On Thursday, August 7th, President Trump signed an Executive Order (EO) that changes the federal grantmaking process. These changes will impact how federal agencies announce funding opportunities, review applications, and manage both current and future awards. Nonprofits in Tennessee – and across the country – should be aware of the new oversight, review requirements, and restrictions outlined in the new order.
Key Changes to the Grantmaking Process
- Political Appointee Oversight – Each federal grantmaking agency must appoint a senior political appointee to review and approve all funding opportunity announcements (FOAs) and grant awards. Until these appointees and new protocols are in place, agencies cannot issue new FOAs.
- Expanded Discretion for Appointees – Political appointees will have greater authority to decide which projects are funded, based on whether they advance agency priorities and the “national interest”
- Additional Review and New Terms – The EO adds new review steps for both new and existing awards. Changes to grant terms and conditions include:
- Allowing agencies to terminate awards “for convenience” or if they are determined not to advance agency priorities, including during the grant period itself.
- Requiring future grant agreements to prohibit recipients from drawing down general funds without affirmative agency authorization
- Requiring written, specific explanations for each drawdown request
Restrictions on Use of Federal Grant Funds
The EO prohibits federal grants from funding, promoting, encouraging, subsidizing, or facilitating:
- Racial preferences or other forms of racial discrimination, including the use of race or proxies for race as a criteria in employment or program participation
- Denial of the “sex binary” in humans or the notion that sex is a chosen or mutable characteristic
- Illegal immigration
- Any other initiatives deemed to compromise public safety or promote “anti-American values”
Directives Regarding OMB Uniform Guidance
The EO includes multiple directives to the Office of Management and Budget (OMB) to revise the Uniform Guidance, which governs the administration of federal grants. Notable provisions include:
- Giving priority to competitive grant applications from organizations with lower indirect cost rates.
- Limiting the use of discretionary grant funds for facilities and administrative costs
These revisions could affect the de minimis 15% indirect cost rate established in last year’s Uniform Guidance updates – a change that the nonprofit sector had advocated for nearly a decade.
Potential Impacts for Nonprofits
These changes may influence:
- Timing – New funding announcements may be delayed until political appointees are appointed and the new review processes and protocols are in place.
- Eligibility and Prioritization – Applications may be evaluated differently based on indirect cost rates and alignment with agency priorities.
- Grant Administration – New drawdown authorization requirements and expanded termination clauses may impact cash flow and project management.
- Allowable Activities – New restrictions could limit certain activities and topics that can be funded with federal dollars.
Tennessee Nonprofit Network will continue monitoring developments related to this EO, including any changes to the OMB Uniform Guidance, and will provide updates to the nonprofit community as more information becomes available.
If your organization receives or applies for federal grants, now is a good time to review your current agreements and upcoming opportunities to understand how these provisions may apply. Review this EO and others at the National Council of Nonprofits’ EO Tracker here.