After $810 million in pocket rescissions, nonprofits with federal awards should check their status

The White House announced on September 25 that President Trump was using "pocket rescissions" to cancel federal funds Congress had already appropriated, five days before the fiscal year ended. The line items in its announcement add up to $810 million, though the statement calls the total "nearly $1 billion." The Government Accountability Office (GAO) says the law does not allow the president to withhold the money past its expiration, and nonprofits and states have sued. Organizations with federal awards, held directly or through a subaward, should check where their funding stands.

What the White House targeted

The announcement lists 11 items. The largest is $567 million in Department of Health and Human Services (HHS) funding for services to refugees and other non-citizens. Others include $70 million in Education Department international education funding, $56 million for Department of Housing and Urban Development (HUD) housing counseling, $25 million in education programs for non-citizens and $15 million for the Justice Department's Community Relations Service. Smaller items include money for the Department of Homeland Security, Treasury, the Minority Business Development Agency and the HHS Office of Minority Health.

The National Council of Nonprofits (NCN), summarizing the action on October 5, named four departments: HHS, Education, HUD and Justice. By our count of the White House list, the cancellations reach at least seven.

How a pocket rescission works

Under the Impoundment Control Act of 1974, a president can ask Congress to cancel funds and hold the money back for up to 45 days while Congress considers the request. The administration argues that sending the request within 45 days of the fiscal year's end lets it cancel the money unilaterally, Roll Call reported.

GAO disagreed in a September 29 letter to congressional leaders. Its preliminary review found that all 11 accounts were set to expire at the end of fiscal 2026, while Congress's review period ends no earlier than November 9. The proposals "do not permit the President to withhold the appropriations beyond the end of fiscal year 2026," GAO wrote, adding that "the President may not force the expiration of budget authority Congress has already enacted and did not rescind." NCN noted that when the Supreme Court let last year's pocket rescission go forward, it said its order should not be read as a final ruling on the merits.

Lawsuits, and one order

Roll Call reported on October 2 that California, Maine, Maryland, Michigan, New Mexico, Nevada and Oregon sued in federal court in Northern California, arguing the cancellations violate the Impoundment Control Act and the Constitution. The HEP-CAMP Association, which represents recipients of two federal programs for migrant and seasonal farmworker students, sued in Washington over $24.9 million. These are claims a court has not yet decided.

In the one order we found, the National Urban League and other housing counseling nonprofits sued HUD, the Office of Management and Budget and the president on September 29. The next day, U.S. District Judge Jia M. Cobb in Washington suspended the September 30 deadline for the $57.5 million Congress appropriated for HUD's Comprehensive Housing Counseling program, of which $56.1 million was proposed for cancellation. Her order keeps the money from lapsing until she rules on the groups' request for a preliminary injunction; it does not decide whether the cancellation was lawful. The government filed its fuller response on October 9, and the nonprofits may reply by October 19.

What nonprofits with federal awards can check

In our view, the following steps are reasonable now. This is not legal advice; have counsel review your award documents.

• Confirm your award status in writing. Ask your program officer, or your prime recipient if you hold a subaward, whether your funding comes from any of the 11 targeted accounts and whether it was obligated before September 30. GAO says the Office of Management and Budget withheld the proposed amounts from obligation.
• Read your termination and funding terms. Note what your award and any subaward say about funding availability, termination and reimbursement, and who must notify whom.
• Map your cash exposure. List open drawdowns, unpaid reimbursements and costs incurred in reliance on the award.
• Brief the board. Share the status, the exposure and a contingency plan.
• Track the dates. Watch the court dockets that touch your program and the November 9 date GAO identified.