Proposed Rule Changes 2 CFR 200 Regulations Governing Grants, Comments Due July 13, 2026

The Office of Management and Budget (OMB) proposed that the 2 CFR 200 revisions would convert Uniform Guidance into government-wide grant regulation, with comments due July 13, 2026, and a proposed effective date of October 1, 2026. Government contractors, recipients, and subrecipients should assess how the changes may affect funding terms, subawards, procurement, payments, and cost principles.

Highlights

• Proposed Rule. OMB published proposed revisions to 2 CFR 200 on May 29, 2026, with comments due July 13, 2026, and a proposed effective date of October 1, 2026.
• Regulatory Shift. The proposal would convert 2 CFR 200 from guidance into government-wide grant regulation, creating more uniform requirements for federal financial assistance.
• Recipient and Subrecipient Impact. Government contractors, recipients, and subrecipients may face new requirements affecting subawards, payment requests, procurement methods, domestic preferences, reporting, and award termination.
• Compliance and Oversight Focus. The proposed changes emphasize accountability for federal funds, stronger internal controls, cybersecurity measures, E-Verify participation, SAM.gov reporting, and conflict-of-interest disclosures.
• Nonprofit Cost Principles. The proposal would remove Appendix VIII, which may affect nonprofit organizations that currently follow FAR Part 31 cost principles but do not meet the proposed federal funding threshold.

On May 29, 2026, the Office of Management and Budget (OMB) published a proposed rule Regulation for Federal Financial Assistance to revise 2 Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards. Comments are due July 13, 2026, with a proposed effective date of October 1, 2026.

The biggest change in the proposed rule is converting 2 CFR 200 from guidance to regulation, as noted in the proposed name change – Uniform Grants Regulation. This will provide government-wide grant management requirements. The proposed changes were made to improve transparency, ensure recipients are held accountable for use of federal funds, clarify that 2 CFR applies uniformly across the Federal government and streamline the grantmaking process.

What are Some of the Proposed Changes?

There are numerous changes. Below are some of the proposed changes we believe will have the biggest impact on recipients and subrecipients:

Section 200.201 Use of grants, cooperative agreements, and contracts - Revised to state fixed amount awards are not permitted unless authorized by Federal statute. This is likely to impact subrecipients seeking fixed-price subawards to reduce their accounting and budgeting requirements.

Section 200.211—Information contained in a Federal award - Federal agencies must include the termination provisions under § 200.340 in each Federal award and must inform recipients of any additional termination provisions that apply. This will require the flow-down and education of subrecipients.

Section 200.112 Conflict of Interest - Recipient or subrecipient must disclose any employees who worked on the proposal or will support the Federal award who were employed by the awarding Federal agency within the preceding two years prior to application submission.

Section 200.216—Prohibition of certain equipment, services, and systems - Prohibits Federal agencies from issuing awards for the procurement of unmanned aircraft systems prohibited by the Federal Acquisition Security Council (FASC) and implementing compliance measures.

Section 200.218 Prohibition of using Federal awards to promote or support theories of disparate-impact liability - Prohibits use of federal awards that promote or support theories of separate impact liability based on federally protected characteristics. The prohibition results from Executive Order 14281 (See our article, “New Executive Order: Restoring Equality of Opportunity and Meritocracy”).

Section 200.220 Prohibition of using Federal funds for covered foreign collaborations – Prohibits recipients and subrecipients from using federal funds to support certain foreign collaborations involving covered foreign countries or covered foreign entities.

Section 200.300 Statutory and national policy requirements - Prohibits use of federal awards and subawards to fund diversity, equity and inclusion, gender ideology, or transition of a child under 19 years of age from one sex to another and prohibits discrimination on the basis of faith-based organizations.

Section 200.303 Internal controls - Recipient and subrecipients must take reasonable cybersecurity and other measures to safeguard confidential information and require participation in the E-Verify program to confirm the eligibility of employees and contractors.

Section 200.305 Federal payment - Payment requests from recipients and subrecipients must include a brief written justification regardless of whether the payment is made in advance or for reimbursement. subrecipient. The justification must include information on the activities or aspects of the Federal award that correspond to the payment request.

Section 200.320 Procurement methods - Recipients are strongly discouraged from issuing cost-reimbursement contracts. When doing so, the recipient must notify the Federal agency of its use of a cost-reimbursement contract and maintain written justification. Federal agencies have the discretion to require prior approval of such contracts.

