By Alexander K. Buchholz, CPA, MBA, CGMA, Partner
On March 6, a U.S. District Court judge ordered the Trump administration to release a portion of foreign aid funds owed for previously completed projects. The deadline for compliance is today at 6 p.m. This ruling came shortly after the U.S. Supreme Court rejected the Trump administration’s request to continue the freeze in a 5-4 decision. The Supreme Court did state that the district court needs to detail “what obligations the Government must fulfill to ensure compliance with the temporary restraining order.” This is the latest in a recent string of legal and court mandates concerning the administration’s attempts to rein in government spending.
The U.S. District Court for the District of Columbia granted a preliminary injunction of the Office of Management and Budget’s (OMB) freeze on federal grant disbursements on February 25 in response to a lawsuit filed by several not-for-profit advocacy groups. The motion filed was to continue the block from pausing disbursements under OMB’s Memorandum M-25-13. This was further supported on March 5, when the U.S. District Court Judge for Rhode Island also granted a preliminary injunction in the lawsuit filed by several states. The states involved with the lawsuit were still waiting for federal funds and clarity on whether payments will be received. Impacted funding includes rooftop solar power in low-income neighborhoods, subsidies for low to moderate-income households’ purchase and installation of electric heat pump water heaters, grants to reduce greenhouse gas emissions and other harmful pollutants, law enforcement funding, essential health care and childcare services and other programs.
As initiatives are being proposed and modified by the current administration, we continue to offer the following suggestions for organizations that may be affected by future potential federal funding reductions:
- Cash Flow Projections: Robust budget and cash flow models are important to determine which actions may be required in response to different economic scenarios. Organizations should look at both short- and long-term scenarios to ensure adequate cash flow needs.
- Drawing on Reserves: Organizations should examine any cash reserves set aside by the board to ascertain whether amounts need to be utilized to continue operations.
- Borrowings and Lines of Credit: Organizations should contact financial institutions to determine whether existing or new lines of credit can be drawn down or obtained as a source of temporary cash inflows to sustain operations.
- Long-Term Scenario Planning: Leadership and board governance should also collaborate to determine any potential impacts to current and future programs. This should encompass, but not be limited to, staffing and programmatic considerations, should federal assistance be reduced or eliminated in the future.
- Alternative Funding Sources: Organizations should seek other sources of private and public funding to make up for any shortfalls caused by OMB restrictions.
We will continue to provide you with updates and further guidance on a regular basis.
Contact Us
If you have any questions, please contact your PKF O’Connor Davies client service team or:
Alexander K. Buchholz, CPA, CGMA, MBA
Partner
Not-for-Profit Services
abuchholz@pkfod.com | 646.965.7783