (EEOC) Letter to the Fortune 500
Companies Regarding Title VII Compliance Related to DEI Initiatives,
Feb. 26, 2026; and EEOC Questions and Answers about ``What You
Should Know About DEI-Related Discrimination at Work,'' <a href="https://www.eeoc.gov/wysk/what-you-should-know-about-dei-related-discrimination-work">https://www.eeoc.gov/wysk/what-you-should-know-about-dei-related-discrimination-work</a> (last visited April 14, 2026).
\78\ Constitutionality of Race-Based Dep't of Educ. Programs,
2025 WL 4055305 (Dec. 2, 2025).
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2. Proposed revisions. OMB, in consultation with DOJ and other
agencies, proposes to amend paragraph (b) of Sec. 200.300, to provide
that, in administering Federal awards, to the maximum extent permitted
by law, the Federal agency or pass-through entity must ensure that the
Federal award is not used to fund, promote, encourage, subsidize, or
facilitate:
<bullet> ``Diversity, equity, and inclusion'' (DEI) or ``diversity,
equity, inclusion, and accessibility'' (DEIA) policies, principles, or
practices that violate any applicable Federal anti-discrimination laws.
This includes racial preferences or other forms of racial
discrimination used by the recipient or subrecipient that violate any
applicable Federal anti-discrimination laws, including activities where
race or intentional proxies for race will be used as a selection
criterion for employment or program participation (the ``Unlawful DEI
Provision'');
<bullet> Gender ideology as defined in Executive Order 14168.
Gender ideology includes theories or ideologies that deny the
biological reality of sex or the sex binary in humans, or endorse or
advocate for the notion that sex is a chosen or mutable characteristic
(the ``Gender Ideology Provision''); or
<bullet> The so-called ``transition'' of a child under 19 years of
age from one sex to another, including the chemical and surgical
mutilation of children. The term ``chemical and surgical mutilation''
has the meaning provided in Executive Order 14187 (the ``Protecting
Children Provision'').
The qualifier ``to the maximum extent permitted by law'' is
intended to ensure that Federal agencies give due consideration to
applicable authorizing legislation for their programs when applying
this provision. As discussed above, OMB also proposes a related
[[Page 32216]]
provision at Sec. 200.218 (the ``Disparate-Impact Provision'').
The existing language in paragraph (a) of Sec. 200.300 already
provides that the Federal agency or pass-through entity ``must manage
and administer the Federal award in a manner so as to ensure that
Federal funding is expended and associated programs are implemented in
full accordance with the U.S. Constitution'' and ``applicable Federal
statutes and regulations,'' including ``those prohibiting
discrimination.'' The proposed amendments would clarify and emphasize
specific applications of that principle consistent with direction in
the President's EOs and recent DOJ guidance. In addition, the proposed
revisions would also reinforce that use of Federal funds must remain
properly aligned with core public purposes authorized by law, not
diverted to subsidizing radical political ideologies, harmful
experimentation on American children,\79\ or unlawful discrimination.
---------------------------------------------------------------------------
\79\ White House Fact Sheet of Apr. 28, 2025, ``Report to the
President on Protecting Children from Surgical and Chemical
Mutilation Executive Summary.''
---------------------------------------------------------------------------
OMB also proposes to add revised language in Sec. 200.300(a)
clarifying that, in managing and administering Federal awards, no
person otherwise eligible will be excluded from participation in,
unlawfully denied the benefits of, or otherwise subjection to unlawful
discrimination in the administration of Federal programs, activities,
projects, assistance, and services. Such non-discrimination language
would encompass requirements, as applicable, not to discriminate on
various bases, including race, color, national origin, disability, sex,
religion, or conscience.
OMB also proposes to amend paragraphs (b) and (c) of the 2024
version of Sec. 200.300 to remove commentary on the Supreme Court's
decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020). OMB
proposes to find that this commentary is unnecessary within the
government-wide regulatory text, and no longer consistent with
Administration policy. The Gender Ideology Executive Order explained at
section (3)(f) that the prior Administration's position regarding
Bostock v. Clayton County is legally untenable and has harmed women.
The order also directed the Attorney General to issue guidance to
agencies to correct the misapplication of the Supreme Court's decision,
and to assist agencies in protecting sex-based distinctions. The Acting
Associate Attorney General issued guidance to the DOJ Civil Rights
Division on February 12, 2025 clarifying DOJ's position regarding
Bostock v. Clayton County (``February 2025 Bostock Memo''). Consistent
with the February 2025 Bostock Memo and the July 2025 DOJ Guidance,
Federal agencies may decide what additional guidance, if any, to
provide recipients of Federal financial assistance regarding the
Supreme Court's decision in Bostock v. Clayton County. To the extent
additional government-wide guidance regarding the decision is provided
in the future, it would most likely come from the Attorney General or
the Civil Rights Division at DOJ.
Finally, OMB proposes to add a new paragraph (c) regarding non-
discrimination against faith-based organizations. The proposed
paragraph (c) provides that Federal agencies and pass-through entities
may not discriminate against or in favor of an applicant on the basis
of the organization's religious character, affiliation, exercise, or
lack thereof, nor on the basis of conduct that would not be considered
ground to favor or disfavor a similarly situated secular organization.
It also provides that faith-based organizations are eligible to apply
for Federal financial assistance on the same basis as any other
organization. It also explains that applicants that meet all
eligibility requirements may be considered for a Federal award under a
notice of funding opportunity.
