Regulation for Federal Financial Assistance
The Office of Management and Budget (OMB) proposes to revise the Guidance for Federal Financial Assistance to improve government- wide policies and requirements related to the management of grants, cooperative agreements, and other forms of assistance. OMB is proposing revisions that would improve transparency, accountability, and oversight for Federal awards across the Federal Government. This includes ensuring that American tax dollars are not wasted or misused, activities performed under Federal awards are consistent with law and policy, and recipients are held accountable when they fail to meet relevant standards. The revisions also aim to ensure that basic American principles of equality and equal opportunity are upheld throughout all stages of the award making process and that unlawful discrimination is no longer permitted. Proposed changes also include providing further clarification on the regulatory status of the OMB requirements and on the process for future updates to the government- wide requirements. Finally, OMB also proposes changes to reduce recipient burden. The listed Federal grant-making agencies propose conforming changes to their respective adopting regulations, or, in the case of some agencies and other entities, establishing new adopting regulations or policies. The proposed changes reflect the administration's commitment to transparency, accountability, and proper oversight for the Federal grantmaking process. The proposed regulations seek to ensure that American tax dollars are ultimately used to serve the needs of the American public.
What this rule actually says
This is a proposed update to how the U.S. federal government manages grants and contracts. It aims to tighten oversight, reduce fraud and waste, and prevent discrimination in how federal money gets awarded and spent. For example, if a government agency funds research or gives a contract to build something, this rule clarifies what recipients must do to stay compliant and what happens if they don't.
Who it applies to
- If you received (or plan to apply for) federal grant money, a federal contract, or cooperative agreement – this applies to you.
- If you're building an AI medical scribe and received NIH, NSF, or HHS funding – this applies.
- If you're selling hiring tools to government agencies and they're paying you via federal contract – this applies.
- If you built a support chatbot with zero federal funding – this does not apply.
- Geographic scope: This is a U.S. federal regulation, so it only affects recipients of U.S. federal money regardless of where you're based.
- Data scope: The rule focuses on how federal money is spent and managed, not on what customer data you collect (that's covered by other privacy laws).
What founders need to do
- Check if you have federal money. Search SAM.gov or ask your funder directly. If the answer is no, stop here. (30 minutes)
- Understand your grant/contract terms. Request the compliance requirements document from your funder and highlight sections on financial reporting, audit rights, and non-discrimination. (1–2 days)
- Set up basic financial tracking. Maintain clear records of how federal funds are spent, separate from other company money if possible. This doesn't require new software—a spreadsheet often works. (1–2 days)
- Ensure non-discrimination policies are documented. If you have employees, confirm you have basic policies against discrimination by protected class. Most legitimate companies already do this. (half day)
- Monitor for updates. This is still "proposed" as of mid-2026, so the final version may differ. Check for the final rule and any guidance from your specific funder once published. (ongoing, low effort)
Bottom line
Ignore this unless you're receiving federal funding; if you are, treat it as basic grant compliance (which responsible founders should be doing anyway) and stay alert for the final rules.