The Office of Management and Budget (OMB) has proposed an expansive redesign of the federal grantmaking process, revisions the Trump administration believes will improve government-wide policies for grants, cooperative agreements, and other assistance, with aims including transparency, accountability, oversight, equal opportunity, and reduced burden. The changes would eliminate progressive mandates added by the Biden administration. They would also greatly increase political appointees’ control of the process and of the awards. Grantmaking would become more like contracting—and less like creating partnerships. The extensive fraud and waste uncovered in federal funding, and administrators’ insistence on nonstatutory grant requirements, do call for major reform. Yet, maximizing top-down control in grantmaking will render the grant process and the grant awards more subject to centralized control by whichever administration is in charge. That will make the federal grants subject to precipitous changes in requirements so that acceptance of federal funds will become much more risky.
Comments on some or all of the proposed changes are due by July 13, 2026 (see the end of the story for a note on how to comment). The administration aims for an effective date of October 1, 2026, for the changed regulations so that the revised system will apply to all federal grants in fiscal year 2027. However, nearly 70,000 comments have already been submitted and it is hard to imagine how officials will be able to carefully review and respond to the public feedback, as required, in the short time available.
From its first days, as the NPRM itself indicates, the second Trump administration has targeted “fraud, waste, and abuse” in federal funding [91 Fed. Reg. 32199–32201]. And it has sought to curtail federal expenditures and grant recipients that the administration contends advance purposes inconsistent with federal policy priorities and core American values, such as spending that promotes gender ideology and racial preferences. It precipitously ended multiple grants—courts required some to be restarted—and in some cases, such as with the US Conference of Catholic Bishops’ work to resettle US-approved refugees, it halted reimbursement for work already completed, until court intervention. (In 2025, the USCCB announced it would not be renewing existing cooperative agreements with the federal government related to children’s services and refugee support following the government’s suspension of the respective cooperative agreements.)
Last August, President Trump issued Executive Order 14332, “Improving Oversight of Federal Grantmaking,” that set out sweeping reforms. The current Notice of Proposed Rulemaking (NPRM) develops those ideas into multiple regulatory changes. We note key proposals, including the reversal of the Biden-era progressive grant requirements, greater protection for the religious freedom of grantees, and the lowering of barriers to participation by smaller and novice organizations. [Page numbers in brackets refer to the NPRM as published in the Federal Register on May 29, 2026. Regulation numbers refer to the new or changed regulations as proposed by the NPRM.]
Of greatest concern is how the proposed fundamental redesign of the grantmaking process, if adopted, will undermine the relationship between agencies and grantees, including damaging the ideal of a partnership between government and faith-based organizations that serve the needy.
The administration has argued that many federal institutions and grantmaking practices have become aligned with policy priorities inconsistent with its own. In response, it has relied more heavily on executive action to redirect federal grantmaking. Our concern is that this approach, if carried too far, could establish a precedent that future administrations may use in very different ways. A grants system that depends heavily on executive discretion may ultimately prove less hospitable to stable, long-term partnerships between government and civil society, shifting grantmaking away from genuine partnerships and toward a model resembling federal contracting, regardless of which party holds office.
Where the changes will apply
The changes are proposed for federal grants and cooperative agreements, not federal contracts [91 Fed. Reg. 32199, 32246–47; proposed 2 CFR 200.101]. In general, they will apply not only to grantmaking by federal agencies but also to subgrants that are awarded by “pass-through entities,” such as a state agency or a nonprofit intermediary that receives federal funds and then makes subawards to other organizations [91 Fed. Reg. 32256–57; proposed 2 CFR 200.329, 200.331, 200.332]. Some of the changes apply only to “discretionary” federal grants and not to federal funding that is prescribed by statute, such as block grants, federal funds awarded to state or local governments by a congressionally required formula (e.g., by population), and disaster relief grants [91 Fed. Reg. 32258–59; proposed 2 CFR 200.340(b)(2), (e)(4)]. Some federal discretionary grants are awarded by federal agencies directly to nonprofits or other non-federal entities; other federal discretionary grants are won in a grants competition by a state or local agency which in turn makes subgrants.
