What Not-for-Profit Federal Grant Recipients Need to Know About OMB’s Proposed Uniform Grants Regulation

Overview of OMB’s Proposed Subpart F Changes to the Uniform Guidance

On May 29, 2026, the Office of Management and Budget (OMB) issued a proposed rule that would revise 2 CFR part 200, the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

While the proposal covers many areas of federal grants management, not-for-profits and other federal grant recipients should not lose sight of the proposed changes in Subpart F Audit Requirements.

The reason? Those provisions shape how Single Audits are performed, how federal agencies use audit results, and how additional oversight may occur. The proposed Subpart F changes focus on three areas:

1. Limiting when federal agencies, Inspectors General, or the Government Accountability Office (GAO) may impose additional audits
2. Revaluating how often OMB issues the Compliance Supplement
3. Removing references to the GAO Green Book and COSO framework from certain audit and internal control language

Together, the proposal changes suggest that OMB is trying to balance two goals: reducing unnecessary audit burden on recipients while preserving federal oversight of award compliance and Single Audit quality.

While the proposed changes may seem minor compared the other proposed changes to Uniform Guidance, the proposed changes also highlight possible future changes to the Single Audit.

Let’s take a deeper dive into the proposed changes:

Additional Audits Under the Uniform Guidance Would Need a Statutory Basis

The current version of § 200.503 provides that a Single Audit conducted under Subpart F must generally be “in lieu of” other financial audits of federal awards that a non-federal entity is required to undergo under other federal statute or regulation. Currently, § 200.503 also allows a federal agency, Inspector General, or GAO to conduct or arrange additional audits to carry out responsibilities under federal statute or regulation, while requiring those audits to avoid duplication and build on work already performed where possible.

OMB proposes revising § 200.503 to clarify that a federal agency, Inspector General, or GAO may impose additional audits only when authorized by statute. Stated plainly, the proposed change would narrow the authority to require audits beyond the Single Audit by requiring a statutory foundation, rather than allowing additional audit requirements to be layered on by regulation when not required by law.

However, the proposal would not eliminate federal oversight. OMB specifically states that the change would not prevent federal agencies from conducting compliance reviews as needed to implement other sections of part 200 and provide effective oversight of federal awards. OMB gives examples of compliance reviews used to determine whether a recipient or subrecipient complies with substantive programmatic or legal requirements, including civil rights laws or conscience protection laws.

Practical takeaway: Not-for-profits should view this proposal as a possible reduction in duplicative audit burden and not as a reduction in accountability. Federal agencies may still review compliance with award terms, program requirements, and applicable laws.

OMB May Move Away from an “Annual” Compliance Supplement

The OMB Compliance Supplement is central to an auditor’s Single Audit planning and execution because it identifies important compliance requirements, suggested audit procedures for the 12 points of compliance, and testing guidance for certain federal programs. Currently, § 200.513(c)(4) requires federal awarding agencies to provide OMB with annual updates to the Compliance Supplement, and current § 200.1 defines the Compliance Supplement as an “annually updated authoritative source” for auditors.

The OMB Compliance Supplement traditionally has been issued in the spring or early summer. However, past years have seen a significant delay in the annual issuance of the OMB Compliance Supplement. In 2025, it was not issued until late November, delaying many Single Audits and their completion.

OMB proposes to revise § 200.513(c)(4) to delete the word “annual” before “Compliance Supplement.” OMB also proposes to delete “annually updated” from the definition of the Compliance Supplement because it is reevaluating the appropriate frequency for issuing the supplement. OMB states that they are evaluating the Single Audit process and whether the Compliance Supplement needs to be updated annually. We may see more changes to Subpart F in the future.

For not-for-profits, this proposed change could have both benefits and risks. On the benefit side, a less frequent update cycle could provide more stability in the Single Audit if the requirements do not change significantly from year to year. On the risk side, if the Compliance Supplement is updated less often, auditors and recipients may need to be more alert to changes in program-specific statutes, regulations, award terms, agency guidance, and Federal Register developments that arise between supplement updates. This could create more administrative burden for both auditors and auditees.

This matters because current § 200.514 explains that, when compliance requirements change and the changes are not reflected in the Compliance Supplement, the auditor must determine the current compliance requirements and modify audit procedures accordingly. Therefore, even if the supplement is issued less frequently, recipients should not assume that an older supplement captures every current requirement applicable to a program or award.

Practical takeaway: Not-for-profits should keep their audit teams informed about new or amended award terms, agency communications, program rules, and compliance obligations throughout the year, not just when a new Compliance Supplement is issued. Not-for-profits should develop a process to retain documentation for these changes and consider the need to communicate these changes to an auditor if they are deemed important to a major program(s) selected for audit.

