Federal Funding Freeze Memo Withdrawn: What to Do Now

  • Regulations
  • 1/30/2025
Business People sitting at desk discussing

Key insights

  • Widespread confusion rippled across the country when a government-wide funding pause was announced. An immediate injunction stopped the funding freeze from going into effect until February 3, 2025.
  • The scope and breadth of impacts to industries such as higher education, nonprofits, health care and life sciences, state and local governments, financial institutions, and beyond, was still to be determined.
  • Less than 48 hours later, OMB rescinded the original memo pausing federal financial assistance.
  • The executive orders issued earlier this year remain in place. How agencies will evaluate funding alignment with the orders remains unclear.

Are you impacted by the federal funding pause?

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An unfolding situation regarding funding freeze

On January 27, 2025, the Office of Management and Budget (OMB) released a memorandum to the heads of all executive departments and agencies of the federal government, requiring a temporary pause in all activity and a mandatory review of all funded agencies and programs.

The OMB’s original memo sparked significant confusion across the country when it was released. The funding pause impacted federal financial assistance (defined by 2CFR 200.1), which pulled in agencies, programs, funding, loans, grants, and much more across all areas of government.

While the memo specifically exempted a few programs from the funding freeze — Medicare, Social Security, and assistance directly received by individuals — it was silent on just about everything else.

As questions mounted, OMB released a frequently asked questions (FAQ) document on January 28, 2025, attempting to explain the original memo and citing other exempted funding streams such as student loans, Medicaid, SNAP, and rental assistance. However, agency actions and on-the-ground impacts across industries were already being felt.

For example, federal grantees were being told by funding agencies grantees couldn’t draw down funding or process reimbursements during the pause and while agency reviews were ongoing.

Another example involved health care providers — like community health centers — and states that encountered problems accessing the Medicaid Payment Portal, even though one of the January 28 FAQs specifically stated Medicaid was not subject to a funding pause.

OMB also sent a spreadsheet and guidance document to agencies to complete reviews related to their federal funding programs. In this 52-page document, thousands of specific programs across agencies like the Departments of Agriculture, Education, Health & Human Services, Interior, Homeland Security, and Treasury were listed. It was unclear how that spreadsheet and the answers provided by agencies would be used.

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In the meantime, a coalition of groups filed for a temporary restraining order over the original OMB memo. On January 28, 2025, a federal judge granted an immediate stay — halting the funding pause from going into effect through 5 p.m. on February 3, 2025.

A group of state attorneys general also filed suit late Tuesday, January 28, 2025.

Late breaking news: OMB rescinds original memo

Then, on January 29, 2025, less than 48 hours after the original OMB memo (M-25-13) was released, OMB released another memo (M-25-14) rescinding it. The two-sentence memo stated, “OMB Memorandum M-25-13 is rescinded. If you have questions about implementing the President’s Executive Orders, please contact your agency General Counsel.”

As of January 29, the Office of Management and Budget has rescinded its original memo to end confusion caused by the court’s injunction. The president’s other executive orders on federal funding remain in full effect.

This recent action impacts the OMB memo, but it doesn’t impact other executive orders (EOs) already released from President Donald Trump’s administration. If your organization’s funding is tied to other EOs, you may still experience issues. For example, some organizations received notices to cease programming funded by specific federal agencies prior to the January 27 OMB memo. Expect this agency-by-agency evaluation to continue.

Next steps for organizations impacted by funding freeze

OMB’s decision to rescind its original memo is good news for those facing a funding freeze. However, there are lingering questions and areas of uncertainty, such as will the freeze come back in another form or another manner? How will each agency address the task to align all funded programs and organizations with the series of EOs?

Steps to proactively consider

  • If you receive federal funds – which may not always come directly from the federal government but could come through state or local governments or other nonprofits, it’s always important to review your grant agreement to understand the terms, especially clauses related to funding availability and reimbursement. You should also monitor policy updates to keep an eye on announcements from the agency overseeing your grant for any updates on funding or compliance updates. Continue ongoing compliance work.
  • Reach out to your point of contact at the funding agency and ask:
  • What process is your agency undertaking to evaluate alignment with the EOs?
  • What should I know about funding for our organization and what steps can we take?
  • When will your agency make decisions and how will they be communicated?
  • Use this recent situation as an opportunity to plan for a future funding disruption. For example, assess which federal funding (programs, grants, loans, etc.) could have been impacted under this funding pause and determine your financial exposure.
  • Have an adjustable daily cash flow model for different scenarios.
  • Work with your HR team or consultants to evaluate options if you do lose funding. How might you approach program changes, paid or unpaid leaves, COBRA, restructuring, layoffs, etc. if funding was cut
  • Know what sources of funding you have readily available in case of disruption. Many organizations went through this activity during the pandemic, and now is a good opportunity to review your existing or available lines or credit — or options to use existing reserves or investment funds if needed.
  • Use this as a learning experience and discuss with your leadership and governance teams. Consider it a case study and develop a plan to respond should larger business decisions (e.g., staffing, expenses) need to be made with funding disruptions.

How CLA can help you navigate disruption

These financial disruptions are likely not over as a new Congress and administration are faced with significant federal debt and a desire to reform government. How that plays out is ongoing and CLA is monitoring it on your behalf.

CLA has robust financial planning, HR consulting, and grants and compliance teams, helping organizations nationwide navigate federal funding, policies, and more.

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Do you have questions on how your organization may be impacted by the federal funding pause? Complete the form below to connect with CLA.

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