Key takeaways from the HORNE team’s presentation at the NGMA Compliance Conversations webinar “Grants in Transition: Practical Steps on Navigating the Now & Preparing for What’s Next.” 

______________________________________________________________________

The federal funding landscape is poised for major transformation with significant proposed changes to discretionary funding, program priorities, and agency responsibilities suggesting a period of turbulence that demands strategic foresight and proactive planning from states, local governments, nonprofits, and education institutions. To navigate what’s ahead, stakeholders must pay close attention to shifting federal priorities, prepare for reform-driven sustainability efforts, and develop adaptive strategies for long-term success.

Major Shifts in Federal Budget Priorities Are Coming

At the heart of the upcoming changes is the recently passed “One Big Beautiful Bill Act” (OBBBA). The OBBBA brings significant shifts to federal grant funding, with a clear reallocation of resources across sectors. One of the most notable changes is the elimination of numerous climate and environmental grant programs, including those related to low-emission energy, climate justice, and greenhouse gas reduction. These cuts reverse many of the investments made under the Inflation Reduction Act, signaling a shift away from federal support for green initiatives. Similarly, in education, the bill tightens Pell Grant eligibility and introduces new but limited workforce-training vouchers, reducing overall support for low-income and non-traditional students.

At the same time, the bill increases targeted grant funding for rural and agricultural programs. A key highlight is the doubling of the Rural Hospital Fund to $50 billion, aimed at offsetting the impact of deep Medicaid cuts that threaten access to care in low-population areas. The USDA also receives enhanced support for rural grants, farm-related funding, and protections for domestic biofuels.

Defense and homeland security spending are also set to grow significantly, with defense budgets increasing by 13% and homeland security receiving an additional $175 billion. Other areas receiving increased attention include traditional infrastructure and rural/agricultural assistance. The Department of Transportation’s infrastructure programs, drinking water initiatives under the EPA, and charter school programs are also positioned for potential funding increases.

With respect to larger federal funding opportunities for local and state governments with potential infrastructure projects, the legislation, as passed, includes large opportunities in these areas:

• Roads, Bridges, and Major Road Projects: $194.38 billion
• Airports: $20 billion
• Public Transportation: $35.26 billion
• Electric Vehicles, Buses and Ferries: $6.25 billion
• Ports and Waterways: $3.25 billion

Sustainability and Reform Require State and Local Preparedness

As federal funding priorities shift, states and local entities will be expected to carry more of the burden, particularly in areas like broadband expansion, education, and disaster response. We have seen several program-specific examples illustrate how sustainability and reform are being restructured to rely more on local execution and preparedness.

For instance, the Broadband Equity, Access, and Deployment (BEAD) program has issued updated guidance removing many social equity and engagement requirements while maintaining a focus on network resilience, compliance with labor laws, and accountability. This reduces federal oversight in favor of more state-driven implementation models.

In education, the proposed budget consolidates 18 federal grant programs into a single $2 billion formula grant. This change provides states with increased flexibility but also places the responsibility on the states to make strategic, needs-based decisions aligned with local workforce trends and policy shifts.

The FEMA Building Resilient Infrastructure and Communities (BRIC) program similarly underscores a move toward local responsibility. Proposed reforms prioritize empowering state, tribal, and territorial governments to lead disaster recovery efforts while the federal government retains core response duties. This includes encouraging local mitigation strategies, cost-sharing innovations, and fiscal preparedness.

Across all areas, one message is clear: sustainability in the face of reform will depend heavily on how well state and local entities prepare for and manage change.

Strategic Planning Is Crucial for Navigating Change

Given the sweeping nature of these shifts, we recommend these strategies to help organizations adapt:

• Diversify Funding Sources: As traditional funding streams are reduced or restructured, stakeholders should explore non-traditional sources and public-private partnerships.
• Budget Forecasting and Tracking: Accurate forecasting will be essential in anticipating funding gaps and identifying opportunities. Monitoring guidance changes in real time ensures that organizations can remain compliant and responsive.
• Target Traditional Grant Areas: Established programs in agriculture, transportation, homeland security, and law enforcement (e.g., DOJ’s COPS program) are expected to remain viable. Entities should refocus efforts on these dependable areas.
• Improve Communications: Real-time updates and transparent stakeholder engagement are critical. Establish recurring reporting mechanisms and communication protocols to ensure alignment across teams.
• Initiate Internal Task Forces: Organizations should consider forming internal working groups to analyze federal guidance, digest programmatic shifts, and lead planning efforts across departments.

