OMB Memo Halts Financial Aid Programs
TL/DR –
The Office of Management and Budget (OMB) issued a memo on January 27, 2025, pausing funding for financial assistance programs that may be affected by President Trump’s executive orders, but this was rescinded two days later. However, there is confusion over whether this rescission also lifts the federal funding freeze, with a statement from the White House press secretary suggesting it does not. The OMB memo had asked federal agencies to pause activities related to the disbursement of federal financial assistance, and to review programs for consistency with Administration Priorities, which could have led to some financial awards being terminated.
Office of Management and Budget Pauses Funding for Financial Assistance Programs
On Jan. 27, the Office of Management and Budget (OMB) paused funding for financial programs that could be impacted by President Trump’s recent Executive Orders. The following two days saw a U.S. District Court issue a “stay” against implementing the OMB Memo M-25-13 and its subsequent rescission. However, the White House press secretary maintained that this does not rescind the federal funding freeze.
Despite this rescission, programs will still undergo review to ensure alignment with “Administration Priorities.” The OMB’s Uniform Guidance could permit termination of financial awards if they no longer serve program goals or agency priorities. However, this could contradict the Congressional Budget and Impoundment Control Act of 1974 (ICA) if due procedures are not followed.
OMB Memorandum Impacts and Court Challenges
The OMB’s Memorandum M-25-13 instructed a temporary pause on all federal financial assistance activities that may be affected by the president’s executive orders. On Jan. 28, lawsuits were filed against the pause, leading to a U.S. District Court judge in Rhode Island indicating his inclination to grant a temporary restraining order despite the Memo’s rescission.
Backstory of the Memo
The Memo was intended to give the administration time to review agency programs and their funding uses in accordance with the president’s priorities. It also directed agencies to review pending Notices of Funding Opportunity (NOFOs) and ensure their alignment with “Administration Priorities.”
This Memo could affect various types of assistance and programs, from CHIPS Act to federal highway funding. It was, however, immediately challenged in court, leading to an “administrative stay” against implementing the OMB Memo.
Following the court’s stay, the OMB rescinded the Memo. However, the White House press secretary maintained that this did not imply a rescission of the federal funding freeze.
Implications of the Freeze and Recision
The “freeze” seemingly references certain Executive Orders pausing various program funding. For instance, the “Unleashing American Energy” Executive Order requires immediate funding pause pending review of these programs. This statement led a U.S. District Court judge in Rhode Island to consider granting a temporary restraining order despite the rescission of the OMB Memo.
The rescinded Memo’s frequent references to “Administration Priorities” echo a provision in the Uniform Guidance for federal financial assistance that permits agencies to terminate awards if it no longer serves “program goals or agency priorities”, provided it is clearly specified in the award’s terms and conditions.
Challenges under the Congressional Budget and Impoundment Control Act
Any funding withdrawals or “pauses” in the Executive Orders and future funding terminations could prompt challenges under the Congressional Budget and Impoundment Control Act of 1974 (ICA) if the administration fails to adhere to its procedures.
Immediate Actions and Considerations
Recipients and subrecipients with awards impacted by the Executive Orders that pause funding should scrutinize their award agreements, agency-specific implementations of the Uniform Guidance, and the authorizing statute for their programs. They should also aim to eliminate costs that were not foreseeable prior to the “pause” to avoid future disputes over unallowable costs.
—
Read More US Economic News