The purpose of the guidance is to ensure that all federal spending is consistent with advancing administration priorities.
Note: On January 29, 2025, OMB released a second memorandum rescinding OMB Memorandum M-25-13, discussed in this Alert. District Judge Loren Alikhan previously issued an administrative stay of the temporary funding freeze included in the memorandum until February 3, 2025. OMB has directed all interested parties to contact the agency's general counsel for additional questions regarding the implementation of the executive orders.
On January 27, 2025, the Office of Management and Budget (OMB) informed all federal executive departments and agencies of a temporary pause for “all activities related to obligation or disbursement of all [f]ederal financial assistance.” This temporary pause affects various financial assistance vehicles including, but not limited, to grants, cooperative agreements, noncash contributions or donations of property, direct appropriations and loans.
As stated in its memorandum entitled “Memorandum for Heads of Executive Departments and Agencies,” all federal agencies are advised to review policies to confirm compliance with recent presidential orders and policies. A separate 52-page memo from OMB identifies the programs that will be temporarily paused while under review. The guidance takes effect on January 28, 2025, at 5:00 p.m. Eastern.
As reported in Politico, the U.S. Department of Education has stated that:
[P]er the OMB memo issued yesterday, the temporary pause does not impact “assistance received directly by individuals.” As such, Title IV, [Higher Education Act] funds that are provided to individual students, such as Federal Pell Grants and Direct Loans, are not impacted by yesterday’s guidance.
It is not clear the extent to which other Title IV programs not specifically referenced by the Department may be impacted.
The memorandum identifies recent executive orders that federal agencies must comply with in order to continue to receive federal funding, “including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” The purpose of the guidance is to ensure that all federal spending is consistent with advancing administration priorities.
In a memo dated January 28, 2025, OMB clarified that the pause does not apply across the board and is expressly limited to programs implicated by the president’s executive orders, such as ending DEI and the “green new deal” and funding nongovernmental organizations that undermine the national interest. The second memo provides examples of programs that are excluded from the freeze, such as student loans and Pell Grants, Social Security and Medicare, Medicaid and SNAP, funds for small businesses, farmers, Head Start, rental assistance and other similar programs.
Restricted Activities
As part of the temporary pause period, all agencies must refrain from the following actions:
- Issuance of new awards;
- Disbursement of federal funds under all open awards; and
- Other relevant agency actions that may be implicated by the executive orders, to the extent permissible by law, until OMB has reviewed and provided guidance in response to the information submitted.
As stated above, all federal agencies must conduct a comprehensive analysis of all of their federal financial assistance programs to identify all impacted activities. According to the original OMB memo, by February 10, 2025, agencies must submit their respective lists to the OMB for further review.
Impact for Federal Grants
All impacted entities should immediately contact grant officers to initiate payment of outstanding invoices prior to the guidance taking effect at 5:00 p.m. Eastern, and to determine whether payment/activities may be subject to further delay as a result of this guidance. As necessary, impacted entities should alert subrecipients, subcontractors and vendors concerning possible delays in payments. Impacted entities should carefully evaluate strategies for addressing or challenging delays in payment and for addressing any potential compliance issues raised by funding agencies as justification for future delays.
For More Information
If you have any questions about this Alert, please contact Geoffrey M. Goodale, Daniel R. Walworth, Anthony J. Guida Jr., Katherine D. Brodie, Rolando R. Sanchez, Matthew Steinway, any of the attorneys in our Government Contracts and International Trade Group, any of the attorneys in our Higher Education Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.