The federal government is not finished tightening its expectations for grant recipients. On May 29, 2026, the Office of Management and Budget published a proposed rule in the Federal Register — Document No. 2026-10817 — that would revise the Regulation for Federal Financial Assistance, the foundational rule at 2 CFR Part 200 governing how federal grants, cooperative agreements, and other forms of assistance are managed across the entire federal enterprise.
If this proposed rule becomes final, it will affect every organization that receives, manages, or passes through federal financial assistance. Universities, nonprofits, state and local governments, tribal entities, and healthcare organizations all operate under 2 CFR Part 200. The proposed revisions — organized around transparency, accountability, and oversight — would require most of these organizations to revisit policies, procedures, and internal controls they may have just updated following the October 2024 revision.
The comment period closes approximately July 28, 2026. Here is what you need to understand before that window shuts.
What Is the Regulation for Federal Financial Assistance?
Most compliance professionals know this rule by its older name: the "Uniform Guidance." Codified at 2 CFR Part 200, it establishes government-wide policies for the administrative requirements, cost principles, and audit requirements that apply to federal awards. It is the single most consequential regulatory document for any organization receiving federal financial assistance.
The federal government distributes approximately $1 trillion in grants and cooperative agreements each year through more than 26 federal agencies. Every dollar of that spending is subject to the requirements of 2 CFR Part 200.
The regulation has evolved significantly since its original publication in December 2014. The 2020 revision added updates to procurement requirements and risk management. The October 2024 revision — the most recent prior update — formally renamed the regulation from "Uniform Guidance" to "Regulation for Federal Financial Assistance," introduced enhanced performance management requirements, and refined several cost principles. Organizations spent much of fiscal year 2025 adapting to those changes.
The May 2026 NPRM proposes to build on that foundation. OMB's framing is direct: taxpayer dollars must be used as intended, and the regulatory framework should make it harder to waste or misuse federal funds. In my view, organizations that read this as a policy statement should understand it will be backed by audit activity.
What the 2026 Proposed Revisions Would Change
The proposed rule addresses several areas of 2 CFR Part 200, clustered around four themes.
Greater Transparency in Fund Use
The proposed revisions would strengthen reporting requirements to give federal agencies — and the public — clearer visibility into how federal assistance funds are being spent. OMB appears to be moving toward a standard that connects specific expenditures to measurable outcomes, making it harder for recipients to report compliance without demonstrating genuine results.
For organizations that rely on broad cost allocation narratives in their financial reports, this is a meaningful shift. The evidentiary bar is moving.
Stricter Accountability for Award Recipients
The proposed rule signals a tightening of accountability standards, particularly around internal controls and procurement documentation. Organizations will likely need to demonstrate not just that controls exist, but that controls function — a distinction that matters enormously in a federal audit.
This also extends to matching fund arrangements, where federal assistance is used alongside non-federal contributions. The documentation burden for these arrangements appears to be increasing.
More Prescriptive Subrecipient Monitoring
Pass-through entities — organizations that receive federal awards and flow funds to subrecipients — face what appear to be the most significant proposed changes. The proposed rule would strengthen requirements for subrecipient risk assessment, monitoring frequency, and documentation of monitoring activities.
In my experience working with pass-through entities, subrecipient monitoring is almost always the weakest link in the compliance chain. Organizations often have solid controls for their own operations but thin, underdocumented processes for verifying that subrecipients are spending federal funds correctly. This proposed rule appears designed to close that gap, with more prescriptive standards replacing the current risk-based approach that gives recipients considerable latitude.
Anti-Waste and Anti-Misuse Provisions
The proposed rule also includes provisions specifically targeting waste and misuse of federal assistance dollars. This aligns with the current administration's stated priorities around government efficiency and fiscal accountability. The specific mechanisms will become clearer once the full text is analyzed, but the direction is unambiguous: OMB intends to use regulatory tools — not just audit findings — to deter misuse before it occurs.
Grant recipients who rely on informal or underdocumented cost justifications should treat this proposed rule as an early warning system. The informal practices that have survived prior audit cycles may not survive what comes next.
Who Is Affected
Every organization receiving federal financial assistance is affected. Some face more immediate exposure than others.
| Organization Type | Primary Risk Area | Urgency |
|---|---|---|
| Universities and research institutions | Indirect cost rates, subrecipient monitoring | High |
| Nonprofit organizations | Internal controls, procurement documentation | High |
| State and local governments | Pass-through oversight, matching documentation | High |
| Tribal governments | Compliance framework design, reporting systems | High |
| For-profit entities with federal awards | Cost principles, conflict of interest disclosures | Medium-High |
| Healthcare organizations with federal funding | Performance reporting, cost allocation | Medium |
| Small community organizations | Administrative requirements, audit thresholds | Medium |
Organizations that expend $750,000 or more in federal awards during a fiscal year are already subject to the Single Audit requirements under 2 CFR Part 200 Subpart F. The proposed revisions are unlikely to reduce that threshold, and may expand the scope of what auditors examine.
Critical Dates and Deadlines
- Proposed Rule Published: May 29, 2026 (Federal Register Document No. 2026-10817)
- Comment Period Closes: Approximately July 28, 2026 (standard 60-day window — verify exact date in the Federal Register notice)
- Anticipated Effective Date: To be determined after finalization; OMB typically allows 90–180 days between a final rule's publication and its effective date for complex rulemakings
This is a proposed rule. It is not yet final. Organizations have a genuine opportunity to influence the outcome by submitting substantive comments before the deadline. OMB reads and responds to public comments in the preamble of the final rule — the final version sometimes reflects material changes from the proposed version based on what affected organizations said.