In both the existing and proposed versions of Sec. 200.300(a), the
examples of laws applicable to Federal awards include ``religious
liberty [laws] . . . and those [laws] prohibiting discrimination.'' All
Federal agencies must comply with the Religious Freedom Restoration Act
(RFRA) (42 U.S.C. 2000bb, et seq.) and any applicable statutes
prohibiting discrimination on the basis of religion or protecting the
exercise of conscience. The First Amendment, RFRA, and applicable
statutes prohibiting discrimination based on religion or protecting the
exercise of conscience require Federal agencies, pass-through entities,
recipients, and subrecipients to respect the exercise of religion. This
includes considering and providing reasonable accommodations or
exemptions for religious or conscience-based objections as required by
law.\80\ Where such legal protections apply, Federal agencies, pass-
through entities, recipients, and subrecipients should not structure
internal procedures in a way that would require discretionary case-by-
case approval of requests for an accommodation or exemption.\81\
Federal agencies, pass-through entities, recipients, and subrecipients
should be aware of their ongoing statutory obligations regarding
religious liberty and conscience. The proposed revision of Sec.
200.300 is intended to clarify that conscience and religious liberty
are protected under multiple statutes and the Federal Government will
enforce such statutes as applicable.
---------------------------------------------------------------------------
\80\ See, e.g., Burwell v. Hobby Lobby Stores, Inc., 573 U.S.
682 (2014) (holding that RFRA requires the government to use the
least restrictive means when substantially burdening religious
exercise).
\81\ A ``case-by-case exemption procedure leaves religious
organizations unable to predict their legal exposure'' and does not
``further[ ] any compelling antidiscrimination interests.'' Catholic
Benefits Ass'n v. Kennedy, No. 3:23-cv-00203-PDW-ARS (D.N.D. June 5,
2025), Dkt. 78 at 14. See also Catholic Benefits Association, ``CBA
Permanently Protected from Federal Gender Transition Mandates,''
Jun. 9, 2025.
---------------------------------------------------------------------------
Recent and ongoing litigation regarding some of the topics
addressed in Sec. 200.300 indicates the need for a clear regulatory
framework reflecting administration policy that can be uniformly
applied by Federal agencies to recipients of Federal financial
assistance. By engaging in N&C rulemaking, OMB seeks to provide clarity
regarding government-wide policies, consider public input, and arrive
at a final policy that is consistent with law, including longstanding
legal principles applicable to Federal financial assistance.
3. Authorities of OMB and agencies. OMB's legal authorities for
this rulemaking are discussed in various sections of this preamble, and
need not be repeated here at length. Generally, OMB relies on
authorities including 31 U.S.C. 503 and 31 U.S.C. 6307 to establish
government-wide policies and requirements related to the management of
Federal financial assistance across all Federal agencies. These
provisions authorize OMB to set uniform conditions on Federal awards to
ensure that Federal funds are expended in accordance with U.S. law and
policy.
In addition, Congress has broadly authorized Federal agencies--
including those participating in this rulemaking--to enforce Federal
nondiscrimination laws in their assistance programs. Recipient of
Federal financial assistance must comply with applicable civil rights
laws, including Title VI of the Civil Rights Act of 1964, Title VII of
the Civil Rights Act of 1964, Title IX of the Education Amendments of
1972, and the Equal Protection Clause of the Fourteenth Amendment.\82\
OMB's statutory authority includes coordinating such cross-cutting
requirements as applied to
[[Page 32217]]
administration of Federal financial assistance.
---------------------------------------------------------------------------
\82\ See July 2025 DOJ Guidance.
---------------------------------------------------------------------------
In designing assistance programs and making new Federal awards, it
is both permissible and required for Federal agencies to review
proposed uses of funds to ensure they remain aligned with Congressional
intent, and are not improperly diverted to subsidizing activities that
fall outside of public purposes authorized by law--especially if those
activities conflict with key administration policies expressed in EOs.
The use of Federal funds must always remain consistent with the purpose
of appropriations and the authorizing program statutes of the Federal
agency. See, for example, 31 U.S.C. 1301(a) (commonly referred to as
the ``Purpose Statute''). The Federal Grants and Cooperative Agreements
Act of 1977--which authorizes OMB to provide government-wide guidelines
``to promote consistent and efficient use'' of grants and cooperative
agreements--also recognizes that Federal awards must be used to ``carry
out a public purpose of support or stimulation authorized by law.'' 31
U.S.C. 6304, 6305, and 6307. Federal agencies are not required to
subsidize activities that fall outside of the core public purposes of
the programs they administer. OMB is not aware of Federal laws that
expressly require funding the relevant activities referenced in the
proposed regulatory text of Sec. 200.300. Multiple Federal statutes,
however, support not funding them, including Federal nondiscrimination
laws and other laws referenced in relevant EOs and the July 2025 DOJ
Guidance.
The EOs discussed above also provide further indication of
Executive Branch policy relevant to these proposals to be implemented
consistent with law. While EOs themselves do not supersede statutes,
they guide Executive Branch polices and actions where discretion exists
under statute. Here, OMB and the participating agencies are using their
discretion to shape financial assistance policy consistent with
applicable law and the clear direction from the President provided in
the recent EOs. Similar to the EOs, the proposed rule expressly
includes the qualifier ``to the maximum extent permitted by law'' to
recognize that particular assistance programs could have purposes,
requirements, or limitations affecting application of this provision--
although, as discussed below, that generally should not occur based on
the way OMB has designed the proposed regulatory text.
The proposed revisions in Sec. 200.300 are consistent with
relevant authorizing laws. By defining public purposes for particular
assistance programs, Congress certainly afforded executive agencies
with authority to condition Federal awards to only be used for those
congressionally-sanctioned purposes, and not for extraneous ideological
activities inconsistent with anti-discrimination laws or Executive
Branch policy. Discretion to attach award conditions can be analyzed by
reference to both authorizing legislation for particular assistance
programs and other government-wide legislation that applies to all
assistance programs, such as Federal anti-discrimination laws and OMB's
authorities related to providing coordinated requirements for the
management and administration of Federal financial assistance across
the Federal Government.
