On Friday, May 29, the Office of Management and Budget (OMB) published a sweeping plan to modify the Regulation for Federal Financial Assistance.
A proposed rule seeks significantly to revise several parts of the OMB Guidance for Federal Financial Assistance[1] to clarify policies and requirements related to funding programs across the government.
This regulatory action follows last summer’s Executive Order (EO) 14332 Improving Oversight of Federal Grantmaking, issued August 7, 2025. It covers most Executive Branch agencies, including those that directly regulate employers and the health care sector in particular, such as the Department of Labor, the Occupational Safety and Health Administration, and the Department of Health and Human Services. This overhaul of federal grantmaking is potentially impactful on any organization – including universities and other educational institutions, arts organizations, manufacturers, healthcare providers and researchers, and other entities that rely on federal funding for research grants and other monies.
Motives and Methods for Reform
The revision, if adopted as proposed, would create a uniform regulation for grant administration across all federal agencies, the “Uniform Grants Regulation (UGR).” As stated in the proposed rule’s Executive Summary, OMB’s impetus for promulgating this regulation is framed as being predicated on what is categorized as the Biden administration’s focus “on using their award programs to serve a ‘woke’ policy agenda that deliberately favored certain identity groups over others.”
Under the UGR, federal funding would be allocated only to programs and projects that advance the Executive Branch’s policy objectives and priorities. Among the aims listed in OMB’s statement of Objectives for the proposed revisions is “to ensure that Federal agencies will appropriately reduce the scope of award activities to only what is necessary to achieve the objectives identified in law consistent with Executive Branch policy.” (emphasis added). Toward that goal, specific new provisions governing federal grantmaking include:
- A rule codifying EO 14281, Restoring Equality of Opportunity and Meritocracy, to ensure that awards are administered in a manner that does not promote or support theories of disparate-impact liability (read more about EO 14281 here and here);
- A rule that federal funding recipients, such as academic institutions or performing arts organizations, that control facilities or services for events, meetings, or other expressive activities cannot “discriminate on the basis of the viewpoint, content, or subject matter of speech—including on the basis of political, ideological, or religious affiliation or perspective...” The stated goal of this rule is to prevent a federally funded organization from disadvantaging or suppressing “disfavored” groups.
Projects Deemed “Woke” Will Not Be Funded
The proposed UGR also seeks to add new rules to reflect “key administration policies and priorities,” including those addressed in EOs related to “unlawful DEI” and “gender ideology.” These include rules that would prohibit the use of federal funds for:
- DEI (see OMB’s detailed justification/analysis here);
- “Gender ideology” (the proposal also removes analysis of the Supreme Court’s Bostock decision as contained in the current regulation)
- Gender affirming care for those younger than 19; and
- Abortion.
The proposal would also include a new rule promoting the eligibility of religious and faith-based organizations for federal funding and another new rule to require all federal financial assistance recipients and their subcontractors to participate in the Department of Homeland Security’s E-Verify program, reflecting the administration’s positions and emphasis on religion and immigration, respectively.
Implications
The proposed UGR would reach a broad cross-section of organizations. While UGR directly binds the federal agencies that administer financial assistance, its practical effect, however, would be felt most acutely by the recipients of federal funds.
Universities and other educational institutions, arts organizations, healthcare and life science researchers and providers, manufacturers, and any other entity that relies on federal money for research grants or other non-contract funding should evaluate how the new conditions—particularly the prohibitions on DEI, “gender ideology,” certain medical care, and the codification of EO 14281—would affect their existing and prospective awards and activities.
Academic institutions, performing arts organizations and other entities that control facilities for events or expressive activities face additional viewpoint-neutrality obligations, and all recipients and their subcontractors would be required to enroll in E-Verify.
The UGR would also increase the likelihood of government use of the False Claims Act (FCA) to challenge grantee practices allegedly in violation of the UGR. We have previously written on the government’s claim that alleged false representations concerning DEI activities provide a basis for FCA claims. One major question about DEI-based FCA claims is whether the alleged violations are “material” to a government grant or contract, which the Supreme Court construed the FCA to require in Universal Health Services, Inc. v. U.S. ex rel. Escobar. [2] The UGR may be a vehicle whereby the government seeks to bolster its position on alleged DEI violations being material to an FCA claim. This is especially true given Escobar’s categorizing the FCA’s materiality standard as both “rigorous” and “demanding” because the FCA is not “a vehicle for pursuing garden-variety breaches of contract or regulatory violations,”[3] as further discussed here.
Grantee Comment Opportunity
Comments are due on or before July 13, 2026, and OMB seeks to issue a Final Rule to be effective October 1, 2026. Affected organizations should consider submitting comments before the July 13, 2026, deadline.
Next Steps for Federal Financial Assistance Grantees and Applicants
Current and potential federal financial assistance grantees should begin assessing compliance or alternative strategies ahead of the proposed October 1, 2026, effective date, given the likelihood that the Administration will seek to codify its priorities expeditiously. Careful planning, establishment of new internal compliance programs, and effective execution will be absolutely necessary for grantees to not run afoul of the new UGR if, as is likely, it is adopted in a form substantially similar to the proposal, especially with the government threatening FCA claims for non-compliance.
Elizabeth A. Ledkovsky, Staff Attorney for Epstein Becker Green, helped prepare this article.
ENDNOTES
[1] Located in title 2 of the Code of Federal Regulations (CFR), subtitle A.
[2] 579 U.S. 176, 194 (2016).
[3] Id.
