New Federal Certifications Raise Stakes for Grant Applicants: What Nonprofits Must Know

Hook

A sweeping new federal proposal could reshape how all nonprofits, small businesses, and public entities deal with federal grant funding. The General Services Administration (GSA) is seeking to require every applicant and recipient of federal financial assistance—including grants, loans, and cooperative agreements—to sign a series of newly expanded certifications. Critically, these certifications would be signed under penalty of criminal and civil law: a reality that increases the legal risks for anyone touching federal dollars, starting as soon as the 2026 grant cycle.

Organizations have until March 30, 2026 to submit public comments. If enacted, this rule could alter grant application and compliance processes for millions of entities, with some nonprofit advocates warning it could deter much-needed applications and disrupt services nationwide.

Context

How has it come to this? In response to recent executive orders—including initiatives opposing certain diversity, equity, and inclusion (DEI) efforts—the administration is pushing for greater scrutiny and more explicit commitments from federal grantees. The proposed changes in the System for Award Management (SAM) would amend longstanding processes by adding layers of attestation around compliance with federal law—not just on traditional issues like anti-terrorism or fraud, but also on immigration, civil rights, and DEI.

While certifications have always been a part of federal grantmaking, the new language is both broader and harsher. Under the new rule, a misstatement, even inadvertent, could expose an organization to criminal or civil action. The threat of legal harassment—through audits, investigations, or even prosecution—raises the stakes for all participants, particularly for under-resourced nonprofits that already operate with thin margins and legal capacity.

The National Council of Nonprofits (NCN) and others argue that vague, complex requirements will make it nearly impossible for good-faith applicants to know whether they're in compliance, leaving many wary of applying. As NCN President Diane Yentel stated, “Nonprofits with a strong track record of delivering federal programs may decide it is not worth the enormous financial and legal risk, leaving communities without the organizations needed to deliver childcare, support for seniors and veterans, job training, food and shelter.”

Impact

For Nonprofits

Nonprofits are most exposed to these changes because they rely heavily on federal grants to deliver essential services. The proposed certifications aren't limited to new applicants, but would also apply to existing grantees seeking renewals or extensions. Key risks include:

• Increased compliance burden: Expect more legal review, more documentation, and often the need for outside counsel before certifying.
• Liability exposure: Even unintended errors or misunderstandings could trigger investigations or sanctions.
• Program disruption: The chilling effect may mean fewer qualified applicants—reducing both competition and innovation in critical service areas.

For Small Businesses, Universities, Tribal and Governmental Entities

Any entity seeking federal financial assistance—from local governments to universities—will face similar requirements. Many, especially smaller entities, lack in-house legal teams and may find the new liability environment prohibitively risky.

• Competitive disadvantage: Wealthier or larger organizations with greater compliance resources may have an edge, marginalizing grassroots or smaller players.
• Broader uncertainty: The complexity and ambiguity around the requirements will make compliance planning and risk management even more difficult, deterring participation.

Action: What Should You Do Now?

1. Review the Proposed Rule: Read the full proposed changes and consult your compliance team or legal counsel.
2. Speak Up by March 30: Submit a comment letter using NCN’s guide, or sign the national opposition letter to make your concerns known.
3. Contact Decision Makers: Email your representatives (see template link) explaining how the changes would hurt your work or community.
4. Prepare for Tighter Controls: Begin auditing your current application and compliance practices, and budget for additional legal compliance costs if this rule proceeds.

Outlook

The coming weeks are critical. If the new rule is implemented, organizations will face an unprecedented compliance regime. Watch for the final rule (likely this summer), as well as possible follow-up from Congress, advocacy coalitions, and future court challenges. Nonprofits and grantseekers should be ready for a tougher, more legally risky grant environment and stay engaged as the landscape develops.

Granted AI helps organizations adapt to shifting grant requirements and policy landscapes so you can keep doing the work that matters.