The Office of Management and Budget’s (OMB) proposed revisions to the Uniform Guidance (2 CFR Part 200), published in the Federal Register on May 29, represent one of the most significant overhauls of federal grants management in years. With a compressed 45-day comment window (closing July 13, 2026) and a target effective date of October 1, 2026, these changes could reshape how federal awards are structured, awarded, and managed beginning in Federal Fiscal Year 2027.

The proposed revisions to the Uniform Guidance signal a fundamental shift in how 2 CFR Part 200 is positioned and enforced across the federal government. Most notably, OMB is moving away from framing the Uniform Guidance as “guidance” and instead solidifying it as the Uniform Grants Regulations using the current formal rulemaking process. For recipients, this means compliance expectations will become more standardized and less flexible, as the rule is elevated to a single, government-wide regulatory framework for all new awards beginning in FY 2027. However, legal challenges to this seem likely.

At the same time, the proposal significantly expands oversight throughout the entire grant lifecycle, introducing greater scrutiny both before and after awards are made. On the front end, enhanced merit review processes and expanded risk assessments will evaluate not just technical merit, but also organizational integrity, affiliations, and alignment with federal priorities. On the back end, recipients will face tighter controls over subrecipient monitoring, cash management, and documentation, along with new requirements such as E-Verify participation and more detailed payment justifications. Perhaps most notably, agencies are granted broad discretionary authority to terminate discretionary awards if they no longer align with program goals or evolving priorities, with limited avenues for appeal.

Finally, the revisions more explicitly tie the use of federal funds to defined policy priorities and restrictions, expanding the scope of what constitutes compliant program activity. New provisions address areas such as foreign collaborations, use of funds in connection with administrative priorities, free speech considerations, and broader statutory policy requirements, while also adjusting procurement standards and cost principles. These changes require recipients to think beyond financial stewardship and consider whether program design, partnerships, and operations align with federally established policy boundaries.

With more than 37,000 comments submitted as of late June 2026 and growing fast, along with the potential for litigation, the final rule may evolve and most likely be delayed. Until OMB issues a final rule sometime in late summer, these proposed changes remain tentative. However, recipients and subrecipients should stay informed and be prepared to make changes once an updated Uniform Guidance is issued.

Missed NGMA’s live webinar on the proposed updates on June 17, 2026? Visit Grants Management Academy to view the recording.

Members: Access to this and all other NGMA webinar recordings is included in your membership! Log in now

Non-Members: Log in/create an account and choose one of two purchase options: 

• Option 1: $49 | Access to this recording only
• Option 2: $174 | One-year access to all courses in Grants Management Academy

Subrecipient partnerships are essential to advancing research and delivering impactful programs, but they also introduce risk. As emphasized in NGMA’s May 2026 webinar, You’re Still on the Hook: The Real Costs of Weak Subaward Oversight, federal oversight expectations are clear: While recipients may delegate work, they cannot delegate responsibility.

Drawing on federal regulations, audit findings, and real-world examples of why oversight falls short, the presentation provided practical strategies for organizations to help protect their funding, reputation, and program success.

Three takeaways from the presentation:

1. Accountability Always Stays with the Prime Recipient

The most important concept in subrecipient management is also the simplest: Ultimate accountability remains with the prime recipient.

Even when a subrecipient is responsible for carrying out a portion of the award, the prime recipient retains full responsibility for all financial and programmatic outcomes. When compliance issues arise—whether due to unsupported costs, mismanagement, or failure to meet program goals—it is the prime recipient that must respond, resolve the issue, and potentially repay disallowed costs.

This dynamic fundamentally shapes how oversight should be approached. Subrecipient monitoring is not simply a compliance exercise. It is a risk management function designed to protect the institution, its funding, and its reputation.