OMB Proposes Removing GAO Green Book and COSO References from the Audit Standards Discussion

Current § 200.514(c)(1) states that the Compliance Supplement provides guidance on internal controls over federal programs based on the GAO “Standards for Internal Control in the Federal Government” and COSO’s “Internal Control Integrated Framework.” Current § 200.303 similarly requires recipients and subrecipients to establish, document, and maintain effective internal control over federal awards and states that those internal controls should align with the GAO or COSO frameworks. In Uniform Guidance, the “should” reference is considered a best practice, not a requirement.

OMB proposes to delete the reference to the GAO Green Book and COSO framework from § 200.514(c)(1). OMB’s rationale appears in the proposed discussion of § 200.303. GAO is a legislative branch agency, COSO is a private-sector organization, and OMB states that directing recipients and subrecipients to follow dynamic standards issued outside the executive branch is inconsistent with the administration’s policy and OMB’s notice-and-comment process for changes to 2 CFR.

OMB emphasizes that the change would clarify that GAO and COSO frameworks do not apply to recipients or subrecipients as binding or expressly recommended standards. At the same time, OMB states that federal agencies, auditors, recipients, and subrecipients may continue to consider GAO, COSO, or other widely recognized frameworks as general reference points when evaluating internal controls.

This is an important, but easily misunderstood, change for not-for-profit organizations. The proposal would not eliminate the requirement to have effective internal controls over federal awards. Recipients and subrecipients would still need controls that provide reasonable assurance that federal awards are managed in compliance with federal statutes, regulations, and award terms and conditions. Auditors would still need to understand and test internal control over compliance for major programs, as required by § 200.514.

The key difference is flexibility. If finalized, not-for-profits would have more discretion in how they establish, document, and maintain internal controls, rather than being told that their controls should align with specific external frameworks.

For many organizations, continuing to use COSO or the Green Book as a reference point may remain practical, especially if those frameworks are already embedded in policies, audit programs, risk assessments, or board oversight processes.

Practical takeaway: Not-for-profits should not abandon recognized control frameworks simply because OMB proposes to remove the references. Instead, organizations should document why their internal control approach is appropriate for their size, complexity, federal programs, and risk profile, and they should be prepared to explain that approach to auditors and grantors.

How the Proposed Changes Fit into a Broader Review of Single Audit Quality

The proposed Subpart F changes also should be read in the context of a broader federal review of Single Audit quality. OMB’s proposal states that OMB and the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) were selected to analyze the Single Audit process.

The Financial Management Risk Reduction Act, enacted as Public Law 118–207, reinforces this broader focus on Single Audit quality. The Act requires the OMB Director to designate one or more federal agencies to conduct a government-wide analysis of Single Audit quality, which may consider reviews by federal agencies, Inspectors General, state auditors, and external peer reviews conducted under generally accepted government auditing standards. The Act requires the designated agencies to complete the analysis not later than three years after enactment and every six years thereafter, and it requires OMB to submit to congressional committees and make publicly available a summary of the results. HHS OIG is conducting this review in accordance with the Act.

The Act also requires analytic tools and a strategy to use Federal Audit Clearinghouse data to identify cross-governmental risks to federal award funds. In addition, GAO must evaluate the effectiveness of that strategy and those tools, reporting burdens for auditors and audited entities, auditor and auditee capacity, and federal agency responsiveness to repeat Single Audit findings and corrective action plans.

For not-for-profit recipients, the implication is clear: even as OMB proposed few changes to subpart F of Uniform Guidance, the federal government is continuing to scrutinize Single Audit quality and the usefulness of audit data for oversight.

Practical takeaway: Recipients should expect continuing attention to audit quality, as well as potential changes to the Single Audit in the future.

Key Takeaways for Nonprofits Receiving Federal Grants

OMB’s May 29, 2026, proposed changes would not overhaul the basic concept of the Single Audit for not-for-profit federal grant recipients. Instead, the proposed Subpart F changes would refine the system by limiting additional audits to those authorized by statute, reconsidering the cadence of the Compliance Supplement, and giving recipients more discretion in how they establish and document internal controls.

For not-for-profits, the message is balanced: the proposed changes may reduce unnecessary duplication, but they do not reduce the need for strong grant compliance, effective internal controls, and focus on Single Audit quality. In fact, the broader federal review of Single Audit quality under the Financial Management Risk Reduction Act suggests that audit quality, data reliability, and repeat findings will remain high priorities for federal oversight in the years ahead. Not-for-profits should use this moment to review their audit readiness, strengthen internal controls, and ensure that federal award compliance is well documented before any final rule changes take effect.

To discuss how these proposed changes may affect your Single Audit, internal controls, or grant compliance efforts, connect with our not-for-profit team to start the conversation.

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