The Rules for Federal Grants Are Being Rewritten. Is your nonprofit ready?
By Maddy Bynes-DeVaney, MPP
Most nonprofit leaders have never read the Uniform Guidance, and honestly most don't need to. It's a dense federal rulebook that sits quietly in the background of every federal grant, and most state and local grants too. This rulebook tells grantees what costs are allowable, how to report those costs, how to handle subawards, and what happens if something goes drastically wrong.
Though changes to the Uniform Guidance are somewhat standard - for instance in 2024 the guidance was changed to increase the de minimis indirect cost rate from 10% to 15%, increase the single audit threshold from $750,000 to $1 million, increase the equipment threshold from $5,000 to $10,000, and mandate that grant announcements had to be made in plain language - this year the changes proposed by the Trump Administration are unprecedented. In May, the White House Office of Management and Budget (OMB) proposed rewriting this guidance from top to bottom. The changes, if implemented, could impact how federal grants are awarded, what you can spend them on, and how easily they can be taken away.
The rewrite is paused for now, but only until December 11. Whether you receive federal funds directly or through your state, county, or larger partners, here's what you need to know and what you can do to advocate.
What is the Uniform Guidance?
The Uniform Guidance, which is formally in 2 CFR Part 200, is the government-wide set of rules of federal grants and cooperative agreements. It covers nonprofits, universities, states, local governments, and tribal nations. It governs everything from how you recover overhead costs to how agencies write grant announcements.
But you might be thinking, "well, I don't receive federal funding." The rub is that you don't have to apply to a federal agency to be covered by the Uniform Guidance. If your funding comes from a state contract, a county program, or a subaward from a larger nonprofit, and those dollars started as federal dollars, then these rules travel to you with the money. This would include Area Agencies on Aging, community health programs, workforce providers, housing organizations, youth programs, and so many more.
In other words, if any part of your budget traces back to federal funding, then these rule changes apply to you.
What is in the proposed changes?
The proposed rule, published May 29, 2026 by OMB and roughly 40 federal grantmaking agencies, run more than 400 pages! Here is a bit of a summary so that you don't have to read the whole document.
The rules politicize federal grant making. Senior political appointees would review discretionary awards before they're issues, to check with alignment with administration priorities. This usurps Congressional authority. For instance, if the administration is opposed to funding LGBTQIA+ initiative, then Congressionally approved funding from Ryan White might be heavily impacted.
Agencies could end a grant if they decide to no longer serve program goals, agency priorities, or the national interest (which is not defined in the rule). This makes grant funding more unreliable and unsustainable for nonprofit organizations. This provision would give the federal government the authority to end or change grant agreements and funding arrangements mid-award.
Federal funds could not be used to influence state executive-branch policy making, support voter registration, or fund issue advocacy unrelated to grant purposes. This both directly contradicts some federal policies (including the Older Americans Act) and puts additional restrictions on nonprofits outside of the lobbying restriction placed on nonprofits through the IRS.
There are new conditions that restrict activities related to DEI or other affirming care. Specifically, the rule focuses on eliminating programming that targets LGBTQIA+, Black, Hispanic/Latino, and Indigenous communities.
Where Things Stand
The public responded in force! Over half a million comments were submitted and an overwhelming majority of them were in opposition to the rule change. Concern came from both parties, with the Senate Appropriations Chair, Susan Collins warning that the rule would politicize the grant making process.
As a result, in September, Congress hit pause on the changes, passing a short-term funding bill that would bar OMB from finalizing or implementing this rule or anything similar prior to December 11, 2026.
The White House and OMB have not withdrawn their proposal and they are not likely to give up on the proposal. We need Congress to continue to extend the block on implementation to protect nonprofits. Until the final rule is published, the current Uniform Guidance still applies. So don't change your compliance practices just yet.
How Should You Plan?
First and foremost, don't panic! We still have a lot of time for advocacy and intervention from Congress. That said, here are some practical things you can do to be prepared for this change in guidance.
Map out every funding source. Many of the funding opportunities that nonprofits receive may not be directly from the federal government, but may have federal money tied to it. Map out each grant source you have and trace the dollar back. If it is a state grant, is that funding coming from the State's general fund or is it pass through of federal dollars controlled by the state. This takes some practice and time. If you need help in mapping out your funding, we are here to help!
Know your current grant terms. For every award, know your terms and conditions. What is the termination clause, what are the reporting requirements, are there any restrictions on advocacy or communications? You can't plan for a change if you don't know where you're starting from.
Stress test your budget. Ask yourself (or do this as an executive team): What would we do if one federal award ended mid-year with little notice? Identify which programs have the most risk and what you'd project both budgetarily and programmatically first. Share this plan with your Board of Directors to ensure that if there is an emergency and you need to act quickly that you already have stakeholder buy in.
Diversify your funding! Foundation, corporate, individual, and local government general fund dollars don't carry these same federal conditions. Building out a diversified pipeline takes time, so starting now is critical.
Separate your advocacy and grants budgets. Advocacy on behalf of your community and the people you serve is a critically important part of fulfilling your nonprofit's mission. Make sure it's clearly funded with unrestricted dollars and documented property so that it cannot be confused with grant funded activities.
Tighten up your documentation. Under any version of the rules, clear records of outcomes and spending are your best protection. If any agency questions whether a grant still "serves program goals," strong data showing results is your answer.
Talk to your elected officials! Congress already has concerns. Tell your Members of Congress how important it is to have predictable federal partnerships to make your important work possible and what this instability would mean for the people you serve.
We're Here to Help
Whatever happens after December 11, the organizations best position will be ones that understand their federal exposure, have options beyond federal dollars and can provide their impact. The work we do every day at Bynes Consulting Group helps to get you there:
Federal compliance planning: mapping your funding, reviewing award terms, and building contingency plans.
Grant strategy and writing: diversifying your funding with foundation, corporate, and non-federal funding sources.
Advocacy consulting: talking points, stories, and nonpartisan outreach to both sides of the aisle.
Program evaluation and design: creating sustainable systems, processes, procedures, and data analysis to show impact not just outcomes.
Systems and quality: outcome measures and dashboards that document your results.
If your organization is trying to figure out what this means for you, reach out to us today and we will help you build a plan.
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