New temporary restraining order broadens halt to federal funding freeze

A group of states filed and successfully received a temporary restraining order that prohibits funding impacts present in or contemplated by various Trump executive orders. The restraining order, issued by the US District Court of Rhode Island, also clarifies the applicability of the Court’s restraining order on the January 28th Office of Management and Budget (OMB) memo.

Nonprofits affected now have a reprieve until the Court hears the case. That includes those that have current federal funding or new awards.

We have summarized the key points in the temporary restraining order below. 

Here, you’ll find the full restraining order and accompanying memo from the US Treasury, which were ordered to be sent to all grantees and contractors, the Trump Administration, and government agency employees by Monday, February 3rd.

Summary of the restraining order’s effect on federal funding

  1. Clarifies that federal agencies cannot pause, freeze, impede, block, cancel, or terminate any awards on the basis of the OMB memo or on the basis of the president’s recently issued executive orders. 

What does this mean? 

This restraining order means that all funding appropriated by Congress must continue unabated. It clarifies that, even if the OMB memo was rescinded (which remains unclear), the order to continue funding applies to any and all of the Trump administration’s numerous executive orders. 

  1. Clarifies that the prohibition applies to ALL awards, including current, existing obligations and future assistance.

What does this mean? 

The Court is clarifying that all funding appropriated by Congress shall be unimpeded by any executive order or memo. This would include current funding (awarded grants, contracts underway, and those in process), obligated funding (e.g. approved and awarded funding that is currently unprocessed or not yet started), and future funding (appropriated funding that is procedurally unawarded or yet-to-be contracted).

  1. Clarifies that the prohibition encompasses all states and territories, not just those involving plaintiff states. 

What does this mean? 

Even though the restraining order was filed by a few states named as plaintiffs, the Treasury Department memo explicitly denotes that the restraining order applies to ALL states and territories, although the retraining order from the Court does not seem to align with the memo in that regard. This is a point of confusion that GCN will actively try to gain information about in the near term. 

  1. Explicitly clarifies that federal agencies are allowed to exercise individual agency authority to pause awards or obligations, but only on the basis of the applicable authorizing statutes, regulations, and terms of each award. For example, funding can be still be impacted if the contract terms between the agency and an individual grantee/contractor are violated. If this is the case, agencies must comply with all notice and procedural requirements in the award, agreement, or instrument that related to a stoppage, delay, or withholding of federal financial assistance programs.

What does this mean? 

Every individual grantee or contractor has a literal contract or funding agreement – whether as a direct federal grantee or a subgrantee – which lays out the terms of the agreement. Grantees and contractors must continue to comply with the contract terms and so must the federal government, which means using proper procedures for administrative actions (like procedures and notice periods for terminations) laid out in those agreements. In other words, compliance with federal contracts will still be administered on an individual grantee basis.

  1. Explicitly notes that any “identification and review” of federal assistance programs as described in the January 28th OMB memo (e.g. reviewing grantees for evidence of “wokeness,” etc.) will not affect the Administration’s compliance with the order to continue funding those programs.

What does this mean? 

The OMB memo and associated executive orders stated that grantees would be “assessed” for evidence of noncompliance with Trump’s executive orders (e.g. regarding DEI, the Green New Deal, etc.). The Court’s order explicitly clarifies that while the Administration can continue to assess grantees and contractors, any findings (as contemplated in the OMB memo or executive orders) cannot be used to affect funding. 

  1. Prevents the reissuance, adoption, or implementation of a funding pause under a new name, title, or any other agency supervised, administered, or controlled by the Administration (e.g. DOGE, the Department of Government Efficiency).

What does this mean? 

The Administration cannot try to enact its attempt to pause or cease funding for grantees and contractors under any other iterative form (name, strategy, department, etc.).

  1. Provides a longer reprieve than the restraining order issued last week (January 28th) related to the OMB memo specifically. However, this case will still be resolved quickly, so nonprofits need to prepare for multiple scenarios.

What does this mean? 

The restraining order states that it will remain in effect until further notice by the Court. Generally, the Court will set a hearing date “convenient to the parties and the Court,” but expeditiously. At that time, the plaintiffs will lay out their case, as will the Administration, and the Court will make a determination. A ruling for the plaintiffs will further lengthen the time that appropriated funding is secure. A ruling for the Administration would mean that federal funds (as appropriated) may again be in jeopardy.    

For full details, please see the full Court Order and the Plaintiff’s filing

To keep up to date on the Administration’s actions relative to the nonprofit sector and federal funding, make sure you are subscribed to GCN communications and notices, which will include notice of upcoming Town Halls, calls to action, tools, and other updates. You can also follow us on Facebook and LinkedIn.

What you should you be doing if you have federal funds 

We cannot stress enough that nonprofits should be working on scenario planning, drafting crisis communications (not just for funding purposes), and reaching out to elected officials (including congressional and local leaders) to reinforce the importance of your work.

In addition, it is critical that your communications include messages about the sector’s work on behalf of ALL Georgia’s residents. We must reinforce the importance of the nonprofit sector to the state’s economy and competitiveness, as well as to our collective welfare and quality of life. Find your representatives here and make time to reach out this week. 

What you should be doing if you don’t have federal funds

Community needs are much like a balloon – squeeze one end and the air simply shifts to the other side. If nonprofits that serve human needs are defunded: 

  • Communities large and small will experience accelerating demand for emergency assistance, health services, senior care, etc. 
  • Community Initiatives from downtown development to housing development projects (CDBG) will be reduced. 
  • Substantial layoffs will occur throughout the sector, which will strain local and state resources, including nonprofits that help individuals and families in crisis. 
  • Private funding competitiveness will increase even in the smallest communities as defunded organizations scramble to replace resources, and as non-federally funded organizations attempt to pay for the increased demand.  

Nonprofits – federally funded or not – should be speaking out about the need for federal funds for local issues, and in support for the nonprofit sector as a whole. This includes calling your elected officials to let them know what you do and how it may be impacted. What our leaders need right now is a reality check on the impact of federal funds to local economies and to the state as a whole. 

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