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Who Controls Federal Grant Money? A New OMB Rule Would Give Political Appointees the Final Say

federal employees federal grants government regulations omb omb policy Jun 30, 2026

Federal grant funding controlled by political appointees under new OMB rule

A proposed federal rule would shift control over nearly every federal grant away from subject-matter experts and into the hands of senior political appointees — and the public comment window closes July 13.

On May 29, 2026, the Office of Management and Budget published a proposed rule rewriting Title 2 of the Code of Federal Regulations, Part 200 — the rulebook behind nearly every federal grant program in the country. The proposal renames that framework the Uniform Grants Regulation and represents the most significant overhaul of federal grant administration since 2013.

What the Proposed Rule Would Do

Three provisions deserve close attention from anyone who works with, administers, or depends on federal grant funding.

First, every discretionary grant would now go through a pre-issuance review by senior political appointees. Expert peer review would remain, but the rule specifies that specialists' recommendations are "advisory" — explicitly not to be routinely deferred to. The people with the deepest knowledge of the subject matter would no longer have the final word.

Second, agencies would be able to terminate a grant at any time if they determine it no longer serves the "national interest" — without being required to provide a detailed explanation. Grantees who have built programs, hired staff, and made long-term commitments would have little recourse.

Third, the scope of this rule is enormous. It touches rural hospitals, mass transit, special education, Head Start, food assistance, cancer research, and more. If your community relies on federally funded programs — and virtually every community does — this rule is relevant to you.

The Legal Shift

The current framework, 2 CFR Part 200, has largely operated as binding guidance with substantial deference to scientific and technical expertise. This proposed rule makes it explicitly binding and moves final decision-making authority from subject-matter experts to political leadership.

On its face, that kind of structural change is within an agency's rulemaking authority. Whether this particular rule survives legal challenge will be determined in court. But read plainly, the proposal puts politics in the room where funding decisions get made — and removes the insulation that expert review was designed to provide.

What You Can Do Now

The public comment period is the only formal, built-in opportunity for the public — including federal employees who administer these programs and communities that depend on them — to be heard before the rule is finalized.

Comments are due July 13, 2026. You can file at regulations.gov using docket number OMB-2026-0034. You can also submit via text by sending RESIST to 50409 (Resistbot).

If you work with federal grants, your comment carries weight. Administrative records matter in any future litigation, and documented public opposition is exactly the kind of record courts look at when evaluating whether agency action was arbitrary and capricious.

For federal employees navigating adverse employment actions or retaliation, the attorneys for federal employees at Southworth PC offer free consultations.

Legal Disclaimer: This content is for general informational purposes only and does not constitute legal advice. Federal employment situations are fact-specific and time-sensitive. Please consult a qualified federal employment attorney about your specific situation.

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