From OMB Guidance to government-wide regulation
What is currently the Office of Management and Budget’s “Uniform Guidance” that guides how agencies must frame their own funding regulations would become a universal set of regulations binding on all federal agencies and other entities that provide federal financial assistance [91 Fed. Reg. 32205–08, 32241, 32246; proposed 2 CFR 1.100, 1.105, 200.110(a)]. There would be some exceptions. For example, while agencies generally will not be allowed to use fixed-amount awards (see below), the Department of State proposes that it be allowed to continue to issue some such awards [91 Fed. Reg 32267; proposed 2 CFR 600.201]. Uniformity should make it easier for applicants to work with more than one funding source, but it may force agencies and programs into standardizing requirements and procedures that ought to remain individualized, given particular purposes or needs. Moreover, by unifying the binding regulations in this way, every new administration will find it much easier and quicker to change how every grant-making federal entity must operate.
Greatly expanded control by political appointees
President Trump’s Executive Order 14332 on grants required agencies to redesign their grantmaking processes to elevate the influence and control of political appointees over civil servants, nongovernmental experts on grant review committees, and the views of professional associations. The Trump administration always stresses that the political appointees in federal agencies are the only staff who are directly accountable to the President, who is the only elected member of the executive branch and thus the only one directly accountable to the voters. The NPRM proposes changes to the OMB rules to align with that revamped grantmaking process. Notably, after an agency’s grantmaking process has identified the best proposals for a discretionary award, high political appointees in the agency or their designees would independently review the choices to ensure that the federally supported activities will abide by applicable law and constitutional principles, agency priorities, and the national interest, and that they “advance the President’s policy priorities.” Similarly, while peer reviewing may continue to be used by an agency, the politically responsible officials must use their own judgment to assess proposals and proposed awards and not simply rubber-stamp committee recommendations (although the laws for some programs may, in fact, mandate a process requiring peer approval) [91 Fed. Reg. 32212, 32248–49; proposed 2 CFR 200.205(b)–(d)].
More accountability and transparency
Grant recipients will be responsible for more reporting. They will have to provide a written justification in order to draw down the next installment of funding [91 Fed. Reg. 32223, 32254; proposed 2 CFR 200.305(c)]. They will need to participate in E-Verify to confirm the employment eligibility of employees and contractors hired in or performing work in the United States under a Federal award [91 Fed. Reg. 32222, 32253–54; proposed 2 CFR 200.303(f)]. Pass-through entities such as state agencies and nonprofit intermediaries that win a federal grant and then make subgrants must report those subgrants to the public grant registry, www.sam.gov [91 Fed. Reg. 32224, 32256–57; proposed 2 CFR 200.329(b), 200.332(g)(h)]. Those pass-through entities, and also the federal grantmaking agencies, must check the Department of the Treasury’s Do Not Pay system, or other official databases, to verify the legitimacy of the intended subgrantees, to eliminate payments to fraudulent applicants, organizations lacking the required legal status, and entities with a record of financial incompetence [91 Fed. Reg. 32223, 32254; proposed 2 CFR 200.303(g), 200.305(a)]. When assessing the risk that grant applicants might be unable to deliver results, federal agencies will be authorized not only to assess such qualifications as an applicant’s managerial and financial capacity but also to weigh both positive and negative outcomes of any previously received federal funding. And—this has the potential for subjective discretion—agencies will also be permitted to assess 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” [91 Fed. Reg. 32212, 32249–50; proposed 2 CFR 200.206(b)(2)(i)–(ix)]
No fixed amount awards and subawards
The administration argues that fixed-amount awards “limit transparency and hinder effective oversight” because grantees are not required to interact continually with the awarding agency. Pursuing awards without fixed amounts will require greater planning and careful assessments by applicants and more extensive reporting if the award is won [91 Fed. Reg. 32204, 32210–11, 32246–47, 32257; proposed 2 CFR 200.201(b), 200.333].
Revised “statutory and national policy requirements,” reversing the Biden grant conditions
The Biden administration revised Section 200.300 of the OMB Universal Guidance to require that, wherever a funding program’s law prohibited sex discrimination, discrimination on the bases of sexual orientation or gender identity (SOGI) was also prohibited—an interpretation of the Supreme Court’s Bostock (2020) decision that has been disputed by many legal scholars and religious freedom advocates. It also implied that the prohibition on SOGI discrimination might reach further, adding to the statutory and national policy requirements a new statement that agencies “must take account of the heightened constitutional scrutiny that may apply under the Constitution’s Equal Protection guarantee for government action that provides differential treatment based on protected characteristics.” Other executive branch actions—executive orders, guidance memos, regulations, agency letters, agency spending decisions, etc.—promoted or required of grantees DEI initiatives, facilitation of elective abortions, action against climate change, and support for gender theory and gender changes.
