440 1st Street, NW, Suite 440
Washington, DC 20001
DATE: June 30, 2026
TO: Local Government Clients
FROM: Summit Strategies
RE: OMB Uniform Guidance Proposed Rule
This week, a coalition including NACo, NLC, and USCM hosted a webinar on the proposed rewrite of 2 CFR Part 200 (also known as the Uniform Guidance). The proposed rulemaking is considered the biggest change to the Uniform Guidance since it went into effect in 2014, with huge implications for how local governments administer federal funding. Below is a summary of the webinar.
Comments are due on July 13. Local governments can submit comments here.
Opening Statements
USCM (Dave Gatton – [email protected])
• USCM passed a resolution opposing the proposed rule. USCM has also publicly called for it to be withdrawn and believes it is the most threatening proposal regarding cities in three decades, maybe ever. USCM called for everyone to submit comments in opposition.
GFOA (Emily Brock – [email protected])
• Anyone who receives federal funding is affected by this. The proposed rule is a joint proposal from OMB and every federal rulemaking agency. All agencies (DOT, EPA, DOL, etc) are already preparing for implementation.
• As of this writing, more than 28,000 letters have been submitted on the federal register.
NLC (Dante Moreno – [email protected])
• NLC will provide a template in the coming days. They also believe that local governments need to reach out to their Members to tell them about the importance of the issue.
What is unform guidance?
The Uniform Guidance (also known as UGG also known as 2 CFR Part 200) was established in 2014 and combines “circulars” with directives on federal government spending.
The Uniform Guidance has gone through revisions several times, including in October 2020 and October 2024.
The federal spending process typically works as follows:
• Congress appropriates funding (establishing legislative intent) > • Agencies organize (design reporting requirements and define how to report) > • OMB Oversees (uniform grants guidance and guidelines for audits)
Why do we care?
Billions of dollars in federal funding are allocated to states and local governments to satisfy legislative intent. The Uniform Guidance provides parameters to audit this process (also known as the Single Audit).
Senior level administrators already have internal controls in place (i.e., grant administration, internal controls for grants, indirect cost allocations, SEFA preparation).
Is this new?
No, on August 7, 2025, the Trump Administration issued an Executive Order on “Improving Oversight of Federal Grantmaking” with the goal of implementing in October 2026.
How are things changing?
Historically, federal finance assistance has focused on program performance, financial accountability, and compliance. Moving forward, it will focus on national policy priorities, workforce verification, recipient eligibility, and risk indicators.
OMB’s stated goals are to improve transparency, accountability, and oversight of the federal financial assistance process; clarify that the Uniform Guidance is a regulation, not guidance; and reduce recipient burden.
Proposed rewrite of the Uniform Guidance
The proposed rewrite of the Uniform Guidance represents the most significant overhaul of federal grants administration since the original Uniform Guidance was implemented in 2014.
Potential impacts include expanded termination authority, new stop-work authority, increased payment verification, E-Verify requirements, enhanced subrecipient oversight, greater federal discretion, and increased compliance burden.
Four broad sections
Administrative Changes
• Key change: Uniform guidance becomes regulation
o Current environment
▪ Agency implementation varies
▪ Guidance often subject to interpretation
o Proposed environment
▪ OMB rules automatically apply government-wide
▪ Agencies no longer separately adopt changes
o Risk—less flexibility and more federal control
• Federal agencies could terminate discretionary awards if:
o Not achieving program goals
o Not supporting agency priorities
o No longer in the federal government’s interest
o Questions recipients should ask:
▪ How will priorities be measured?
▪ Can priorities change mid-award?
▪ How should recipients manage this risk?
