UPDATE 1/29/2025 12:24 PM :
The White House has officially rescinded its order to freeze federal aid spending. This decision comes after legal challenges and public concern over potential disruptions to federally funded programs. With the order reversed, federal aid distribution should continue as usual. We will continue to monitor the situation and communicate any developments that may impact nonprofits as they occur.
On January 27, 2025, the Office of Management and Budget (OMB) issued a memo announcing a temporary pause on all federal grants, loans, and financial assistance programs.
This pause is intended to allow for a comprehensive review of how these funds align with the Administration’s new priorities. The original memo was set to be effective January 28, 2025, at 5 PM EST, the pause affects disbursements under existing awards and the issuance of new awards, creating significant uncertainty for many organizations that rely on federal funding.
However, moments before the memo was set to go into effect, a federal judge issued a temporary injunction blocking the Trump administration’s directive to pause federal grants and loans. The ruling halts the freeze, allowing funding to continue while the court reviews the legality of the administration’s actions. The pause had faced immediate legal challenges, with critics arguing it threatened essential services and exceeded executive authority. A final decision is expected in the coming weeks, adding further uncertainty for nonprofits reliant on federal funding
What This Means for Nonprofits
The memo is vague, and more guidance is needed to fully understand its implications. There’s still a lot of uncertainty about how this pause will play out and how long it will last. I believe most organizations ultimately won’t see their funding impacted. However, if your programs don’t align with the current administration’s priorities, your funding could be at risk. Unfortunately, it may be days or even weeks before we have clarity or know when payments will pause/resume.
This pause impacts not only future grant opportunities but extends to current projects as well. For nonprofits managing federally funded initiatives, payment delays could strain operations. If the pause is prolonged, nonprofits will need to assess the sustainability of their programs and realign operations to adapt. Additionally, the government’s review process may bring changes to program eligibility or priorities, leaving nonprofits uncertain about long-term funding stability.
On Tuesday, the OMB issued a memo explaining the federal funding pause, clarifying that it applies only to programs impacted by specific Executive Orders. Programs related to DEI initiatives, certain international agreements, and foreign aid are under review, while direct benefit programs like SNAP, Medicaid, Social Security, and Medicare are excluded. Essential funding for small businesses, farmers, Pell Grants, and Head Start also remains unaffected.
Tips for Managing Funding Challenges
During this period of uncertainty, nonprofits can take proactive steps to navigate these changes:
- Do a Cash Flow Analysis: Evaluate how long current resources will sustain operations. A detailed cash flow analysis can also help pinpoint short-term funding needs. Sharing these insights with donors, banks, or other funding sources might lead to short-term solutions to bridge gaps.
- Review Current Grants: Take a closer look at your grant agreements to identify projects that could conflict with the Administration’s stated priorities. These grants could be at higher risk of being permanently cut.
- Keep Stakeholders in the Loop: Be transparent with your board, staff, and funders about the situation. Let them know your plans to address potential delays or funding gaps. Clear communication can foster trust and even lead to creative solutions.
- Plan for Contingencies: Prioritize essential programs and expenses to ensure critical services continue. Build a backup plan now so you’re ready to act if the pause stretches out longer than expected.
- Monitor Updates: While the memo provides limited clarity, more guidance from federal agencies is expected in the coming days and weeks. Stay informed and be ready to adapt as more details become available.
We’re Here to Help
At Wegner CPAs, we understand how critical federal funding is to nonprofit operations. Our team is closely monitoring the situation and staying up to date on developments.
