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Impacts of Federal Disbursement Pause on Local Governments

January 28, 2025

UPDATE: 1:30 p.m., Wednesday, January 29, 2025

The Office of Management and Budget has released a memo rescinding memo M-25-13, which was issued on January 27, 2025. Federal agencies are no longer freezing federal financial assistance payments as previously directed. This action does not rescind Executive Orders issued by President Trump that were referenced in the original memo; therefore, additional action related to review and funding of programs noted in those orders may be forthcoming. We will continue to keep members informed as the situation evolves.

Original Post (published January 28, 2025):

Throughout today, you have likely received and read information related to steps the federal Office of Management and Budget (OMB) has taken to implement President Trump’s Executive Orders. With any presidential transition and one between parties, it is common to review and align federal agency programs and funding with the new administration’s priorities.

In partnership with our federal relations consultants at Strategics, we hope the following information provides further information and clarity regarding the current situation, as of January 28, 2025, at 6:00 p.m. Centralina will continue to update our Insights blog with the latest information as it becomes available. Our goal is to provide accurate and balanced information to guide your next steps in navigating a fluid situation.

Timeline

On Monday, January 27, 2025, OMB issued a memo to all federal agencies requiring a temporary pause in all activity and a mandatory review of all federal financial assistance.

A second OMB guidance containing instructions was released in the morning on Tuesday, January 28, 2025, and provided a list of programs included, but not limited to, in the mandatory review.

A third OMB memo was released Tuesday, January 28, 2025, in the afternoon with further guidance, emphasizing that “Any program not implicated by the President’s Executive Orders is not subject to the pause.”

At 5:03 p.m., U.S. District Judge Loren L. AliKhan issued an administrative stay blocking the pause on awarded grants until Monday, February 3rd.

What We Know

This is not a new Executive Order (EO) but guidance to federal agencies for implementing EOs now in place.

The pause is to allow agencies and OMB to review federal funding programs to ensure alignment with EOs.

The temporary pause is effective by 5 p.m., Tuesday, January 28, 2025; however, U.S. District Judge Loren L. AliKhan issued an administrative stay blocking the pause for awarded grants until Monday, February 3rd.

All federal agencies must complete an analysis (via a spreadsheet) by February 7, 2025, providing information on programs with funding or activities planned through March 15, 2025, and a program review against specific criteria related to the EOs.

OMB may grant exceptions to the pause on a case-by-case basis, and to the extent required by law, without waiting for these deeper reviews by each of the agencies.

The pause does not apply across the board. Non-impacted programs include, but are not limited to, the following:
- It does not apply to payments directly to individuals, such as Medicare and Social Security.
- It does not apply to mandatory programs, such as Medicaid and SNAP.
- It does not apply to payments required by law.

There is no deadline set yet for how long the pause will continue while OMB reviews the individual agency reports and provides agencies with further guidance and actions to be taken.

Processes to review federal grants under active notices of funding opportunities (NOFO) are paused.

Release of new NOFOs are paused.

Actions to Consider

As we wait for additional information and clarifications, we encourage you to take the following steps to proactively inform, engage and plan for possible scenarios:

Review the OMB spreadsheet here to determine what federal grant programs, including entitlement and pass-through grants to state governments, are being reviewed. If you have questions or need help with this process, please reach out to us and we will assist.

For potentially impacted grants, review your grant agreements and cooperative agreements with federal agencies, paying special attention to sections on reimbursement/payment and cancellation/termination.

Be on the lookout for direct communication from your grant officers and/or agencies regarding the status of the program review and your grant specifically. Don’t be surprised if they don’t have answers to your questions if you reach out to them. They may not be able to comment or will defer to their agency leadership or OMB.

Unless instructed otherwise by an agency representative, continue to submit grant reports and financial reports on time and meet all other terms and conditions of your awards.

Provide direction to your staff on how to proceed with projects or work in light of this temporary delay. Consider the pros and cons of proceeding with major purchases, procurements, contracting or encumbering funds that may be delayed or at risk for reimbursement.

Ask legal counsel to review active sub-award agreements and contracts to ensure that you have sufficient language to address delayed reimbursement and/or cancellation/termination of the prime award. Consider proactive communication with vendors and contractors once more details are available on the scope and impact of the memo.

Build a cash flow model and run scenarios for paused federal payments (through February 10, through the end of February, through March, etc.) to determine when your organization will be challenged to meet expense obligations.

Run scenario plans and engage in discussions with your leadership and governing boards. If all of your federal funds are delayed or rescinded, what changes would you need to make to program services, staffing or other expenses? Would you need to dip into fund balance to cover expenses while you are waiting for reimbursement?