On January 27, 2025, the Office of Management and Budget (OMB) released a memorandum for heads of executive departments and agencies to temporarily pause agency grants, loans, and other financial assistance programs.
This memo requires federal agencies to identify and review all federal financial assistance programs and supporting activities to ensure they are consistent with the President’s policies and requirements. In accordance with this requirement, each agency is being asked to complete a comprehensive analysis of all of their federal financial assistance programs to identify any programs, projects, and activities that may be implicated by any of the President’s recent executive orders.
Federal agencies must temporarily pause all activities related to obligation or disbursement of federal financial assistance and other relevant agency activities (including issuing new awards and disbursement of federal funds under open awards) to allow the administration time to review the agency programs and determine the best uses of the funding for those programs.
The possible impacts on not-for-profit organizations include:
- Delayed or stopped payments for all federal financial assistance, meaning “assistance that recipients or subrecipients receive or administer” in various forms, but does not include assistance provided directly to individuals. The pause is not expected to impact Medicare or Social Security benefits.
- Postponed review of new federal grants
- Termination of current grants and other financial assistance for recipients no longer eligible under the series of executive orders. A summary of the executive orders and their impact on nonprofits has been compiled by the National Council of Nonprofits.
Several nonprofits, public health organizations, and small businesses filed a lawsuit to block this order. However, if the order is not blocked, not-for-profit organizations should consider several recommendations:
- Review cash flow projections and budgeting for paused federal payments
- Diversify funding sources by reaching out to non-federal sources (individuals, foundations, corporations, etc.) for temporary cash flow support
- Meet with management and board of directors to make contingency plans for program services, staffing, or other expenses if federal funding is paused, lowered, or cut completely
- Evaluate financing possibilities including lines of credit, selling investments, or pulling from board designated endowments to improve cash flow position
This temporary pause will become effective on January 28, 2025 at 5:00 PM.
The memo requires the agencies to submit to the OMB detailed information on any programs, projects, or activities subject to the pause by February 10, 2025. The OMB may grant exceptions on a case-by-case basis and agencies may continue certain administrative actions to the extent required by law.
A spokesperson from The U.S. Department of Education has stated that “the temporary pause does not impact Title I, IDEA, or other formula grants, nor does it apply to Federal Pell Grants and Direct Loans under Title IV [of the Higher Education Act]” and “only applies to discretionary grants at the Department of Education.”
This is a fluid situation, and we will keep you updated as more information emerges. If you have any questions or would like to discuss how the federal funding freeze may impact your organization, please reach out to Katie Galaska, Director, Audit & Accounting, or any member of our Not-for-Profit Industry Group.
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