Updates on Federal Grant Freeze: OMB Order Rescinded

The federal Office of Management and Budget (OMB) sent a memo to federal agencies on the evening of January 27 ordering them to pause most of their grants and loans – including billions of dollars in grants to nonprofits – at 5 p.m. on January 28. The memo required all federal agencies to pause issuing new grant awards, disbursement of funds under existing grants, and other relevant agency actions related to their grant programs. It also required agencies to review their grant programs and report to OMB by February 10 on grants that are inconsistent with President Trump’s Executive Orders.

Where Things Stand

Thanks to a lawsuit led by the National Council of Nonprofits and parents in public health and small business, a federal judge issued an administrative stay minutes before the memo was set to take effect delaying the implementation of parts of the memo until at least Monday, February 3 at 5 p.m.

Then on January 29th, Acting Director of the White House Office of Management and Budget sent a memo that OMB Memorandum M-25-13 is rescinded. 

In a statement from National Council of Nonprofits, their President & CEO Diane Yentel wrote, 

“We are glad that this memo has been rescinded. The chaos unleashed by the uncertainty and lack of adequate notice yesterday should never have happened. Nonprofits are vital partners for government, and payment for the services they provide should never have been in question.

"Nonprofit organizations throughout the country and the people they serve can breathe a sigh of relief now that the White House has, at least for now, backed off its reckless and harmful plan to halt all federal funding for critical programs from homelessness and housing assistance, to disaster relief and rebuilding, to rape crisis centers and suicide hotlines. 

“Right now, we will celebrate this victory for nonprofits and the people they serve across the country. But we will remain vigilant for any further actions that harm nonprofits’ ability to serve their communities.”

What to Do Now

While we celebrate this collective advocacy success, we caution Maine nonprofits to use lessons from this week's events to prepare. This has likely been a preview of future efforts to delay or restrict funding, and the Executive Orders referenced in the memo remain in place.

• To help understand the impact of Executive Orders and/or a future pause on federal grants, MANP is collecting examples via this form. Your responses will help us amplify your stories and advocate for  continuity of federal funding.
• Make sure your elected officials understand how a pause or reduction in funding would impact your organization and the communities you serve. (Representative Jared Golden, Representative Chellie Pingree, Senator Susan Collins, Senator Angus King)

Now is also the time for nonprofits receiving federal funding to make contingency plans. These resources may be useful:

• What to Do if You Are in a Financial Crisis (Kim Klein in Nonprofit Quarterly)
• Scenario Planning Playbook (Georgia Center for Nonprofits)
• Business Impact Analysis Worksheet (Nonprofit Risk Management Center)

What Would a Freeze Mean for Maine?

Organizations that rely on federal grants and contracts may experience immediate cash flow disruptions, making it difficult to maintain services and staff. This threatens not only nonprofit operations but the well-being of thousands of Mainers who depend on these programs. Members have shared with us:

• “EVERY program and service we provide to people impacted by sexual violence is at risk.
• “The people we support rely on our federal funds to educate middle school students in every Maine county, innovate new fishing gear, grow Maine's aquaculture workforce, finance important working waterfront infrastructure, invest in start-up technology companies, and so much more."
• "Loss or threat to funding will force mass layoffs, furloughs and resignations, resulting in more people unemployed and in need of vital social supports."
• "We are already receiving panicked calls from clients concerned about their services."

Frequently Asked Questions About the January 27 OMB Memo*

*Important Update: Since the order has been rescinded, the information below is no longer in effect, but is included here for context and to help organizations prepare for similar future efforts. 

Which federal funding streams are affected? 

Potentially, the pause applies to all (or at least most) federal grants. The memo directs agencies to “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.” Because several of these terms are not clearly defined, it is possible that some or all federal agencies may interpret the memo to require a pause in virtually all of their grants.

The memo does not apply to federal aid to individuals, including Social Security, Medicare, Medicaid, Supplemental Nutrition Assistance Program (SNAP), Pell grants, and rental assistance, so these payments should continue.

OMB has the authority to grant exceptions to allow agencies to grant new awards or make payments on a case-by-case basis.

How long will the pause be in effect? 

The memo is unclear on how long the pause in grants will be in effect. MANP is hearing from some sources that it could be potentially 30-60 days. 

Could this lead to the cancellation of existing grants? 

Potentially, yes.

Is there anything nonprofits with federal grants can do before the pause takes effect? 

The pause on grants doesn’t take effect until 5 p.m. on Monday, February 3. Some federal agencies may be willing to make advance payments to nonprofits before that time. If your nonprofit has a federal grant and is expecting a disbursement in the next few weeks, you may want to reach out to your grant administrator to find out whether you may be able to get your next disbursement before 5 p.m. on Monday, February 3.

Will this be challenged in court? 

It already has! The National Council of Nonprofits (NCN), along with small business and public health advocates, filed a lawsuit on January 28 asking the U.S. District Court for the District of Columbia to stop the implementation of the OMB memo. The lawsuit alleges that OMB’s memo is not allowed under the Administrative Procedures Act because it is: (a) arbitrary and capricious; (b) in violation of the First Amendment to the U.S. Constitution; and (c) beyond OMB’s statutory authority. The NCN lawsuit seeks a temporary restraining order and preliminary injunction that would immediately stop the implementation of the memo, along with a permanent injunction that would invalidate the memo. Shortly before the pause was set to take effect on January 28, the court issued an administrative stay delaying the implementation of parts of the memo until Monday, February 3 at 5 p.m. As the court explained in its ruling, "[a]n administrative stay 'buys the court time to deliberate' when issues are not 'easy to evaluate in haste.'" The administrative stay ensures that federal agencies may continue to make disbursements to existing grantees through Monday, but it does not allow for the awarding of new grants.

The parties to the lawsuit will submit additional briefs to the court this week so that the court can make a ruling on the merits of the case on Monday to determine whether to issue a preliminary injunction and temporary restraining order that would stop the implementation of the grants pause beyond Monday.  It is likely that some state and local governments will file similar actions in federal court.