Finally, understanding local-level impacts, developing backup plans, and preparing to advocate for essential programs will be critical steps in ensuring resilience through what may be a prolonged period of federal funding realignment.

________________________

Sarah Legner, CGMS is a senior manager; Ashley Swain is the director of compliance and monitoring; Kyle Skene, CPA, is a senior manager; and Lindsey Howard is a compliance and monitoring manager at HORNE LLP. Learn more at horne.com. 

Key takeaways from the BFS team’s presentation at the NGMA Compliance Conversations webinar “Grants in Transition: Practical Steps on Navigating the Now & Preparing for What’s Next.” In this webinar, the BFS team provided practical steps to navigate the shifting federal funding landscape.

______________________________________________________________________

We are grateful to the grants professionals who joined us for an important compliance conversation on grants in transition. These conversations are more than just training—they’re a space to tackle real-world pressure points and share strategies that help agencies stay one step ahead of compliance risks.

In this session, we focused on what’s keeping folks up at night: policy gaps, spending stress, desk reviews, and documentation pressure. And we didn’t just talk about the problems—we shared practical tools to help solve them.

Here are a few highlights and takeaways from the session.

Review, Track, and Update Your Policies – Starting Now

With changes to 2 CFR 200 coming in FY26 and a steady stream of impactful Executive Orders (EOs), now is the time to review and align your internal policies and procedures to keep pace with the evolving federal landscape. We recommend:

• Reviewing policies now to see where alignment is possible
• Tracking EO-related changes that may affect policies and compliance
• Updating policies and procedures regularly as part of internal controls best practice
• Flagging policies that may need revision later, once 2 CFR 200 has been updated

Don’t wait for formal implementation dates to begin your internal work. Proactive alignment not only supports compliance, it strengthens your operational integrity.

Audit & Desk Review Focus Has Shifted – Are You Ready?

Traditionally, audits focused on familiar territory: HR, procurement, and other program-facing policies. But today, the lens is wider—and sharper. Auditors are no longer just checking boxes; they’re evaluating how your policies, practices, and spending align with program intent, performance outcomes, and federal priorities.

Even policies that once went unnoticed may now raise red flags if they’re outdated, misaligned, or undocumented. In this new environment, internal policy reviews, clear justification, and organized documentation aren’t just best practices—they’re essential tools for audit readiness and risk mitigation.

Are you a Red Flag?

• Do you have high unobligated balances?
• Do you have a spend-down strategy that aligns with program goals?
• Do your programs and policies align with the intent of your programs and the current EOs?

Budget Modifications Require Strategy – and Transparency

Budget realignments don’t have to be reactive. We talked about how to navigate spending down and budget shifts with confidence by:

• Staying within the lines – understand pre-approval thresholds
• Aligning spending with program goals – don’t just “use it or lose it”
• Talking to program leads early – don’t wait for a crisis
• Documenting every step – because if it’s not documented, it didn’t happen
• Drawing down regularly – don’t let claimed-but-unreimbursed funds pile up

Too many agencies fall into the “use it or lose it” trap without a strategic plan. We emphasized that spending should be intentional, documented, and defensible. With today’s unpredictable funding environment, sitting on reimbursements is a risk. Claim within 30 days of expenditure whenever possible.

If It’s Not Documented…It Didn’t Happen

We can’t say this enough: Good documentation is your first line (and often strongest) defense.  Make sure your grant documentation is:

• Centralized, organized and accessible
• Clear, legible, and tied to the decision being made
• Contextual – not just what happened, but why it happened

Action Items You Can Tackle Today

• Review and revise your policies, especially procurement, cost allowability, and disclosures.
• Centralize your grant documentation, so it’s ready when you need it.
• Start the budget reallocation conversations now, before deadlines close in.
• Prep for monitoring and desk reviews – they’re coming, even if you haven’t been flagged yet.

As the grants landscape continues to shift, stay focused on what you can control. Create a list of action items, tackle every item on the list and keep reviewing, documenting and making changes as needed to ensure compliance. Stay up-to-date by remaining engaged and continuing to seek and use information, resources and tools.

____________________________

Mara Ash, CIA, CGFM, CMRA, CICA is the CEO and Cindy Watson, CICA is the managing director of BFS Strategic Partners. For additional support and tools, visit decoded.expert.