U.S. District Judge Loren L. AliKhan has temporarily blocked the Trump administration freeze on federal grants and loans till Monday, February 3.
Special Update:
OMB Freeze of Federal Grants and Loans
Last night, the Trump Administration announced an immediate freeze of federal grant, loan, and other financial assistance funds related to the executive orders it has issued in the past week.
We strongly encourage you to read the order here. As of writing, there are reports of various federal grant portals closing down, limiting nonprofit abilities. It raises large constitutional questions and has already been legally challenged.
The Office of Management and Budget order requires that “to the extent permissible under applicable law, federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” While Congress holds the power of the purse and has authorized these expenditures, it is likely that the President has the power to “pause” spending, subject to review.
This action will effectively and “temporarily” halt, as of 5pm today, many billions of dollars in federal grants and loans to organizations across the country. The memo specifies that Social Security, Medicare, and “payments to individuals” will not be affected, but appears to leave many other federal payments in jeopardy — including grants and loans issued to research bodies, community projects, and all types of nonprofits. A review of spending to ensure alignment with the Administration’s priorities will ensue. Agency officials have until February 10 to submit reports for OMB’s consideration.
This is a rapidly evolving situation with currently unknown implications for nonprofits nationwide and the communities we serve. The Alliance is actively engaging with elected officials, including RI’s Attorney General, our state and federal delegation, and the National Council of Nonprofits to gain clarity.
What we know:
Who does that freeze impact: Based on the memo, the freeze impacts nonprofits, higher education institutions, state and local governments, health care entities, and nonprofit and for-profit organizations that receive federal funding.
When does the freeze begin: Federal grants and loans will be paused starting Tuesday, January 28 at 5pm ET, 4pm CST.
How long will the freeze last: The pause is temporary, but no end date has been declared. “Each agency must pause…until OMB has reviewed and provided guidance with respect to the information submitted.” Some news agencies are reporting February 10 as a freeze deadline, but the OMB memo names that as a deadline for federal agencies to identify programs, projects, and activities subject to the pause, not the resumption of funding.
What is being reviewed during the freeze: Federal agencies must submit detailed information to the administration on programs, projects, or activities no longer eligible under the series of Executive Orders by Monday, February 10.
Are any programs exempt from the freeze: Medicare and Social Security benefits will be unaffected by the pause. The memo does state that the OMB may grant exceptions on a case-by-case basis, and to the extent required by law, agencies may continue certain administrative actions.
Does this impact previously awarded grants: Even grants that have been awarded but not spent are supposed to be halted. Any pending payments organizations are waiting to receive on federal grants will likely be delayed or stopped. Activity must freeze by 5pm ET Tuesday, January 28, so there is a chance a pending payment already in process is paid out today.
Is this legal: As of this writing, a coalition of organizations (represented in the legal challenge by Democracy Forward, include the National Council of Nonprofits, the American Public Health Association, Main Street Alliance, and SAGE) filed a Motion for Temporary Restraining Order in the U.S. District Court for the District of Columbia to block the White House Office of Management and Budget from pausing all agency grants and loans.
What is considered “federal financial assistance”: Defined by 2CFR 200.1, it is assistance that recipients or subrecipients receive or administer in the form of grants, cooperative agreements, non-cash contributions, direct appropriations, food commodities, loans, loan guarantees, interest subsidies, and insurance.
What we don’t know:
How wide is the scope of the freeze and how will the Executive Orders be interpreted during this evaluation period?
What access will nonprofits have to individuals at their funding agencies to ask questions and receive guidance during this evaluation period, particularly in light of staffing freezes and terminations?
What are the ramifications in our communities if needs go unmet and if organizations are forced to downsize or close?
What nonprofits can do:
Communicate what you can with staff to reduce fear.
Fill out the Alliance for Nonprofit’s Survey: ”Questions, Concerns and Impacts of Executive Orders and Federal Funding Pause”: This information will help as we communicate with federal and state leadership about the negative impact of this freeze.
Contact state and federal elected officials.
Questions to ask:
What is the plan to protect the most vulnerable Rhode Islanders, and indirectly, the nonprofits that support them?
How are you collecting information from constituents about the impact of this grants freeze?
An immediate impact on nonprofits, particularly those with tight balance sheets and reliance on timely grant reimbursements, is cash flow. Advice from Clifton Larson Allen (CLA):
Build a daily cash flow model and run scenarios for paused federal payments through the end of February, March, etc. to determine when you will be challenged to meet expense obligations.
Connect with your bank(s) to refresh on your cash flow options and what may be available to your organization. What are the terms on your lines of credit? What ability do you have to pull funds from CDs or similar products?
Consider engaging with other funding sources (individuals, foundations, and other non-federal sources) that are not impacted by the freeze to see if they can assist in temporary cashflow support.
Run scenario plans and engage in discussions with your leadership and governance. If all your federal funds were cut, what changes would you need to make to program services, staffing, or other expenses to remain viable?
Start documenting how you anticipate this impacting your organization.
Ensure any communications you receive from federal agencies is legitimate.
How the Alliance is helping nonprofits navigate:
The Alliance is actively engaging with elected officials and the National Council of Nonprofits to gain clarity. Our goal is to mitigate the impact on our state’s most vulnerable communities and the operations of Rhode Island’s thousands of nonprofits and the people they serve.
The Alliance remains steadfast in our commitment to our shared values, to ensure that our most vulnerable and traditionally marginalized communities and nonprofits that serve them are protected. To that end, we are collecting stories, data, and any relevant information you think we should know as we communicate and collaborate with our national and local partners, elected officials, and other key decision makers.