2. Weak Oversight Has Real Financial and Programmatic Consequences

Subrecipient oversight failures are not theoretical; they are consistently identified in audit findings across federal programs. Recent audit reports issued by federal oversight bodies highlight common breakdowns, including failure to conduct risk assessments, inadequate review of subrecipient audit reports, and insufficient monitoring practices, and included findings with:

• Unallowable and unsupported costs resulting in substantial questioned costs
• Inaccurate classification of subawards versus contracts, leading to missed compliance requirements
• Inadequate monitoring that undermines program performance and accountability

Weak oversight can also result in missed program goals, reduced transparency, and increased scrutiny from funding agencies—ultimately putting future funding at risk.

3. Effective Oversight Requires a Proactive, Risk-Based Approach

Strong subrecipient oversight does not happen by accident. It requires intentional, documented, and risk-based processes across the lifecycle of the subaward.

Effective practices begin before the subaward is issued, with meaningful due diligence that evaluates a subrecipient’s financial systems, internal controls, and past audit results. Importantly, this process should go beyond collecting information to verifying that key controls actually exist and function as expected.

Once a subaward is established, oversight should include:

• Tailored terms and reporting requirements aligned to identified risk
• Ongoing monitoring of financial and programmatic performance
• Regular review of audit results and follow-up on any findings
• Clear documentation of monitoring activities and corrective actions

Critically, effective oversight is not one-size-fits-all. Federal guidance emphasizes the importance of adjusting monitoring activities based on the level of risk presented by each subrecipient. High-risk subrecipients require more intensive oversight, while lower-risk partners may warrant a lighter approach—but in all cases, monitoring must be purposeful and documented.

Final Thought

Subrecipient partnerships are critical to delivering federal programs, but they require thoughtful oversight to manage the risks they introduce. By understanding the accountability framework, recognizing the real consequences of weak oversight, and implementing proactive, risk-based practices, organizations can better safeguard federal funds and strengthen program outcomes.

At the end of the day, regardless of how experienced your partners may be or how strong your relationships are, one principle remains constant: You’re still on the hook.

Missed the live presentation? This and all other recorded webinars are available in Grants Management Academy, NGMA’s education portal. (Member login required)

As the American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds (SLFRF) program moves into closeout phase, it’s clear that closeout success is determined long before the final report is submitted.

NGMA and Hagerty Consulting partnered on a webinar presentation to help ensure a successful SLFRF closeout. Below are key takeaways from the presentation for recipients and subrecipients navigating the SLFRF closing stages. While this information focuses on SLFRF, the principles shared are broadly applicable for federal grant closeout.

1. Spending the Money is Not the Finish Line

Awareness of the expenditure deadline (and the specific instances of variation from that deadline) is essential but is only the starting point of compliance, not the end. Treasury’s closeout process confirms that funds are spent and reported, but audits, data reviews and follow-up inquiries continue long after a closeout certification is submitted. SLFRF closeout triggers a five-year record retention period, during which Treasury, the Government Accountability Office (GAO), or the Treasury Inspector General may request records. Organizations that “finish strong” are those that can clearly track where every dollar went, reconcile reported data back to their general ledger, and explain why each cost was eligible. In short, reporting done does not mean compliance done.

2. Audit Readiness Comes Down to Systems, Not Intentions

Let’s highlight a “48-hour test,” which is: If an auditor requested complete SLFRF documentation with two days’ notice after the person who organized it was no longer with the organization, could your organization deliver it? Many audit findings are not caused by bad actors or misuse of funds, but by fragmented documentation, informal practices or controls that existed on paper but not in daily operations. Audit-ready organizations have standardized documentation systems, clear ownership of compliance responsibilities and controls that operate in real time rather than at closeout. Additionally, if justification, approvals and reconciliations live only in email threads or people’s heads, the file is not audit‑ready, regardless of how confidently staff remember the decisions.

