Navigating the Federal Funding Freeze: What Nonprofits Need to Know (Part 1)
January 29, 2025 - This content will be updated as developments unfold.
The recent directive from the White House to temporarily freeze federal grants and loans has created uncertainty and concern for many organizations that rely on federal funding to sustain vital programs. At Purpose Possible, we understand these concerns and are actively working to gather and share information in an effort to provide clarity, guidance, and support as we navigate this evolving situation together.
What’s Happening?
On Tuesday, January 27, 2025 the Trump White House issued a temporary freeze on federal grants and loans as part of a broader policy review (Roll Call, January 27, 2025). This pause delays funding disbursements and approvals, creating challenges for nonprofits that depend on these resources.
While the full implications of this directive remain unclear, it's important to note that the Impoundment Control Act of 1974 limits the executive branch's power to withhold funds without congressional approval. This means that while delays are possible, permanent cuts to already-appropriated funding are unlikely without further legislative action.
How This Affects Funding
Current Grants and Loans
Late Tuesday afternoon, a federal judge in the District of Columbia temporarily blocked the order in response to a lawsuit filed by Democracy Forward, a liberal organization that argued that the directive violated the First Amendment and a law governing how executive orders are to be rolled out. The judge, Loren AliKhan, said she would issue a more permanent decision on February 3.
On Wednesday, January 28, 2025, the White House rescinded the Office of Management & Budget Memo, M-25-13. White House Press Secretary, Karoline Leavitt did say that some funding freezes would remain in effect. We are awaiting further clarification but can share that clients in the housing sector have reported the reopening of grant reimbursement portals on Wednesday afternoon.
Whether the funding freeze announced this week fully goes into effect or not, it is clear that government funding may not be a reliable source of funding going forward. Read on for recommendations for how to manage these changes in the weeks ahead.
Future Grants and Loans
The announcement or awarding of new funding opportunities may be postponed, which could delay programs in the application or approval stages.
Steps You Can Take Now
Stay Informed
Organizations have been advised to continue submitting budget claims, funding requests, and reimbursements.
Reach out to the program officer at the federal agency from whom you receive funding to seek clarity on the next steps. Stay in contact with this person but also know that they may also be seeking clarity and answers. Be diligent, but be patient.
Familiarize yourself with specific contract terms and conditions related to existing awards, especially regarding termination requirements. Your terms and conditions are part of the contractual agreement, and ensuring your continued compliance with your grant is critical.
Assess Financial Impact
Build a daily cash flow model and run scenarios for paused federal payments (for the next two weeks, next month, three months, etc.) to determine when your organization will be challenged to meet expense obligations.
If you anticipate that this funding halt will impact your ability to operate, contact your bank about immediate cash flow options that may be available.
If your organization has a board-restricted reserve and/or endowment, convene a discussion regarding shifting policy to access these funds, if necessary.
Develop Contingency Plans
Create scenario plans to identify adjustments you could make to programs, staffing, or expenses if federal funding is delayed or reduced.
Draft messaging to donors and stakeholders about the potential impact of the freeze and the need for support.
Develop strategies to diversify funding sources for both immediate and long-term stability.
Advocate for Clarity
Engage with congressional representatives and advocacy groups to emphasize the importance of uninterrupted federal funding for your programs.
Document how the freeze affects your operations and collaborate with peers to amplify concerns.
Moving Forward
While this directive has created uncertainty, Purpose Possible remains committed to helping our communities navigate the challenges ahead. We will continue to monitor developments, provide updates, and offer resources for support during this time.
If you have questions or need assistance, please don’t hesitate to reach out. Together, we can weather this challenge and continue our vital, mission-driven work.
Ways Purpose Possible Can Help:
● Strategize on non-government funding sources to assist with immediate cash flow support and long-term financial stability.
● Understand grant terms and agreements.
● Support in drafting messaging to your individual donors or community to convey the impact of this freeze on your mission and how they can offer their support.
● Support in reviewing your contingency plans.
Here are a few articles and resources:
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