Current vs. Proposed: Key Areas at a Glance
| Area | Current Standard (Post-2024 Revision) | Proposed Direction (2026 NPRM) |
|---|---|---|
| Transparency | Outcome reporting tied to performance goals | Enhanced disclosure linking expenditures to results |
| Internal Controls | Standard COSO-aligned framework required | Tighter documentation; proof of design and effectiveness |
| Subrecipient Monitoring | Risk-based monitoring with significant flexibility | More prescriptive standards; updated risk assessment frequency |
| Cost Principles | Established allowable cost criteria | Tighter justification thresholds for certain cost categories |
| Pass-Through Obligations | Requirements documented in award terms | Expanded due diligence obligations for pass-through entities |
| Anti-Waste Provisions | General prohibition on misuse | Specific anti-waste mechanisms; potential new reporting triggers |
The 2024 revision was a significant compliance lift for most organizations. This proposed rule suggests OMB intends to continue raising the floor — not stabilize it.
Practical Compliance Guidance: What to Do Right Now
I have helped more than 200 organizations navigate federal regulatory changes and prepare for federal audits, with a 100% first-time audit pass rate across those engagements. The organizations that struggle with new compliance requirements share a common trait: they waited for a final rule before starting to prepare.
Here is what I recommend doing before July 28, 2026 — and certainly before any final rule is published.
Read the Proposed Rule and Its Preamble
Pull Federal Register Document No. 2026-10817 from federalregister.gov. The preamble — the explanatory text before the regulatory language — often tells you more about how OMB will interpret ambiguous provisions than the regulatory text itself. This is where OMB explains its reasoning, and that reasoning helps you predict where auditors will focus during your next review cycle.
Conduct a Gap Assessment Now
Compare your current policies, procedures, and internal controls against the proposed changes. Identify gaps — especially in subrecipient monitoring, internal controls documentation, and cost allocation methodologies. This is not a one-afternoon exercise. Budget a week or more depending on the complexity of your award portfolio. Organizations with multiple awards across multiple federal agencies should treat this as a program-level review, not a document review.
Audit Your Subrecipient Monitoring Program
If you are a pass-through entity, look critically at your monitoring processes. Are risk assessments documented and current? Are monitoring activities happening and being recorded? Are subrecipient financial reports being received, reviewed, and acted on? Under the proposed rule, the expectation appears significantly tighter. Start closing gaps before a federal program officer does it for you.
Document Your Internal Controls
Many organizations have controls that work but are poorly documented. That gap does not survive a federal audit. Controls need to be written down, tested, and demonstrably effective. The proposed rule appears to raise the evidentiary bar on this point — "we have a control for that" is not the same as "here is documented evidence that the control operated effectively."
Submit a Comment
If specific proposed changes would impose unnecessary burden, create operational impossibilities, or would fail to achieve their stated policy objective, say so in writing. Submit substantive comments at regulations.gov before the comment deadline. Comments from affected organizations — particularly those backed by specific operational examples — carry real weight in the rulemaking process. A well-reasoned comment from a nonprofit managing a complex, multi-award portfolio is far more persuasive than a generic objection filed at the last minute.
Draft Updated Policies Now
You do not need to wait for a final rule to begin revising your policies. Draft changes that align with the proposed direction. When the final rule lands, you will be weeks ahead of organizations that haven't started. Policy drafts can always be refined once the final rule clarifies specific language.
Talk to Your Federal Auditor
If you are subject to Single Audit requirements, your auditor already has a view on where OMB's expectations are heading. Federal auditors often see emerging priorities before they appear in final regulatory text. That conversation is worth having now.
The gap assessment that takes three weeks before a final rule is published takes three months after an audit finding. Auditors do not award credit for good intentions or plans to improve.
The Broader Context: Why This Keeps Happening
This proposed rule does not exist in isolation. It reflects a sustained policy trajectory — across administrations, with different emphases but the same direction — toward tighter accountability for federal assistance spending. The current administration's focus on government efficiency has accelerated the timeline and sharpened the language, but the underlying movement was already underway.
Organizations that have treated prior 2 CFR Part 200 revisions as one-time compliance exercises — check the box, update the policy binder, file it away — are going to find each subsequent revision more difficult and more expensive. The ones building genuine compliance infrastructure right now — real internal controls, real subrecipient monitoring programs, real documentation cultures — will find each revision a smaller lift.
That is the practical difference between compliance as a posture and compliance as a practice. One looks good until an auditor arrives. The other holds up.
Certify Consulting helps organizations navigate evolving federal compliance requirements — from initial gap assessments to audit preparation. If you are working through what this proposed rule means for your award portfolio, visit certify.consulting to learn more about our federal compliance consulting services. Organizations managing federal compliance alongside quality management system obligations may also find our ISO and regulatory certification consulting relevant — the internal control gaps federal auditors find most often are the same ones that surface in ISO gap assessments.
Last updated: 2026-06-15
Jared Clark
Principal Consultant, Certify Consulting
Jared Clark is the founder of Certify Consulting, helping organizations achieve and maintain compliance with international standards and regulatory requirements.