The Federal Kill Switch: Navigating the New Era of Grant Termination

For many years, federal grant compliance was viewed as a check-the-box exercise in retrospective grants monitoring and accounting—something to be handled during the annual review or audit. However, recent developments have shifted the landscape. The Office of Management and Budget’s Memoranda 25-30, Ensuring Accountability: How We Oversee, Audit, and Improve, states: “compliance for its own sake is no longer the goal.”

The current administration’s aggressive stance on non-compliance, paired with the 2024 Uniform Guidance revisions, has significantly increased the risk of funding freezes. Several updates introduced new triggers of the kill switch, which allows agencies to pause, withhold, or terminate funds if concerns are not addressed.    

To help your organization navigate the heightened risks, we have outlined several changes that could trigger a funding crisis.  

The Risks: What Has Changed?

The 2024 Revisions to the Uniform Guidance (2 CFR Part 200) introduced several changes that have put organizations at a higher risk of funding interruptions:

• The Credible Evidence Standard (2 CFR § 200.113): Applicants, recipients, or subrecipients are no longer permitted to wait for a proven violation before notifying the Federal awarding agency. While previously mandated reporting covered only violations, you now must disclose potential violations of criminal law involving fraud, conflicts of interest, bribery, or False Claims Act violations as soon as you have credible evidence. Credible evidence is a significantly lower threshold than a final legal determination, but it is timelier than a court proceeding, which can take years to conclude. If a federal agency discovers you held onto trustworthy evidence without disclosing it promptly, your program could be designated non-compliant, which could lead to a funding interruption or termination of the award in part or in its entirety.

• Mandatory Cybersecurity & Whistleblower Rights: New requirements for reasonable cybersecurity measures (2 CFR § 200.303) and mandatory written whistleblower notifications (2 CFR § 200.217) create new avenues for compliance failure that could ultimately trigger a funding interruption.

• Dynamic Risk Assessments: Federal awarding agencies can now modify your risk assessment at any time during the period of performance. If an interim risk assessment determines that your entity is at higher risk than initially determined, the Federal agency can put you on a shorter leash by applying the specific conditions of 2 CFR § 200.208, which could lead to a funding pause if unresolved.

• Award Termination Provisions Strengthened: Although the courts may ultimately determine the fate of some grant cancellations, pursuant to 2 CFR § 200.340(a), a Federal agency can terminate an award that “no longer effectuates the program goals or agency priorities” or that the agency determines “will not accomplish the purposes for which the Federal award was made.” President Trump’s Executive Order No. 14332 (August 7, 2025) requires agencies to work to revise the terms and conditions of existing discretionary grants (i.e., grants issued by the Federal agency, keeping with specific statutory authority) to permit immediate termination for convenience, or clarify that such termination is permitted, including if the award no longer advances agency priorities or the national interest. The EO also requires discretionary awards to include clear benchmarks for measuring success and progress towards relevant goals. Under these strengthened provisions, failing to meet relevant goals puts your funding at risk.

What are the Specific Conditions detailed in 2 CFR § 200.208?  

If your risk assessment—governed by § 200.206—flags issues like late reporting, financial instability, or poor internal controls, or if you have a significant change in circumstances that increases your risk level, the agency can:

1. Require payments as reimbursements rather than advance payments.

2. Withhold authority to proceed to the next phase until receipt of evidence of acceptable performance.

3. Require additional or more detailed financial reports.

4. Require additional project monitoring.

5. Require the recipient or subrecipient to obtain technical or management assistance.

6. Establish additional prior approvals.

Activating the Kill Switch: § 200.339 Remedies for noncompliance: When the Federal agency or pass-through entity determines that noncompliance cannot be remedied by imposing the “specific conditions,” the agency can:

1. Temporarily withhold payments until the recipient or subrecipient takes corrective action.

2. Disallow costs for all or part of the activity associated with the noncompliance of the recipient or subrecipient.

3. Suspend or terminate the Federal award in part or in its entirety.

4. Initiate suspension or debarment proceedings as authorized in 2 CFR Part 180 and the Federal agency's regulations, or for pass-through entities, recommend suspension or debarment proceedings be initiated by the Federal agency.

5. Withhold further Federal funds (new awards or continuation funding) for the project or program.

6. Pursue other legally available remedies.

How the Vander Weele Group Protects Your Funding

The Vander Weele Group specializes in Meaningful Monitoring®—a proactive oversight approach that transcends basic compliance, offering strategic insight to help programs meet their objectives, and achieve their mission. Led by Maribeth Vander Weele, a former Inspector General, our firm understands the nuances of federal oversight from the inside out.

We help organizations mitigate the risk of funding interruptions through:

• Guardrails 360™: We set up critical safety checkpoints within your organization to identify front-line weaknesses in meeting compliance requirements, mandatory program outcomes and  internal controls before an auditor or watchdog does. And we don’t just find weaknesses; we fix them. 

• AI-Driven Risk Assessments: Using our Agent Tipster™ tool, we conduct AI-driven risk assessments to identify areas of concern before they reach the credible evidence threshold for mandatory disclosure. We help you determine when a red flag needs to be reported and how to frame that disclosure to demonstrate that you are a proactive, responsible steward rather than a liability.

• Technical Assistance & Training: We provide customized training for your team on revisions to compliance guidance, helping you implement the policies and procedures that prevent funding interruptions.

• Integrity Monitoring: As a leading integrity monitor for grant mega programs, we build rigorous oversight mechanisms that help your organization steward taxpayer funds responsibly, saving you from funding interruptions and ensuring your program reaches those who need it most.

Don’t Wait for the Kill Switch to be Triggered

The best time to address a compliance gap is before it becomes a mandatory disclosure. By partnering with the Vander Weele Group, you can assess and strengthen your compliance with emerging federal regulations, keeping your funding more secure and your focus on your mission.

In the 2026 funding environment, the government’s finger is already on the switch. Stewardship is no longer a goal; it is a prerequisite for every dollar you draw.

Visit VanderWeeleGroup.com to find out more about our Guardrails 360™ program, our Agent Tipster™ tool, and our Meaningful Monitoring® approach.