June 15 Federal Update: Proposed Regulation to Make Extensive Changes in Federal Grantmaking  

The Office of Management and Budget (OMB) and 41 federal agencies proposed a rule that would make sweeping changes to how the government manages federal grants, cooperative agreements, and other forms of federal financial assistance. If finalized, the rule will significantly affect how individuals apply for funding, how award decisions are made, how federal funding is used, and how federal awards are terminated.  

The proposal raises several areas of critical concern, including: 

• Prohibits federal awards from funding, encouraging, or facilitating diversity, equity, inclusion, and accessibility (DEI or DEIA) activities, “gender ideology,” or pediatric gender transition procedures for individuals under 19 years of age (§ 200.300(b)  

• Requires senior political appointees to conduct pre-issuance reviews of all discretionary awards to ensure they demonstrably advance the President’s policy priorities and are not used for discriminatory or impermissible purposes (§ 200.205(b))  

• Expands risk assessment factors that agencies may consider when evaluating an applicant’s ability to fulfill grant terms and conditions, including their history of “questionable practices” based on publicly available information, such as activities inconsistent with federal civil rights laws and activities inconsistent with religious liberty laws (§ 200.206(b))  

• Allows federal agencies and pass-through entities to terminate and temporarily suspend discretionary federal awards, in part or in its entirety, if the agency determines the award does not advance program goals, agency priorities, or the national interest (§ 200.340), (§ 200.340(e))  

• Encourages the use of multi-year awards to reduce the frequency of applications (§ 200.202), pre-application Statements of Interest to pre-screen applicants (§ 200.204), eliminate the use of fixed amount awards and subawards, unless otherwise authorized by statute (§ 200.333), and postings for all federal funding opportunities on Grants.gov to reduce duplicative processes (§ 200.204) 

• Requires all recipients and subrecipients to participate in the Department of Homeland Security’s E-Verify program to confirm employment eligibility of employees and contractors hired or performing work under federal awards in the United States (§ 200.303(f)) 

• Prohibits the allocation of federal funds to issue advocacy, voter registration, and lobbying-adjacent activities (§ 200.450) 

• Mandates that funding directed toward conferences require express agency approval and must be included in the terms and conditions of the Federal award (§ 200.432), while memberships, subscriptions, and professional activity costs are only allowable if they are necessary to fulfill the award requirements (§ 200.454) 

The proposed changes introduce critical challenges for nonprofits as they apply for and maintain federal grants by easing grant terminations, attaching politicized conditions, and increasing the time burden organizations face in applications. The scope of the changes will likely create a chilling effect by discouraging community organizations from applying for federal funding as barriers to attaining and maintaining federal funding grow.  

Comments are due July 13, 2026, with a proposed effective date of October 1, 2026. 

Federal Agencies Establish New Government‑Wide Acquisition Pathway for Modern Grants Management 

The U.S. Department of Health and Human Services (HHS), in partnership with the General Services Administration (GSA), announced the launch of the Grants Management Special Item Number (SIN). The Grants Management SIN is a streamlined, government‑wide procurement tool for federal agencies to access pre‑vetted and modern commercial grants management solutions and services through the GSA Multiple Award Schedule (MAS). 

It will be available to eligible state, local, tribal, and non‑governmental organizations through GSA’s Cooperative Purchasing Program. The Grants Management SIN aims to improve  interoperability and visibility into grants data, merge and standardize systems, and remove redundancies.  

Applications for the Grants Management SIN are now open through the GSA MAS. 

CMS Launches Nationwide Framework to Implement Medicaid Work Requirements 

The Centers for Medicare & Medicaid Services (CMS) released an Interim Final Rule to implement work requirements created by H.R. 1..Under this rule, adults aged 19-64would be required to document 80 hours of community service, employment, or education, or a combination, per month to remain eligible for Medicaid. The rule establishes state data reporting requirements, how states must assess and verify compliance, and how states must communicate the new requirement to Medicaid applicants and beneficiaries.   

Unless they receive an exemption, states must implement the requirements by January 1, 2027. The work requirements will not apply to:  

• Former foster care youth,  
• Veterans with a total disability rating 
• Participants in a drug or alcohol rehabilitation or treatment program 
• Parents and guardians of dependent children under the age of 13 years or of a disabled individual, and 
• Individuals who meet the TANF work requirements or are members of a household meeting the work requirements to receive SNAP benefits. 