This administration’s NPRM, along with multiple other executive actions, would reverse many of those prior policy requirements. Section 200.300 would now prohibit federal funds from supporting DEI initiatives; promoting ideas and activities that “deny the biological reality of sex or the sex binary in humans”; and facilitating what the NPRM describes as “the chemical and surgical mutilation of children.” [91 Fed. Reg. 32215-16, 32253; proposed 2 CFR 200.300(b)(1)(2)(3)]. Elsewhere, the NPRM proposes to prohibit federal spending that uses the concept of “disparate impact” to justify discrimination based on race, etc. [91 Fed. Reg. 32213, 32252; proposed 2 CFR 200.218]. Multiple other Trump administration initiatives have throttled spending on activities intended to combat climate change.
Protecting institutional religious freedom
The revised Section 200.300 will also have a new subparagraph prohibiting discrimination against faith-based organizations in grantmaking—a valuable statement of national policy [91 Fed. Reg. 32216, 32253; proposed 2 CFR 200.300(c)]. However, current regulations in major federal grantmaking agencies already require the equal treatment of religious applicants for federal funds (equal, and thus neither better nor worse than secular applicants). But those existing Equal Treatment or Equal Opportunity funding regulations, based on the Charitable Choice statutory language adopted in the 1990s, include multiple other related provisions, including the balanced requirement to protect the religious freedom not only of faith-based organizations but also of people who turn to them for federally funded social services. Is the proposed new Section 200.300 provision intended to undermine that balanced pair of requirements in order to promote participation by faith-based organizations with services that include religion even when a church or faith-based charity would be the sole local provider of a federally funded service?
The NPRM’s explanatory text includes the very strong statement that federal agencies must robustly respect the Religious Freedom Restoration Act—not only heeding its protection of religious freedom if a court rules that a government action may not burden religious exercise but also prospectively honoring RFRA and the First Amendment by providing a religious accommodation when it can be foreseen that a government rule or action will undermine religion [91 Fed. Reg. 32216]. That strong statement, however, is not translated into a specific regulatory requirement that will compel agency adherence. Moreover, several proposed regulations would ban religious as well as other types of discrimination but without providing an accommodation for faith-based colleges and other faith-based organizations that have the right to assert religion-based standards. Take, for example, the event-services provision and its application to non-public entities [91 Fed. Reg. 32214, 32252–53; proposed 2 CFR 200.219].
Easing participation barriers for smaller organizations
The NPRM proposes that the regulatory burden on every grantee will be significantly eased by the removal of current requirements, such as complying with DEI mandates, that it regards as unconstitutional [91 Fed. Reg. 32200, 32208; proposed 2 CFR 200.202, 200.204]. It also proposes changes intended to facilitate participation by smaller organizations lacking a considerable staff to apply for grants. For example, all grants will have to be announced on www.grants.gov, a single location. In the case of discretionary grants where many applicants are expected, agencies are encouraged to allow interested entities to submit statements of interest rather than full applications, as a first step. After sifting through these preliminary statements, the agency will invite the best candidates to make full applications [91 Fed. Reg. 32211–12, 32247-48; proposed 2 CFR 200.204(a)(1), 200.204(c)]. Applicants with little chance of success will be spared much paperwork, and agencies are to beware of simply awarding new grants to legacy winners [91 Fed. Reg. 32248–49; proposed 2 CFR 200.204(a)(3), 200.205(b)(4)].
Curbing the use of grants for lobbying and electioneering
Federal social-services funding is not intended to promote candidates nor to advance broader ideological or policy advocacy. One new subparagraph would specifically prohibit the use of grant funds to promote voter registration [91 Fed. Reg. 32231, 32262; proposed 2 CFR 200.450(c)(1)(iii)]. Two other new subparagraphs would prohibit use of federal funding to engage in “issue advocacy or public messaging that promotes or opposes a particular social, political, or public policy position” or to influence state executive branch agencies—on matters not directly relevant to the federal grant [91 Fed. Reg. 32231, 32262; proposed 2 CFR 200.450(c)(1)(iv), 200.454(d), 200.450(c)(1)(v)].
