CED Newsletters & Policy Alerts

Action: Memorandum “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs” 

What it does: The Memorandum from the Acting Director of the Office of Management and Budget orders Federal agencies to complete a comprehensive analysis of all Federal financial assistance programs to identify programs, projects, and activities that may be implicated by any of the President’s executive orders, including, but not limited to, “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” In the interim, Federal agencies must temporarily pause all activities related to obligation or disbursement of all implicated Federal financial assistance. Federal agencies must submit detailed information to the Office of Management and Budget (OMB) by February 10, 2025, on the programs, projects, and activities subject to this pause. 

Key Insights: 

• The Memorandum states that Federal financial assistance under review excludes certain assistance provided directly to individuals does not impact Medicare or Social Security benefits. 

• Nevertheless, the scope of the Memorandum is broad as Federal regulations (2 CFR § 200.1) define “Federal financial assistance” to include assistance that recipients receive or administer in the form of grants, cooperative agreements, direct appropriations, food commodities, loans, loan guarantees, interest subsidies, and insurance.  

• Recipients of Federal financial assistance, including state and local governments and nonprofit organizations, are seeking more clarity on what the Memorandum covers, including such areas as vouchers, in which a direct grantee is responsible for issuing the assistance.  

• The Memorandum will likely face legal challenges. On Tuesday evening, a federal district judge issued an administrative stay on the Memorandum until Monday, February 3, to allow for a hearing on its legality. 

• Despite Federal regulations excluding reimbursement for Medicaid services rendered to individuals from the definition of Federal financial assistance (2 CFR § 200.1 “Federal financial assistance” subsection (4)), states reported on Tuesday that they had trouble accessing the Medicaid Payment Management System that provides Federal payments for Medicaid services.  

• The White House later clarified that programs involving “direct benefits to individuals,” including Medicaid and Supplemental Nutrition Assistance Program funds, would not be affected. 

• The Memorandum may be a prelude to a more assertive OMB and Executive Branch regarding decisions on whether to spend Federal funding appropriated by Congress. Russell Vought, the President’s nominee for OMB Director, stated in his confirmation hearing that he believes the 1974 Impoundment Control Act limiting the President’s ability to delay or rescind funds is unconstitutional. 

• On Wednesday, the Acting Director of OMB issued Memorandum M-25-14 rescinding this Memorandum and lifting the pause on Federal financial assistance.