Based on the authorities of OMB and agencies summarized above,
Congress has afforded the Executive Branch discretion to establish the
proposed provisions, which ensure that award funds are used solely for
authorized public purposes and not for other extraneous activities that
conflict with anti-discrimination laws or Executive Branch policy.
Unlike a hypothetical award condition designed to induce recipients to
undertake activities unrelated to the underlying purposes of a
particular Federal award program, these provisions are designed to
ensure that Federal funds are only used for authorized public
purposes--not ideological side missions that are misaligned with
Federal law and policy, including program goals and objectives as
designed by Federal agencies in accordance with law. Activities
performed under Federal awards must be aligned with both relevant
legislation for assistance programs and the discretionary design of
those programs by Federal agencies within legislative bounds. Under the
proposed text, OMB will clarify that award funds must not be used in
support of activities that violate Federal anti-discrimination laws,
promote divisive ideologies unrelated to program goals and objectives,
or are otherwise unrelated to Federal agency's discretionary design of
programs to satisfy core public purposes authorized by law.
4. Clear and unambiguous incorporation in award agreements. By
codifying the provisions in 2 CFR, and incorporating them in new award
agreements, applicants and recipients will be provided with clear and
unambiguous notice of their applicability. The Supreme Court has
explained that if ``Congress intends to impose a condition on the grant
of federal [funds], it must do so unambiguously.'' Pennhurst State Sch.
& Hosp. v. Halderman, 451 U.S. 1, 17 (1981). The Court has further
explained that ``Congress must express clearly its intent to impose
conditions on the grant of federal funds so that the States can
knowingly decide whether or not to accept those funds.'' Id. at 24. The
Pennhurst notice principle also generally applies to an executive
agency's discretionary decision to impose conditions on awards based on
its discretion available under law. By defining these parameters in the
regulatory text of 2 CFR based on the statutory authorities outlined
above, OMB and the participating agencies will further ensure that such
conditions are unambiguously incorporated by the Federal agencies in
award agreements.
The formal codification of the principles in regulation will
eliminate any ambiguity for the Federal grants community regarding what
conditions apply to Federal awards on these topics. Following issuance
of a final rule, a recipient will have no basis to claim that it was
unaware that, for example, DEI practices that violate Federal anti-
discrimination laws, such as disparate treatment on the basis of race
or sex, would jeopardize its Federal funding. Even under the existing
version of OMB's guidance, there is already little or no basis for such
claims considering that the relevant principles arise under long-
standing anti-discrimination statues already referenced in the
regulatory text, governing constitutional principles, and binding
Supreme Court precedent. See, for example, Students for Fair
Admissions, Inc. v. President & Fellows of Harvard Coll., 600 U.S. 181
(2023) (``Students for Fair Admissions''). The principles were also
recently highlighted and reinforced by a series of high-profile
Presidential EOs and guidance documents from DOJ. Following formal
codification of these principles in 2 CFR through issuance of a final
rule, OMB will make these conditions even more clear and unambiguous to
all applicants for and recipients of financial assistance. This
promotes fairness, as all applicants will know the rules upfront when
applying for and accepting new awards. It will also avoid the ``unfair
surprise'' concerns discussed in Pennhurst and similar cases.
5. Spending Clause framework. The proposed revisions are also
consistent with established jurisprudence related to the Spending
Clause. In South Dakota v. Dole, the Supreme Court outlined the
framework governing the authority of Congress under the Spending Clause
to attach funding conditions to Federal award programs. 483 U.S. 203
(1987). Under this framework, a funding
[[Page 32218]]
condition must: (1) promote ``the general welfare;'' (2) be clear and
unambiguous so that recipients can ``knowingly'' accept the term; (3)
be reasonably related ``to the federal interest in particular national
projects or programs'' at issue (or ``reasonably calculated'' to
support ``a purpose for which the funds are expended''); (4) not induce
recipients to engage in activities ``that would themselves be
unconstitutional;'' and (5) not be unduly coercive such that ``pressure
turns into compulsion.'' Id., at 207-11 (quotations omitted). Because
executive authority to attach funding conditions to assistance awards
is derived from the enactment of legislation by Congress, evaluating
executive authority to attach such conditions also generally involves
consideration of this framework. The proposed amendment of Sec.
200.300 is well within the bounds of the framework provided in Dole.
First, the proposed revision promotes the general welfare by
ensuring that Federal funds are not used to undermine the U.S.
Constitution or Federal anti-discrimination laws, to support divisive
ideologies misaligned with core purposes of discretionary assistance
programs and Executive Branch policy, or to harm minors. Ensuring that
Federal tax dollars are only used for purposes authorized by the
Federal Government--and not for extraneous ideological missions
unrelated to Federal awards--certainly promotes the general welfare.
Second, the proposed rule is designed to clearly define the
prohibited activities in the regulatory text of 2 CFR and Federal
awards made after its effective date. This satisfies the requirement to
allow recipients to ``knowingly'' accept the provisions. See also
Pennhurst, 451 U.S., at 17. Further discussion of the Pennhurst notice
principle as applied to Sec. 200.300 is provided in the immediately
preceding section of this analysis.
Third, the amended provision is designed to ensure that activities
preformed under a Federal award remain aligned with the ``federal
interest'' in particular appropriations and program statutes. See also
New York v. United States, 505 U.S. 144, 167 (1992) (grant ``conditions
must (among other requirements) bear some relationship to the purpose
of the federal spending''). In other words, the provision seeks to
ensure that Federal funds are only used for the core public purposes
for which the funds are expended, and not for illegal discrimination or
promoting divisive ideologies or harmful practices. The provision would
further ensure that activities carried out under Federal awards are
reasonably related to the Federal interest in the project or program at
issue, and not improperly diverted to other activities or ideological
initiatives unrelated to the purposes authorized by Congress and
implemented by discretion of the Executive Branch. There is a strong
Federal interest in ensuring that award activities do not drift away
from authorized public purposes into activities that conflict with key
Executive Branch policies expressed in Presidential Executive orders
and reflected in program design by agencies. Thus, preventing
violations of nondiscrimination laws, avoiding circumstances in which
Federal award funds are improperly used to support divisive ideologies
misaligned with core public purposes authorized by law, and protecting
the health and safety of children are all Federal interests applicable
to all discretionary assistance programs.
