Executive Order Seeks to Reshape Federal Grantmaking Policy and Oversight

On Aug. 7, 2025, President Trump issued Executive Order 14332, titled “Improving Oversight of Federal Grantmaking.” The executive order marks a new direction for federal grantmaking policy and oversight. In recent months, the Trump administration has implemented significant changes to federal grants and assistance. This order consolidates, reinforces and calls for codifying the administration’s grant initiatives, including measures such as increasing senior political appointee involvement in funding opportunities and awards, standardizing and expanding federal agencies’ rights to unilaterally terminate grants, reducing indirect cost rates, and scrutinizing diversity, equity, and inclusion and similar programs. The executive order also introduces other notable changes in how federal grants will be awarded—and, potentially, to whom.

Executive Order 14332 is intended to ensure that federal grant spending more closely reflects the administration’s policy objectives, limit funding for activities deemed contrary to those objectives and increase accountability in the grant award and management process. Federal assistance recipients should expect heightened scrutiny and potentially significant shifts in funding opportunities and program requirements.

Political Appointee Review

The EO calls for senior political appointees to provide new oversight for grant solicitations and awards in coordination with the Office of Management and Budget (OMB):

• Senior appointees or their designees will review and approve agency funding opportunity announcements and conduct pre-issuance reviews of discretionary awards to ensure consistency with applicable law, agency priorities and national interest, including conducting discussions with grant review panels or program offices.
• New measures will be instituted to ensure funding opportunity announcements include only requirements necessary for adequate evaluation, are in plain English, minimizing the need for legal or technical expertise in drafting an application, and eliminate redundancy between agencies.
• Agency heads are directed to designate one or more senior appointees to review awards annually for consistency with agency priorities and substantial progress, with “an accountability mechanism for officials responsible for selection and granting of the awards.”
• No new funding opportunity announcements may be issued until the review processes are established, unless prior approval is granted by the designated senior appointee.

Considerations for Discretionary Awards

The order establishes new requirements for awarding discretionary grants to promote the Administration’s policies and to disfavor or eliminate awards contrary to those policies. 

• Discretionary awards “must, where applicable, demonstrably advance the president’s policy priorities.”
• Discretionary awards are prohibited from funding, promoting, encouraging, subsidizing or facilitating: (A) racial preferences or other forms of racial discrimination by grant recipients (including “activities where race or intentional proxies for race will be used as selection criterion for employment or program participation”); (B) “denial by the grant recipient of the sex binary in humans or the notion that sex is a chosen or mutable characteristic”; (C) illegal immigration; or (D) any other initiatives that “compromise public safety or promote anti-American values.”
• A new preference will apply for “institutions with lower indirect cost rates.” The National Institutes of Health (NIH)¹, the National Science Foundation (NSF)², the Department of Defense (DoD)³, and the Department of Energy (DOE)⁴ took steps earlier this year to restrict federal research organizations’ reimbursement for indirect costs, generally instituting a 15 percent indirect cost rate cap. Plaintiff groups challenged the legality of the rate caps, and litigation is ongoing.⁵ Now, indirect cost rates will receive new consideration in awards of discretionary grants under the EO.
• Applicants for awards pertaining to scientific research “should” commit to “Gold Standard Science,” and awards should include benchmarks measuring success and progress toward relevant goals.” This requirement builds on another recent Executive Order, EO 14303, Restoring Gold Standard Science (May 23, 2025), which defined “Gold Standard Science” as science conducted in a manner that is, among other things, reproducible, transparent, skeptical of its findings and assumptions, and without conflicts of interest.⁶ The Administration touted EO 14303 as a measure to “rebuild public trust in science.”⁷ However, some in the scientific community, such as the Union of Concerned Scientists, expressed concerns that EO 14303 gives political appointees control over science.⁸
• The EO calls for issuing awards to “a broad range of recipients rather than to a select group of repeat players” and, with respect to institutions of higher education, indicates that agencies should discount “historical reputation or perceived prestige” in favor of consideration of “an institution’s commitment to rigorous, reproducible scholarship.” These changes, together with new plain language and directives to simplify funding opportunity announcements, may potentially broaden access to federal assistance.

Mandatory Termination for Convenience Clauses

OMB’s Uniform Guidance currently provides for funding agency rights to unilaterally terminate an award “to the extent authorized by law” if it “no longer effectuates the program goals or agency priorities.”⁹ In the early months of the president’s second term, agencies have terminated an unprecedented number of grants. But termination rights must be specified in the terms and conditions of the award, and if the agency does not include a termination provision —intentionally or inadvertently —the agency will not have the right to terminate.¹⁰

• The EO calls for revisions to the Uniform Guidance termination provisions “to further clarify and require all discretionary grants to permit termination for convenience, including when the award no longer advances agency priorities or the national interest,” subject to certain discrete exceptions.
• Agencies are directed to review their standard grant terms and conditions within 30 days and report to the OMB Director whether they permit termination for convenience, including of awards that “no longer effectuate the program goals or agency priorities,” whether foreign assistance awards permit termination “based on the national interest,” and information about the number of active awards and amount of funding obligated under awards with termination provisions.
• Agency heads are also directed, “to the maximum extent permitted by law,” to revise terms and conditions of existing discretionary awards to add convenience termination rights or “clarify” that convenience termination is permitted.
• Finally, the EO prescribes new controls over payments under federal awards. “To the extent practicable and consistent with applicable law,” the EO calls for agency heads to insert in future discretionary grants award terms that require affirmative authorization of the agency to draw down general grant funds for specific projects and require grantees to provide specific “written explanations or support” for each drawdown request.

Takeaways for Federal Assistance Recipients

• The implementation of the Order in the Uniform Guidance and agency grant and assistance regulations will influence the extent of the effects of the EO. But the EO contemplates substantial changes.
• The changes in how grants are evaluated and awarded will present new opportunities for some organizations and will present challenges for others, including particularly many established recipients that rely on federal funding. Recipients will need to consider how these changes affect their organizational plans moving forward. For some, this will create uncertainty.
• In addition to affecting recipients, this will also affect the substance of work performed with federal funding. The new reviews called for by the order could affect award timelines, and the new controls for drawdowns could affect the timeliness of payments under awards.
• Among the issues to watch is how these new policies will interact with statutes and how OMB will navigate potential statutory conflicts in updating the Uniform Guidance.
• As with other Administration grant policies, affected parties are likely to bring legal action challenging some of the provisions, which will be closely watched.