Changes to US Funding
The recent actions taken by the new US Administration have raised questions among charities and organisations reliant on US funders.
Date Posted:
March 3, 2025
Categories:
In recent weeks, the new Administration in the United States has issued a number of orders and initiated actions. Many charities and organisations who receive support from US funders are concerned about what this means for their fundraising and support for their programmes. Whilst it is an evolving situation and many of these actions are facing legal challenges, Chapel &York is monitoring it closely. The high-level takeaway is that if your organisation is not currently or anticipating receiving funds from the US Government, nor working with partners who are, there will be no direct effect on your funding. You may, however, experience indirect effects of these funding cuts and freezes as the fundraising becomes more competitive due to affected organisations seeking replacement funding. We hope the following summary of what we know thus far and potential effects on funding is useful:
Diversity, Equity, and Inclusion (DEI)
“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”
On January 21, the administration issued an executive order that requires every federal grant or contract to certify it is compliant with “anti-discrimination” laws and does not operate any programs promoting DEI that violate “anti-discrimination” laws. The order also targets for possible investigation philanthropies and public charities with assets of more than $500 million and medical associations and higher education institutions with endowments of $1 billion or more.
What to know: This primarily pertains to federally (US Government) funded programmes. US 501(c)(3)s are only impacted by this if they are receiving federal funds for DEI programmes (those promoting diversity, equity and inclusion), have more than $500 million USD in assets or are a university with an endowment of $1 billion or more. If you have a DEI programme, consider broadening its scope so that no one group is favoured or has exclusive eligibility.
Federal Funding Freeze
“Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs”
On January 27, the Office of Management and Budget imposed a temporary freeze on federal funding, including grants to a wide range of nonprofits. On February 10, Federal Judge John J. McConnell Jr. ordered the government to “immediately restore frozen funding.”
The Trump Administration has also stated its intention to close the U.S. Agency for International Development, an agency which provides $22 billion in grants and contracts to international organisations. On February 21, a federal judge dissolved the temporary restraining order blocking the Trump administration’s plan to put 2,700 USAID staff on leave and recall overseas employees of the United States.
What to know: If you are currently receiving funding from USAID or have an active application for these funds, it is highly unlikely this funding will be received or approved, respectively. If this pertains to your 501(c)(3), it is recommended that you diversify your fundraising and seek alternate funding sources. It should be noted, however, that this freeze will have the knock-on effect of creating a more competitive fundraising environment as other organisations also seek other funders to fill these gaps.
Nonprofits that receive federal support
“Advancing United States Interests When Funding Nongovernmental Organizations”
On February 6, a memo stated many NGOs (, i.e., nongovernmental agencies, also known as nonprofit organisations) “are engaged in actions that actively undermine the security, prosperity, and safety of the American people” and “[i]t is the policy of my Administration to stop funding NGOs that undermine the national interest.” The memo directs the heads of executive departments and agencies to “review all funding that agencies provide to NGOs” and “align future funding decisions with the interests of the United States and with the goals and priorities of the Administration.”
What to know: This memo calls for added scrutiny and potential cuts of funding to nonprofits receiving federal (US Government) funding for missions and programmes that do not align with the current Administration’s priorities. If you are receiving federal funding, it is recommended you diversify your fundraising and seek alternate funding sources.
White House Office of Faith-Based and Neighborhood Partnerships
“Initial Recissions of Harmful Executive Orders and Actions”: This January 20 order rescinds Executive Order 14015 of February 14, 2021 (Establishment of the White House Office of Faith-Based and Neighborhood Partnerships). Nonprofits will no longer have direct connections to the executive branch through this office.
What to know: If your US 501(c)(3) is a faith-based organisation, you will no longer have a connection to the Administration through the White House Office of Faith-Based and Neighborhood Partnerships. This office had previously served as a channel to collect input from and provide feedback to faith-based nonprofits.
Immigration
“Protecting the American People Against Invasion”
This January 20 executive order requires the U.S. Attorney General and Secretary of Homeland Security to review all federal contracts, grants, and other programs that provide funding to nonprofits that support or provide services to “illegal aliens” for waste, fraud, and compliance with immigration laws. It also pauses funding, which affects nonprofits that may also serve legal, documented immigrants.
What to know: If your 501(c)(3) is receiving federal (US Government) funding for programmes related to immigration or refugee services, this funding is now halted. It is unlikely this funding will resume and is therefore recommended that you diversify your fundraising and seek alternative funding sources. It should be noted, however, that this freeze will have the knock-on effect of creating a more competitive fundraising environment as other organisations also seek other funders to fill these gaps.
Environment
“Initial Rescissions of Harmful Executive Orders and Actions”
This January 20 order revokes several executive orders related to the environment, including the implementation of the Infrastructure Investment and Jobs Act. Nonprofits receiving or expecting funding in clean energy transition, climate mitigation, and various environmental programs may have their funding paused or terminated.
What to know: If your 501(c)(3) is receiving federal (US Government) funding for programmes related to environment, climate change or clean energy, this funding is likely to be halted. It is unlikely this funding will resume and is therefore recommended that you diversify your fundraising and seek alternative funding sources. It should be noted, however, that this freeze will have the knock-on effect of creating a more competitive fundraising environment as other organisations also seek other funders to fill these gaps.
LGBTQ+
This January 20 executive order stated, “It is the policy of the United States to recognize two sexes, male and female. These sexes are not changeable and are grounded in fundamental and incontrovertible reality. Under my direction, the Executive Branch will enforce all sex-protective laws to promote this reality.”
What to know: If your 501(c)(3) is receiving federal (US Government) funding for programmes related to LGBTQ+ issues, this funding is in jeopardy. It is unlikely this funding will resume and is therefore recommended that you diversify your fundraising and seek alternative funding sources. It should be noted, however, that this freeze will have the knock-on effect of creating a more competitive fundraising environment as other organisations also seek other funders to fill these gaps.
Research
The National Institutes of Health (NIH) recently issued “Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates,” stating NIH is imposing a standard indirect cost rate on all grants of 15%. This notice says the cap on the indirect rate will allow grant recipients a reasonable and realistic recovery of indirect costs while helping NIH make sure grant funds are primarily used to advance its mission. The notice states that as of February 10, an indirect cost rate cap of 15% would be in place for new and any expenses incurred on or after that date for existing grants. Per the notice, the 15% limit would replace previously negotiated rates with universities and research institutions. Indirect costs are those categorised as ‘Facilities and Administrative Costs.’
What to know: If your organisation is partnering with a US university or research institution to carry out research investigations, or if your organisation had been in discussion to begin such a partnership, this cap on indirect cost rates will likely have a significant impact on the US university’s or research institution’s ability to carry out its research as previously budgeted and planned. This may end or delay partnerships as alternate funding sources will likely need to be secured in order to carry out projects as a result of this cap.
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