New Executive Order Could Create New Barriers for Federal Grants to Nonprofits

President Donald Trump issued an Executive Order last week making several significant changes to the process by which federal agencies award, oversee, and terminate federal grants, including grants to nonprofits. Several of these changes could have significant implications for nonprofits that currently have federal grants and for those applying for federal grants in the future. Major changes include:

• Requiring that each agency have a political appointee responsible for oversight of its grant process. That political appointee will have broad authority to develop a process for reviewing grant applications and to ensure that grants are “consistent with agency priorities and the national interest.”
• Prohibiting federal grants for a variety of purposes that are inconsistent with President Trump’s priorities. Specifically, competitive federal grants could not be awarded to nonprofits that use racial preferences, including “proxies for race” in employment or program participation decisions. Competitive grants also could not be awarded to nonprofits that don’t acknowledge “the sex binary in humans or the notion that sex is a chosen or mutable characteristic”, to nonprofits serving undocumented immigrants, and for “any other initiatives that compromise public safety or promote anti-American values.”
• Giving priority to nonprofits with lower indirect cost rates in competitive grant application processes. 
• Requiring the Office of Management and Budget (OMB) to revise its Uniform Guidance to require all federal grant agreements to include provisions allowing for “termination for convenience” by federal agencies, meaning that political appointees of federal agencies will have the discretion to terminate federal grants to nonprofits for almost any reason.
• Requiring OMB to revise its Uniform Guidance to “appropriately limit the use of discretionary grant funds for costs related to facilities and administration.” Potentially, this could mean that OMB may soon make changes to last year’s major improvement of the Uniform Guidance that included a de minimis 15% indirect cost rate on federal grants, for which the MANP and many other nonprofits have successfully advocated for nearly a decade.

Thank you to David Heinen and the North Carolina Center for Nonprofits for this analysis.