The Trump administration is preparing a sweeping overhaul of the federal grant‑making system, aiming to tighten eligibility rules, increase oversight, and prevent noncitizens from receiving taxpayer‑funded awards.
The effort, led by Office of Management and Budget Director Russ Vought, targets what officials describe as “significant flaws” in a grant structure that distributed roughly $1 trillion during the final year of the Biden administration.
Senior officials said the reforms will apply across federal agencies but will have the greatest impact on departments with large grant portfolios, including Health and Human Services, which oversees about $85 billion annually, and the Department of Transportation, which manages roughly $45 billion. The changes are designed to ensure that federal dollars are awarded only to eligible recipients and that underperforming grants can be canceled more quickly.
Under the proposal, political appointees will receive final sign‑off authority on federal grants, replacing a system in which multi‑year awards often continued with limited performance review. One official said the previous structure created incentives for “underperformance and under‑delivery” because recipients were “guaranteed a payment regardless.”
The new rules would shift federal grants to a performance‑based model. “You get a grant awarded with the policy shared from the president, signed off by a political appointee, and it damn well better produce, otherwise it could be canceled for cause,” an OMB official said. The Treasury Department’s Do Not Pay Registry will be used more aggressively to screen applicants.
A central component of the overhaul requires all federal award recipients to undergo verification through the E‑Verify system, ensuring that only U.S. citizens and authorized individuals receive taxpayer funds. Agencies will also impose English‑language requirements for all funding announcements; a change officials say will standardize communication and reduce compliance errors.
The administration is also tightening fraud‑reporting procedures. Valid complaints must be referred to inspectors general and the U.S. Attorney’s Office in Washington within ten days, replacing internal investigations that previously stretched on for years. Officials said the accelerated timeline is intended to prevent abuses similar to those uncovered in pandemic‑era relief programs.
Grants that conflict with Trump administration policies will be suspended or terminated. Officials cited awards related to Diversity, Equity and Inclusion initiatives, gender‑identity programs, and renewable‑energy projects as examples of funding streams that have already been curtailed or are under review. “If a grant … veers off from the commitment to stick with presidential policies, then … we’re able to turn it off,” an official said.
OMB officials said the reforms are intended to prevent a recurrence of large‑scale fraud and to ensure that federal dollars are not used to support programs that undermine the administration’s policy priorities. They also emphasized that the changes would give the federal government greater visibility into state‑administered programs that distribute federal funds.
A formal notice of proposed rulemaking is expected later this summer, outlining the full scope of the grant‑system overhaul and opening the process to public comment.
