By Deena Bosworth/Director of Governmental Affairs
As MAC and the National Association of Counties have been reporting over July and August, county officials should be watching a sweeping federal proposal that could significantly change how counties receive, administer and manage federal grants.
MAC asks Michigan county leaders to reach out to their members of Congress on this issue right away (see details below)
The federal Office of Management and Budget (OMB) has proposed a government-wide rewrite of the regulations governing federal financial assistance under 2 CFR Part 200. NACo recently submitted detailed comments on the proposal, raising concerns about increased administrative requirements, uncertainty surrounding federal funding commitments and potential financial exposure for counties.
Counties are among the nation’s largest recipients and pass-through administrators of federal assistance, administering programs across public safety, transportation, health, housing, human services and emergency management. Federal financial assistance to state and local governments totaled $1.1 trillion in fiscal 2024.
One of the most significant changes expands federal agencies’ authority to terminate certain discretionary awards if they no longer advance program goals, agency priorities or the “national interest as they exist at the time of the termination.”
NACo argues this standard could create significant uncertainty for counties that enter into contracts, commit local resources or advance funds based on a federal award.
Importantly, the proposal exempts block grants, formula grants and disaster recovery grants from the expanded discretionary termination authority. NACo is asking OMB to identify the specific programs covered by those exemptions so counties can know with certainty which funding streams are protected.
The termination provisions are particularly problematic for reimbursement-based infrastructure projects. Counties often advance local funds or enter binding contracts before receiving federal reimbursement. Under the proposed rules, if an award is suspended or terminated mid-project, there may not be a guaranteed path for recovering all costs already incurred. …
NACo is asking OMB to establish clear protections for counties that have acted in good faith and incurred legitimate expenses under the terms of an existing federal award.
The proposal could also increase grant administration responsibilities, particularly for smaller and rural counties with limited staff.
Among the changes, counties could face expanded requirements for classifying and monitoring subrecipients. The proposed rules would also extend E-Verify requirements to contractors and subcontractors performing work under federal awards. NACo is requesting that OMB consider thresholds based on award size and risk rather than applying the requirement universally.
The proposal does have some plus sides, but they don’t outweigh the concerns. Requiring 500-word executive summaries in plain language in Notices of Funding Opportunity, establishing a minimum 30-day posting period and encouraging multi-year awards where appropriate are among those.
OMB has proposed an Oct. 1 effective date, just 40 days from now. The U.S. Senate recently passed a budgetary continuing resolution that would delay implementation, but the U.S. House, in its continuing resolution, did not include a delayed implementation. If the House fails to delay the implementation, then counties will be forced to comply.
How to take action
Contact your House member using NACo’s template letter and urge them to support the Senate CR, including the provision delaying OMB’s Uniform Guidance rule until Dec. 11. Visit NACo’s OMB Resource Hub for talking points and help contacting your U.S. representative.
For more information on this issue, contact Deena Bosworth at bosworth@micounties.org.