At REDW, we understand the ever-changing landscape of compliance and the uncertainties that can come with it. Should the legal landscape shift, we will help you navigate these uncertainties with confidence and readiness. For a timely update on this evolving situation, please contact our trusted advisors.
Recent guidance from the Office of Management and Budget (OMB) was poised to significantly affect Tribal, governmental and nonprofit services by halting federal drawdowns/reimbursement and new awards. Since it’s announcement on January 27th, there has been a lawsuit, a temporary delay and now a recission of M-25-13. It is unclear at this time if the memo will be re-written and re-issued with a new timeline, or if the entire concept will be abandoned.
Here, we would like to share our insights and suggest steps you might face to prepare for this type of situation, or if this memo resurfaces.
Impacts of OMB Memo M-25-13 and Timeline
The memo would have frozen new draw-down (reimbursement-based) federal funding for certain programs, excluding programs providing direct benefits to Americans. It targeted projects and activities not aligned with the recent executive orders issued since January 20, 2025, including but not limited to those affecting:
- Green New Deal initiatives (e.g., environmental programs, conservation, electric vehicle stations)
- Assistance or benefit provided to “removable and alien immigrants”
- Diversity, equity, and inclusion (DEI)
- Foreign aid
The intended purpose was for federal awarding agencies to review and report on the types of programs, project and activities included in their awards and sub-awards. It had a short timeline, which could resurface again if the topic is readdressed. It would have stopped federal payments for an estimated 45-day timeline.
Key Action Takeaways
Given the uncertainty of the current federal climate, a loss or delay in funding could have significant detrimental impacts on organizations relaying on the funding. The same could happen to any other types of revenue streams that might face censure or closure in the future.
In order to prepare, here are some immediate actions to consider:
- Cash Flow Analysis: One takeaway from this situation, is the emphasis on the importance of cash reserves. Evaluate how long your current reserves can sustain operations. Ideally, we advise maintaining enough cash to cover 90 days of average payroll and the average monthly outstanding accounts payable balance. If you are worried about cash flow, reach out to the CAAS team for an evaluation or tailored advice for next steps.
- Available Funds Assessment: Review cash and investment accounts to identify funds that are available to pay expenses now, including federal program funds received in advance. However, for these reserves, identify if the funds are:
- Board designated/committed
- Restricted for allowable purposes
- Permanently restricted (non-spendable)
- Unrestricted and available for any use
Consider whether your governing body needs to make any encumbrances, changes to the budget, or other formal resolutions to adjusting funding sources or make others available.
- Additional Considerations:
- Determine if any projects need to be paused
- Explore other funding sources for interim coverage, such as:
- Applying costs to allowable non-federal funding sources
- Seeking funding from non-federal entities, inter-agency loans, state/local grants, or fundraising efforts
- Identify any AP balances that have longer payment terms
- Negotiate longer payment terms with vendors, if possible
- Reach out to your grant contract officer (CO) to arrange for expedited payment processing before or directly after a system freeze, if possible.
By taking these steps, you can better navigate significant losses to funding and ensure the continuity of your operations.