There was an Executive Order (EO) in August from the White House that made some fundamental changes to the way that federal grants work – some positive and some negative. The EO is titled Improving Oversight of Federal Grantmaking.

The Order instructs the Office of Management and Budget (OMB) to overhaul the Uniform Grant Guidelines (2 C.F.R. Part 200) and other related documents related to all federal grants. The new rules are going to impact every stage of the grant life cycle, from the application process through compliance. The rules don’t only impact future grants but potentially affect all existing grants that are in the process of being implemented. Following are some of the key changes from this EO.

Stronger Oversight and Accountability. Each agency must name a senior appointee who will manage the process for all new grants. Before any new funding opportunity is announced, it must undergo review and approval by the senior appointee. This process mandates input from subject-matter experts, identified by the agency head. Grant announcements must be “written in plain language”. The senior appointee must review all open grant programs every year to assess progress and to make sure the program is still consistent with the agency priorities. Prior to issuing grant awards, the grant panel or program officers who will be making the awards must engage in a meeting with the senior appointee. Until the new review process is in place, agencies are prohibited from issuing new grant opportunities.

Grant Restrictions. Grants cannot be used to fund, promote, encourage, subsidize, or facilitate 1) racial preferences, 2) denial that sex is binary and that sexual preferences are chosen or mutable, 3) illegal immigration, or 4) any initiative that compromises public safety or promotes anti-American values.

Grant Applications. Grant applications must be more accessible and less burdensome. All parts of the application process must be written in plain language. Applications should only include requirements that are strictly necessary for a review of the application. The decision on who wins grants rests with the senior appointee or their designee. Grant awards must be consistent with administration policies and statutory requirements.

Termination for Convenience. All grants must include terms that allow the grant agency to terminate a grant “for convenience”. This means an agency can cancel a grant at any time and doesn’t need a reason. An agency can decide to change priorities and cancel all open grants that don’t meet the new priorities. Current grantees must agree this change for existing grants.

Grant Drawdowns. Grantees will be required to provide a detailed, written justification for each drawdown request. This is to prevent premature use of federal funds and to make sure that disbursements are tied to project milestones and agency oversight.

Limitations on Overhead Costs. The EO directs the OMC to revise the Uniform Guidance to restrict the use of grant funds to cover facilities and administrative expenses. This might include costs like administrative salaries and general institutional support.

What Does This Mean for a Grant Recipient?

It’s positive that grant applications should be easier. Some federal broadband grants have complicated instructions and forms.

The biggest change is that a grant recipient has a new risk that grants that cover multiple years might be canceled before the project is completed. Agencies don’t need a reason to cancel a grant and can do so at their convenience. This adds new risk for accepting a federal grant, with the risk increasing as a project is partially implemented.

It sounds like drawing funds will take more work. Gone will be any grant draws that are not based on actual invoices or milestones.

To some degree, this potentially dilutes grant programs developed by Congress since the Agency in charge of the grant seems to have more discretion in determining the grant rules.