To the extent that some as-yet unidentified assistance program
expressly required performance of such activities without violating the
U.S. Constitution, the proposed qualifier ``to the maximum extent
permitted by law'' could apply in those circumstances. The government-
wide presumption, however, would be that Federal financial assistance
programs will not be designed or administered by Federal agencies to
support such activities, which are not expressly authorized by Congress
and conflict with Executive Branch policy. All statutes must be
administered in accordance with the U.S. Constitution and Federal anti-
discrimination laws, and OMB is not aware of legislation establishing
an entitlement to funds for the purposes of unlawful discrimination,
promoting ``gender ideology'' as defined by Executive Order 14168, or
assisting in the so-called ``transition'' of a child from one sex to
another as discussed in Executive Order 14187.
Fourth, the proposed revisions do not induce unconstitutional
conduct. On the contrary, the Unlawful DEI Provision and related
Disparate-Impact Provision at Sec. 200.218 align with the
Constitution's equal protection principles by clarifying that Federal
awards may not be used to support activities involving unlawful
discrimination based on protected characteristics--as discussed in more
detail in section 8.a below. Regarding the Protecting Children
Provision, no court has recognized a constitutional entitlement to such
procedures, and certainly not at the public expense. Moreover, with
regard to all provisions, the proposed regulatory text for this
rulemaking merely says that Federal award funds may not be used for
certain defined activities--which will generally fall outside of the
authorized public purposes a particular award program is intended to
support--without attempting to more broadly regulate other activities
beyond the scope of the Federal award.
Fifth and finally, the proposed revision is not unduly coercive. An
applicant or prospective recipient may simply opt out of particular
Federal award or program if it cannot manage to design its project or
program in a way that does not violate Federal anti-discrimination laws
or use Federal funds to promote gender ideology or assist in sex-
transition procedures for minors.
6. Permissibility under the First Amendment. The proposed revisions
also do not implicate free speech concerns under the First Amendment.
All of OMB's proposed revisions related to national policy are merely
providing clear notice to applicants for, and recipients of, Federal
awards that, unless expressly required by law, executive agencies do
not intend to use their discretionary authority to fund these
categories of activities. As such, the proposed provisions do not
infringe on protected speech--they merely set parameters for Federal
funding or subsidization of speech, clarifying that the Federal
Government will not subsidize certain categories of ideological
activities. All executive agencies have received clear policy direction
through the President's Executive orders and other executive actions,
which they will follow in their administration of discretionary award
programs. The proposed provisions only apply to activities performed
under the federally funded award programs, and do not penalize or
scrutinize recipients' speech outside of the Federal award.
The Supreme Court has long been clear that the First Amendment
provides the government significant flexibility when it acts as patron
to subsidize speech under Federal spending programs, as opposed to when
it acts as sovereign to regulate speech beyond the scope of such
programs. The distinction that has emerged from the Supreme Court
regarding whether a funding condition may result in an unconstitutional
burden on First Amendment rights is between: (i) conditions that define
the limits of the government spending program by specifying the
activities the Federal Government wants to subsidize; and (ii)
conditions that seek to leverage funding to regulate speech outside the
contours
[[Page 32219]]
of the Federal program itself. Agency for Int'l Dev. v. All. for Open
Soc'y Int'l, Inc., 570 U.S. 205, 206, 215-15 (2013). The ``decision not
to subsidize the exercise of a fundamental right does not infringe the
right.'' Regan v. Taxation with Representation of Washington, 461 U.S.
540, 549 (1983). The government is permitted to make a value judgment
regarding the public interest and ``implement that [value] judgment by
the allocation of public funds.''' Rust v. Sullivan, 500 U.S. 173, 192-
93 (1991) (quoting Maher v. Roe, 432 U.S. 464, 474 (1977)). Thus, when
acting as a patron to subsidize speech--using discretion to fund
certain activities under a Federal program and not others--the
government can choose which activities to fund without implicating
concerns under the First Amendment. ``[C]ho[osing] to fund one activity
to the exclusion of the other'' is permissible. National Endowment for
the Arts v. Finley, 524 U.S. 569, 588 (1988) (citation omitted). The
``Government can, without violating the Constitution, selectively fund
a program to encourage certain activities it believes to be in the
public interest.'' Rust at 193. Conversely, the government is not
required to subsidize activities that it does not wish to promote. Id.
Constitutional concerns arise only when the Federal Government is using
the funding to affect speech beyond the scope of the federally-funded
spending program. See also California ex rel. Becerra v. Azar, 950 F.3d
1067, 1093 n.24 (9th Cir. 2020) (``The Supreme Court has repeatedly
reaffirmed . . . that the government may constitutionally preclude
recipients of federal funds from addressing specified subjects so long
as the limitation does not interfere with a recipient's conduct outside
the scope of the federally funded program.'').
The proposed revisions to Sec. 200.300 are focused on activities
within the scope of federally-funded programs. In the previous
administration, executive agencies frequently chose to subsidize and
expressly prioritize projects based on their ideological alignment with
the categories of activities discussed in the proposed version of Sec.