• Appointment of Senior Level Appointee
o Ensures thorough pre-issuance reviews
o Use independent judgement when evaluating Federal award proposals o Deploys peer review as applicable to ensure advisory recommendations • Implementing Executive Orders in Grant Requirements
o Diversity, Equity, Inclusion, and Accessibility (DEIA) o Gender ideology
o Disparate impact liability
o Faith-based organization protections
o Immigration and workforce verification requirements
o National policy priorities
Pre-award Rules
• Key Change: changes to NOFOs
o Streamlining processes
▪ Agencies must post NOFOs on grants.gov
▪ Applications through grants.gov
▪ Executive summary with key eligibility information and dates on grants.gov
▪ Encourages statement of interest (SOI) pre-application phases in certain cases
o Improving access
▪ Plain language requirements
▪ Minimum posting period of 30 days
▪ Green lights pre-grant technical assistance
• Key change: pre-award risk reviews
o New merit and expanded risk reviews
▪ Merit reviews
• Factors related to: president’s national priorities, “unlawful DEI” ▪ Risk reviews
• Adds to the list: membership and affiliations, questionable practices
▪ Do not pay system for states & E-Verify for all
o Questions recipients should ask:
▪ Will evaluation criteria be defined?
▪ Will agencies provide a list of practices or organizations that raise risk? ▪ Will factors and risks be weighted equally?
o Pass through entities may be required to address:
▪ Actions damaging recipient reputation
▪ Actions damaging agency reputation
▪ Actions damaging federal government reputation
o Questions to ask:
▪ How do you monitor reputational risk?
Grant Administration (post-award) Rules
• Key change: subrecipient monitoring
o New monitoring requirements include:
▪ All down-stream entities must be subaward or contract • Applies to internal transfers to related entities
▪ All subawards and contracts must be logged in SAM.gov • Failure is grounds for termination for non-compliance ▪ Ensure activities do not cause “reputational harm” to recipient or federal agency
▪ Federal agency could terminate award to recipient based on subrecipient actions
o Questions recipients should ask?
▪ How will transfers between government departments be treated? ▪ How does OMB define reputational harm?
▪ Where will there be opportunities to correct SAM.gov reporting? • Key change: new documentation layers
o Payment justifications
▪ Required for recipients and subrecipients other than states • Applicable to advance payments & reimbursements
▪ Recipients submit justification to agency
▪ Subcabinets submit justification to recipient
o Questions recipients should ask:
▪ Will there be limits to length and contents of justification? ▪ Should OMB consider a phase-in?
▪ Will recipients be expected to implement before federal agencies? • Key change: new cost restrictions
o Added cost principles related to:
▪ Advertising and public relations
▪ Conferences
▪ Memberships, subscriptions, and professional activity costs ▪ General cost of government outside of specified grant activities
o Questions recipients should ask:
▪ How clear will the delineation between grant activities and general government activities be?
▪ Will OMB or federal agencies provide further guidance specific to grant programs?
Audit
• Key change: no longer an annual update for compliance supplement o Anticipated audit impacts
▪ No change to single audit but under review
▪ Less frequent guidance for single audit process
• High risk programs
• Compliance factors
o Questions recipients should ask:
▪ What occasions would trigger a compliance supplement update? ▪ Will 2026 compliance supplement remain in effect until a new update is released?
How can local governments respond?
Local governments should take immediate administration actions, including monitoring all grants in their organization, review grants terms and conditions, understand internal policies and practices, inventory subrecipient relationships, access E-Verify readiness, review payment verification processes, enhance monitoring frequency and detail, improve documentation standards, and evaluate exposure across grant portfolios.
Local governments should also consider submitting comments, including what their organizations do well regarding grant administration and internal controls. Comments should also outline how implementation will impact budgets and organization’s future grants and plans.
What does October 1 mean?
There is a lot of uncertainty remaining about the implementation of the proposed rule.
Outstanding questions include:
• Will the guidance affect current grants?
• Will it affect grants awarded OR renewed on or after October 1? • What about renewing grants?
• How to handle retroactivity of affiliates, subsidiaries, or related organizations? • Will there be a list of agencies authorized to not use Grants.gov?