On Monday, January 27, 2025, the Office of Management and Budget issued a memo to the heads of all executive departments and agencies of the federal government, requiring a temporary pause in all disbursement activity and a mandatory review of all funded agencies and programs.
This sweeping order caused chaos across the nonprofit sector. Thankfully, a federal judge has issued a one-week temporary stay (until Feb 3rd) until further arguments can be heard.
What we know so far:
- Who does the proposed freeze impact? The proposed pause is relevant for all “federal financial assistance,” which is defined as 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.
- When does the freeze take effect? Prior to the stay issued by a federal judge, the memo ordered that all activity must cease by 5:00 pm Tuesday, January 28th. The stay provides a one-week reprieve.
- What is the effect of the order? If the order is not halted, pending payments that organizations are waiting to receive with regards to federal grants will likely be delayed or stopped. New federal grants under review will also be paused.
- How long will the proposed freeze last? The order states that Federal agencies have until February 10th to review all grants (and other financial assistance, disbursements, etc.) and to compile lists of recipients no longer eligible under the president’s executive orders. The pause was proposed to last 90 days, but the true length of the potential freeze is unclear.
- What is being reviewed during the freeze and what does “no longer eligible” mean? According to the memo, departments have been charged with assessing grantee/contractor activities for consistency with the “President’s policies and requirements” and alignment with advancing the Administration’s priorities. The memo describes these criteria as follows:
- Advancing a stronger and safer America
- Eliminating the financial burden of inflation for citizens
- Unleashing American energy and manufacturing
- Ending “wokeness” and the weaponization of government
- Promoting efficiency in government
- Making America Healthy Again
The administration has also issued the document Instructions for Federal Financial Assistance Program Analysis in Support of M-2 containing a template for each agency department to complete for all federal programs.
- Does this impact previously awarded grants? Yes. Grants that have been awarded but not spent are subject to the freeze. Pending payments that organizations are waiting to receive from federal grants would likely be delayed or stopped.
- How does the freeze impact funding to Georgia? The funding freeze could affect the billions of dollars Georgia receives each year from the federal government, including direct funding for nonprofits as well as funds flowing to the state of Georgia that are then allocated to nonprofits in support of the State’s priorities. In 2024-25, Georgia received approximately $38.2 billion in federal funds.
- Is this legal? There were numerous lawsuits filed the week of Jan 27th by state Attorneys General, nonprofits, small business associations, public health agencies, Democracy Forward, and others, asserting that the order is not legal. These efforts have secured a 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 we don’t know:
- If the order will be reconstituted in some way after review by the court over the next week.
- How wide the scope of the freeze is, and how the executive orders will be interpreted during this evaluation period. For example, it is currently unclear if Medicaid will be impacted.
- What the ramifications are for our communities given a sudden halt in services – for instance, should nonprofits need to downsize or close, and residents are unable to access healthcare, disaster assistance, emergency food, etc.
What nonprofits can do:
- Contact your federal, state, and local elected officials to express your concerns and convey what is at stake in terms of the communities you serve, and what you do to serve them. They need to hear from us – the experts! Here are some important questions to ask:
- What is your plan to protect Georgia’s most vulnerable residents?
- What is your plan to protect Georgia’s nonprofits – the state’s 5th largest employment sector and partner on many important State priorities?
- How are you collecting and conveying information from constituents about the impact of this freeze?
You can also click here to find a sample script ready to customize.
- Fill out GCN’s Federal Grants Freeze Survey to help us measure and communicate the totality of the impact.
- Take steps with your staff and board to plan for potential impacts, including financial and community demand-related. Here are some suggestions from CliftonLarsonAllen LLC:
- Create a cash flow analysis and consider scenarios for paused federal payments over specific time periods – one month, three months, six months, etc.
- Connect with your bank to refresh your cash flow options and explore potential sources of temporary funding such as lines of credit.
- Create a quick strategy for the worst case scenario – what operational or programmatic changes would need to happen if you lost your federal funding sources?
- Document the impact of this loss to your community and stakeholders. Can you put it in economic terms?
- Document any communication received from federal agencies.
How GCN is helping nonprofits navigate:
- GCN is actively engaging with elected officials to communicate impact and seek clarity.
- We are actively collecting stories, local data, and economic impact data to communicate and collaborate with key decision makers, donors, our national and local partners, and elected officials.
- We are vetting information as it arises and communicating it through our channels.
- We will be providing calls to action and convening partners around issues in the coming weeks.
- We are examining the assessment that will be used to determine “eligibility” for federal funds so that you can understand your organization’s risks.
We recognize that this is an unsettling time. The pace at which these orders have been issued, the sweeping nature of their reach, and the lack of clarity within them as to their intended targets has caused tremendous confusion. Our job as nonprofit leaders is to stay true to our missions – which includes preserving them through actions that include communicating the work and worth of nonprofits to elected officials and to your stakeholders.
We all need to work together to ensure we are heard. We are stronger together: Let’s make some noise!