- Details
- By Chez Oxendine
- Policy and Law
A federal proposal to significantly rework grant rules could change how tribes compete for, manage and retain federal funding. Tribal finance experts say governments should prepare now to avoid potential disruptions.
The Office of Management and Budget released proposed revisions to its “Guidance for Federal Financial Assistance” in late May, giving tribes and other grant recipients until July 13 to submit comments. OMB framed the proposal as an effort to tighten oversight, simplify requirements and bring federal programs back into alignment with statutory authority. The agency did not respond to repeated requests for comment.
The proposal would convert the government-wide grants framework laid out in Title 2 of the Code of Federal Regulations (2 CFR) from guidance into binding regulation — a shift OMB says will create more consistent standards across agencies and reduce duplication in how programs are administered.
For tribes, the rewrite arrives at a time when many governments are already strained by staffing shortages, rising costs and growing administrative demands. Tribal programs in housing, public safety, broadband, transportation, environmental protection and community development all rely on federal grants governed by 2 CFR. Any shift in how those grants are designed, awarded, monitored or terminated can ripple across entire systems, especially in communities where administrative capacity is limited.
“This isn't just a technical grant management update,” said Brandi Liberty (Kansas and Iowa Tribe,) founder and owner of grant consultancy Luak Group. “It has the potential to reshape the entire federal grant lifecycle, including how grants are paid, suspended and terminated.”
The proposal calls for stronger internal controls, more rigorous risk assessments and clearer expectations for how agencies structure programs and evaluate applicants. It also removes a range of requirements added in recent years, including identity-based selection factors and reporting elements the administration argues created unnecessary administrative burden.
With those controls in place, for example, grants that were previously approved on diversity and inclusion grounds could be more easily terminated, Liberty said. Grants that remain intact would still require more stringent auditing afterward, demanding more capacity from already stressed departments.
One of the most closely watched provisions would expand the circumstances under which agencies may suspend or terminate an award. Under the draft, an agency could end a grant if it determines the project no longer aligns with program goals or federal interests, raising questions about the stability of multi-year tribal projects that depend on predictable funding.
During a webinar held by NAFOA June 8, Anita Shah, principal at accounting and advisory firm Baker Tilly, said the proposed political review represents a major procedural shift. Ostensibly, the review, in tandem with a stated authority to terminate grants that fall outside of federal priorities, would open grants perceived as “woke” or diversity-focused to termination.
“Your grant applications will be reviewed by a senior political appointee,” Shah said. “They’ll be looking at statutory authority, agency priorities and national interest, and they explicitly say they’ll give priority to lower indirect cost rates.”
Shah said tribes should begin tightening their grant narratives now to account for the new criteria.
“Make sure your applications clearly address statutory authority, measurable outcomes and why activities are necessary,” she said. “If these changes go through, you want your documentation tied down.”
The rule also introduces new expectations for payment documentation, drawdowns and financial reporting. Those new requirements could delay contractor payments, slow construction schedules and strain small staff.
Dhruv Patel, CEO and founder of Syncurrent, said the rule’s language around diversity raises additional concerns for tribes navigating eligibility and program design.
“I want clarity on the DEI and gender ideology provisions, and specifically where the definition of tribes falls under that,” Patel said. “There have historically been misinterpretations that tribe, tribal, native or Native American is a race affiliation and not a political one, and I want clarity on that.”
Experts speaking during the NAFOA presentation warned that agencies could incorrectly apply the proposal’s restrictions to programs serving tribes or tribal citizens if they treat Native status as a racial classification rather than a political one.
“Tribal programs are government statutory programs, not DEI initiatives,” Brian Anderson, a partner at accounting and tax consultancy Wipfli’s tribal practice, said during the webinar. “Use language about trust and treaty obligations, government-to-government relationships and serving tribal citizens.”
Anderson said tribes should review their grant language now to avoid framing that could trigger scrutiny under the proposed rule.
“Scrub any DEI framing you added in recent years,” Anderson said. “Be consistent with the statutory purpose of your programs and cite the legal basis for tribal political status.”
The Southern Ute Indian Tribe said in comments filed June 30 that some federal agencies misclassified programs benefiting tribes as DEI initiatives after President Donald Trump issued an executive order targeting federal diversity programs in 2025, resulting in critical tribal funding being withheld.
The tribe said the proposed rule does not go far enough to prevent similar mistakes and asked OMB to state explicitly that the final guidance does not affect the federal government’s statutory, treaty and trust obligations to tribes.
The proposed rule does not clarify tribes to be exempt from diversity initiatives. While the Trump administration has expressed it views tribes as political groups, rather than racial groups, multiple tribal-serving grants have been terminated in widespread purges of identity driven awards. An early 2025 budget freeze and government shutdown in November that year also appeared to blur the administration’s stated views.
The proposal also eliminates fixed-amount awards, a mechanism some tribes use to reduce administrative burden. Without that option, more programs would shift to cost-reimbursement structures, which require detailed documentation and can create cash-flow challenges for tribal governments that must front costs before receiving federal payment.
“Many tribes will simply refuse to pursue funding if they see it is structured as a reimbursement,” Liberty said. “It creates this cooling effect on who’s even applying for the awards.”
“Federal grants are already very onerous to administer,” Ian Record, a tribal policy consultant, said on the Difference Makers 3.0 podcast this week. The proposed rule “could have a chilling effect on the ability of … Native-serving institutions to administer federal funds or even apply for them.”
Record said organizations may begin questioning whether federal grants are worth pursuing if funding can be delayed or suspended after an award is made particularly if they have already hired staff or committed resources based on the award.
Patel said the most significant shift may be the movement of administrative burden from the post-award stage to the pre-application stage, where tribal staff must potentially interpret a substantially revised rulebook before deciding whether to apply.
Across Indian Country, the overarching concern is that the rule could reshape the federal grant environment. The comment period ends July 13. OMB says it plans to consult directly with tribes before finalizing the changes, but has not announced a date. The Southern Ute Tribe said in its June 30 comments that consultation had not yet begun and urged OMB to start immediately.
“Everyone needs to be concerned,” Liberty said. “The Uniform Guidance rules everything we do at a federal level in Indian Country, and tribes need to be engaging in consultation now.”
Shah said tribes should begin preparing immediately for potential implementation later this year. OMB says it intends to issue a final rule effective by Oct. 1, the start of fiscal year 2027.
“The time to act is now,” Shah said during a NAFOA webinar. “Review your language, strengthen your internal controls and get ready for potential changes on October 1.”
Brian Edwards contributed reporting.
