Update as of January 28, 2025 at 12:30PM: The Trump’s administration’s Office of Management and Budget issued a memorandum rescinding the January 27 order to freeze federal financial assistance. Click here to read the National Council of Nonprofits’ statement on the memo’s rescission. The memo is available here.
The Council will continue to update this pages as information becomes available. For a full list on how the current Executive Orders are affecting nonprofits, please see the National Council of Nonprofits’ webpage.
What happened?
The Trump Administration announced on January 27 a temporary suspension of federal grants loans and other financial assistance linked to recent executive orders. This decision impacts a wide range of programs across the nation. Providers can view the decision here.
On January 28, the Providers’ Council’s national partner, the National Council of Nonprofits, filed a motion for a Temporary Restraining Order in the U.S. District Court for the District of Columbia today to block the White House Office of Management and Budget from pausing all federal agency grants and loans. NCN is filed together with public health and small business leaders, and it will be represented in court by Democracy Forward.
What does the freeze mean?
This freeze raises critical constitutional questions, and other legal challenges are anticipated. Under the directive from the Office of Management and Budget (OMB), federal agencies are required to pause activities related to disbursing financial assistance, as allowed by existing laws. This includes funding for various programs such as foreign aid, nonprofit initiatives and DEI efforts. While Congress has authorized these funds, the Trump administration’s decision to delay their distribution is likely to undergo legal review.
Critical programs like Social Security, Medicare and direct payments to individuals are excluded from this freeze. However, funding for community programs, research and nonprofit projects may face delays. Federal agencies must provide their reviews to the OMB by February 10.
What does the lawsuit and court decision say?
The lawsuit alleges that OMB’s memo is not allowed under the Administrative Procedures Act because it is: (a) arbitrary and capricious; (b) in violation of the First Amendment to the U.S. Constitution; and (c) beyond OMB’s statutory authority. The NCN lawsuit seeks a temporary restraining order and preliminary injunction that would immediately stop the implementation of the memo, along with a permanent injunction that would invalidate the memo. Shortly before the pause was set to take effect on January 28, the court issued an administrative stay delaying the implementation of parts of the memo until Monday, February 3 at 5 p.m.
As the court explained in its ruling, “[a]n administrative stay ‘buys the court time to deliberate’ when issues are not ‘easy to evaluate in haste.'” The administrative stay ensures that federal agencies may continue to make disbursements to existing grantees through Monday, but it does not allow for the awarding of new grants. The parties to the lawsuit will submit additional briefs to the court this week so that the court can make a ruling on the merits of the case on Monday to determine whether to issue a preliminary injunction and temporary restraining order that would stop the implementation of the grants pause beyond Monday. It is likely that some state and local governments will file similar actions in federal court.
What should nonprofits do now?
If you receive any federal funding – whether directly from the federal government or a pass-through, such as a state or locality – reach out to your grant/contract contact immediately to ask if you will be affected if the freeze is allowed to go into effect.
If you receive confirmation that your funding will be affected, please fill out this form on NCN’s website to help us understand the scope of programs affected and the effects a freeze would have on your mission and the people you serve.
What happens next?
With the Administrative Stay in place, nonprofits have a few days to try to gain more clarity over whether their programs are affected and to make contingency plans. If Judge AliKhan rules in favor of NCN’s lawsuit, then a more lasting order could be put in place. Further, Monday, February 3rd, may not be the final word on this, as either side may appeal this all the way to the Supreme Court.
Please reach out to Caroline O’Neill if your organization will be impacted.
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