On Jan. 27, the White House Office of Management and Budget (OMB) released a memorandum instructing all federal agencies to temporarily pause the obligation and distribution of all federal funding (other than payments to individuals). The document, signed by Acting OMB Director Matthew J. Vaeth, requires agencies to conduct a review of all programs and activities to determine if they comply with recent Executive Orders (EOs) released by the Trump Administration.
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Background: Following his inauguration on Jan. 20, President Donald Trump issued a series of EOs addressing immigration, foreign aid, gender, environmental spending, domestic energy resources, diversity, equity, and inclusion programs (DEI), and more. Each of these are cited as specific areas of concern in the OMB memo. TRPs running list of Trump EOs can be found here. While some federal agencies had already issued statements indicating that they are reviewing open funding opportunities to ensure EO compliance, the instruction released by OMB makes this action mandatory.
In addition to halting the disbursement of funding, federal agencies are directed to modify unreleased Notices of Funding Opportunity (NOFOs), withdraw released NOFOs, and, when legally possible, cancel already awarded funding that conflicts with administration priorities. In addition to funding related activities, all other agency actions that "may be implicated" by Trump's EOs are also required to halt. Agencies are instructed to assign a senior political appointee to oversee this process and determine when conflicts are found.
The guidance also has additional implications for former and current grant awardees. In addition to requiring agencies to cancel awarded funding when legally possible, OMB also specifies that agencies should initiate investigations to identify award recipients deemed to be "underperforming" and take action to address performance issues. These actions may include award cancellation.
The memorandum specifies that OMB may grant exceptions to the pause on a case-by-case basis. Legally required federal actions and award distributions, Medicare, Social Security benefits, and assistance distributed directly to individuals are also specifically exempted. However, the memo does not clarify whether this exemption includes funding sent first to recipient organizations and then provided to individuals. The document notes that all agencies should immediately identify and report any legally required actions to OMB.
As written, this will affect all federal grant funding that is not part of a legally required award closeout or specifically exempted by the OMB. The broad language of the instruction could also potentially implicate Medicaid, rental assistance programs, state highway reimbursements, and other federally funded activities.
The legality of the Administration’s order is questionable. While the President may be allowed to defer spending for a period of time, the Impoundment Control Act of 1974 is intended to establish procedures to prevent the President and other government officials from unilaterally substituting their own funding decisions for those of the Congress, who retains the “power of the purse.” The Administration has made it clear that they believe the 1974 law is unconstitutional; the question may have to be adjudicated by the courts.
In response to the memo, the democratic Ranking Members of the House and Senate Appropriations Committees, Sen. Patty Murray (D-WA) and Rep. Rosa DeLauro (D-CT) sent Acting Director Vaeth a letter on Jan. 27 expressing their concern about the effects of the pause and questioning the legality of the action.
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What’s Next? The pause will take effect on Jan. 28, 2025, at 5:00 PM. Federal agencies will be required to submit a report to OMB with detailed information about all paused programs and activities by Feb. 10, 2025. According to the memo, affected operations must remain paused until OMB issues guidance responding to these reports.
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