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01/29/2025
Navigating federal funding uncertainty: What to consider
As news around federal funding continues to evolve, consider these potential steps around continuing work, cash flow management, and more.
As news around federal funding continues to evolve, what should recipients be doing now to build resilience against potential changes?
With uncertainty remaining around a January Office of Management and Budget (OMB) memorandum calling for a temporary pause and mandatory “comprehensive analysis” of federal financial assistance programs, it remains prudent for recipients to consider their funding sources and prepare to weather any changes. As federal instructions evolve, so too will the implications for the various industries and organizations that rely on this funding.
As we continue to monitor federal actions, consider these potential steps now.
For funding recipients
What recipients will need to do in response to federal actions will likely vary based on their specific industry sector and funding sources. Our team stands ready to help you build the best plan for your circumstances. In the meantime, we recommend the following actions:
Continue working
- Not every new release will automatically trigger a suspension, stop-work, or a termination. If you have an active award with performance obligations, and you have not received a directive to discontinue performance, it is advised to continue working per the terms of your agreement to avoid noncompliance. Send invoices as timely as you can to support prompt payment where possible. If you get a notice of award suspension, stop-work, or termination, act on the instructions in that notice for the specified award. It would be prudent to track, by award if possible, any incremental costs that result from awardee accommodation of changing guidance, as those could be the basis for future claims or adjustments.
Conduct a thorough review of your awards and purpose
- Identify which awards may be at risk for reduction or termination based on administration priorities. Examine those programs and be prepared to explain the specific purpose for your award, how it aligns with administration priorities, and how it does not conflict with law or active Executive Orders.
Put greater emphasis on careful cash flow management
- Clean up and collect accounts receivables.
- Monitor cash daily, and prepare or update cash flow forecasts (i.e., 13-week cash flow, rolling 12-month forecast) to provide a real-time roadmap for decision-making.
- Review line-item expenses; reduce or eliminate non-core expenses. Implement tight controls with a clear approval process for incurring new costs. Review all contracts in place.
- Carefully manage and control inventory levels.
- Temporarily delay or reduce non-core capital expenditures.
- Consider an action plan for the redeployment of personnel and capital currently supporting programs that may be at risk.
Reduce losses and optimize profitability
- Conduct a vendor assessment; consider switching or negotiating for better prices.
- Review your current debt and costs of borrowing: In seeking more favorable terms, consider refinancing and/or negotiating the timing and amounts of scheduled principal payments.
- Inform and leverage existing relationships with board members, donors, creditors, and other sources of capital to support liquidity needs that may become necessary.
Stay informed
CohnReznick industry advisors are monitoring developments around federal funding, and we will continue to update you through various CohnReznick communication channels. Make sure you are subscribed to receive our updates. In the meantime, if you would like to discuss protective planning measures for your organization, please reach out to your CohnReznick advisor or any of the contacts listed below for assistance.
Industry insights and updates
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While the late January funding pause memo was rescinded, we expect the administration to continue to evaluate each program in light of recently signed executive orders with an eye toward reprioritizing federal spending. This effort combined with negotiations on the FY25 budget is likely to stretch resources for housing. Politicians of all parties have recognized the need for more affordable housing, and housing advocates will remain focused on obtaining more resources for construction and preservation, as well as for the services needed for residents to thrive. Owners need to understand which funding ultimately comes from federal sources and continue to monitor for any signs that the programs they rely on are at risk.
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While the first funding pause memo was rescinded, we expect to see more refined guidance or a different government approach to the new administration’s goal of reducing federal spending.
Therefore, we recommend that government contractors take the following immediate actions:
• Contact the government award officials for guidance on how to proceed with the scope of work. This is critical in order to avoid performance issues that could result in termination for non-compliance with performance requirements.
• Conduct a review of current grants/loans/financial assistance awards:
o Understand your compliance requirements and performance obligations.
o Outline the scope of purpose and each award.
o Assist the agency in identifying ways to continue work on federal grants or awards, aligning with new priorities and requirements.
o Provide analytical support to agencies as they review and realign their financial assistance programs in accordance with the new memorandum.
o Be prepared to accumulate and track direct costs under separate charge codes in preparation for a potential termination or other impact.
• Get your invoices in, as outlined in 2 CFR 200.305(b)(3) the agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request.
• Connect with your government contract or legal advisors on potential next steps and risks associated with those steps.
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NFPs need to move quickly into scenario and contingency planning. Engage and leverage boards and major recurring donors; but more than ever, it will be critical to find strategies to obtain alternative funding sources and preserve liquidity.
Engage advisors, such as attorneys, accountants, bankers, and fundraising professionals, to help you:
• Understand and defend contractual obligations
• Build and stress-test financial models
• Secure alternative sources of funds, such as credit lines and donations
• Plan for and execute cost-cutting measures
It may also be smart to engage lobbyists and/or participate in trade associations to stay apprised of developments and increase advocacy efforts against further curtailments in funding.
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With access to funding currently uncertain, recipients in the Solar for All (SFA) program should be considering contingency plans for accommodating a continued freeze or other loss of funding.
SFA recipients were notified Jan. 28 that their funding had been paused, and several reported losing access the following morning to EPA’s online grant management portal, Politico reported.
The governments and nonprofits that receive SFA funding ultimately lend or grant money to sub-awardees for residential and community solar projects, and those awards could be delayed without reliable federal funding, CohnReznick’s Roman Castillo told Politico.
“I think it’s safe to say that when funding flows are disrupted, Solar for All grant recipients have no choice but to reevaluate their financial commitments,” Castillo said. “That uncertainty is likely going to result in delays or some sort of interruption in program implementation.”
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.