Navigating the Freeze: Insights from a Certified Grants Management Specialist and a Policy Expert

HOST: Welcome and thanks for listening to Cherry Bekaert's Government and Public Sector podcast series. In each episode, we hear from the best in the business on the latest challenges, trends, and opportunities affecting the government and public sector.

HOST: I'm Christian Fuellgraf, leader of Cherry Bekaert's Government and Public Sector Industry Team. I hope you enjoy and thank you for joining us.

KAT KIZIOR: Hello and welcome to Navigating the Freeze: Insights from a Certified Grants Management Specialist and a policy expert. I am your grants management specialist, Kat Kizior, and I'm the Grants Management Solutions Lead for Cherry Bekaert.

KAT KIZIOR: I have about 25 years in grants and accounting across various types of organizations: state and local government, not-for-profit, and for-profit entities. I am a Certified Grants Management Specialist (CGMS), and I'm active with the National Grants Management Association.

KAT KIZIOR: I am excited today to be recording with one of my favorite partners in podcasting, Robert Shea.

ROBERT SHEA: Kat, I'm so intimidated by that introduction. I'm delighted to be with you again. My name is Robert Shea. I had a career in government, first in the House and Senate Oversight Committees, and then in the U.S. Office of Management and Budget.

ROBERT SHEA: I also spent a considerable amount of time consulting at Grant Thornton. I couldn't be happier to be joining my friends at Cherry Bekaert to talk about the whirlwind we've been in over the last 10 days.

KAT KIZIOR: Right, and I'm pretty sure I'm the one that should be intimidated, but thank you very much. I am super happy to be working together again.

KAT KIZIOR: By the way, Robert, just to kick this off, I want to tell you what the real title of this podcast is. It's called The Federal Funding Freeze Frenzy. Say that ten times fast. For some reason, they didn't want me to use that title. It didn't fly, so instead we went with the title we're using now.

ROBERT SHEA: Don't let a bunch of accountants tell you what to title your podcast.

KAT KIZIOR: So unofficially, The Federal Funding Freeze Frenzy. I'm afraid I'm really going to mess that up at some point. Anyway, speaking of flies, we are doing this podcast on the fly to bring you the latest on the funding freeze that happened the fourth week of January.

KAT KIZIOR: We want to talk about how these policy changes could affect funding now and in the future, and discuss what actions an organization can take to lessen the effects of current and potential federal funding policy changes.

KAT KIZIOR: Let's talk about the chaos — I'll call it chaos, use whatever word you like — that ensued in the grants management world this past Monday night. For me, it was Tuesday morning when I woke up at 7 a.m. to a text that said, "You have to read this, get up," and my day started that way.

KAT KIZIOR: Some of us woke up to news that there was going to be a freeze or a halt on federal financial assistance that would take effect at 5 p.m. that evening. First came an executive order dated January 27, 2025, from the Executive Office of the President and the Office of Management and Budget.

KAT KIZIOR: They put out a memorandum called M-25-13 with the subject "Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs." It said that federal agencies must identify and review all federal financial assistance programs and supporting activities consistent with the President's policies and requirements.

KAT KIZIOR: The memorandum required federal agencies to temporarily pause all activities related to obligation or disbursement of federal financial assistance and other relevant agency activities implicated by executive orders. That triggered immediate panic in the grants world.

KAT KIZIOR: A few hours later, a clarifying memo was released by OMB, specifically stating the executive order subject to the pause and clarifying that all financial assistance was not subject to the freeze. Student loans, SNAP, Medicaid, Medicare, and Social Security disbursements would not be affected.

KAT KIZIOR: The clarifying memo also said this was not an impoundment under the Impoundment Control Act. Robert, do you want to walk us through what the Impoundment Control Act is and why that determination matters?

ROBERT SHEA: Yes. The sequence of events over the last several days has been dizzying. The memo was issued imposing a very broad freeze on payments for loans and grants. Agencies tried to walk that back with subsequent guidance limiting it, but the damage was done and agencies were so confused that payment systems were shut down, including systems related to Medicaid.

ROBERT SHEA: Based on that blowback, the memo was rescinded. The White House press secretary subsequently said it wasn't rescinded and that the payment freeze remained, and a judge retained an injunction on the freeze in spending.

ROBERT SHEA: There are many threads here. Several executive orders may have driven this memo. One order prevented all future spending on diversity, equity, inclusion, and accessibility, and required agencies to inventory individuals, contracts, or grantees related to DEIA and send that inventory to OMB.

ROBERT SHEA: Another executive order halted climate-related spending under the Inflation Reduction Act, so programs spending in those areas had to be reported to OMB. Officials in the incoming administration have said they believe the Impoundment Control Act is unconstitutional and want to test that view.

