An update on the federal funding freeze

Please note that this is an evolving situation with new information emerging regularly.

Summary of Developments

On Monday, January 27, 2025, the Office of Management and Budget (OMB) issued a memorandum to the heads of federal executive departments and agencies, mandating a temporary pause on agency grant, loan, and other financial assistance programs. The agencies were required to identify and review all federal financial assistance programs and supporting activities to ensure alignment with President Trump’s policies and requirements.

A brief fact sheet issued by the OMB on Tuesday, January 28, 2025, clarified that programs providing direct benefits to individuals would not be subject to this temporary funding pause. This includes Social Security, Medicare, and Supplemental Nutrition Assistance Program (SNAP) benefits. Other exclusions from the funding pause include funds for small businesses, farmers, Pell Grants, Head Start, and rental assistance.

Originally, the funding suspension was set to begin at 5 PM on Tuesday, January 28, 2025. However, US District Judge AliKhan temporarily delayed the funding pause until 5 PM on Monday, February 3, 2025. On Wednesday, January 29, 2025, the OMB rescinded the initial memo and directed federal executive departments and agency heads to consult their respective general counsel regarding the implementation of President Trump’s executive orders.

Despite the rescission of the initial OMB memo, White House Press Secretary Karoline Leavitt announced that the President’s executive orders will remain in full force and effect. These orders, signed by President Trump on Monday, January 20, 2025, include directives such as:

• Protecting the American People Against Invasion
• Reevaluating and Realigning United States Foreign Aid
• Putting America First in International Environmental Agreements
• Unleashing American Energy
• Ending Radical and Wasteful Government DEI Programs and Preferencing
• Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government
• Enforcing the Hyde Amendment

How to Prepare

As the White House continues to evaluate the dispersal of federal funds in accordance with these executive orders, organizational leaders can take proactive steps to mitigate financial distress:

• Assess Financial Impact: Conduct a thorough assessment to understand which programs and services may be affected and the extent of the potential financial shortfall. Review relevant grant agreements for payment obligations.
• Program Efficiency: Assess the effectiveness and efficiency of existing programs and innovate to maintain impact with reduced funding.
• Financial Management: Enhance financial management and reporting systems for improved transparency and accountability.
• Explore Revenue Options: Consider options for increasing local revenue, such as adjusting taxes, fees, or service charges, to offset the loss of federal funds. Ensure that these measures are communicated clearly to the public to maintain transparency and support.
• Monitor and Adapt: Continuously monitor the evolving financial landscape to remain informed and make necessary adjustments in response to new developments and information. Some of the organizations we suggest looking to for up-to-date news and information include:
  • For nonprofits: National Council of Nonprofits, Minnesota Council of Nonprofits
  • For government entities: Government Finance Officers Association, International City/County Management Association, League of Minnesota Cities

By taking these proactive steps, nonprofit organizations or local governments can better navigate the challenges posed by changes in federal funding and continue to fulfill their missions effectively.

Support from Abdo

Abdo is here to help your organization navigate the potential changes in federal funding streams. Our team is closely monitoring all information regarding the executive orders and the impact on federal funding. We can assist and guide you as you:

• Analyze the Situation: Understand the specific impacts on your organization and develop tailored strategies to address them.
• Develop Contingency Plans: Create robust contingency plans to ensure the continuity of essential services and programs.

Our experts are ready to provide you with the insights and support you need to manage this evolving situation. For more information or to schedule a consultation, please contact us.

Together, we can work towards maintaining the stability and effectiveness of your organization despite the uncertainties in federal funding streams.