Note: Content has been updated February, 6, 2025, to reflect the most current information.
Updates on the Federal Grant Freeze
In a notable policy change, the White House's Office of Management and Budget (OMB) released a memorandum requiring a temporary suspension of all federal financial assistance programs, including grants, loans and other forms of aid. The funding freeze was intended to start January 28, 2025, at 5 P.M. EST, to help ensure that federal expenditures align with President Donald Trump's priorities, emphasizing the efficient use of taxpayer funds.
However, as of January 29, the OMB has rescinded the federal funding pause. A federal judge also ordered the Office of Management and Budget to restart releasing funds on February 3, 2025. Currently, there is no federal funding pause in place.
Understanding the Executive Orders and Possible Impact on Federal Funding
While the new directive was withdrawn by the OMB, there is still some benefit in reviewing its possible impact and proposed requirements.
The order would have required all federal agencies to pause activities related to the obligation or disbursement of federal financial assistance. This would have included funding for foreign aid, nongovernmental organizations, diversity, equity and inclusion (DEI) programs, gender ideology, Green New Deal initiatives, as well as funding under the IRA and IIJA programs.
The pause was intended to allow the administration to review these programs and determine their alignment with legal and presidential priorities. Agencies would have been required to complete a detailed analysis of their federal financial assistance programs and report their findings to the OMB by February 10, 2025.
Steps to Mitigate Potential Risks and Review Processes
Even with the memorandum’s recension, organizations reliant on federal financial assistance should take proactive measures to mitigate potential future disruptions:
- Review Current Funding: Assess all funding sources to identify those that could be affected by a possible pause, including grants and loans.
- Evaluate Impact: Analyze how a temporary suspension might affect your operations, project timelines, cash flow and financial stability.
- Develop Contingency Plans: Prepare plans to manage disruptions by identifying alternative funding, adjusting timelines and reallocating resources.
- Stay Informed: Monitor updates from federal agencies and the OMB. Watch for communications about any future pauses, exceptions or changes that may affect your organization.
- Engage with Stakeholders: Communicate transparently with employees, clients and partners about potential impacts if a federal funding pauses goes into effect. Provide updates and reassurance during this period of uncertainty.
- Seek Professional Advice: Consult legal and financial advisors to fully understand what the implications would be if a pause is reissued and develop risk mitigation strategies.
Additional Federal Funding Recommendations for Organizations
Organizations can also take immediate actions to safeguard their operations in case of future memorandums, including:
- Submit Drawdowns Promptly: Expedite reimbursement requests, as timing is crucial. Note that processing delays or blocks may occur. Seek assistance if needed.
- Understand Grant Terms and Conditions: Review your grant or award agreements for guidance on cost recovery in the event of terminations or stop work orders.
- Evaluate Staffing Needs: Assess the necessity of your grants management team. Consider temporary reassignments to avoid unnecessary costs, maintaining only essential positions.
- Manage Funding Sources: Ensure continuity for federally funded employees providing critical services by reviewing funding sources and documenting reallocated payments for potential reimbursement.
- Maintain Compliance: Continue adhering to existing rules and regulations for federal funding.
Another executive order pausing federal assistance could present challenges for organizations that depend on federal funding. However, taking these proactive steps can help organizations navigate uncertainty and mitigate potential risks.
How Cherry Bekaert Can Help
At Cherry Bekaert, we understand the complexities and challenges that come with navigating changes in federal financial assistance policies. Our Grants Management team is committed to giving you personalized support and strategic advice. We aim to help your organization handle the effects of future policy changes. We offer a range of services, including assistance with analyzing finances, conducting compliance reviews and planning for contingencies.
Our skilled professionals can help you assess funding sources, optimize resource allocation and ensure that you remain compliant with donor regulations. We are here to partner with you through this period of uncertainty, offering insights and solutions to safeguard your operations and financial stability.
At Cherry Bekaert, we are committed to supporting our organizations during this time. Please reach out for assistance.