CMS will accept comments until July 31. For further information about the rule, CMS has published a fact sheet. 

ACF Adds New Suite of Prevention Services to Prevention Services Clearinghouse 

The Administration for Children and Families (ACF) announced the inclusion of three new evidence-based interventions to the Title IV-E Prevention Services Clearinghouse:  

• Acceptance and Commitment Therapy (Well-Supported) 
• Ohio Kinship and Adoption Navigator (Supported) 
• Promoting First Relationships (Well-Supported) 

The expansion of services aims to support ACF’s ongoing efforts to equip states with proven interventions that help strengthen families and prevent unnecessary entries into foster care. 

House-Passed Bill Sanctions States for Improper Use of CCDBG Funds 

On June 3, the House of Representatives passed H.R. 7726 by a vote of 217 to 207. The bill is intended to prevent fraud and strengthen oversight of the Child Care and Development Block Grant (CCDBG). However, it has raised concerns about how administrative errors may restrict access to vital funds.  

Under this bill, states with an improper payment rate of more than 5 percent will receive corrective action plans, but if the rate exceeds 5 percent for two consecutive fiscal years, they will become ineligible for CCDBG funding.  It will also allow the Secretary of Education to permanently ban providers from receiving funding if they knowingly submit false documentation or improperly spend funds. 

House Advances Critical Appropriations Legislation 

Early this month, the House of Representatives advanced appropriations policies for the Departments of Agriculture, Health and Human Services, Education, and Housing and Urban Development: 

• H.R.8646: Passing with a vote of 213 to 210, this bill includes a $6 billion reduction in Supplemental Nutrition Assistance Program (SNAP) funding, a $200 million reduction in Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and a $5 million reduction in the Emergency Food Assistance Program (TEFAP). Funding for rural housing programs, limiting repairs, rental assistance, and new development would be maintained at current levels.  has now been sent to the Senate for their consideration.
  
• H.R.9170: Approved by the committee in a 34 to 27 vote, this bill includes a $356 million decrease in funding for Tenant-Based Rental Assistance (TBRA) in FY27 and a $257 million decrease in funding for Homeless Assistance Grants (HAG). It decreases public housing operating costs by $287 million and the U.S. Interagency Council on Homelessness by $2.8 million. The bill does not provide funding for new vouchers under the Veteran Affairs Supportive Housing (VASH) program or HUD’s Eviction Protection Grant Program.
  
• H.R.9260: This bill advanced out of committee with a 34 to 28 vote. It increases mental health and substance abuse block grant funding by $61 million, the Low-Income Home Energy Assistance Program by $10 million, and Child Care and Development Block Grants by $10 million. It increases funding for Head Start by $10 million, the Community Services Block Grant by $5 million, and the Social Security Administration by $26 million. The bill would also eliminate funding for the Agency for Healthcare Research and Quality, Healthy Start, Preschool Development Grants, and Full-Service Community Schools. It would decrease funding for the Substance Abuse and Mental Health Services Administration by $91 million, Administration for Children and Families by $1.9 billion, and Workforce Innovation and Opportunity Act State Grants by $1.8 billion.

Key Funding Opportunities Announced for School Safety and Mental Health  

The Substance Abuse and Mental Health Services Administration (SAMHSA) announced $40 million in funding opportunities. The funding will go toward eight grant programs intended to support communities addressing trauma, mental illness, substance use prevention, addiction treatment, and strengthening the behavioral health workforce. 

The announcement arrived shortly after the U.S. Departments of Education and Health and Human Services announced the School Safety Enhancement program Fiscal Year (FY) 2026 competition to bolster school safety and school infrastructure security. 

Children’s Bureau Amends Child Welfare Policy Manual  

The Children’s Bureau recently amended the Child Welfare Policy Manual to offer additional guidance on the definition of a consecutive month when determining eligibility for Title IV-E kinship guardian assistance payments. Question 6 clarifies that title IV-E agencies can count up to 60 days toward the consecutive 6-month requirement. This applies when there are agency delays in issuing approval or a license, as long as the prospective guardian’s home meets all licensure or approval requirements. 

USDA Guidance Clarifies SNAP Time Limit Changes Following H.R. 1

The Food and Nutrition Administration published a series of questions and answers to guide the implementation of time limits for SNAP, including exemptions and waiver criteria. The changes were implemented through H.R. 1, a comprehensive reconciliation bill.

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