Termination for convenience
As a key tool to ensure that federal grants achieve the government’s aims, this NPRM, as did the grants executive order, stresses the utilization of the termination for convenience provision. This provision exists in the current OMB rules for grants but is expanded in scope and elevated in importance for discretionary grants [91 Fed. Reg. 32225–31, 32258–61; proposed 2 CFR 200.340(a)(2), (b), 200.341(c), 200.343]. Grant officials already have the authority to end a grant early because a grantee has violated requirements. And officials may end a grant because they have determined that the grant program’s goals or the agency’s priorities are no longer being fulfilled by the grant’s continuation. The NPRM stresses and expands this latter discretionary authority. It proposes that a grant can be terminated mid-term because agency priorities have changed, the grant is no longer regarded as meeting the national interest, or the agency has decided that the particular grantee no longer is the best choice for achieving the grant program’s purposes [91 Fed. Reg. 32258–59; proposed 2 CFR 200.340(a)(2)]. This broad conditionality of grants is emphasized in the draft regulations and would be made clear in grant announcements and documents [91 Fed. Reg. 32213, 32260-51, 32258–59; proposed 2 CFR 200.211(c)(1)(v), 200.340(b)]. The discussion of the expanded discretion emphasizes the importance of an administration’s authority to “terminate discretionary awards for discretionary reasons.” This expanded discretionary authority would be given to pass-through entities with regard to the subawards they make, but would not apply to non-discretionary federal grants that are awarded according to statutory criteria such as block grants to states and disaster recovery grants [91 Fed. Reg. 32258–59; proposed 2 CFR 200.340(b), 200.340(e)(4)].
Expanded federal control would increase grant volatility and grantee risks
Federal law and practice carefully distinguish between grants (and cooperative agreements) and contracts. The federal government uses contracts to obtain particular items (jet planes, pencils) and services (janitorial services, technical advice) it has determined it needs. It uses grants to support non-federal entities—nonprofits, sometimes companies, often state or local agencies—to maintain or expand what they know how to do. A grant might be awarded to support those research universities that have a proven track record in accomplishing frontier medical research. A grant might enable Catholic Charities or Jewish Social Services to expand their existing housing programs for low-income families. The federal agency, similar to grantmaking philanthropies, after deciding that some need requires a response, solicits proposals about how best to understand and respond to the problem, evaluates the likelihood that particular applicants will succeed in addressing the need, awards funding to one or more organizations, and then requires them to report on how they used the funds and what they achieved. This is a partnership relationship, not a buyer-seller interaction. It allows government officials to support solutions that are outside their own competence. Often they support a variety of proposed solutions—important because of the great complexity and value-ladenness of human problems, which are more intractable than rocket science.
However, the administration is proposing to change federal grantmaking to become much more like federal contracting by expanding the government’s control and its authority to change or terminate discretionary grants after they have been awarded. It even justifies its proposed expansion of federal oversight over grants by referencing micromanaging requirements that apply currently only to contracts [91 Fed. Reg. 32212–13, 32225–30, 32246, 32258–60; proposed 2 CFR 2 CFR 200.208, 200.201(a), 200.340(a)(2), (b)]. Greater top-down control is the Trump administration’s strategy to gain control over federal funding that has gone to fraudulent and wasteful uses and to end federal support for grant-funded activities that it regards as unconstitutional (e.g., DEI programs) or as undermining what the administration regards as authentic national values and priorities (e.g., funding that the administration believes has not effectively addressed homelessness).
Yet this top-down strategy to resolve those problems will create a range of negative effects. More control by political appointees means more research and services that simply mirror the values and perspectives of government officials generally, and in particular those appointed by the administration of the day, reducing variations that might, in fact, be more constructive and effective. Most concerning, the strategy will greatly increase both the volatility and the riskiness of federal grants. Consider: a discretionary grant is awarded and then, midway in its duration, the presidency changes from one party to the other. The agency that made the award now has new priorities, and it may terminate the grant or subject it to new requirements. Grantees required to facilitate elective abortions wherever possible may, the next day, be commanded to end all such support. One day nothing may be said to promote the concept of climate change; under a future administration, grantees may be tasked to promote activities intended to mitigate the negative effects of climate change.
As requirements change, a grantee may decide that continuing with the government will violate its mission and convictions and abandon government funding. Or the agency, now with new leadership, may decide that another organization is more aligned with the new administration’s beliefs and choose to switch the funding. In either case, the grantee, after having in good faith expanded its staff and facilities in order to serve many more people, will have to rapidly reduce staff and facilities. It will be able to seek reimbursement for its closeout costs [91 Fed. Reg. 32229–31, 32260–61, 32263; proposed 2 CFR 200.341(c), 200.343(c), 200.472]—nevertheless, faced with a grants system that has become so volatile, the government’s prospective partners may well conclude that the risks outweigh the benefits of participating. The government may lose many providers with exemplary qualities and results.
