Many of the executive orders ("EO") and actions1 recently issued by the new administration directly impact recipients of federal funds, including exempt organizations, non-governmental organizations and universities.
In this new and continuing series, we will summarize these specific EOs and what they mean for exempt organization and higher education sector, starting below with a review of four EOs and actions that are expected to have a significant impact on their operations, as well as those of other federal contractors and the private sector in general.
1. Memorandum for the Heads of Departments and Agencies (February 6, 2025)
This memorandum "directs the heads of executive departments and agencies to review all funding that agencies provide to NGOs. . . to align future funding decisions with the interests of the United States and with the goals and priorities of [the current] Administration, as expressed in executive actions."
Although the impact of this memorandum is unclear at the moment, reviewing executive orders and the current administration's policy positions may help NGOs determine the alignment that is being considered, including the intent off the 2 EOs reviewed in item 2 These two EOs work together and will likely have an impact on federal government-funded activities in the foreign policy space.
2. America First Policy Directive to the Secretary of State and Reevaluating and Realigning United States Foreign Aid (January 20, 2025)
In the "America First Policy," the Secretary of State is directed to " issue guidance bringing the Department of State's policies, programs, personnel, and operations in line with an America First foreign policy, which puts America and its interests first." Additionally, changes to the rules governing the spending of federal funds outside of the US for purposes such as international aid and development are expected once the Secretary of State issues guidance under the America First Policy.
The "Reevaluating and Realigning United States Foreign Aid," EO directs "a 90-day pause in United States foreign development assistance for assessment of programmatic efficiencies and consistency with United States foreign policy."It also "directs a review of US foreign assistance programs by the State Department in consultation with the director of OMB."2
The 90-day pause has been challenged in the courts, and it is unclear where this directive will stand in the coming weeks. However, exempt organizations and universities that receive federal funds directly or indirectly have already begun receiving stop work orders ("SWOs"), and USAID staff have been put on administrative leave since the EO was issued.
Similarly, the NIH Freeze on communications and travel is providing uncertainty about whether NIH funds can continue to be used for the intended contractual purposes by funding recipients. This will likely have an impact on research and other grants at exempt organizations, universities, companies and research institutions. We expect more information about NIH funding and activities in the coming weeks.
Organizations and institutions that receive federal funds may want to review their contracts for termination, force majeure clauses or similar provisions that allow a funding organization (such as a prime funder) to stop work on an agreement for a set period or to terminate an agreement due to work stoppages or any Law or decision, order or judgment of any Governmental Authority. