Organizations that receive or administer federal funding could soon face significant changes to the rules governing their awards. On May 29, 2026, the Office of Management and Budget (OMB), together with federal grantmaking agencies, issued a proposed rule that would substantially revise 2 CFR Part 200, commonly known as the Uniform Guidance. The proposal touches nearly every stage of the federal award lifecycle, from award administration and payments to subrecipient monitoring, reporting, and audits.
For accountants and finance teams responsible for federal awards, the scope of these proposed new rules makes it worth paying attention now. Although these proposed changes have not yet been finalized, organizations can begin evaluating where their policies, accounting processes, documentation, and internal controls could be affected.
What is being proposed?
The OMB’s proposed new rule centers around three key objectives:
- Improving transparency, accountability, and oversight for the usage of federal funds,
- Clarifying the regulatory status of 2 CFR Part 200, and
- Reducing the burden on recipients.
Below, we will look further at eight of the most impactful key provisions for governmental accountants.
1. The renaming of Uniform Guidance
One of the most fundamental proposed changes is the replacement of the commonly used “Uniform Guidance” designation with the “Uniform Grants Regulation” (UGR). Currently, Uniform Guidance is described as “guidance, not regulation;” however, replacing it with UGR would carry a government-wide regulatory effect that would not require separate rulemakings by each agency whenever OMB updates the standards.
2. Fixed amount awards and subawards could be eliminated
The OMB proposes eliminating lump sum grant instruments in favor of cost-reimbursable models. According to OMB, the change is intended to improve transparency and oversight by more closely tying federal funding to actual costs incurred. Existing fixed amount awards and subawards issued before the effective date of a final rule would not be affected by the proposed change.
For accounting teams, this could mean a greater need to maintain detailed documentation supporting actual costs rather than relying on milestone- or performance-based payment structures. Organizations currently using fixed amount subawards should also identify those arrangements and determine how future awards could be affected.
3. Termination and suspension authority
The OMB’s proposed rule also creates a new temporary suspension authority, allowing agencies to issue a written stop-work order while an investigation or review is completed. This discretionary termination provision would not apply when it conflicts with federal statute or to statutory entitlements, including block grants, formula-based awards, disaster recovery grants, certain CHIPS Act awards, and international trade agreements. Governmental accountants, however, should be aware that mid-award terminations can create complex accounting and reporting challenges.
4. New national policy prohibitions and unallowable costs
The proposed rule would add a broad set of national policy requirements and new unallowable cost provisions. Some would be incorporated directly into the terms and conditions of every federal award under 2 CFR 200.300, while others would be added to Subpart E as unallowable costs. A few of these prohibited activities include funding, promotion, encouraging, subsidizing, or facilitating:
- Diversity, Equity, and Inclusion (DEI) or Diversity, Equity, Inclusion, and Accessibility (DEIA)
- Gender ideology
- Non-discrimination against faith-based organizations
Other prohibited activities include disparate-impact liability, discriminatory event services by public entities, and covered foreign collaborations, amongst others.
5. Changes to the Internal Control framework
Recipients and subrecipients would still be responsible for establishing, documenting, and maintaining effective internal controls over federal awards under the new rule. However, the proposed rule would remove the existing language directing organizations toward the “Standards for Internal Control in the Federal Government” and “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission framework. Rather, the OMB explains that organizations could continue using these frameworks as general reference points, but they would no longer be expressly recommended.
It should be noted that this proposed change would not eliminate the need for strong internal controls. Accountants should continue to focus on whether controls are appropriately designed, documented, and operate to support compliance with federal award requirements.
6. Mandatory E-Verify participation
The mandatory participation in the Department of Homeland Security’s E-Verify was previously limited to government contractors; however, the OMB is now proposing that it should apply to all grant recipients and subrecipients. E-Verify confirms the eligibility of all employees and contractors hired or performing work under a federal award.
For accountants, now is the time to begin reviewing your Single Audit programs and compliance testing procedures to identify areas that will need revision if the proposed rule is finalized. This is important in multiple areas, but especially with the new E-Verify and expanded termination authority requirements discussed under point number three.
7. Conflict of interest and mandatory disclosure requirements
The OMB’s proposed rule would require that a recipient or subrecipient disclose whether any employees who worked on the proposal or will support the resulting federal award were employed by the awarding federal agency within the last two years. The mandatory disclosures would also be strengthened to require that any disclosures made to an Office of Inspector General would be transmitted to the U.S. Attorney’s Offices for the District of Columbia within ten days of receipt.
8. Compliance Supplement Update frequency
The OMB Compliance Supplement is currently defined as an “authoritative source of information for auditors” that is updated on an annual basis. However, the proposed rule would remove the language pertaining to annual updates because the OMB is evaluating the Compliance Supplement frequency. For governmental auditors, this is a significant change, reflecting a shift from decades of well-established practices that can create significant uncertainty.
Proposed effective date
The OMB originally proposed an effective date of October 1, 2026; however, on September 2, 2026, President Trump signed the Continuing Resolution (CR), which was passed by Congress to fund the federal government through December 11, 2026. Included in this is a provision that places a temporary prohibition on finalizing or implementing the Uniform Guidance overhaul, which means that nothing can be enforced until that date. Throughout the waiting period for this proposal, it is important to note that the final requirements could differ from the May proposal.
Next steps for governmental accountants
As a governmental accountant, it’s important to remember that these rules are still only proposed. While it’s likely not the time to begin replacing your current Uniform Guidance policies, it may be the right time to educate your finance team on what may be coming soon to allow the proper planning and preparation time.
You may start the planning and preparation process by identifying the federal awards and subawards your organization currently administers and reviewing the processes that support them. Pay particular attention to fixed amount awards and subawards, subrecipient classifications and monitoring, procurement documentation, payment requests, internal controls, and the connection between financial and performance reporting.
Organizations subject to Single Audit requirements should also discuss these proposed rules with their auditors. Early conversations can help identify areas where documentation, accounting procedures, or internal controls may need attention if the final rule incorporates these provisions.
We are here to help
We understand that federal grant requirements can already be complex, and a revision of this size can create new questions for organizations responsible for administering and accounting for federal funds.
At SEK, our Local Government team is closely monitoring this proposed rule, and we are here to help you understand the potential impacts on your organization. If you have any questions, please contact your SEK Client Relationship Manager or any member of our Local Government team.
Source: Thomson Reuters, The PPC Governmental Update, Vol. 33, No. 7
