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UPDATE:  As of January 29, 2025, the Trump Administration appears to have rescinded OMB Memo M-25-13 ordering a temporary pause on federal financial assistance activities and disbursements.

OMB Memorandum (M-25-13) advises federal agencies that they must temporarily pause all activities and disbursements of federal financial assistance that may be implicated by any of President Trump’s recent Executive Orders at 5:00 p.m. Eastern Time today, January 28, 2025.

According to the OMB Memo, implementing the pause requires agencies to: (i) pause activity under open notices of funding opportunities (NOFOs) and not issue any new awards; (ii) not disburse funds under any open awards; and (iii) pause any related activities until OMB has reviewed and provided guidance on how the agency is using its funds.

Agencies are required to submit a “comprehensive analysis” of their federal financial assistance programs to identify projects and programs that may be implicated by the President’s recent orders by February 10. They must also assign responsibility and oversight for each of their federal programs to a senior political appointee to ensure that the program “conforms to Administrative priorities,” and, if necessary and allowed by law, withdraw funding announcements, cancel awards, and initiate investigations into underperforming recipients, on programs that are implicated by the Executive Orders. OMB has provided federal agencies with instructions and a list of federal programs that are impacted.

The full implications of the OMB Memorandum and the new Administration’s review are yet to be determined. A lawsuit challenging the pause and seeking a temporary restraining order has already been filed in D.C. federal court. But here are some of its immediate impacts.

1. The OMB memorandum applies to grants, not contracts.

The OMB Memorandum makes it clear that government contracts are not implicated. The pause applies only to “federal financial assistance,” which is defined in 2 C.F.R. § 200.1 and does not include acquisitions, which are separately defined in FAR 2.101. In broad terms, the difference between the two is whether the funding is used to accomplish or expand a particular public purpose (federal financial assistance / grants) versus acquiring goods or services that an agency needs or wants (acquisitions / contracts). The pause and the public purpose review applies only to federal financial assistance.

Contractors providing good or services related to priorities that are implicated by President Trump’s Executive Orders may be understandably worried that acquisitions may be next. But that has not happened yet and contractors have some level of financial protection if their contracts are changed or terminated for convenience.

2. The effects on specific grant programs likely depends on how much has been obligated.

In the short term, federal financial assistance is only paused, not rescinded. But the requirement for agencies to review their programs for alignment with President Trump’s Executive Orders, coupled with the directive to take additional action, as necessary and allowed by law, suggests that at least some funding may be at risk of being rescinded. To understand the potential risks, it is helpful to distinguish between three terms: appropriated, approved, and obligated.

When funds are appropriated, Congress makes funds available for agencies to use for a delineated purpose.

Funds are approved when an agency selects a specific project for funding. This is typically done in response to NOFOs and project narratives and applications showing how a proposed project will meet the objectives outlined in the NOFO. Even after the agency makes an award and approves the budget for a project, the funds needed to proceed with the work are not yet committed to the project. The grant or cooperative agreement terms typically include warnings that future amounts are subject to availability of funding in the future.

Funds are obligated when the agency has created a definite liability for the associated amount. GAO Red Book at 7-40 (“In order to properly obligate an appropriation for an assistance program, some action creating a definite liability against the appropriation must occur during the period of the obligational availability of the appropriation.”) (emphasis added). Funds are obligated when the agency makes a “firm commitment” to pay the money and the grantee accepts the terms of the commitment and any prerequisites. 

In simple terms, “the ‘obligational event’ for a grant generally occurs at the time of grant award,” which is when the Agency has to record the obligation. See GAO Red Book at 10-107. But that is not always the case. For a multi-year project, for example, when the project is approved, the agency may only obligate the amount required for the first year of the project. This gives the agency financial flexibility and reflects the reality that future funding needs may change.

What does this mean in terms of the pause in financial assistance?

Funding that is not tied to an approved project (e.g., may be subject to an open NOFO) are most at risk. The OMB Memo requires open NOFOs to be paused and potentially rescinded, indicating that the Trump administration may simply decide not to spend those funds. Those decisions would potentially be subject to Congressional approval and court challenges citing the  Impoundment Control Act of 1974.

Although to a lesser degree, funds that are approved but not yet obligated are also at risk. There is not yet a “definite liability” for those funds and most grant and cooperative agreements terms and conditions warn of the risk of those funds being unavailable. Nevertheless, the removal of those funds creates hardship for financial assistance recipients, subrecipients, and beneficiaries of those programs.

Obligated funds are significantly more difficult to rescind. They reflect an agency’s legal liability and recipients and subrecipients have a basis to rely on the agency’s release of these funds in accordance with terms and conditions of their grant or cooperative agreement. There is a much greater likelihood that rescission of those funds would create legal and financial liabilities for recipients who would seek to recover those funds from the Government.

3. Plan for delays and potential rescission.

For now, recipients of federal financial assistance should plan for the pause in funding disbursements and prepare for a potential rescission of funding. This means working with your subrecipients and partners to delay work and financial commitments in the short term (to the extent possible), at least until the funding agency provides greater clarity. Give your partners prompt notice of the pause and discuss potential options for delaying or suspending work.

Recipients should also review their terms and conditions to distinguish between how much of their funding was merely approved versus obligated. This background context will be helpful in understanding the potential impacts to the program if the funding agency realigns its priorities and decides to reduce or completely rescind funding in the future.

Recipients should continue to track their costs to understand and quantify any potential impacts from the pause in federal funding and the potential impact of a rescission of funding.