On May 29, 2026, the Office of Management and Budget (OMB), together with numerous federal agencies, published a proposed rule titled Regulation for Federal Financial Assistance. Under the proposal, federal agencies will be able to terminate any federal award (e.g., grants and cooperative agreements) at any point in time if the award no longer aligns with “program goals, Agency priorities or the national interest.” It also authorizes temporary suspension of awards for up to 90 days, with extensions permitted by mutual agreement, and introduces new requirements for those receiving federal funding. The rule will impact any entity receiving federal awards, including hospitals, universities, allied health colleges, food banks, and other community-based organizations. Comments are due July 13, 2026. If you wish to provide feedback to inform AHPA’s response, please email Rylie.Granville@AdventHealth.com by July 1, 2026.

The OMB wants to revise requirements across several steps of the federal award lifecycle—from the initial funding announcement through award selection— with the stated goal of reinforcing transparency, accountability and oversight.

The rule would revise government-wide requirements for federal financial assistance and give political appointees increased authority. It would create a new pre-issuance review for discretionary awards, with oversight by designated senior political appointees to ensure proposals align with legal requirements, agency priorities, program goals, and the national interest. Currently, political leadership sets broad priorities but doesn’t usually decide individual awards. The rule gives political appointees increased decision-making and makes peer review advisory only.

The rule adopts new research-focused criteria to be used in the merit review process for discretionary awards, directing senior appointees to apply specific principles during the pre-issuance review.

• These principles emphasize adherence to “Gold Standard Science,” including commitments to rigorous, reproducible research, the inclusion of measurable benchmarks, and demonstrated institutional success in implementing high-quality scientific practices.
• While the proposal doesn’t mandate that only projects meeting these standards receive funding, it embeds these considerations into the review framework, potentially shaping award selection.
• Awards being given to foreign entities would be restricted, unless the award is expressly authorized by the statute, or a senior appointee determines that the award is justified by a compelling interest related to the agency’s mission, administration priorities, and the United States. The restriction is not a complete prohibition, and foreign entities are allowed to participate as subrecipients or contractors under awards made to eligible U.S. entities but would face additional review requirements.

The proposal also adds and revises current restrictions on certain federally funded activities, including “unlawful DEI practices,” “gender ideology” and the transition of individuals under age 19. According to the rule, public entities receiving federal awards could not discriminate based on the “viewpoint, content, or subject matter of speech” in providing services for events held on their property, even when those events are not directly funded by the federal award. Additional proposed restrictions on activities for federal award funds include voter registration, lobbying, fundraising, membership, conferences and public messaging. Prior approval would be required for specific conference expenses. Several of these restrictions would be implemented through revisions to the cost principles in Subpart E.

The rule also removes Appendix VIII to Part 200 and narrows the exemption allowing certain not-for-profit  organizations to apply for-profit cost principles. Under the revision, only not-for-profits that receive at least 90 percent of their funding from federal contracts or operate federally funded research and development centers would remain subject to for-profit principles, while most other not-for-profit would be governed by Subpart E cost requirements.

The proposed rule would also revise requirements for Notices of Funding Opportunity (NOFOs). The revisions introduce a streamlined, staged application approach, allowing agencies to use statements of interest to reduce burden and require full applications only from applicants under further consideration. Citing inconsistent implementation over the years, the proposed rule would eliminate the use of fixed amount awards and subawards unless otherwise authorized by federal statute.

If finalized as currently written, the rule is likely to be legally challenged. Some Democrat leaders in the Senate sent a letter to the Director of the National Institutes of Health (NIH) raising concerns with the rule and requesting additional information. AHPA will continue monitoring this issue and will be submitting comments to the OMB.