What Nonprofit Leaders Need to Know About the Proposed Federal Grantmaking Changes

By Karina B. Swenson, Esq.

In May 2026, the U.S. Office of Management and Budget (OMB) proposed sweeping revisions to the Uniform Guidance. The Uniform Guidance (2 CFR Part 200) is the comprehensive federal rulebook that governs how grants are awarded and administered across virtually every federal agency. These proposed regulations have generated significant attention throughout the nonprofit sector because, if adopted, they would fundamentally change how many organizations access and maintain federal funding.

Importantly, these are proposed regulations, not final rules. They have undergone a public comment process, and aspects of the proposal may change before any final rule is issued.

What Changes Have Been Proposed? 

The proposal would significantly increase executive branch discretion over federal grantmaking. Among the most discussed provisions are proposals that could:

• Allow political leadership greater authority to review or override grant recommendations.

• Require grants to align with current administration priorities.

• Expand agencies' ability to modify, suspend, or terminate awards under broader circumstances.

• Permit additional grant conditions during the life of an award.

• Increase uncertainty from one presidential administration to the next.

  
  

Supporters argue these changes would improve oversight, accountability, and ensure taxpayer dollars support national priorities. Critics (including many nonprofit organizations, universities, and grant professionals) argue they could reduce predictability, increase political influence, and make long-term program planning substantially more difficult.

Why Does This Matter to Nonprofit Leaders? 

Many nonprofit organizations rely heavily on government grants to provide housing, health care, education, food assistance, workforce development, environmental programs, arts programming, scientific research, and community services.

Even organizations that receive only a portion of their funding from federal grants may experience significant operational challenges if funding becomes less predictable.

Potential impacts include:

• Delays in grant awards

• Increased administrative requirements

• Greater uncertainty when hiring staff

• Difficulty making multi-year commitments

• More frequent program modifications

• Increased competition for private foundation funding if organizations lose public support
  

The Governance Muscle to Exercise: Funding Resilience

Regardless of whether these proposed regulations are ultimately adopted, they highlight an important governance principle: over-reliance on any single funding source creates risk.

Strong nonprofit organizations are financially resilient because they intentionally diversify revenue and prepare their organization to fulfill its mission through changing economic conditions, shifting political priorities, and evolving philanthropic trends. 

A sustainable funding portfolio often includes a mix of:

• Individual donors

• Major gifts

• Monthly giving programs

• Private foundation grants

• Corporate sponsorships

• Government grants

• Fee-for-service revenue

• Events

• Planned giving

• Endowment income (when appropriate)
  

Diversification helps organizations weather changes in government priorities, economic downturns, and philanthropic trends.

The proposed OMB regulations are a reminder that sustainability is about more than winning the next grant. It is about creating an organization that can continue serving its community regardless of changes in the political or funding landscape.

If these proposed changes move forward, how would they affect your organization or the nonprofits you support? I'd love to hear how nonprofit leaders, board members, grantmakers, and philanthropists are thinking about long-term funding sustainability.

I've also developed a Funding Source Health Check to help boards and executive leaders evaluate funding concentration, identify potential vulnerabilities, and begin strategic conversations about building greater financial resilience. 

If you'd like a copy, I am excited to share!

Karina B. Swenson My Nonprofit Lawyer