Update 1/29/2025: The White House has rescinded the Office of Management and Budget (OMB) memorandum (M-25-13). In a statement, White House Press Secretary Karoline Leavitt said the administration was still pursuing a freeze.
"This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo," she said. "Why? To end any confusion created by the court's injunction. The President's EO's on federal funding remain in full force and effect, and will be rigorously implemented."
Reports indicate that Leavitt is referring to the executive orders signed last week, which direct government agencies to review and cut funding for programs that do not align with the administration’s priorities. The now-rescinded OMB memo was initially issued to implement these orders by pausing all spending while agencies determined which programs to defund. While that specific memo is no longer in effect, the broader executive orders remain active.
Additional guidance from OMB and federal agencies is expected as the administration refines its approach. Fluxx will continue to monitor these developments and provide updates as more information becomes available..
Fluxx will continue to monitor these developments and update.
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The social sector has always been a vital safety net for communities, but recent developments require nonprofits and agencies to recalibrate their strategies and prepare for the short- and long-term future. A new executive order, coupled with an Office of Management and Budget (OMB) memorandum, directed a temporary pause on federal funding obligations and disbursements. This directive is subject to ongoing legal challenges including a federal court ruling which continue to evolve the circumstances for its implementation.
The Office of Management and Budget (OMB) recently issued a memorandum (M-25-13) that pauses all federal financial assistance programs, including grants, loans, and other funding mechanisms. This pause stems from an executive order by President Trump, aimed at aligning federal financial assistance with the administration’s priorities. The directive, set to take effect on January 28, 2025, requires federal agencies to review and flag programs that may conflict with these new priorities.
However, a U.S. District Judge has temporarily blocked the administration from halting "open awards"—funds already scheduled for disbursement—until at least February 3, 2025. The memo highlights programs potentially linked to Diversity, Equity, and Inclusion (DEI), green energy initiatives, and other projects that may not align with the administration’s stated goals. Agencies have also been instructed to pause merit reviews, adjust or withdraw funding announcements, and shift oversight responsibilities to political appointees.
While this pause may feel disruptive, it’s important to remember that these actions are subject to legal challenges, reviews, and potential changes. For now, the pause is meant to create a temporary window for review, not to cut funding entirely. The stated purpose is to ensure federal dollars align with administration priorities and to strengthen oversight.
Agencies are required to report back to the OMB by February 10, 2025, with details on affected programs, after which additional guidance will follow. While there is still uncertainty, these processes often evolve in response to challenges, offering opportunities for further clarity and potential adjustments.
Philanthropies, agencies, and their grantees that rely on federal funding could face delays in accessing grants, reimbursements, and other federal resources. The immediate halt on new awards and the disbursement of funds under existing grants could temporarily disrupt cash flows. However, certain administrative activities, such as closing out awards or fulfilling legally mandated deadlines, are allowed to continue. As the legal process unfolds and further guidance is issued, additional clarity on disbursements and grant activities that are not subject to this directive are expected to be clarified.
This is not a time to panic but a call to action. The following steps can help nonprofits prepare and respond proactively:
Review your federal grant agreements to understand the legal obligations attached to your funding. Partner with a legal or grants expert to navigate complex clauses or stipulations, and ensure you fully understand your rights and responsibilities under the terms of your agreements to safeguard your funding.
Managing cash flow is a critical priority for organizations, particularly those with tight balance sheets and heavy reliance on timely federal grant reimbursements. To stay ahead, develop a weekly cash flow model and simulate scenarios for delayed federal payments—whether through February 10, the end of February, or into March. This will help you pinpoint when your organization may face challenges in meeting expense obligations and allow you to implement proactive adjustments to maintain financial stability. According to the Uniform Guidance (2 C.F.R. 200.305), grantees are permitted to draw down funds in advance to meet immediate cash needs. You may want to look to draw down funds immediately in advance of cash need.
Leverage tools like Fluxx to segment your funding sources and optimize data management. Effective segmentation enables you to allocate resources strategically while maintaining control over sensitive data and meeting compliance requirements during audits. Additionally, engage with your banking partners to review your cash flow options and available financial resources. Assess the terms of your lines of credit and explore other forms of financing. Proactive financial planning ensures your organization remains agile and prepared during uncertain times.
Explore alternative funding sources, such as individual donors, private foundations, and other non-federal options, to secure temporary cash flow support during this period. Consider leveraging tools like Grantseeker, which offers a free two-week trial, to identify and connect with potential funders. For organizations that rely heavily on federal grants, now is the time to diversify your funding strategy. Pursue opportunities with corporate sponsors, private foundations, and individual giving campaigns.
Collaborate with networks like the National Council of Nonprofits to amplify your voice. They are tracking the various Executive Orders and their impacts here. Policymakers must understand how funding freezes impact the people you serve. Share stories and data-driven insights to demonstrate the importance of continuity in your work. Additionally, engage your board and stakeholders to join advocacy initiatives, emphasizing the broader societal consequences of interrupted funding.
The OMB memo emphasizes enhanced oversight measures, including potential investigations into underperforming recipients. To stay ahead, ensure your grant management practices are robust, your data is accurate, and your reporting mechanisms are fully operational. Regularly audit your internal processes to identify and address any gaps, and provide staff with training to maintain compliance with federal requirements and demonstrate accountability during potential reviews.
Leverage your Fluxx data and projected payments to simulate potential scenarios, such as delayed grant disbursements or reductions in federal support. These simulations enable you to proactively adjust budgets, timelines, and staffing plans to minimize disruption. Conduct scenario planning and engage your leadership and governance teams in strategic discussions. Consider critical questions: if your federal funding were entirely cut, what adjustments would be necessary to sustain program services, staffing levels, and other operational expenses? Preparing for such contingencies ensures your organization’s resilience and long-term viability.
The National Grant Management Association has useful resources such as important news for the grants community and an active community page for members to discuss developments and share their expertise and best practices with peers as they navigate the evolving policy landscape.
While the immediate impact of the funding freeze is concerning, this is also a chance to demonstrate the resilience and value of the social sector. What is going on underscores the importance of accountability, transparency, and alignment with national priorities. By being vocal about your organization’s role in advancing community well-being, you can strengthen relationships with stakeholders and secure alternative funding sources.
The evolving directive for a federal funding freeze is undoubtedly a challenge, but it’s not insurmountable. With proactive planning, diversified revenue streams, and continued advocacy, your organization can navigate this period and could even emerge stronger on the other side.
As Fluxx CEO Kristy Gannon reminds us, “In moments of disruption, it takes steady leadership to weather the storm. Don’t panic, remain focused - let this moment be a testament to your organization’s resilience, adaptability, and commitment to your mission.”
At Fluxx, we are committed to supporting you through every step of this journey. Together, we can ensure your impactful work continues to thrive, even in the face of uncertainty. Stay optimistic, stay proactive, and know that we’re here to help.
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