President Trump sitting in the oval office and holding up an executive order with his signature on it. He has a determined and stoic look on his face.
Image Credit: The White House from Washington, DC

Update: On Tuesday evening a federal judge granted a request by a coalition of nonprofits seeking a temporary restraining order to prevent the Trump administration from unilaterally freezing all federal grants. The judge’s order lasts until Monday afternoon.

The White House budget office Monday ordered a temporary halt to all federal loans, grants, and financial assistance programs, pending a review by the administration.

“This order is a potential 5-alarm fire for nonprofits and the people and communities they serve.”

The unprecedented move, whose legality has already been challenged, could affect trillions of dollars in federal aid to thousands of programs, and threatens to have a catastrophic impact on the US nonprofit sector—and civil society at large—if the funds are successfully halted. Federal grants make up about a third of nonprofit funding through direct grants, state pass-throughs, and other mechanisms for everything from scientific research to education to arts and culture to critical services for children and families.

By Monday night, nonprofit executives around the country were still grappling with how to respond to a crisis of potentially colossal proportions; on Tuesday morning, the sector was waking up today to a new, uncertain reality.

Five-Alarm Fire

The move by the White House budget office is “a potential 5-alarm fire for nonprofits and the people and communities they serve,” Diane Yentel, president and CEO of the National Council of Nonprofits said in a statement posted on X on Monday evening.

“From pausing research on cures for childhood cancer to closing homeless shelters, halting food assistance, reducing safety from domestic violence, and shutting down suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives,” she added, noting that thousands of organizations could be affected.

On Tuesday, a coalition of nonprofit organizations, including the National Council on Nonprofits, Democracy Forward, the American Public Health Association, Main Street Alliance, and SAGE, filed a motion the US District Court for the District of Columbia seeking a restraining order on the Trump administration to prevent the funding freeze.

The suit claims the White House Office of Management and Budget does not possess the authority to unilaterally cease funding already approved by Congress.

“The actions taken yesterday are a callous disregard for the rule of law and a drastic abuse of power that will harm millions of Americans across the country,” said Skye Perryman, president and CEO of Democracy Forward. “We are honored to represent diverse sectors in urging the court to block this lawless attempt to harm everyday Americans in service of a political goal. It’s past time to put people over politics and we will continue to be in court on behalf of the American people.”

This response, as well as an immediate outpouring on social media, signal what is sure to be a massive, sectorwide call for action, including contacting elected representatives about the importance and impact of federal grant programs on their communities, with some on social media noting that anyone can look up specific information on federal grant programs via the website https://www.usaspending.gov/.

The measure appears to include new disclosure requirements that threaten to serve as a purity test for nonprofits.

An Ideological Attack

The move was framed as a response to a who’s who of disfavored buzzwords associated with progressivism. A memo from the Office of Management and Budget (OMB) said:

The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve.

The memo outlines that the programs affected include “all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.”

The funding “pause,” which goes into effect at 5:00 pm on Tuesday, January 28, excludes direct assistance to individuals, such as Social Security and Medicare recipients.

Further alarming sector advocates, the measure appears to include new disclosure requirements that threaten to serve as a purity test for nonprofits across the country. The memo directs affected programs to supply “detailed information” to the OMB:

No later than February 10, 2025, agencies shall submit to OMB detailed information on any programs, projects or activities subject to this pause. Each agency must pause: (i) issuance of new awards; (ii) disbursement of Federal funds under all open awards; and (iii) other relevant agency actions that may be implicated by the executive orders, to the extent permissible by law, until OMB has reviewed and provided guidance to your agency with respect to the information submitted.

What’s more, the Trump administration is reportedly already exerting pressure on nonprofits not to raise public alarms. As The Washington Post reports:

Trump officials warned aid groups not to complain to the media about the halt of aid, which has stoked fear at organizations including Save the Children, Mercy Corps and scores of other nonprofit institutions, aid workers told The Post.

Debilitating Effects

Of the $10 trillion that the federal government spent in fiscal year 2024, more than $3 trillion was federal financial assistance, according to the memo. The funding freeze could impair nonprofits’ ability to continue operating, Brian Riedl, a senior fellow at the Manhattan Institute, told The Washington Post.

“The funding delays are going to prove very difficult for grantees under the impression the money is coming, and have rent and salary payments dependent upon it,” Riedl said.

As BoardSource President and CEO Monika Kalra Varma told NPQ, “This order affects every nonprofit across our country, regardless of their mission area, the populations they serve, or their federal funding status. Boards and executives are being forced to make impossible decisions.”

Posting to social media, others in the nonprofit community expressed concern about the future of their organizations.

“If this is true, and goes into effect tomorrow, it will pause the federal funds that support my nonprofit and hundreds of other organizations,” Jessica Ellison, executive director of the National Council for History Education, posted to Bluesky, commenting on the announcement.

“Call your elected officials,” Ellison added. “This will be devastating.”

As the news spread Monday night and early Tuesday morning, advocates and allies of the civil sector pointed out that the implications of a total freeze in federal grants could reach well beyond mom-and-pop nonprofits to the very bones of civil society.

Members of Congress reacted with a mix of condemnation and challenges to the legality of the measure.

In a letter to the White House Monday, Sen. Patty Murray (D-WA) and Rep. Rosa DeLauro (D-CT) expressed alarm over the pause in funding.

“The scope of what you are ordering is breathtaking, unprecedented, and will have devastating consequences across the country,” the lawmakers wrote. “We write today to urge you in the strongest possible terms to uphold the law and the Constitution and ensure all federal resources are delivered in accordance with the law.”

Senate Minority Leader Chuck Schumer (D-NY) echoed challenges to the president’s authority to suspend funding allocated by Congress.

“Congress approved these investments and they are not optional, they are the law,” he posted to X. “These grants help communities in red states and blue states and support families, help parents raise kids, and lead to stronger communities.”

Reflecting on the order’s broad implications for civil society, Akilah Watkins, president and CEO of Independent Sector, told NPQ: “The Trump administration’s order to freeze federal grants threatens to undermine the essential health and safety of the communities nonprofits work tirelessly to support. While the full scope of its intended impact is still unfolding, it’s clear this order jeopardizes vital services and sets the stage for inevitable battles ahead….Governments at every level need nonprofits as partners on the front lines of community support.”

The freeze in federal grants was first reported by independent journalist Marisa Kabas, according to multiple outlets.