By Elizabeth Gousse Ballotte, Partner; Umer Dangra, Manager; and Michael Verdeschi, Senior Associate
Recently enacted policies by President Trump may impact public sector entities and nonprofit organizations. Read on for more information.
Executive Orders to Date
Several recent executive orders relate to Diversity, Equity and Inclusion (DEI) policies, federal workforce size and various federally funded programs.
- Ending Illegal Discrimination and Restoring Merit-Based Opportunity (January 20, 2025)
- Mandates federal agencies to include terms in federal grants and contracts that require counterparties and grant recipients to certify:
- Compliance with “anti-discrimination” laws.
- They do not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws.
- Encourages the private sector to end DEI policies.
- Mandates federal agencies to include terms in federal grants and contracts that require counterparties and grant recipients to certify:
- Hiring Freeze (January 20, 2025)
- Implemented a freeze on the hiring of federal employees throughout the executive branch.
- Initial Rescissions of Harmful Executive Orders and Actions (January 20, 2025)
- Rescinded various executive orders from the previous administration, including the implementation of the:
- Energy and infrastructure provisions of the Inflation Reduction Act of 2022.
- Infrastructure Investment and Jobs Act.
- Rescinded various executive orders from the previous administration, including the implementation of the:
- Reintroduction and Expansion of Tariffs (February 1, 2025 and February 11, 2025)
- Implements a 25% additional tariff on imports from Canada and Mexico, a 10% additional tariff on imports from China and a 10% tariff reduction on energy resources from Canada.
- Closes existing loopholes and exemptions to restore a 25% tariff on steel and increase the current tariff on aluminum to 25%.
Pause of Federal Grants, Loans and Other Financial Assistance Programs
On January 27, 2025, Memorandum M-25-13 was issued by the Office of Management and Budget (OMB), requiring federal agencies to temporarily pause all federal financial assistance. Additionally, it required federal agencies to review all federal financial assistance programs and ensure they comply with the president’s policies.
On January 29, 2025, the memorandum was rescinded. Although it has been rescinded, the memorandum proved the Trump administration is willing to take bold action to meet policy goals. Additionally, there is no guarantee that a federal funding pause won’t be reinstated in the future. See our recent article for more on the developments concerning the federal government’s effort to pause grant, loan and other financial assistance programs.
Public Sector Entities
Public sector entities that are a part of the federal government, or receive partial or full funding from federal sources, may expect some changes. It is essential for these entities to closely monitor federal policy action and remain responsive in their planning. If possible, these entities should identify alternative funding sources for federally funded activities if these programs are reduced or eliminated.
If federal programs issue new requirements for existing programs, public sector entities should proactively review the changes to ensure they remain in compliance. Changes may include increased reporting requirements or a more competitive grant application process. To navigate evolving requirements, public sector entities should have compliance management on staff or through a third party. This practice provides the best opportunity for entities to remain in compliance with federal guidelines through a time of uncertainty and change.
The potential impact of tariffs on public sector entities remains fluid, as proposed measures may not always come to fruition. If enacted, however, tariffs could significantly impact these entities’ budgets or planned capital projects.
Federal agencies may face staffing shortages due to the hiring freeze. Nonfederal entities may experience backlogs when working with federal agencies.
Nonprofit Organizations
Nonprofit organizations that expect to receive or have already received funding through federal programs, such as the Inflation Reduction Act, may expect some changes. Organizations should continuously monitor federal policy action. Nonprofits should prepare to have federal funding reduced in the event some federal programs are canceled.
Similar to public sector entities, if federal programs issue new compliance requirements for existing programs, nonprofits should review such changes to ensure they remain in compliance. For instance, nonprofits should monitor if the federal government provides guidance on allowable and unallowable DEI practices.
Nonprofit organizations should also be aware of potential backlogs they may experience when partnering with federal agencies due to the hiring freeze. This may include longer processing periods for tax-exempt status applications.
Adapting to New Regulations
In these changing and uncertain times, PKF O’Connor Davies is prepared to help its clients navigate federal funding programs, mitigate risks and strategically plan for the future. Our comprehensive services are designed to support nonprofit organizations and public sector entities in adapting to new regulations, ensuring compliance and optimizing financial resources. These services include:
- Grant management (from application assistance to reporting).
- Compliance audits to ensure your processes and fund use meet federal standards.
- Operational reviews to ensure your organization is running effectively.
- Documentation support to demonstrate compliance.
Most importantly, we offer strategic consultation to help you identify eligible projects and initiatives that maximize the effect federal funding has on your organization and community.
Contact Us
We welcome the opportunity to answer any questions you may have related to this topic or any other accounting, audit, tax or advisory matters. Please contact your PKF O’Connor Davies client service team or:
Elizabeth Gousse Ballotte
Partner — Advisory
eballotte@pkfod.com
Melissa Szot
Partner — Public Sector
mszot@pkfod.com
Umer Dangra
Manager — Advisory
udangra@pkfod.com
Michael Verdeschi
Senior Associate — Advisory
mverdeschi@pkfod.com
References
- Initial Rescissions Of Harmful Executive Orders And Actions |The White House
- Ending Illegal Discrimination And Restoring Merit-Based Opportunity | The White House
- Hiring Freeze | The White House
- Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China | The White House
- Fact Sheet: President Donald J. Trump Restores Section 232 Tariffs | The White House