“Improving Oversight of Federal Grantmaking” Gives Agency Heads More Control Over Federal Grant Review and Provides for Uniform Guidance Revisions

A new Executive Order (EO) issued Thursday, August 7 continues—and expands upon—the Trump Administration’s efforts to intensify control and oversight over federal grant funding. The EO, entitled “Improving Oversight of Federal Grantmaking,” tasks federal agencies with ensuring, among other things, that all new funding announcements are consistent with the Administration’s policy priorities. It also instructs the Office of Management and Budget (OMB) Director to revise the Uniform Guidance to further clarify new grant requirements.

While many aspects of the EO are focused on directing agency heads to develop set policies for stricter reviews of grant funding announcements, certain provisions undoubtedly will trigger immediate and significant impacts for federal funding recipients:

• Section 3(a) mandates that “each agency head shall promptly designate a senior appointee who shall be responsible for creating a process to review new funding opportunity announcements and to review discretionary grants to ensure they are consistent with agency priorities and the national interest.” Notably, Section 3(c) provides that until the review process is in place “agencies shall not issue any new funding opportunity announcements without prior approval from the senior appointee designated . . . except as required by law.” While it is unclear how narrowly this section will be construed in practice, we may see a slower pace in Notice of Funding Opportunities (NOFOs) being issued under this new rubric, at least in the short term.
• Section 4 provides a list of considerations that agencies should utilize when reviewing funding opportunity announcements and abides by all the previous guidance issued by the Administration relating to ensuring grant awards are not used to fund or promote racial preferences, racial discrimination, gender ideology promotion, illegal immigration, or other initiatives that “compromise public safety or promote anti-American values.”
• Section 5 focuses on revisions to the Uniform Guidance “to streamline application requirements and to further clarify and require all discretionary grants to permit termination for convenience, including when the award no longer advances agency priorities or the national interest.”
• Section 6 requires a deep-dive review of grant terms and conditions by agency heads within 30 days of the date of the EO. The review must encompass whether the agency’s terms and conditions for discretionary awards include the termination provisions described in 2 C.F.R. 200.340, which provide that an award may be terminated if it “no longer effectuates the program goals or agency priorities.” While certain funding agencies have used this rationale in grant terminations over the past six months, the authority often has not held up during litigation challenges. The EO instructs that agency heads shall take steps to revise terms and conditions of existing grants to permit the immediate addition of the “termination for convenience” provision. See Section 6(b).
• Section 6(c) also authorizes tighter controls over funds drawing down: the EO (i) permits agency heads to insert language in grant agreements that prohibits recipients from directly drawing down general grant funds for specific projects without affirmative authorization from the agency and (ii) requires grantees to provide written explanations, with specificity, for drawdown requests.
• Moreover, the EO contains several provisions that target research institutions and science-related grant funding. In Section 4, “Considerations for Discretionary Awards,” the EO provides that preference for discretionary awards should be given to institutions with lower indirect cost rates, “all else being equal.” The EO also advises that agencies should prioritize grant applications from institutions that implement Gold Standard Science and that new Uniform Guidance revisions should “limit the use of discretionary grant funds for costs related to facilities and administration.”

Of course, agencies must implement the EO before its provisions become applicable to recipients of federal funding, and we expect each agency to have a different process for doing so. However, it is clear that the EO demands increased accountability from agency heads in ensuring that discretionary grants are stringently reviewed to align with agency priorities—and we expect that this heightened review will cause even greater concern for grantees who have grappled with ever-evolving changes to federal funding under the Trump Administration. While we do expect to see a considerable amount of litigation attempting to block some of these changes—and such litigation could delay the timetable for agency implementation, district courts now are more limited in their authority to issue nationwide injunctions, which adds yet another wrinkle to the uncertainty facing federal funding recipients.

Feldesman attorneys will continue to monitor agency implementation of the EO and the long-term impact on grant terms and conditions—and issue additional guidance as available. For questions, please contact Mindy B. Pava or Phillip A. Escoriaza.

***

For updates, please join Feldesman’s Monthly Briefings for Federal Grantees: Key Updates and Developments webinar. The next webinars in this series will take place on August 19, 2025 and September 16, 2025.