Agencies to Continue Review of Federal Funding, but Should Honor Existing Processes, per Courts

This overview is excerpted from , Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments. For more information on how to subscribe and to activate a complimentary one week trial to Manatt on Health, please reach out to .

Last week, two federal courts (in D.C. and Rhode Island) temporarily blocked the Trump Administration from pausing or canceling federal funds as envisioned under the Office of Management and Budget’s (OMB’s) January 27 , which directed agencies to pause many types of pending a review for alignment with President Trump’s (EOs) on diversity, equity, and inclusion and other issues.

Although the OMB memo was rescinded on January 29, the courts were persuaded to enter temporary restraining orders (TROs) based on statements from the White House and evidence of ongoing disruptions in the flow of federal funds to states and nongovernmental organizations—disruptions that occurred, in many cases, without notice or adherence to standard procedures. On February 10, acknowledging ongoing payment issues, the Rhode Island court issued another order directing the Trump Administration to release all improperly withheld funds. The Administration has filed an appeal.

Meanwhile, in response to the TROs, HHS last week issued a memo to its component agencies—including the Centers for Medicare & Medicaid Services (CMS), the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), and the National Institutes of Health—confirming that neither the President’s EOs nor the OMB memo creates any new authority for agencies to “pause, freeze, impede, block, cancel, or terminate any awards or obligations,” as to both existing funding as well as future awards or obligations.

HHS advised that agencies may decide to pause awards or obligations “based on their own discretion—not as a result of the OMB memo or the President’s Executive Orders—and provided the pause complies with all notice and procedural requirements” for that funding stream.

For more information on how to subscribe and to activate a complimentary one week trial to , please reach out to .