Why it matters:

This proposed guidance changes how organizations should think about the stability of federal grant funding over time. Even when requirements are being met, funding may be subject to change based on broader program considerations.

This also increases the importance of planning for uncertainty in multi-year awards. Nonprofits may need to place greater emphasis on cash flow management and operational flexibility to stay prepared for potential disruptions.

What is the uniform guidance?

The OMB Uniform Guidance is the common set of rules governing most federal grantmaking to charitable nonprofits, state, local, and Tribal governments, and others. The Uniform Guidance provides guidelines on various aspects of managing federal awards, including administrative requirements, cost principles and audit requirements.

What’s new? 

One of the biggest proposed changes to the Uniform Guidance (2 CFR Part 200) affects when and how federal agencies can suspend or terminate grant funding.

In the past, grant awards were generally terminated for clear reasons, such as failing to meet program requirements, poor performance, or misuse of funds. Under the proposed rules, agencies could also terminate an award if they determine it no longer aligns with agency priorities or program goals even if the organization is fully compliant and meeting all grant requirements.

That's a significant shift. Instead of focusing solely on whether a recipient is performing as expected, agencies would have broader discretion to decide whether a grant should continue.

What is the 90 day suspension authority? 

The proposal also introduces a new 90-day suspension authority. This would allow agencies to temporarily pause funding while they evaluate whether to terminate an award. For nonprofits and other grant recipients, that could create financial and operational challenges, forcing organizations to manage expenses and staffing decisions while waiting for a final determination.

Impact on Tax-Exempt Organizations

For tax-exempt organizations, this introduces real operational and financial challenges:

• Program disruption: Multi-year programs can be paused or terminated mid-cycle
• Cash flow risk: Funding may stop while expenses (payroll, leases, subawards) continue
• Limited recourse: Discretionary terminations may only require brief notice, with limited opportunity to respond
• Cost exposure: Recovery of certain costs after termination may depend on agency discretion

Organizations delivering ongoing services (particularly those tied to federal funding) will feel this most directly.

How can organizations prepare?

While the proposed rules are not yet final, organizations can strengthen their financial and operational resilience now.

1. Treat grants as variable (not guaranteed) over the full award period- Assume funding could be interrupted, even when performance and compliance are strong.

2. Strengthen cash flow planning: It’s helpful to maintain rolling 3–6 month cash flow forecasts and identify which programs are most dependent on federal timing.

3. Build contingency funding strategies: Develop access to reserve funds or board-designated reserves where possible. If possible, identify bridge funding options (lines of credit, unrestricted revenue sources, or philanthropic support). 

4. Review staffing and contract flexibility: Evaluate whether staffing models can adjust quickly during funding disruptions and take a closer look at subrecipient and vendor agreements for pause/termination flexibility. 

5. Scenario plan for “funding pause” event: Develop internal protocols for a 30–90 day funding suspension. Identify which services would continue, scale back, or pause. Pre-assign decision-making authority for rapid response

We will keep you updated as guidance comes out.