On August 7, 2025, President Trump issued Executive Order 14332, “Improving Oversight of Federal Grantmaking”, a sweeping directive that reshapes the federal grantmaking process. Framed as a move to improve accountability and reduce waste, the Executive Order aims to ensure that discretionary federal grants align with the President’s policy priorities. It also introduces new termination for convenience rights and increased scrutiny of grantee indirect cost rates.
The Executive Order is among the most consequential developments in federal grant policy in more than a generation. Academic institutions, nonprofit organizations, and research institutes are particularly vulnerable to funding disruption, delays, and uncertainty under the new regime. We offer below an overview of key developments and implications for recipients.
Key features of the Executive Order
Discretionary grants only
- The Executive Order applies only to “discretionary awards” as that term is defined in 2 CFR Part 200.1 – awards where the agency exercises judgment, normally through a competitive process. Accordingly, it does not apply to block grants, those awarded based on a statutory formula, or disaster recovery grants.
Advancing the president’s policy agenda
- Agencies must designate a “senior appointee” (a non-career person) to review new funding opportunity announcements and discretionary grants to ensure that they are consistent with “agency priorities and the national interest”.
- Senior appointees must confirm that funding announcements and awarded grants, among other things, demonstrably advance the President’s policy priorities and do not promote racial discrimination, illegal immigration, “denial by the grant recipient of the sex binary in humans or the notion that sex is a chosen or mutable characteristic”, or other initiatives that “compromise public safety or promote anti-American values.”
- This is a notable change to a financial assistance regime where scientific and programmatic merit historically has been paramount; now, grant applications appear subject to additional policy review, with political appointees given broader discretion and authority to evaluate alignment with evolving Administration priorities.
Increased scrutiny of indirect cost (F&A) rates and repeat recipients
- Grant reviewers now must give preference to institutions with “lower indirect cost rates”. As written, this preference appears to apply across the board to all types of grantees, not just higher education institutions. OMB also must revise the Uniform Guidance (2 CFR § 200) to limit the use of grant funds for facility and administration costs.
- Implementation of this preference will be tricky. It’s unclear how much preference agencies will afford to lower rates, how this would be scored in the grant review process, and how OMB would attempt to “limit” F&A costs through regulation.
- The Executive Order also signals skepticism of “repeat” grant winners and instructs agencies to award research grants to a “broad mix” of recipients, presumably to expand the pool of funding recipients.
Termination for convenience in grants
- Agencies must take several steps relative to termination for convenience rights—a standard clause in federal procurement contracts but historically not a feature of grant and cooperative agreement instruments. OMB must revise the Uniform Guidance to require all discretionary grants to permit termination for convenience, including when the agency decides the award “no longer advances the agency priorities or the national interest”.
- All agencies must review their standard grant terms and conditions (“T&Cs”) to determine whether those T&Cs permit such termination for convenience.
- Agencies also must revise their standard T&Cs and regulations to permit immediate termination for convenience, including when the agency determines the award no longer effectuates agency policy or serves the national interest and incorporate these new T&Cs into all future grant award amendments.
- For the past several months, the Trump Administration has deployed 2 CFR § 200.340(a)(4) aggressively to terminate awards. However, a formally adopted termination for convenience clause in the Uniform Guidance may undermine a grantee’s ability to challenge, delay, or appeal grant terminations.
Drawdown controls
- Agencies must require grantees to provide written explanations or support “with specificity” for each drawdown of grant funds.
- Although some agencies have introduced these requirements in the past few months, drawdown controls are a marked shift in how grantees historically drew on grant funds. This change may introduce administrative burdens, additional scrutiny, and delays in receipt of federal assistance funds.
Gold standard science
- In a nod to EO 14303, Restoring Gold Standard Science – which directed federal agencies to enhance transparency, reproducibility, and objectivity in federally funded research – the Executive Order direct agencies to prioritize science grants to institutions that have demonstrated success in implementing Gold Standard Science.
- Under this standard, an institution’s record on research integrity and research misconduct could be a factor in grant awards.
Looking ahead and next steps
Executive Order 14332 signals a philosophical shift in how the federal government views grants—not merely as financial assistance to achieve a public good, but as performance-based investments molded to promote the Administration’s priorities. This action is part of the Trump Administration’s broader redirection of federal research and grantmaking policy to align with the party’s platform.
While EO 14332 establishes a framework, the Executive Order is not self-executing. Agencies must take action to implement the order, and OMB must propose revisions to the Uniform Guidance. Recipients can expect quick agency-specific implementations through updated notices of funding opportunities (“NOFOs”) and revised award terms and conditions.
Recipient institutions can prepare for these shifts in federal grant policy in several ways:
- Already, grant recipients are receiving requests from agency officials to remove or revise disfavored terms in proposals and applications. Anticipation and attention to these requests is critical, and applicants may see additional grant conditions that target issues such a DEI, gender ideology, and climate change.
- Indirect cost rate scrutiny is bound to increase. Some organizations are developing plans to address new costing realities, including updated budget models and documentation for appropriate direct cost recovery.
- If a grant is denied on Administration policy grounds (as opposed to scientific or programmatic merit), institutions may wish to develop a playbook for how to address, or potentially challenge, the denial.
- Accounting and finance teams may need training on appropriate records and statements submitted as drawdown documentation.
- Grantees may wish to update and revise subaward templates.
