Proposed OMB Federal Grantmaking Overhaul Prompts Bipartisan Concerns; Take Action! Submit Comments Opposing Proposed Rule – Comments Due TODAY, July 13
Jul 13, 2026
By Sarita Kelkar, NLIHC Policy Intern and Renee Williams, NLIHC Senior Advisor for Public Policy
On May 29, the Office of Management and Budget (OMB) published its proposal to reshape the framework for federal funding awards. The Notice of Proposed Rulemaking (NPRM), entitled “Regulation for Federal Financial Assistance,” would update regulations across federal agencies, including HUD. The scope and nature of the changes have prompted bipartisan concern, leading both the Senate Democratic Caucus and Senator Susan Collins (R-ME), Chair of the Senate Appropriations Committee, to send letters to OMB Director Russell Vought.
In their July 1 letter, Senate Democrats called for recission of the Proposed Rule. In her July 6 letter, Senator Collins urged OMB to extend the rule’s 45-day comment period by at least 90 days and to withdraw portions of the Proposed Rule that are likely to harm 1) small and rural communities and 2) scientific and biomedical research.
The NPRM comment period is closing, with comments due TODAY, July 13, 2026, at 11:59 pm ET. NLIHC encourages organizations and individuals to voice opposition to the Proposed Rule. Commenting resources are referenced below.
Background on OMB’s Proposed Rule
The Proposed Rule would codify the OMB “Uniform Guidance” governing federal funding awards, with substantial revisions, as regulations (as opposed to guidance). This approach centralizes rules governing federal financial assistance at OMB—specifying at proposed 2 C.F.R. 1.205 that the rulemaking focuses on grants and cooperative agreements, though portions of the OMB regulations would apply to federal financial assistance broadly.
OMB’s changes, if finalized, would apply across the grantmaking cycle, including application, as well as suspension and termination, with an overarching emphasis on ensuring funding recipients do not run afoul of the administration’s policy positions (see Memo, 6/29). For example, the Proposed Rule would, among other changes, require federal agencies to ensure funds are not used to support disparate impact; diversity, equity, inclusion and accessibility (DEI/DEIA); or “gender ideology.”
NLIHC strongly opposes the Proposed Rule, and is particularly concerned about how, if finalized, the proposed changes would impact federal housing programs, including by creating confusion and uncertainty for federal funding recipients during an affordable housing crisis.
Senate Democratic Caucus, Senator Collins’ Letters to OMB
The Senate Democrats’ letter describes the proposal as “transform[ing] federal grants from policy tools that Congress uses to promote the public good into a political cudgel...,” arguing that:
Grants could be arbitrarily suspended or terminated through expanded political influence and agency authority. The letter points to the ability of the president to “terminate or suspend any grant at any time for any reason and without any notice” through this rulemaking, creating a chaotic landscape and harming the likelihood of organizations and communities applying for future grants.
Under this rulemaking, political appointees would be able to decide which grants receive funding. Using scientific research as an example, the letter argues that the Proposed Rule creates a reality where political appointees are directed to “substitute their own independent opinions over those of panels of experts.”
Grantees’ ability to receive funds would be dependent on ambiguous and potentially unlawful conditions. The loosely defined terms OMB lays out for recipients to follow calls for federal funds to solely “advance the president’s policy priorities”: naming violations such as DEI, “radical political ideologies,” and “anti-American values,” among others. With applicants and grantees forced to “play an endless guessing game,” the gap widens between what federal funds are intended to be used for—i.e., research that supports communities impacted by health disparities—and grant recipients’ capacity to utilize such funding.
The proposal obscures how grant recipients would use taxpayer dollars. By removing their requirement to follow financial internal control standards established by the Government Accountability Office (GAO), transparency is lost; the risk of fraud or abuse increased.
OMB lacks the legal authority to dictate arbitrary grant cancellations.
Senator Collins’ letter highlights the proposal’s effect on scientific institutions, grant recipients/sub-recipients, and agencies. She also requested an extended comment period of at least 90 additional days to afford more time for public input, based on feedback from “numerous stakeholders” that the current 45-day comment period is “inadequate.” She asks OMB to withdraw “portions of the rule that would unduly burden scientific and biomedical research and small communities.”
The letter also asserts:
The proposal “injects uncertainty into the Federal award process.” The Proposed Rule’s focus on ensuring federal grants align with “program goals and agency priorities” deviates from prior iterations by removing agency discretion and limiting appeals.
The proposal would “undermine scientific and biomedical research.” Being able to issue mid-award terminations creates uncertainty, lessening the scientific community’s future likelihood of applying for federal grants and potentially leaving patients without treatment. Allowing senior appointees to have decision-making undermines the principle that scientific merit and value, not political ideology, guides the grant issuance process.
Requiring recipients to “submit a written justification for every payment request” creates an additional burden that likely affects smaller institutions and communities disproportionately. The letter argues this would also conflict with OMB’s stated goal to “reduce recipient burden.”
The Proposed Rule would “conflict with Congress’ control over the federal funding process.” The proposal is unclear regarding how agencies can maintain federal grants’ congressional intent while ensuring consistency with the president’s policy priorities.
Take Action!
NLIHC encourages organizations and individuals to voice opposition to the Proposed Rule. The National Council of Nonprofits has a chart outlining the proposed changes, a general commenting guide, and a broad organizational sign-on letter. NLIHC has drafted a resource that outlines possible impacts on housing programs here.
Submit comments by 11:59 pm ET, TODAY, July 13, here.
Read the Senate Democratic Caucus’s letter here; read Senator Collins’ letter here.
Read the Proposed Rule.
Read the National Council of Nonprofits explainer resource.
Read NLIHC’s resource regarding possible impacts on housing programs.
Read additional analysis of the rule here.