200.300. See, for example, E.O. 13985, sec. 1, 86 FR 7009, 7009 (Jan.
25, 2021) (``It is therefore the policy of [the Biden] Administration
that the Federal Government should pursue a comprehensive approach to
advancing equity . . . .''). In this administration, executive agencies
will continue to use their discretionary authorities in a manner
consistent with current Executive Branch policy. If executive agencies
were entitled to subsidize those types of activities during the
previous administration, there is no constitutional basis to prevent
the government from reaching a different policy determination regarding
which activities to fund during this administration. For the purposes
of the proposed regulatory text for this rulemaking--which is all that
is relevant to this analysis--the government does not propose to deny
recipients the right to pursue such activities outside of activities
performed under their Federal awards. In the context of Federal grants
administration, OMB and Federal agencies propose to make a
constitutionally permissible decision not to subsidize those activities
with Federal funds unless expressly required by law. The First
Amendment does not require providing taxpayer resources to support,
promote, or advocate for policies that the government finds are not in
the public interest. Selective government funding that leaves private
entities free to express themselves as they wish outside of Federal
award activities, and using their own resources, does not implicate
concerns under the First Amendment.
7. Permissibility under equal protection principles. The proposed
revisions are permissible under the equal protection component of Fifth
Amendment's Due Process Clause. The revisions provide clear notice that
the government will not fund these categories of activities, but do not
direct agencies to take actions that discriminate on the basis of
protected characteristics such as race or sex.
First, the Unlawful DEI and Disparate-Impact Provisions seek to
ensure that unlawful discrimination is not permitted to continue in the
future. For example, the Equal Protection doctrine rejects the notion
that the Constitution permits--let alone requires--the Government to
``intentionally allocate preference to those who may have little in
common with one another but the color of their skin.'' See Students for
Fair Admissions, 600 U.S. 181, 200 (2023) (citation and quotation
omitted). OMB's intent in proposing these provisions is to prevent
unlawful discrimination from occurring under federally-funded programs.
Further discussion of the Unlawful DEI provision is provided in section
8.a below.
Second, the Gender Ideology and Protecting Children provisions
distinguish between the concept of biological ``sex'' and other
amorphous concepts associated with gender ideology. These provisions
give notice that executive branch agencies will no longer use their
discretionary authorities to subsidize projects or activities promoting
gender ideology, including those seeking to replace the concept of
biological ``sex'' with a divisive, unstable, and subjective concept of
``gender identity.'' The previous administration attempted to impose
this contentious concept on all members of the American public through
various funding streams, including by reinterpreting Federal sex-
discrimination statutes for this purpose.\83\ In doing so, it promoted
and subsidized activities that diminished the rights, dignity, safety,
and well-being of women; infringed on fundamental religious liberties;
and caused life-long harm to vulnerable children. See Gender Ideology
Executive Order, secs. 1 and 2; Protecting Children Executive Order,
sec. 1. Pursuant to the President's Executive orders, the Executive
Branch no longer wishes to endorse the ideological doctrine that
``sex'' and self-assessed ``gender identity'' are interchangeable. The
proposed revisions direct agencies to ensure that, to the extent
permitted by law, Federal money is no longer used to fund programs or
projects that violate Federal antidiscrimination laws or promote gender
ideology.
---------------------------------------------------------------------------
\83\ See, e.g., Rachel N. Morrison, ``Gender Identity Policy
Under the Biden Administration,'' Federalist Society Review, May 2,
2022.
---------------------------------------------------------------------------
The Supreme Court's recent decision in United States v. Skrmetti,
605 U.S. 495 (2025) is instructive in relation to the Gender Ideology
and Protecting Children provisions. The Supreme Court evaluated a
Tennessee law prohibiting medical interventions for ``gender dysphoria,
gender identity disorder, or gender incongruence'' in minors. Id. at
495-7. The Skrmetti plaintiffs argued that the law ``discriminates on
the basis of sex and transgender status'' and could not withstand
intermediate scrutiny. Id. at 520. The Supreme Court rejected these
arguments and upheld Tennessee's law on rational-basis review. It first
held that Tennessee's law does not classify based on sex because it
``does not prohibit conduct for one sex that it permits for the
other.'' Id. at 497. Rather, the prohibition turns on the treatment of
``gender dysphoria'' and ``applies regardless of a minor's sex.'' Id.
at 511.
The same principle holds true for the proposed 2 CFR revisions. The
proposed regulatory text gives notice that Federal funding will no
longer be used to subsidize or promote the doctrine that sex and
``gender identity'' are interchangeable concepts--or other activities
based on that doctrine such as harmful medical procedures performed
[[Page 32220]]
on children. The notice regarding the Executive Branch's funding
priorities does not discriminate on the basis of the sex of any group
or individual. Rather, it applies equally to all.
8. Analysis of specific national policy provisions.
a. Unlawful DEI Provision (and related Disparate-Impact Provision).
The proposed restriction on funding for unlawful DEI activities is
based on the obligation of every Federal grant recipient to comply with
Federal anti-discrimination laws as a condition of receiving Federal
funds. See July 2025 DOJ Memorandum. Expressly stating this condition
at Sec. 200.300--and the related provision at Sec. 200.218--is
consistent with Federal law and well within OMB's authority to clarify
and coordinate award conditions used by the Federal Government.
Government-wide coordination is needed to ensure that recipients of
Federal awards do not continue to engage in unlawful discrimination. In
recent years, the Federal Government has ``turned a blind eye toward,
or even encouraged, various discriminatory practices.'' \84\ For
example, some recipients have adopted unlawful DEI initiatives or
practices that include providing benefits or opportunities based on
race or sex; imposing race-conscious quotas or objectives under a
variety of names, labels, or proxies; or conducting training sessions
that endorse and encourage racial stereotyping and scapegoating,
promote unlawful discrimination, or create a hostile environment.\85\
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\84\ July 2025 DOJ Guidance.
\85\ See examples of unlawful discriminatory policies and
practices in July 2025 DOJ Guidance.
