OMB Proposed Rule for CFR Part 200: A Proposed Change in Federal Grantmaking to Tribal Nations

The United States Office of Management and Budget (OMB) recently published a proposed rule that would codify a sweeping update to 2 C.F.R. Part 200, also known as the “Uniform Guidance.” 2 C.F.R. Part 200 contains the benchmark rules applicable to many discretionary federal grant programs and other forms of discretionary federal financial assistance. The proposed rule would modify nearly all facets of funding administration under 2 C.F.R. Part 200, from application to compliance.

As further described below, these changes, if adopted, could have significant consequences for Tribal Nations because they will affect how Tribal Nations apply for, administer, use, and comply with any discretionary federal awards.

Note: The proposed rule only impacts discretionary grants, in other words, grants awarded through a competitive application process. The proposed rule will not impact statutory or formula-based grants, or, in other words, those grants issued on a non-competitive, predetermined basis (e.g., ISDEAA funding).

Key Changes

The Proposed Rule would, among other things, make the following changes to 2 C.F.R. Part 200:

  1. Guidance to Regulation. The proposed rule purports to change 2 C.F.R. Part 200 from “guidance” to regulation, which means that it will apply over any conflicting agency-specific requirements. Proposed 2 C.F.R. § 200.101(d)(2).
  2. Increased Termination Authority. The proposed rule expands the authority of an agency or pass-through entity to terminate awards at will if it determines that termination is in its own interest or that the award does not meet program goals, federal agency priorities, or the national interest as they exist at the time of termination. Proposed 2 C.F.R. § 200.340(a)(2).
  3. Political Review. The proposed rule adds a new “pre-issuance review” where a political appointee will screen applications to see if they meet “federal agency priorities and the national interest” and give preference to applications that “demonstrably advance the president’s policy priorities.” Proposed 2 C.F.R. § 200.205(b).
  4. Anti-DEIA Language Implementation. The proposed rule codifies executive orders related to prohibitions against diversity, equity, inclusion, and accessibility (DEIA) programming and language. Services that Tribal Nations provide to their citizens are based on political classification and do not fall within the parameters of any “DEIA” programming as defined by executive order or this proposed rule. However, if implemented, this language will require consideration when submitting applications, communications regarding programming, and audit compliance, and there is a risk that Tribal Nations’ initiatives are improperly flagged as “DEIA.” Proposed 2 C.F.R. §§ 200.300(b)(1)-(2).
  5. Competitiveness (Indirect Costs). The proposed rule adds language preferencing applicants with lower indirect cost rates, which will put Tribal Nations with higher indirect cost rates at a disadvantage in competitive application processes.

This list only covers a handful of changes under the proposed rule. OMB’s proposed rule itself, available at https://www.federalregister.gov/documents/2026/05/29/2026-10817/regulation-for-federal-financial-assistance describes all of the forthcoming changes. In addition, more information may be found at: Submit Comments on OMB’s proposed Federal Financial Assistance Rule by July 13 | NAFOA and Overview of OMB Rule Proposing Significant Changes to Financial Assistance | NCAI.

Next Steps

The proposed regulations are set to go into effect on October 1, 2026, but there is an open public comment period that ends on Monday, July 13 at 11:59 PM EST.

Under federal administrative law, agencies are required to review, consider, and respond to comments submitted during the public comment period. The benefit to commenting is to communicate concerns that you may have directly with OMB, and, to the extent that OMB does not address your concern, to build a potential record regarding OMB’s non-compliance with federal law.

Drummond Woodsum is available to assist with drafting any comments that you may want to submit to OMB, or to recommend or assist with using any template letters drafted by intertribal organizations such as NAFOA (NAFOA Template Letter – 2026 OMB Proposed Rule).

Beyond the comment period, it is important to monitor the status of this proposed rule and any further communications from OMB. There may be additional opportunities to comment or changes to the proposed rule that may be implemented.

If you have questions about the proposed rule, please let us know. We will be monitoring and will provide any updates as we have them.