Nonprofits warn federal grant rewrite could threaten essential services

A sweeping rewrite of federal grant rules could turn compliance into a front-line operations issue for food pantries and recovery groups that already run lean. The Office of Management and Budget published its more than 400-page proposal, called Regulation for Federal Financial Assistance, on May 29, and the comment clock runs until July 13.

The National Council of Nonprofits warned in its June 15 update that the changes could create more unpredictable financial, legal and reputational exposure for organizations delivering housing, health, education, food, shelter and disaster recovery services. Diane Yentel, the council’s president and CEO, said the proposed changes may profoundly affect nonprofits delivering those services. The council also published a comment guide, a chart of key provisions and a sign-on letter urging nonprofits to oppose the proposal before the deadline.

For A Simple Gesture in Guilford County, the concern is not abstract. The nonprofit partners with dozens of local food pantries in Guilford County, North Carolina, to make food donations easy and convenient for donors, and its mission includes supplying local pantries, collecting excess perishable food for community meals and supporting the SHARE program in Guilford County Schools. Its food recovery work also matches food businesses with vetted nonprofits, which means any added federal compliance burden can ripple through referral partners, pantry schedules and pickup routes.

That is where the labor strain shows up. If federal award rules become more complicated, nonprofit leaders can end up spending more time on documentation, reporting and audit readiness and less time on the work that keeps food moving. Slower reimbursements can squeeze cash flow. More paperwork can raise overhead. Narrower partner participation can leave local networks with fewer hands to absorb a spike in need. For a group that depends on volunteers, pantry coordination and food recovery logistics, even small administrative delays can mean fewer bags sorted, fewer pickups completed and less flexibility when a pantry runs short.

The proposal would apply government-wide across grants, cooperative agreements and other federal financial assistance, with agencies including USDA, HHS, State, USAID, Veterans Affairs, the Department of Defense, the Environmental Protection Agency, the Department of Housing and Urban Development and others. That breadth is why the nonprofit sector is treating the rule as a nationwide operating risk, not a niche procurement issue.

The local stakes are already high. Feeding America estimates 1,627,360 people in North Carolina faced hunger in 2023, including 438,200 children, with a statewide food insecurity rate of 15.0% and an annual food budget shortfall of $1,080,608,000. A Simple Gesture also points to the Bill Emerson Good Samaritan Food Donation Act, which protects wholesome food donors and nonprofit officers from civil and criminal liability. In practice, that means food recovery depends on clear legal and administrative rules as much as it depends on volunteers, trucks and donated food.