NOTE: The following is current as of February 5, 2025.
On January 27, 2025, the Office of Management and Budget (OMB) issued Memorandum M-25-13, requiring federal agencies to temporarily pause obligations and disbursements of federal financial assistance. This directive follows several executive orders signed by President Donald J. Trump aimed at realigning federal spending with Administration priorities, such as promoting energy independence, reducing inflation, and eliminating funding for initiatives inconsistent with these goals.
On January 29, 2025, the Office of Management and Budget issued OMB Memorandum M-25-14 that rescinded OMB Memorandum M-25-13.
On Friday, January 31, Judge McConnell from the U.S. District Court in Rhode Island issued a temporary restraining order to lift the federal funding freeze. Just a few days later, on Monday, February 3, Judge AliKhan from the U.S. District Court in D.C. did the same. Both judges agreed that the plaintiffs had a strong chance of winning their cases and noted that the cases weren't irrelevant even after the Office of Management and Budget rescinded OMB Memorandum M-25-13. The D.C. court pointed out that, despite the withdrawal, some groups still can't access federal funds. The Administration hasn't yet announced when funding will be fully restored.
The events discussed above result in the following key implications for CFOs to consider:
- Uncertainty in Federal Funding:
Federal grants, loans, and other assistance programs are under review, that is impacting cash flows for existing and pending awards.
Disbursements for current awards may be delayed. - Impact on Program Operations:
Activities funded by Federal grants particularly in areas like DEI initiatives, environmental programs, or foreign aid may face interruptions or cancellations. - Agency Analysis:
Under Executive Order, Reevaluating and Realigning United States Foreign Aid, agencies are required to perform an analysis and review each foreign assistance program under guidelines provided by the Secretary of State, in consultation with the Director of OMB. The responsible agencies are expected to make determinations within 90 days of this order on whether to continue, modify, or cease each foreign assistance program based upon the review recommendations, with the concurrence of the Secretary of State.
Some of these same considerations are being performed by other agencies under other executive orders. - Immediate Administrative Actions:
Agencies must pause issuance of new awards, disbursements of Federal funds under all open awards, and activities related to open Notices of Funding Opportunities (NOFOs). - Exceptions:
Exceptions may be granted by OMB on a case-by-case basis for legally mandated actions or deadlines.
Action Steps for CFOs:
- Assess Funding Risk: Identify programs reliant on Federal assistance that may be impacted and determine contingency plans for potential delays or reductions.
- Monitor Agency Communications: Stay informed about developments or exceptions issued by relevant Federal agencies or OMB.
- Contact Federal and Pass-Through Funders: Be proactive and reach out to these parties for more specific guidance to your scenario.
- Engage Key Stakeholders: Inform leadership and program teams of potential delays or changes in Federal funding availability.
- Coordinate Reporting: Prepare for increased oversight and potential investigations into the use of Federal funds, including compliance with Administration priorities.
This pause introduces significant short-term uncertainty for Federally funded programs. This is a developing situation and will change very quickly so CFOs must remain vigilant and proactive in addressing operational and financial impacts while awaiting further guidance.