On Jan. 27, 2025, OMB issued Memorandum M-25-13, entitled “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs.” The Memo directs every federal agency to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by [President Trump’s] executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal” effective at 5 p.m. EST on Jan. 28 (emphasis in original).

The pause applies to “(i) issuance of new awards [including all activities related to open Notices of Funding Opportunity (“NOFOs”)]; (ii) disbursement of Federal funds under all open awards; and (iii) other relevant agency actions that may be implicated by the executive orders[.]” The Memo states that OMB may grant exceptions to the pause on a “case-by-case basis.”

The Memo states that “[t]his temporary pause will provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.” It directs agencies to “submit to OMB detailed information on any programs, projects or activities subject to this pause” and to continue the “pause” “to the extent permissible by law, until OMB has reviewed and provided guidance” to the agency.

The Memo seeks to assert political control over federal assistance programs by directing agencies to assign responsibility and oversight for each federal assistance program to a senior political appointee to ensure each program “conforms to Administration priorities.” It also instructs agencies to review pending NOFOs and other assistance announcements “to ensure Administration priorities are addressed, and, subject to program statutory authority,” modify or withdraw announcements and cancel existing awards that conflict with those priorities “to the extent permissible by law.” The Memo suggests that agencies should initiate more investigations “to identify underperforming recipients.” 

The Memo applies to grants, cooperative agreements, loans and loan guarantees, and insurance programs, among other types of assistance, and may impact a broad range of programs, from the CHIPS Act to federal highway funding. As originally written, the only specific exceptions were for Medicare, Social Security, and “assistance received directly by individuals.”

On Jan. 28, OMB issued a Clarification Memo stating that “the pause does not apply across-the-board. It is expressly limited to programs, projects, and activities implicated by the President’s Executive Orders, such as ending DEI, the green new deal, and funding nongovernmental organizations that undermine the national interest.” However, it does not explain how agencies would determine which programs are implicated. The only guidance it provides is that “mandatory programs like Medicaid and SNAP” and “[f]unds for small businesses, farmers, Pell grants, Head Start, rental assistance, and other similar programs will not be paused,” and that if agencies are concerned that specifically exempted programs “may implicate the President’s Executive Orders, they should consult OMB to begin to unwind these objectionable policies without a pause in the payments.” The Clarification Memo also attempts to assuage concerns about the disruption, claiming that a pause might be for as little as one day or less.

The Memo appears to be laying the groundwork for a legal basis to terminate awards the administration disfavors. Its repeated references to “Administration Priorities” allude to a provision in 2 C.F.R. § 200.340 (the termination provision of OMB’s Uniform Guidance for federal financial assistance) that permits agencies to terminate an award if it no longer effectuates “program goals or agency priorities” “to the extent authorized by law.”

Awards issued after the revised Uniform Guidance’s Oct. 1, 2024, effective date may be better protected from this than awards issued before that date, depending on agency-specific implementation dates of the Guidance. When OMB amended the Uniform Guidance last year, it clarified that, if agencies want the option of terminating awards on this basis, it “must clearly and unambiguously specify” that in the award’s terms and conditions. That was not as clear under the prior version, which still applies to most awards made before Oct. 1, 2024. Prior to the 2024 changes, 2 C.F.R. § 200.211 required agencies to “make recipients aware, in a clear and unambiguous manner, of the termination provisions in § 200.340, including the applicable termination provisions in the Federal awarding agency’s regulations or in each Federal award.” But previous § 200.340(b) stated that “[a] Federal awarding agency should clearly and unambiguously specify termination provisions applicable to each Federal award, in applicable regulations or in the award” (emphasis added), suggesting that an agency may terminate an award for no longer effectuating program goals or agency priorities even if the award agreement does not expressly contemplate such a termination. 

The “pause” and any future terminations may run afoul of the Congressional Budget and Impoundment Control Act of 1974 (ICA) if the administration does not follow its procedures. An “impoundment” is any action or inaction by a federal government officer or employee that precludes obligation or expenditure of budget authority. The Constitution delegates the power of the purse to Congress, and the president cannot unilaterally withhold funds from obligation. Funds are obligated when the agency has created a definite liability for the associated amount.

The ICA permits the president to temporarily withhold funds from obligation—but not beyond the end of the fiscal year—by proposing a “deferral.” Deferrals cannot be used because a president does not agree with the program. The president may also seek the permanent cancellation of funds for fiscal policy or other reasons, including the termination of programs for which Congress has provided budget authority, by proposing a “rescission” in a “special message” that explains the rationale for the recission. If Congress enacts the proposal, the funds would no longer be available. But if Congress does not enact the rescission within 45 calendar days of continuous session after the special message’s receipt, any withheld funds must be reapportioned and made available for obligation and expenditure. Only discretionary (not mandatory) funds can be subject to recissions and deferrals.

In anticipation of challenges under the ICA, OMB’s Jan. 28, 2025, Clarification Memo declares that the pause “is not an impoundment under the Impoundment Control Act.” It claims that “[t]emporary pauses are a necessary part of program implementation that have been ordered by past presidents to ensure that programs are being executed and funds spent in accordance with a new President’s policies and do not constitute impoundments.”

The pause has been challenged in court—advocacy groups representing non-profits and small businesses filed a lawsuit in U.S. District Court for the District of Columbia on Jan. 28 challenging the pause under the Administrative Procedure Act. On that same day, the judge issued an “administrative stay” enjoining the Trump administration “from implementing OMB Memorandum M-25-13 with respect to the disbursement of Federal funds under all open awards.” A group of State Attorneys General filed a similar lawsuit in U.S. District Court in Rhode Island.

Affected recipients and subrecipients should look closely at the terms and conditions of their award agreements, agency-specific implementations of the Uniform Guidance (including appeal procedures for grant disputes, to the extent the agency has them), and the authorizing statute and any implementing regulations for the programs they are working on to evaluate their options if the government suspends or terminates their awards. To the extent possible, recipients and subrecipients should also try to avoid incurring costs that were not foreseeable prior to the “pause,” as agencies may later assert these costs are unallowable. 

The District Court’s temporary “administrative stay” expires Feb. 3, 2025, at 5 p.m. EST.