3. The Real Outcome of Closeout is Institutional Capacity

SLFRF closeout is not just about SLFRF. The controls, governance, reconciliation practices, and documentation systems required to close this award cleanly are the same ones that auditors will expect on every future federal grant. Organizations that treat closeout as a one‑time cleanup exercise miss the opportunity to convert years of effort into durable grants management capacity and often repeat the same findings later under a new program.

Bottom line? Finishing strong requires planning ahead. Organizations that actively manage time risk, build documentation for external review, and treat closeout as capacity‑building, will exit SLFRF not just compliant, but stronger than when they entered.

Missed the webinar? This and all other recorded webinars are available in Grants Management Academy, NGMA’s education portal. (Member login required)

Nicole Ward and Benjamin Shay are senior managing associates with Hagerty Consulting, a firm that partners with clients to safeguard their people, operations and communities before, during, and after disasters.

The U.S. Government Accountability Office (GAO) has estimated that, for fiscal years 2018 through 2022, the U.S. government’s total direct annual financial losses will range from $233 billion to $521 billion. ^[1] This staggering amount encompasses various types of fraud, including grants.

Primary Stage of Fraud Occurrence

The majority of fraudulent activities transpire after the award is granted, specifically during the active award phase (also known as post-award), when the award has been conferred, work is in progress, and financial transactions are ongoing. Granting agencies utilize a range of procedures and tools to identify fraud during this post-award period; however, these measures are predominantly reactive rather than proactive.

Lack of Structured Fraud Data Compilation

Given the wide variety of grant fraud, agencies may encounter different types of fraud across grant programs. Some of the common categories of fraud encountered are:

• Program fraud
• Procurement fraud
• Misallocation of funds
• Nepotism

Diverse, disconnected, unstructured data on fraud originating from multiple sources and in incompatible formats is lost without a standardized storage and reporting framework. The type and nature of the fraud, along with other associated details, aren’t captured in a format that can be used to perform future checks against grantees.

Closeout Evaluation: Data with a Strong Purpose

Closeout evaluation isn’t merely a report or a formality to be completed. It is a powerful tool that captures comprehensive feedback on the grant. When used as intended within the specified timelines, it serves as a one-stop shop for highlighting the grantee’s operational, financial, and behavioral performance on the grant, which ultimately helps prevent future grant fraud. By capturing potential red flags in a structured format across these categories, the evaluation clearly documents deviations from standard grant management procedures. The recommendations below are not exhaustive, but are intended to guide practical, detailed action for documenting abuse, fraud, or waste concerns in a structured, consolidated format.

• Financial Indicators:
  • Spending arrangement (especially at award end)
  • Reallocation of funds without conforming to procedures
  • Frequent budget revisions
• Operational Indicators:
  • Poor and/or missing documentation, patterns indicating false deliverables
    • These two forms of fraud illustrate tactics used to obtain willful gains
  • Deviations in reporting requirements and monitoring results
  • Unverifiable/false reporting on outcomes
    • In the case of “Feeding Our Future,” multiple entities were created to open Federal Child Nutrition Program sites throughout Minnesota, falsely claiming to serve thousands of children within days or weeks of formation
  • Behavioral Indicators:
    • Repeated late submissions, multiple resubmissions, and corrections of documents
    • Irregular conduct or inconsistencies observed on a consistent basis
    • Unresolved issues or concerns with overall performance

A grant applicant’s past performance can be evaluated either manually or using newer technologies, such as Artificial Intelligence (AI). A standardized format leveraged by AI can perform a quantitative risk analysis. It can generate risk scores for each grantee based on its analysis of the evaluation categories.

To conclude, well-structured, properly completed closeout evaluations not only facilitates the closure process but also serve as vital input for assessing the grantee in future grant applications. Using the grantee’s Unique Entity ID (UEI), agencies can review previous closeout evaluations and generate a summary of past performance and related metrics to evaluate the grantee’s future proposals. This creates a complete cycle in which closeout evaluations inform the risk assessment during the pre-award phase.

