Last month, the U.S. Office of Management and Budget (OMB) published its proposed changes to the OMB Uniform Guidance, the rules that govern federal grants to charitable nonprofits, in the Federal Register. OMB is proposing to change the name of the document from the Uniform Guidance to the Uniform Grants Regulation (UGR).  

Notably, the proposed UGR retains several key provisions from the 2024 revision of the OMB Uniform Guidance, along with a few additional changes that NAO and our nonprofit partners have long advocated:  

  1. Ensuring that nonprofits may receive a de minimis indirect cost rate of 15% of their modified total direct costs on their federal grants;
  2. Setting the threshold for a single audit at $1 million in federal grants received;
  3. Ensuring that federal agencies’ notices of funding opportunities (NOFOs) are clearly worded; 
  4. Encouraging federal agencies to award multi-year grants instead of requiring nonprofits to reapply for federal grants every year, creating greater certainty or cost savings for many nonprofits; and 
  5. Limiting federal agencies’ ability to require additional audits of nonprofit grantees.  

The proposed rule changes would introduce several major shifts in federal grant requirements, raising serious concerns for nonprofits. They would give unprecedented discretion to any administration to withhold, suspend, or terminate grants, or change terms and conditions during performance, forcing grantees to operate in a shifting environment. These changes include:  

  • Requiring political appointees to conduct a “pre-issuance review” of many grant awards to ensure that grants are used for purposes consistent with Administration priorities.
  • Expressly providing that federal grant funds must not be used for: (a) diversity, equity, and inclusion (DEI) or diversity, equity, inclusion, and accessibility (DEIA) policies, principles, or practices; (b) gender ideology (meaning “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”); and (c) “the so-called ‘transition’ of a child under 19 years of age from one sex to another.” The proposed rule includes a lengthy justification for the legality of this new provision, presumably anticipating that it will be challenged in court.
  • Providing that federal grants may not be used to promote or support “disparate impact liability.” (Disparate liability is embodied in U.S. civil rights law that targets policies or practices that appear neutral but result in a disproportionate adverse effect on members of a protected class, such as race, sex, national origin, or disability, even if there is no intent to discriminate. Unlike disparate treatment, which requires proof of intentional discrimination, ‘disparate impact’ focuses solely on the outcomes of a policy rather than its motives.
  • Allowing federal agencies to consider the risk level of grantees based on their “history of questionable practices,” which includes plagiarism, use of “discredited studies,” and engaging in activities that violate federal civil rights or religious liberty laws (presumably including activities such as DEIA or other work mentioned above). 
  • Increasing the authority of federal agencies to terminate or temporarily suspend federal grants for violations of the OMB UGR. This could be used as a political tool. 

Expanding the prohibition on the use of federal grant funds for lobbying to also restrict the use of federal grants for nonpartisan voter registration and for public messaging on public policy issues. (Effectively rewriting the right of charitable nonprofits to advocate for their communities.)

These changes to the OMB guidelines are among the most significant in decades. They will formalize into policy what the Administration has been unable to achieve via Executive Orders and program freezes, which were challenged and overturned in court. This marks a fundamental shift in how the federal government will administer grants moving forward. OMB intends to publish a final version of the UGR by summer or early fall, aiming for it to take effect on October 1, 2026, at the start of the new federal fiscal year. 

Please take action by: 

  1. Signing a national letter
  2. Using the National Council of Nonprofit’s comment guide to submit a public comment
  3. Emailing your members of Congress