Regulation Undermining Mission: A Call to Action on GSA’s Proposed Anti-DEI Certification for Nonprofits

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Jennifer Beightley and Lauren Azevedo
February 27, 2026

On January 28, 2026, the General Services Administration posted a memo in the Federal Register stating its intention to change how nonprofits certify they meet the requirements that come with accepting federal grants. Its stated purpose is to bring those requirements into alignment with how the Executive branch defines discrimination, pointing to the July 29, 2025 Department of Justice memo. Public comments are open until March 30, 2026, and the stakes for nonprofit organizations and their stakeholders are significant. To do so, nonprofits with federal grants may have to formally certify that they do not employ DEI related practices or “proxy discrimination” within the System for Award Management. This requirement could affect the eligibility of federal grant recipients.

The memo

While it states that organizations must follow federal law, the memo serves to provide “non-binding suggestions” that are “not mandatory requirements but rather practical recommendations to minimize the risk of violations.” Such violations include what it describes as “unlawful proxy discrimination” as applied to hiring and promotion decisions, as well as decisions about program or service recipients. Examples include a university DEI program funding scholarships exclusively for Black students, a university designating a lounge exclusively for a specific ethnic group or an organization prioritizing underrepresented groups in admission, hiring or promotion practices.

But it is the “unlawful proxy discrimination” that may be most challenging for nonprofits. According to the DOJ memo, proxy discrimination is criteria that appears “facially neutral” but serves as “substitutes for protected characteristics.” It gives examples of using language such as “cultural competence” and “lived experience.” Targeting geographic areas because of racial composition is a given example of proxy discrimination. The memo outlines best practices to avoid discrimination, including avoiding organizing based on protected traits and avoiding using socioeconomic or first generation status and geographic diversity, including underserved areas, as selection criteria if they function as proxies for race, sex or other protected characteristics. Several times the memo states that facially neutral criteria must not be used as a proxy for achieving racial or sex based outcomes.

Implications for the nonprofit sector

Government failure theory suggests that nonprofits fill gaps in service delivery when government capacity or political will fall short. Because the government is structurally designed to serve the median voter, it provides broad, uniform goods to meet the needs of the majority. That approach leaves many out of reach. This is where nonprofits step in. Because they are able to specialize in whom they serve and how they do it, they meet the needs of minority and underserved populations. This means that inherent in their mission is the objective to serve targeted populations where the government falls short. Thus, nonprofits enable the government to maintain a level of efficiency demanded by taxpayers by stepping into this service gap and efficiently carrying out their specialized missions.

By labeling targeted programs and populations as “proxy discrimination,” the government may require nonprofits to move toward broader service models similar to those under which government operates, potentially diminishing the sector’s specialized capacity. While grants and contracts allow nonprofits to serve populations that the government has been unable to reach, new certification requirements could constrain them in ways that make them resemble the very systems that initially struggled to serve these communities.

Take for example a nonprofit food pantry in Charlotte, NC. Data shows that areas within “the Crescent” of the city contain the highest number of low income households and are the most likely to be without access to a grocery store. The Crescent is also home to a majority of Charlotte’s Black residents. When a food pantry targets these areas to maximize mission fulfillment, this could raise questions under the DOJ’s definition of “proxy discrimination.” The food pantry may need to either broaden its services and serve the entire city less efficiently or assume additional compliance risk. The proposed requirement amendment means organizations must weigh data driven targeting against expanded certification obligations.

Call to Action

The General Services Administration is accepting public comments on the proposed amendment until March 30, 2026. Nonprofit leaders may wish to submit comments explaining potential impacts on service efficiency and administrative burden. Changes that limit targeted service delivery could affect how effectively government grant and contract funds are used. The nonprofit sector has demonstrated resilience across changing regulatory environments, but careful review of the administrative implications of this proposal is warranted.

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Author: Jennifer Beightley is a public policy Ph.D. student at UNC Charlotte. She studies nonprofit policy and food insecurity. She can be reached at [email protected].

Author: Lauren Azevedo, Ph.D. is an Assistant Professor in the Department of Political Science and Public Administration at UNC Charlotte. She can be reached at [email protected]

 

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