OMB Proposes Major Shift in Federal Grant Administration

Why This Matters

OMB is relying on its authority to set government-wide financial management policies to remove language stating that 2 CFR Part 200 is administrative guidance. That shift could create new legal and practical uncertainty over which rules control when the Uniform Guidance conflicts with agency regulations.

Currently, agency regulations adopted through notice-and-comment rulemaking generally take precedence over the Uniform Guidance. Under the proposal, the Uniform Guidance and agency rules would sit on more equal footing as a matter of administrative law—while agencies would still be responsible for ensuring compliance with their underlying program statutes. The result could be more disputes, more confusion, and fewer program-specific flexibilities.

Broad Reach Across HUD Programs

The Uniform Guidance already applies broadly to federal financial assistance—not just discretionary grants. Within HUD, it applies to essentially all grant programs, including entitlement programs such as Community Development Block Grants (CDBG) and the Section 8 program, and in more limited ways to loans under the Federal Housing Administration and Ginnie Mae operations.

Potential Loss of HUD-Specific Flexibilities

HUD programs currently include carve-outs and tailored approaches that deviate from the Uniform Guidance. For example:

• The HOME program excludes certain Uniform Guidance provisions by regulation.
• HUD has allowed public housing agency (PHA) joint venture partners to obtain exceptions to Uniform Guidance procurement requirements.

If OMB’s proposal is finalized, HUD may have less room to preserve these program-specific adjustments, if not required by their authorizing statutes.

Key Substantive Changes OMB Is Proposing

OMB’s proposal also includes several policy and compliance changes that could directly affect PHAs, affordable housing developers, and other recipients, including:

• New pre-award review and risk-evaluation requirements, including senior agency review of selected proposals.
• A requirement that all federal grant recipients enroll in E-Verify.
• New national policy restrictions stating that federal award funds may not be used for DEIA, “gender ideology,” or gender transition services for individuals under 19.
• A requirement to obtain awarding-agency preapproval before using federal grant funds to attend conferences.

Related HUD Proposal Highlighted in the Rulemaking

HUD is also proposing a change tied to the rulemaking: expanding nonprocurement debarment and suspension coverage to subcontractors when the contract is expected to be $25,000 or more.

Public Comment Period

The proposed rule, accessible here, is currently available for public comment. There is a shortened 45-day comment period. The comment period closes on July 13, 2026.

Copyright © 2026 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.