ROBERT SHEA: The Impoundment Control Act was enacted after the Watergate scandals to give Congress greater control over appropriations and limit executive discretion in withholding appropriated funds. Because the incoming administration has asserted the law to be unconstitutional, they're likely to test its limits.

ROBERT SHEA: The language in the memo noting this was not an impoundment under the Impoundment Control Act is important, because the administration is framing this as a pause of appropriations rather than an impoundment. They view spending under the IRA that is climate-related and spending on DEIA initiatives as paused, if not prevented, and we'll see what legal fights ensue.

KAT KIZIOR: That was a lot, and it left all our heads spinning. I know a lot about federal assistance compliance, but I don't know the ins and outs of federal policy. Can you give us your take on why this is happening? Is it all about presidential initiatives, or are there other aspects involved?

ROBERT SHEA: Yes, yes, yes, and yes. The administration has issued a rash of actions since January 20th, and this memo is one example. They issued a broad pause and then tried to limit it, but the confusion caused payment systems to shut down. The memo was rescinded, but statements from the White House led the judge to retain the injunction.

ROBERT SHEA: The memo and related executive orders are targeting DEIA and climate-related spending. Officials are also testing the boundaries of the Impoundment Control Act. These issues will likely be litigated over the next 6, 12, or 18 months as lawsuits work their way through the courts.

KAT KIZIOR: I want to ask about one specific element of the memo. They listed certain categories of grant funding recipients they wanted to halt, including funding to non-governmental entities. Do you think they're still going to try to withhold funding to nonprofits and similar organizations?

ROBERT SHEA: It remains to be seen. The administration and the Department of Government Efficiency have ambitious budget-cutting targets. To the extent an entity — a nonprofit or NGO — is engaged in DEIA or climate-related initiatives under the Inflation Reduction Act, those programs will likely be targets for an ongoing pause.

ROBERT SHEA: In the short term, other budget-cutting initiatives could also impact spending. We've already seen a major pause in foreign assistance spending. It's critical that recipients of federal funds monitor developments closely.

KAT KIZIOR: Would you say this is not over by a long shot?

ROBERT SHEA: I would say it is not over by a long shot. One interesting facet is the worksheet OMB sent to agencies asking them to inventory programs. The worksheet asks for the program name, the component that administers it, the senior political appointee who will govern it, and whether the program has any pending funding.

ROBERT SHEA: The worksheet asks whether the program has any anticipated obligations or disbursements before March 15, 2025, around the time the current continuing resolution expires, and whether any statutes require the obligation or disbursement of funds.

ROBERT SHEA: They also ask whether the program provides federal funding to non-governmental organizations supporting or providing services to removable or illegal aliens, whether the program is foreign assistance, and whether the program is implicated by the revocation of the U.S. International Climate Finance Plan.

ROBERT SHEA: This gives an idea of the investigation they are doing so they can target the pause going forward.

KAT KIZIOR: As a grants professional, I've heard a lot of talk about how federal funding terminations can come about. Are there specific conditions that must be met? How much power does the executive branch actually hold in these cases?

KAT KIZIOR: Here's why I ask. There are specific rules in the Uniform Guidance that dictate how and why the federal government can terminate funding. The Uniform Guidance (2 CFR 200) states that explicit language for termination must be in the terms and conditions of the funding agreement; otherwise, the grant or funding cannot be terminated except in certain circumstances.

KAT KIZIOR: For example, 2 CFR 200.340 says the federal award may be terminated in whole or in part by the federal agency or pass-through entity pursuant to the terms and conditions of the federal award, including to the extent authorized by law, if an award no longer effectuates program goals and grant priorities.

KAT KIZIOR: Subsection B requires the federal agency or pass-through entity to clearly and unambiguously specify all termination provisions in the terms and conditions of the federal award. If termination language wasn't explicitly stated, how can the executive office override this? From a policy standpoint, is this possible, and how does this affect the rights of organizations?

ROBERT SHEA: The government has a broad ability to terminate grants and contracts for convenience. There may be the ability to file a claim for compensation based on that termination.

ROBERT SHEA: This administration appears willing to test traditional and legal limitations on its spending, including termination of grants, contracts, and loans. I expect many of these issues to be tested in court. People sued based on the initial memorandum that paused spending; a judge enjoined that pause, and the injunction has persisted.

ROBERT SHEA: This will be a major debate, and we'll learn where the line is as lawsuits progress. We should schedule another podcast for when those decisions come down.

KAT KIZIOR: We should. There is no certainty so far in this administration about federal assistance funding and what's going to happen next. All we can do is be as preemptive as possible.

KAT KIZIOR: Rights of federal aid recipients and the communities that depend on this funding will likely have to be defended in courts. For example, if funding for climate initiatives is ramped down or terminated, how does that realign the country's focus? Will innovation in clean energy be abandoned, or will private actors step in?