_________________________________________

Bharadwaj (B) Raghuram, PMP, CSM, is a program manager at I&I Software Inc. with more than 20 years of experience in the private and public sectors. He currently advises state and local governments, with a focus on program and technology transformations, particularly the modernization of grant initiatives. His current work emphasizes improving grant programs through AI-powered fraud detection and prevention. He may be reached at bharadwajraghuram7@gmail.com
_________________________________________________________________________________________________________________________

[1] Fraud Risk Management: 2018-2022 Data Show Federal Government Loses an Estimated $233 Billion to $521 Billion Annually to Fraud, Based on Various Risk Environments – GAO-24-105833 – Published: Apr 16, 2024. Publicly Released: Apr 16, 2024, 2.

Joey DeSantis and William Treanor of EY were a part of NGMA’s monthly webinar series. In their presentation, How to Get Sub-Awardees to Understand and Follow the Rules: A Lifecycle Approach to Uniform Guidance Compliance, they offered practical strategies for ensuring sub-awardees understand and comply with federal, state and organizational regulations. This article summarizes key takeaways from their presentation.

Access the recording through Grants Management Academy, NGMA’s education portal.

_________________________________

Over the last year, grant professionals have been operating in a more uncertain environment than usual. Funding pauses, program terminations, legal challenges, and updated federal guidance have created real pressure for both prime recipients and their sub-awardees. In this climate, expectations around sub-awardee oversight have continued to increase, even as capacity remains strained.

Based on recent discussions with grant professionals, three themes consistently stand out when it comes to strengthening sub-awardee oversight in today’s environment.

1. Sub-Awardee Oversight Starts Earlier Than Many Organizations Think

Many compliance issues traced back to sub-awardees do not originate during project execution. They begin much earlier, often during pre-award or onboarding, when expectations are not clearly communicated or risks are not fully assessed.

Recent policy changes and audit findings reinforce the importance of treating oversight as a lifecycle responsibility. Risk assessments, eligibility verification, flow-down of requirements, and documentation of expectations all need to happen before funds are released. Waiting until reporting problems or audit findings surface makes issues harder—and more expensive—to correct.

Organizations that invest time upfront tend to spend less time later responding to findings, negotiating corrective actions, or repairing strained relationships with sub-awardees.

2. Many Compliance Issues Reflect Capacity Gaps, Not Resistance

In practice, most sub-awardee challenges are not caused by a lack of willingness to comply. They are caused by limited staffing, competing priorities, and unfamiliarity with federal requirements, especially among smaller organizations or first-time recipients.

When oversight is framed purely as enforcement, it can lead to pushback, delays, or breakdowns in communication. When it is paired with clear guidance, onboarding support, and targeted technical assistance, outcomes tend to improve for everyone involved.

Grant managers frequently see better results when they focus on helping sub-awardees understand what is expected, why it matters, and how to meet those expectations within their existing capacity.

3. Risk-Based Monitoring Is More Effective Than One-Size-Fits-All Oversight

Not all sub-awardees pose the same level of risk, and monitoring approaches should reflect that reality. A risk-based framework allows organizations to focus attention where it is most needed, rather than applying the same level of scrutiny across the board.

Effective monitoring programs typically include regular desk reviews, periodic site visits for higher-risk partners, follow-up on audit findings, and clear documentation throughout the grant period. Just as important, they build in opportunities to adjust monitoring as circumstances change.

This kind of structured approach helps organizations identify issues earlier, use oversight resources more efficiently, and demonstrate due diligence if questions arise later.

Looking Ahead

Sub-awardee oversight is becoming more visible, more scrutinized, and more consequential. Federal agencies, auditors, and the public all expect stronger accountability across the full chain of grant funding.

For grants professionals, the goal is not simply to avoid findings. It is to create oversight practices that support compliance while allowing programs to operate effectively. Organizations that take a proactive, risk-informed approach are better positioned to meet that challenge—especially in an environment where uncertainty is likely to continue.