USDA's Small Print
Grab a coffee; here is what you need to know. If you have an active USDA grant, this one is for you. We need to talk about some proposed rule changes that could affect your cash flow, your compliance, and, in some cases, your entire award.
On May 29, 2026, the Office of Management and Budget released a proposed overhaul of 2 CFR Part 200, the federal rulebook every USDA grant rests on. It is the bones beneath the bones. Even though it is not final, the proposal signals a major shift in how federal grants will operate: from how payments flow to how projects are monitored and, in some cases, terminated.
Budget for Slower Payments
The proposal allows USDA to shift awards to reimbursement-only at any time. Every payment request must clear Treasury’s Do Not Pay system and meet stricter documentation requirements. Payment timing may stretch longer than in past years. For capital-heavy work, this is a meaningful shift in how cash moves through a project. Subpart D § 200.305 Federal Payment
Fixed Amount Awards May Disappear
Fixed amount awards, long valued for their simplicity, would be eliminated unless Congress authorizes them. Without them, farms will see more receipts, more cost tracking, and more detailed financial documentation. The administrative load increases, but so does the clarity around allowable costs and audit expectations. Subpart C § 200.201 Fixed Amount Awards
Track Every Dollar from Day One
USDA can add new conditions mid-award based on updated risk assessments or performance reviews. Even after a budget is approved, farms may be asked for additional documentation or new prior approvals. This creates more touchpoints with the agency and more time and paperwork on your end. Subpart C § 200.208 Specific Conditions
Expect a Deep Background Check
The expanded risk review widens what USDA can evaluate. New factors include financial capacity for high-dollar awards, publicly verifiable questionable practices, foreign gift and contract disclosures, and certain affiliations. The lens is broader and more detailed than in past cycles. This does not mean farms are doing anything wrong. It means the agency is applying a more comprehensive review framework across all programs. Subpart C § 200.206 Risk Review
Know Your Contract Type Before You Sign
The proposal strongly discourages cost-reimbursement contracts and adds prior approval requirements for their use. If your grant funds work through contractors for equipment, construction, and technical services, the contract type matters more now. Farms using this structure should expect additional scrutiny and documentation requirements before those funds can flow. Subpart D § 200.320 Procurement Methods
Mid-Award Termination Is Now Explicitly on the Table
This is the change most farms are not paying attention to and should be. The proposal makes mid-award termination far more explicit, including termination based on “agency priorities or national interest.” That language is broad. It means an active grant could be stopped before completion, even if your farm is performing well, if the program no longer aligns with current agency direction.
For farms with multi-year awards, VAPG operating capital grants, REAP projects, SARE research grants, this is real risk. Document your performance consistently. Keep records current. You want a clear paper trail. Subpart D § 200.340 Termination/Suspension
What This Means for Your Application
Funding pools are shrinking. Applicant volume is rising. Cutoff scores have climbed from the 65–75 baseline into the low 80s. These proposed UG changes make that environment harder, not easier. A rushed application in this environment does not just score lower. It will not clear the new cutoff at all.
The competitive shift at a glance:
Old cutoff baseline: 65–75 points. Acceptance rates: 30–50 percent.
New cutoff baseline: 80–85+ points. Acceptance rates: 10–20 percent, sometimes lower in high-demand cycles.
Your project may be just as strong as last year. The bar you must clear is now significantly higher.
The Rule Is Not Final. Your Comment Counts.
OMB is accepting public comments through July 13, 2026. This is a real opportunity to put farmer voices on the record before these rules are finalized. Submit directly or contact your U.S. Senator. Submit your comment: Regulation for Federal Financial Assistance—OMB, May 29, 2026, Contact your U.S. Senator: senate.gov/senators/senators-contact.htm