Undermining faith-based partnerships
Unfortunately, these negative consequences for the federal grants system will particularly affect the faith-based initiative. For three decades, with the support of presidents of both parties, extensive and consequential efforts have been made to change federal policies and practices so that the federal government’s spending to address social problems can benefit from the values, community trust, spiritual depth, networks, and experience and insight of houses of worship and faith-based social service organizations. Religious communities respond to these needs not because government funds are available but because their neighbors and their own members require assistance. Government funds in a partnership of service can expand the good that the faith-based organizations already are accomplishing. But to be a partnership, the terms and operations of the relationship must accommodate the distinctive convictions and practices of the organizations—this is a positive feature for people needing help who also have varied convictions and practices. And the funding relationship must be hospitable to their commitment to service rather than a dedication to chasing grants, parsing the details of Federal Register fine print, and building up financial reserves to cope with new volatility in federal funding.
It will be discretionary federal grantmaking that becomes most volatile and risky should all of the proposed changes be made. Federal funding for statutory federal-state programs that underwrite services such as child care, drug treatment, and medical clinics will be less affected, and it is such funding that is more likely to be utilized by a faith-based social services provider or a house of worship that operates services. That differentiation will make the changes less damaging to faith-based partnerships.
But it would be better for faith-based partnerships, and also for other federally funded services, including higher education and health research, if the administration reconsidered whether expanding centralized executive control is the best means of addressing the significant problems within the federal grants system.
Resource
Stanley Carlson-Thies’ new book on the faith-based initiative, Making Possible Partnerships for Faithful Service: The Vision, Advances, and Unfinished Reforms of the Faith-Based PInitiative (available at Amazon), explains the Charitable Choice and Equal Treatment principles, traces how these have been modified over time, explores the reform impulses of the second Trump administration with respect to the faith-based initiative, and proposes ways to strengthen partnerships between government and faith-based and other civil society organizations.
Commenting
Comments in response to the grants NRPM are due by July 13, 2026, and must be submitted electronically to www.regulations.gov (search for docket OMB-2026-0034).
For pointers on commenting, see “Public Comments on Agency Rulemaking” from the Administrative State Accountability Project (ASAP) at the Ethics and Public Policy Center.
Skeptical about the value of laboring on a careful comment? See Rachel Morrison, of ASAP, “When Public Comment Matters,” National Review, April 8, 2024.
This article has not explored every aspect of the NPRM. For other overviews that mention other aspects and offer other evaluations, see (and read with discernment), for example :
- American Council on Education, “Office of Management and Budget Government-Wide Regulations for Federal Financial Assistance” (June 2, 2026).
- John Timmer, “Proposed new US funding rules: We can cancel any grant at any time,” Ars Technica, May 29, 2026.
- Brownstein Client Alert, “OMB Unveils Proposed Rule to Restructure Federal Financial Assistance Oversight,” June 1, 2026.
- Erin Gibson Allen, “6 Things Non-Profits Need to Know About OMB’s Major Proposed Overhaul of the Federal Grant Rules,” Fischer Phillips LLP, June 17, 2026.
Stanley Carlson-Thies is the founder and former senior director of the Institutional Religious Freedom Alliance (IRFA), a division of the Center for Public Justice. Carlson-Thies is also a senior fellow at the Canadian think tank Cardus. From 2009-2010 he served on a task force of President Obama’s Advisory Council on Faith-Based and Neighborhood Partnerships and he also served with the White House Office of Faith-Based and Community Initiatives from its inception in February 2001 until mid-May 2002 under President George W. Bush.
Dr. Girien Salazar is the Director of Faith-Based Policy and Research at the Center for Public Justice (CPJ). Girien’s non-profit leadership experience includes roles as Executive Director of the National Hispanic Christian Leadership Conference (NHCLC), Director of Development at The Philos Project, Director of Development at Nelson University, and service on non-profit, local, and state boards such as the Latin American Heritage Society, San Antonio Parks and Recreation, and OneStar National Service Commission Board in Texas. Girien holds a Bachelor of Science in Church Ministry and a Master of Arts in Theological Studies from Nelson University and a Doctor of Philosophy in Leadership Studies from Dallas Baptist University. A U.S. Navy veteran, he served eight years as a Religious Programs Specialist and was honorably discharged at the rank of Petty Officer 1st Class.
Graphic by Center for Public Justice