Section 200.322 Domestic preferences for procurements - Retains domestic preferences for infrastructure awards. Adds that agencies should include terms and conditions in Federal awards to maximize the use of domestic goods, products, and materials, not just for infrastructure awards. These requirements must be included in all subawards, contracts, and purchase orders if included in the Federal award.

Section 200.329 Monitoring and reporting program performance - Requires recipients to confirm in their performance reports that subawards have been reported in SAM.gov.

Section 200.331 Subrecipient and contractor determinations - Pass-through entities cannot treat transfers of Federal funds to related entities as being exempt from this determination. Related entity transactions must be classified as a subaward or contract.

Section 200.332 Requirements for pass-through Entities - Added wording that pass-through entities must (g), report subawards to SAM.gov; (h), make subrecipient and contractor determinations for all entities, including related parties; and (i), ensure subrecipients do not take actions that damage the reputation of the pass-through entity, Federal agency or Federal Government, and if so, determine if termination is warranted.

Section 200.333 Fixed amount subawards - Revised to state that fixed amount subawards are not permitted.

Section 200.340 Termination and suspension - Clarifies reasons for discretionary terminations and adds new provisions regarding temporary suspension of Federal awards. The proposed rule states that failing to report a subaward in SAM.gov can result in termination.

Section 200.343 Effects of suspension and termination - Clarifies the allowability of costs during suspension or after termination. Recipients and subrecipients must make all reasonable efforts to discontinue costs immediately after the effective termination date.

Section 200.432 Conferences, 200.442 Fundraising and investment management costs, 200.454 Memberships, subscriptions, and professional activity costs, 200.461 Publication and printing costs – These costs require prior written approval of the Federal agency.

Appendix VIII to Part 200—Nonprofit organizations exempted from Subpart E of Part 200 - Proposes removal of Appendix VIII in its entirety. Only nonprofit organizations that receive 90 percent or more of their Federal funding in the form of contracts or operate a Federally Funded Research and Development Center (FFRDC), will continue to use Federal cost principles that apply to for-profit organizations. The cost principles in subpart E will apply to all other nonprofit organizations.

Takeaways

Comments are due by July 13, 2026, and the new compliance requirements will apply to awards issued on or after October 1, 2026. We recommend that all recipients and subrecipients of federal awards review the proposed changes and assess how they may affect future funding. This summary does not cover every modification included in the proposed rule, so additional requirements may apply to your organization.

Nonprofit organizations that currently follow the FAR Part 31 cost principles but do not meet the threshold of receiving 90 percent or more of their Federal funding through contracts or FFRDC activity should consider submitting comments. It doesn’t appear that these organizations will be grandfathered in, or how they will transition back to the Subpart E cost principles, and, if so, how the transition will take place: new grants, existing grants with rates computed using the FAR 31 cost principles. This timing is particularly important for nonprofits that generally have a June 30 fiscal year-end, given that the new regulations apply to awards issued after October 1, 2026.

Maintaining Grant Compliance Across the Award Lifecycle

Redstone GCI supports organizations throughout the grant lifecycle by assisting with the development of grant-compliant policies and procedures, establishing compliant accounting systems or providing ongoing monthly accounting support, reviewing agreement documentation prior to award, and supporting post-award compliance activities such as SF425 reporting and invoice review. Our team of experts also provides training focused on FAR and grant compliance to help organizations remain aligned with federal expectations as requirements continue to evolve.

Frequently Asked Questions (FAQs)

• What is 2 CFR 200? 2 CFR 200 is the set of federal requirements that governs many grants and other federal financial assistance awards. It covers topics such as award administration, costs, payments, procurement, reporting, and audit expectations.
• What is OMB proposing to change? OMB is proposing to revise 2 CFR 200 and convert it from guidance into a government-wide grant regulation. This would make the requirements more formal and consistent across federal agencies.
• Who should pay attention to the proposed changes? Recipients and subrecipients of federal awards should review the proposed changes. Government contractors that receive grant funding, manage subawards, or support federally funded programs may also be affected.
• When would the proposed changes apply? Comments are due July 13, 2026, and the proposed effective date is October 1, 2026. The article notes that the new requirements would apply to awards issued on or after that date.
• Why do these proposed changes matter? The proposed rule could affect how organizations manage federal funds, document payment requests, handle subawards, address procurement requirements, and support compliance. These changes may require updates to internal processes before new awards are issued.
• Why are nonprofit organizations specifically mentioned? The proposal may change which cost principles apply to certain nonprofit organizations. Nonprofits that currently follow FAR Part 31 cost principles may need to assess whether they would continue to qualify under the proposed rule.