Key Details: Last month, President Trump Issued Executive Order 14322 (the “EO”), titled “Improving Oversight of Federal Grantmaking.” This sweeping directive aims to tighten oversight of federal discretionary grants. Additionally, the EO was framed as a response to inefficiencies and “waste” of taxpayer dollars in grant programs. With large budgets spent annually across health, education, infrastructure, and more, the EO stands to significantly reshape how grants are awarded, managed, and terminated.
Increasing oversight of federal grant-making will create several new hurdles for institutions aiming to secure funds in the future or that are currently performing grant-funded work. Contact Ryan & Wetmore today to learn more about how our consulting services can help you remain competitive.
The EO introduces a series of updates to the grantmaking process with new measures embedded into layers of review and criteria for how grants are solicited, evaluated, and managed. Below are some of the key mechanisms established by the EO and how each intends to reshape the federal grant administration landscape. Institutions are encouraged to meet with a trusted advisor to determine how the EO impacts their business.
The EO directs agencies to give preference to institutions with lower indirect cost rates when evaluating discretionary grant applications. The reasoning is so that more grant funds are allocated to direct project costs, rather than to overhead or other administrative processes.
Perhaps the most consequential change is the EO’s directive to permit termination for convenience in all discretionary grants. This would apply when an award “no longer advances agency priorities or national interest,” effectively giving agencies a broad license to cancel grants mid-stream if the project conflicts with a new policy direction.
The EO requires each federal agency that awards grants to appoint a senior political official to oversee the grantmaking process. These appointees are charged with reviewing all new funding opportunity announcements and discretionary grant awards to ensure they align with national interests. In practice, this means no new grant can be announced or awarded without sign-off at higher levels. This may cause a slowdown of the grant approval process significantly as agencies navigate the new oversight for each funding decision.
The EO extends oversight into post-award grant management. Each agency’s senior appointee must conduct annual reviews of all discretionary grant awards to check that each project is making substantial progress and still aligns with agency priorities. Additionally, the EO establishes an accountability mechanism for officials responsible for grant selections.
The EO sets “principles” that grants must adhere to, embedding ideological alignment into the grant selection process. It mandates that any discretionary award “must, where applicable, demonstrably advance the President’s policy priorities.” Additionally, the EO highlights that no grant funds may be used to “promote, encourage, subsidize, or facilitate” any of the following:
Agencies are also directed to favor a “broad range of recipients rather than to a select group of repeat players.”
Another notable priority in the EO is raising scientific rigor and integrity in grants. It references the administration’s “Gold Standard Science” policy, requiring grant applicants to commit to rigorous, reproducible scientific practices. In essence, agencies should favor institutions that uphold high standards for data transparency and validity over those relying on historical reputation.
One of the major ramifications of this EO is its targeting of indirect costs – the Facilities and Administrative (F&A) expenses associated with grant-funded projects. Indirect costs (sometimes called G&A or overhead,) include things like building utilities, administrative staff salaries, and general office expenses that support a project but are not charged as a direct expense. Under longstanding federal rules, organizations can recover these costs as a percentage (through an indirect cost rate) applied to their direct grant expenditures. The EO states that “preference for discretionary awards should be given to institutions with lower indirect cost rates.” This is a significant development for institutions relying on recovering overhead costs or those with higher F&A rates.
Additionally, institutions are encouraged to monitor future publications for further guidance on F&A rates or any changes to F&A rate policies and caps.
EO 14332 represents a significant update in standards for federal grantmaking. For businesses and organizations operating in the grants space, the most important thing now is to stay agile and informed. Grant recipients should consider taking the following steps to stay ahead:
For further information and expertise, contact Ryan & Wetmore today.
What are the new federal rules for grant oversight in 2025?
In 2025, the federal government introduced stricter oversight of discretionary grants through Executive Order 14332. The changes focus on reducing overhead costs, adding new termination rights for agencies, and requiring closer alignment with administration policy priorities.
How will these new rules affect federal grant applicants?
Grant applicants may face tougher competition and higher compliance standards. Agencies will now favor applicants with lower indirect (overhead) costs, require more detailed reporting, and may cancel grants midstream if projects no longer align with national priorities.
What does “termination for convenience” mean in federal grants?
Termination for convenience gives agencies broad authority to cancel a grant, even if the project is on track, if it no longer supports current policies or priorities. This increases financial and operational risk for organizations relying on long-term federal funding.
How do indirect cost rates impact federal grant funding?
Indirect costs (also known as F&A or overhead) cover support expenses like facilities, utilities, and administrative staff. Under the new rules, federal agencies are directed to give preference to applicants with lower indirect cost rates, meaning organizations with higher overhead may be at a disadvantage.
Who decides whether grants are approved under the new oversight rules?
Each agency awarding federal grants must appoint a senior political official to review funding announcements and awards. These appointees must also conduct annual reviews of existing grants to ensure progress and alignment with national interests.
How are science and research grants affected by the new rules?
The new oversight requires grant applicants to follow “Gold Standard Science” principles. This means proposals must emphasize rigorous, reproducible, and transparent research methods, not just rely on institutional reputation.
What steps should organizations take to stay compliant with federal grants?
Organizations should:
How do these changes impact nonprofits, universities, and research institutions?
Institutions that depend heavily on overhead recovery or that have projects not fully aligned with federal priorities may face challenges securing funding. Universities, healthcare providers, and nonprofits should evaluate both their indirect cost strategies and how they frame their mission alignment in proposals.
Where can I get expert help with navigating federal grant changes?
Professional advisors like Ryan & Wetmore help organizations understand new compliance requirements, optimize indirect cost structures, and position proposals for success under the latest federal rules.
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About Peter Ryan
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Peter T. Ryan co-founded Ryan & Wetmore in 1988 with business partner Michael J. Wetmore. Peter provides clients with the best strategies for success. His expertise extends across various industries. Peter obtained a Master of Business Administration in Finance from the University of Baltimore and a Bachelor of Arts in Accounting from the Catholic University of America.