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The Supreme Court's decision in Students for Fair Admissions
reaffirmed that racially discriminatory practices are unlawful even if
labeled as promoting ``diversity'' or ``equity.'' 600 U.S. 181
(2023).\86\ Executive Order 14173 explains that ``the Federal
Government is charged with enforcing our civil-rights laws'' and states
plainly that the purpose of the order is to ensure that the Federal
Government now fulfills that responsibility ``by ending illegal
preferences and discrimination.'' Consistent with Supreme Court
precedent interpreting civil-rights statutes, protecting and enforcing
civil rights includes ensuring that Federal funds are not used to
support unlawful discrimination based on protected characteristics.\87\
This rule reflects that principle and is intended to promote equal
treatment consistent with the purposes of Federal civil-rights law.
Similar principles are reaffirmed in the July 2025 DOJ Guidance and the
OLC opinion dated December 2, 2025.\88\
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\86\ Specifically, the Court held that racial classifications by
public institutions are subject to strict scrutiny and racial
classifications by private institutions can serve as basis for
revoking funding under Title VI. See also, e.g., Ricci v. DeStefano,
557 U.S. 557, 579 (2009) (``[E]xpress, race-based decision-making
violates Title VII's command that employers cannot take adverse
employment actions because of an individual's race.''); Wtolo u.
Guzman, 999 F.3d 353,361 (6th Cir. 2021) (holding grant program with
race and sex preferences is unlawful under Equal Protection Clause).
\87\ EO 14281, sec. 1.
\88\ 2025 WL 4055305 (Dec. 2, 2025).
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The proposed provisions at Sec. Sec. 200.300 and 200.218 are
consistent with the Federal Government's commitment to treat every
American with equal dignity and respect discussed in Executive Order
14151, the principle of merit-based opportunity discussed in Executive
Order 14173, and the principles regarding unlawful discrimination
discussed in the July 2025 DOJ Guidance. The proposed provisions will
provide clear notice to all recipients of the need to ensure that their
programs and activities comply with Federal law and do not discriminate
on the basis of race, color, national origin, sex, religion, or other
protected characteristics--no matter the program's labels, objectives,
or intentions. The proposed provisions benefit both recipients and the
Federal Government by promoting consistency, transparency, and fairness
through a uniform award condition. The provisions will put recipients
on clear notice that such practices constitute a material breach of the
Federal award, and further strengthen the government's rights to
recover misused funds or terminate awards based on noncompliance.\89\
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\89\ Additional grounds for terminating awards are also
available under the existing and proposed versions of regulatory
text in part 200.
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Based on other public comments, OMB anticipates that some
commenters for this rulemaking may contend that the Unlawful DEI
Provision is excessively vague or open to misinterpretation, including
by suggesting that it could be read to prohibit lawful activities under
Federal awards that do not discriminate based on protected
characteristics such as race or sex. Commenters should focus their
attention on the regulatory text proposed in this document, which would
prohibit Federal agencies from using Federal awards to ``fund, promote,
encourage, subsidize, or facilitate . . . policies, principles, or
practices that violate any applicable Federal anti-discrimination
laws.'' This proposed text does not expand the scope of applicable
statutes. Rather, consistent with OMB's authorities to establish
government-wide policies for the administration of Federal financial
assistance, the proposed text clarifies how those requirements apply in
the context of Federal awards and the responsibilities of agencies and
recipients under part 200. It also reflects the established function of
implementing regulations and the terms and conditions of Federal awards
in ensuring that Federal financial assistance is administered and used
in a manner consistent with statutory requirements and governing
constitutional principles.
The July 2025 DOJ Guidance provides illustrative examples of
practices that may violate underlying anti-discrimination statutes
depending on the facts and circumstances of particular matters. The
guidance reflects the longstanding Executive Branch practice of issuing
interpretive guidance regarding the application of Federal anti-
discrimination statutes in specific contexts. Whether a violation
exists in any particular case would continue to be determined by
reference to the governing legal standards under applicable anti-
discrimination laws as interpreted in light of controlling Supreme
Court precedent.
Consistent with longstanding Executive Branch practice, OMB's
interpretation of Federal anti-discrimination laws in the context of
this proposed rulemaking is informed in part by guidance issued by DOJ
regarding the application of those laws. The principles and
illustrative examples discussed in the July 2025 DOJ Guidance provide
additional context regarding the application of those laws in certain
circumstances. OMB's interpretation is also informed by the Supreme
Court's decision in Students for Fair Admissions, which addresses the
application of Federal anti-discrimination statutes in light of
constitutional equal protection principles, and by the December 2, 2025
OLC opinion addressing the administration of Federal programs
consistent with statutory requirements and governing limitations under
the U.S. Constitution. Thus, commenters may also review those sources
in reviewing and responding to this document.
OMB believes the regulatory text provides sufficient clarity
regarding prohibited forms of discrimination, but seeks comment on
whether the final rule should include additional discussion or
elaboration in the regulatory text or preamble. The proposed regulatory
text explains that
[[Page 32221]]
unlawful DEI would include, for example, racial preferences or other
forms of racial discrimination used by the recipient or subrecipient
that violate any applicable Federal anti-discrimination laws, including
circumstances in which race or intentional proxies for race are used as
a selection criterion for employment or program participation. This
example is not exhaustive, but reflects a major category of conduct
addressed by the Supreme Court in Students for Fair Admissions. Thus,
the proposed regulatory text clarifies that Federal awards may not be
used to support activities involving disparate treatment based on
protected characteristics under applicable law, including race or
intentional proxies for race. Commenters may also consider the
definitions and model contract clause set forth in E.O. 14398 of March
26, 2026, ``Addressing DEI Discrimination by Federal Contractors,'' and
provide input regarding whether any similar language would be
appropriate or informative in the context of this rulemaking, such as
language further clarifying the application of disparate treatment
standards in connection with activities under Federal awards.\90\ OMB
also seeks comment on whether such additional discussion or elaboration
would be helpful to recipients and subrecipients in meeting their
obligations under part 200 for activities carried out under Federal
awards, including their internal control responsibilities under Sec.
