The Future of Federal Grants: Preparing for Potential Changes in Community Funding

On January 27, 2025, a temporary pause on financial assistance programs (OMB Memorandum M-25-13) was issued, catching many nonprofits off guard as trillions of dollars in funding were scheduled to be frozen. New awards or obligations of Federal funds and disbursement of funds under existing awards would have been affected. OMB rescinded the memo on January 29, following a temporary injunction by a federal judge.

As of February 3, 2025, a U.S. district judge extended the pause, effectively preventing OMB from proceeding. This marks the second temporary restraining order, with several legal challenges filed against the directive, including the challenge presented by the National Council of Nonprofits, the American Public Health Association, the Main Street Alliance, and SAGE.

Understanding the Legal Landscape

In addition to these challenges, the 1974 Impoundment Control Act prohibits the executive branch from withholding congressionally appropriated funds and creates an accountability procedure. Given the broad legal opposition, there is no immediate reason for nonprofits to panic about the freeze—particularly for already appropriated funds. There will likely be additional twists and turns in the pause in the coming weeks and months.

Immediate Actions for Nonprofits

While the situation continues to evolve, nonprofits that receive federal funding—either directly or through pass-through grants—should act now:

✔ Contact your grant officers to clarify the status of any pending or ongoing funding.
✔ Review financials and engage board leadership to assess organizational stability.
✔ Evaluate cash flow and prioritize mission-critical programs to prepare for potential delays or disruptions.
✔ Continue exploring new revenue streams—diversifying funding remains key to long-term sustainability.

Strengthening Donor and Community Engagement

Proactive communication with donors and corporate partners is critical. Major funders may want to understand your organization’s readiness for potential challenges. Enter these conversations prepared with a clear plan and reassurance about your nonprofit’s stability.

Additionally, rally your mid-level and small donors—as well as program participants and community supporters—to help reinforce your mission. These stakeholders may be eager to take action through:

🔹 Donation drives to help bridge potential funding gaps.
🔹 Inviting new supporters to engage with your organization.
🔹 Connecting with local representatives to advocate for continued funding.

Looking Ahead

Your community connections and network of support will be your greatest asset in navigating uncertainty. While federal funding changes may cause temporary disruptions, staying informed, proactive, and mission-focused will ensure your organization remains resilient. CHC will continue to monitor the situation and provide weekly updates—nonprofits can sign up to receive alerts as new information becomes available.