The Office of Management and Budget has proposed new rules for the Guidance of Federal Financial Assistance. These proposed rules would apply to a large percentage of federal grants awarded to States or directly to grantees. In the broadband world, the new rules would apply to grants made by the FCC, NTIA, U.S. Treasury, and the USDA. They would also apply to any secondary grants made through states, such as state broadband grants made using underlying federal funds. That means these rules impact BEAD, RDOF, ReConnect, Capital Project Fund grants, and the various NTIA broadband grants. The new rules would also apply to any payments made from federal programs to the public, which are not strictly considered as grants, such as E-Rate payments made to schools and libraries, and Lifeline payments made to reduce broadband bills.

This blog covers a few highlights of the proposed changes. For more details, see this comprehensive summary created by the Benton Institute. Comments on the proposed rules are due by July 13. The new rules are proposed to go into effect on October 1, 2026.

The new rules are intended to meet three objectives. This supposedly will improve transparency, accountability, and oversight. OMB says the changes will reduce recipient burden. Probably most importantly, OMB is taking charge of grants, and what the agency used to issue as guidance will now become binding regulation.

The following are some of the most important changes that could affect broadband:

• One of the most consequential proposed changes is that the new rules expand the ability for federal agencies to cancel a grant mid-stream. This would apply to all discretionary grants (which are grants where a federal agency chooses the grant winners). There is a carve out and special rules for BEAD, for the CHIPs Act, and for block grants, formula grants, and disaster recovery grants. This is a huge change, because it means the federal government can stop a broadband infrastructure grant at any time – making it even riskier to take grant funding.
• There would no longer be any fixed amount awards, and all grant expenditures have to be substantiated by invoices.
• All grant recipients would have to participate in the E-Verify system, which would mean verifying the eligibility of employees and all subcontractors for receiving payments from federal funds. This new requirement also seems aligned with the new requirement that no grant funds can be used to reimburse payments to any person or company from a “covered” country, meaning countries on a list of countries that can be changed at any time.
• The new rules completely eliminate any grant provisions that would promote DEI (diversity, equity, inclusion, and accessibility) based on race or sex.
• Agencies and grant recipients will be expected to ensure that federal grant funds are not used to promote or support “theories of disparate-impact liability”. In plain English, that means grants can’t be used in a way that results in any discrimination by race, sex, or other protected characteristics. Grant recipients are also not to discriminate on the basis of “viewpoint, content, or subject matter of speech”, including political, ideological, or religious affiliation.
• The new rules add a new layer of bureaucracy by requiring that every grant be approved by a senior political appointee. All grant awards are also expected to demonstrably advance the President’s policy priorities.
• All else being equal, grants should be awarded to entities with the lowest indirect cost rates.
• Pass-through entities (like a State Broadband Office) must ensure that grant recipients do not take actions that could damage the reputation of the grant pass-through agency or the federal government.

What are the practical results if these changes are implemented? While one stated goal is to reduce the burden on grant recipients, these changes would significantly increase paperwork. The proposed rules also increase the risk of accepting grant funding since a grant can be canceled at any time for violating the new political and social grant rules. Probably the most insidious proposed rules are that grant awards would have to pass several political sniff tests to be awarded, rather than being made on merit.

The big picture is that this is a clear attempt by OMB, which is part of the Executive branch, to take over the grant process. The vast majority of grants are created by federal legislation, and this would allow the executive branch to override grant rules created by Congress.