200.303. In addition, OMB seeks comment on whether further
clarification would be helpful regarding the relationship between Sec.
200.300 and other provisions of part 200--including Sec. 200.204,
Sec. 200.211, Sec. 200.303, and Sec. 200.403--as well as the
relationship between those provisions and the terms and conditions of
Federal awards issued by Federal agencies pursuant to this proposed
rulemaking.
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\90\ E.O. 14398 applies to Federal procurement contracts and
contract-like instruments.
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Executive Branch agencies have long issued government-wide and
program-specific regulations and guidance interpreting Federal civil
rights requirements as applied to recipients of Federal financial
assistance. This proposed rulemaking continues that established
practice by clarifying how existing nondiscrimination requirements
apply within the scope of Federally-funded activities. Consistent with
longstanding Executive Branch practice, OMB seeks to ensure that
Federal financial assistance is not used by recipients or subrecipients
for discriminatory policies or practices, including those that
discriminate based on a person's protected characteristics.
Although DOJ's guidance is described as non-binding, OMB and
Federal agencies intend to clarify through this N&C rulemaking process
how applicable anti-discrimination laws apply to Federal financial
assistance programs. Recipients and subrecipients should be aware that
discriminatory practices already present compliance risks under
existing anti-discrimination laws enforced by the Executive Branch.\91\
In light of the clarification provided through recent Executive Branch
guidance--which would be given regulatory effect through this N&C
rulemaking--recipients and subrecipients should not assume that
practices previously viewed as consistent with prior Executive Branch
guidance will necessarily satisfy applicable Federal anti-
discrimination requirements as applied to Federal awards. Recipients
and subrecipients should evaluate existing policies and practices in
reference to the legal standards reflected in this rulemaking and the
applicable anti-discrimination laws discussed above. Following issuance
of a final rule, the policy proposed in this document will have
regulatory effect as part of the government-wide regulations for
Federal financial assistance set forth in 2 CFR.
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\91\ See, e.g., July 2025 DOJ Guidance.
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b. Gender Ideology Provision. The proposed restriction on funding
the promotion of gender ideology is based on ensuring that Federal
awards are only used for public purposes authorized by law. Within
legislative bounds, Federal agencies must also design their assistance
programs and funding opportunities to be consistent with Executive
Branch policy.
The Federal Government has no obligation to provide taxpayer funds
to promote divisive and harmful ideologies. On the contrary, it has
compelling reasons not to do so. As explained in Executive Order 14168,
government-sponsored efforts ``to eradicate the biological reality of
sex'' harm women by ``depriving them of their dignity, safety, and
well-being.'' Various commenters have explained how such efforts also
do significant harm to public trust in government.\92\ Rather than
continuing to waste Federal funds in support of divisive gender
ideologies, which harm women, have a corrosive effect on public trust
in Federal grantmaking agencies, infringe on religious liberties, and
fall outside of specifically enumerated purposes of authorizing
legislation, the Federal Government should instead refocus its efforts
more squarely on using Federal awards for core purposes authorized by
law. Discretionary awards must also be channeled through an agency's
careful design of programs and funding opportunities for consistency
with both law and, where applicable, administration policy
priorities.\93\ Ending government-sponsored promotion of divisive
gender ideology is critical to scientific inquiry, public safety, and
trust in government.\94\
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\92\ See, e.g., Sarah Parshall Perry, ``The Uprising: Families
Clash with Schools Over LGBTQ Propaganda,'' Heritage Foundation,
Jun. 22, 2023; Emilie Kao, ``Safeguarding Parental Rights and
Protecting Children from Federally Mandated Gender Ideology.''
Heritage Foundation Backgrounder No. 3744, Jan. 10, 2023; Carl R.
Trueman, ``Gender Ideology and the Future of the Human Person.''
Heritage Foundation, Mar. 20, 2023.
\93\ EO 14332, sec. 4(b).
\94\ EO 14168.
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Consistent with the principles outlined in Executive Order 14168,
the proposed provision will provide clear notice to recipients that
promoting gender ideology is not something that the Federal Government
wishes to fund as part of any Federal program. The proposed rule
ensures that federally appropriated award funds--which are intended for
purposes like education, research, and health--are not improperly
diverted to purposes outside of the program's approved scope as
designed by Federal agencies consistent with authorizing law. Again,
the proposal benefits both recipients and the Federal Government by
establishing government-wide consistency through a uniform and
transparent provision. Recipients will receive clear notice that using
Federal award funds for unauthorized purposes related to promoting
gender ideology will constitute a material breach of the Federal award,
and the government's rights to recover misused funds or terminate
awards based on noncompliance will be further strengthened.\95\
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\95\ Additional grounds for terminating awards are also
available under the existing and proposed versions of regulatory
text in part 200.
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c. Protecting Children Provision. The proposed restriction on
funding the so-called ``transition'' of a child under 19 years of age
from one sex to another is also based on ensuring that Federal awards
are only used for authorized public purposes. Within legislative
bounds, Federal agencies must also design their assistance programs and
funding opportunities to align with administration policy priorities.
[[Page 32222]]
This provision is also based on a compelling public welfare
justification. As discussed in Executive Order 14187, ``maiming and
sterilizing a growing number of impressionable children under the
radical and false claim that adults can change a child's sex through a
series of irreversible medical interventions'' is a practice with
``destructive and life-altering'' consequences that ``will be a stain
on our Nation's history.'' The Federal Government has an obligation to
avoid subsidizing what it considers to be unethical and unsafe
practices with profound consequences on the lives and well-being of
American children. Sex-rejecting procedures performed on children with
profound and life-altering consequences fall in this category.
Executive Order 14187 explained that a growing number of minors soon
regret that they have undergone such procedures and begin to recognize
the physical, financial, and psychological consequences that will
follow them for the rest of their lives. The Executive Order labeled
these interventions ``chemical and surgical mutilation'' of children,
which reflects the administration's conclusion that such activities are
not legitimate healthcare warranting government financial support, but
rather harmful experimentation on minors, which must end.