ROBERT SHEA: I wish I had a better crystal ball. I think funding for climate-related initiatives will decline significantly, affecting contracts, grants, and loans across the board. I'll be interested to see what Congress appropriates in reconciliation or FY25-26 spending.

ROBERT SHEA: Private foundations and private industry may pick up some of the slack. After President Trump withdrew from the Paris Accords upon inauguration, Michael Bloomberg said he would replace some of that contribution. You will likely see private investment move into innovation where federal support declines.

ROBERT SHEA: Innovation across the board will still be sought after, but funding priorities may shift away from DEIA and climate toward other areas.

KAT KIZIOR: As Americans, and even for listeners outside the U.S., we step up and help each other when we have to.

ROBERT SHEA: Right.

KAT KIZIOR: I almost forgot to ask about grant regulations. I've heard that compliance and regulations may become more stringent going forward. Grant professionals are already stretched thin. Have you heard anything about restructuring or adding more regulations to federal funding going forward?

ROBERT SHEA: I haven't heard anything specific on new regulations. I've been working to highlight the flexibility in the new Uniform Guidance and how state, local, and tribal governments can use those flexibilities.

ROBERT SHEA: We've highlighted inefficiencies in federal oversight of grants. For example, the Program Support Center at the Department of Health and Human Services has a backlog in approving statewide cost allocation plans. There's an opportunity to improve federal-state-local collaboration.

ROBERT SHEA: If funding is constrained, agencies and grantees could discuss relaxing certain restrictions, investing in data systems and evaluation, and reducing reporting burdens. A lot of reporting by grantees goes unused, and audit findings are often ignored.

ROBERT SHEA: In many cases, grant funds go unused because grantees can't muster the resources to meet reporting obligations. There is room to reduce administrative burden and make grant reporting more useful.

KAT KIZIOR: I agree. Anything we can do to reduce administrative burden and increase grants compliance knowledge would be helpful.

KAT KIZIOR: I'm going to wrap up with activities organizations should consider now and long term to lessen the impact of a loss of federal funding.

KAT KIZIOR: First, review your current awards and see if anything is out of alignment. If any part of your grant funding supports areas under review, such as DEIA or climate initiatives, stop that spending immediately and start looking for alternative funding sources.

KAT KIZIOR: Second, review current expenses. Anything may become ineligible going forward. The budget is not in place yet, and any expense could become a red flag. Look at your expenses and identify potential risks.

KAT KIZIOR: Third, develop alternative funding strategies to cover your costs. Review your draws and expenses and plan timing carefully. You may need to tighten timelines and process quicker reimbursements in the event federal funding is delayed or halted.

KAT KIZIOR: Read your terms and conditions and look for explicit termination language. That language may provide a legal basis to defend your funding, though those provisions could be tested.

KAT KIZIOR: Stay informed. Keep an eye on the news and follow grants management consultants and policy experts on LinkedIn and other media sources. Share updates with your peers and other grants management professionals.

KAT KIZIOR: Remain compliant. Continue to follow the rules, submit reports on time, and meet reporting deadlines. Don't give agencies a reason to terminate funding based on noncompliance.

KAT KIZIOR: Consider the long-term "waterfall effect," where impacts cascade through your organization to the community and client base. Examine your funding cycles and timing, identify potential shortfalls, and implement contingency plans.

KAT KIZIOR: Contingency planning should include maintaining operations, risk management, and minimizing negative impacts on your organization and community.

KAT KIZIOR: Protect your organization, protect your communities and stakeholders, and be prepared and plan accordingly because we have no idea what the state of federal funding will be tomorrow.

ROBERT SHEA: Monitor developments closely. whitehouse.gov tracks official actions. Avoid relying on unofficial statements and stay very close to your grants management officials at the cognizant agency.

ROBERT SHEA: Keep lines of communication open with your agency contacts and listen to Kat. Her instructions were thorough and will serve grantees well if they follow them.

KAT KIZIOR: Thank you. Thank you for filling us in on policy areas where everyone is wondering what's going to happen. We will provide links in the show notes to the executive orders, memorandums, and the spreadsheet that accompanied the memo so you have access to those documents.

KAT KIZIOR: Though we can't give assurances about what the next day will bring in the federal funding assistance world, we will keep you up to date and informed. Robert and I will be on top of these issues as they arise, and we will be back together soon.

KAT KIZIOR: If you have questions, please feel free to reach out. Robert's email is rshea@govnavigators.com, and my email is kat.kizior@cbh.com.

ROBERT SHEA: It was great to be with you, and I look forward to doing this again. Never a dull moment.

KAT KIZIOR: Thanks so much. We will see you next time.

HOST: This was Christian again. I hope you enjoyed this episode and look forward to our next one. Don't forget to subscribe.