The legal basis for the prohibition is straightforward: there is no
right or entitlement to receive these procedures at the public expense
under Federal law, and the Federal Government will not--and has no
legal obligation to--provide funding for them. The proposed rule does
not deny any person a constitutional or statutory right because there
is no such right under Federal law. For all of the reasons set forth in
Executive Order 14187, the Federal Government has determined that
providing assistance for such sex-rejecting procedures on children is
not in the public interest--and it will not do so.\96\
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\96\ See also HHS Gender Dysphoria Report of November 19, 2025,
``Treatment for Pediatric Gender Dysphoria: Review of Evidence and
Best Practices.''
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Consistent with the principles outlined in Executive Order 14187,
the proposed provision will provide clear notice to recipients that the
Federal Government will not provide funding for these practices. Once
again, the proposal benefits both recipients and the Federal Government
by establishing government-wide consistency through a uniform and
transparent provision. Recipients will receive clear notice that using
Federal award funds for these purposes will constitute a material
breach of the Federal award, and the government's rights to recover
misused funds or terminate awards based on noncompliance will be
further strengthened.\97\
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\97\ Additional grounds for terminating awards are also
available under the existing and proposed versions of regulatory
text in part 200.
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9. Conclusion. OMB is aware that it is changing existing policy in
Sec. Sec. 200.300 and 200.218, but proposes to find that these changes
are warranted for all of the reasons described in this document. The
existing language in paragraph (a) of Sec. 200.300 already provides
that the Federal awarding agency must manage and administer Federal
awards in full accordance with U.S. law. OMB's proposed revisions
related to unlawful discrimination clarify and emphasize specific
applications of that principle consistent with underlying statutory
authorities and recent policy direction from the Executive Branch
regarding implementation and enforcement of those statutes. OMB's
proposed changes in this section are also designed to ensure that
Federal funds are only used for core public purposes authorized by law
and the terms and conditions of Federal awards, and not for other
extraneous activities that conflict with key Executive Branch policies
and priorities.
OMB recognizes that the factual findings in this document are
inconsistent with certain factual findings and policy positions that it
offered to support revisions of Sec. 200.300 in 2024. OMB has provided
a reasoned explanation above regarding its rationale for the new
policies. OMB invites comments on the rationale provided in this
document in relation to reasons that supported OMB policies in 2024 or
earlier years. OMB will respond to such comments in the final rule.
Section 200.303--Internal Controls
OMB proposes a clarification in Sec. 200.303(e) regarding
confidential business information. Specifically, OMB proposes to
include confidential business information as a type of information that
a recipient or subrecipient must take reasonable cybersecurity and
other measures to safeguard.
In Sec. 200.303(a), OMB also proposes to delete the statement that
internal controls should align with the guidance in ``Standards for
Internal Control in the Federal Government'' issued by the Comptroller
General of the United States or the ``Internal Control-Integrated
Framework'' issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The U.S. Government Accountability Office
(GAO)--under the Direction of the Comptroller General--is a legislative
branch agency; its views regarding internal controls are not binding on
Executive Branch regulations applicable to recipients and subrecipients
of Federal awards. COSO is a private-sector organization. Directing
recipients and subrecipients to follow dynamic standards issued by
organizations outside of the Executive Branch is inconsistent with
Administration policy and the longstanding notice and comment
procedures used by OMB for updates to 2 CFR. See 2 CFR 1.230. OMB
cannot--and does not desire to--delegate rulemaking authority to GAO or
COSO regarding standards for internal control used by recipients and
subrecipients of Federal financial assistance. This revision will
clarify that the GAO and COSO frameworks do not apply to recipients or
subrecipients as binding or expressly recommended standards. Federal
agencies, auditors, recipients, and subrecipients may continue to
consider these or other widely recognized frameworks as general
reference points when evaluating the adequacy of internal controls.\98\
OMB is only proposing to clarify that recipients and subrecipients have
some degree of reasonable discretion regarding how to establish,
document, and maintain effective internal control in ways that may not
be fully consistent with the GAO or COSO frameworks. Recipients and
subrecipients would not be required to adopt or follow any specific
framework issued by these external organizations.
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\98\ As authorized by the Federal Managers' Financial Integrity
Act (FMFIA) of 1982 (Pub. L. 97-255), as amended and codified at 31
U.S.C. 3512(c) and (d), and the Government Performance Results Act
(GPRA) Modernization Act of 2010 (Pub. L. 111-352), OMB recently
issued a revised framework for internal control applicable to
Federal agencies through a revised version of OMB Circular No. A-123
(Mar. 10, 2026). This framework does not apply directly to the
recipients and subrecipients of Federal awards, but illustrates
internal control principles used across Federal programs by the
Federal Government.
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OMB proposes to add Sec. 200.303(f) to require all recipients and
subrecipients of Federal financial assistance to participate in the
Department of Homeland Security's E-verify program to confirm the
employment eligibility of employees and contractors hired in or
performing work in the United States under a Federal award. This
additional safeguard would be implemented as part of the internal
control responsibilities of the recipient or subrecipient. The Federal
Government has applied the E-
[[Page 32223]]
verify program to Federal contractors for over 15 years.\99\ OMB is now
proposing to expand the application of the E-verify program to Federal
financial assistance programs based on its government-wide financial
management authorities discussed above. Although OMB is proposing to
expand application of the program, the requirements under the program
would otherwise apply in accordance with applicable Federal law and DHS
program requirements. For entities and activities to which the E-Verify
participation program is applied, OMB does not propose to alter
existing exceptions or limitations recognized in DHS program
requirements based on DHS authorities. OMB also does not propose to
apply the
[…truncated; see source link]Indexed from Federal Register on May 29, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.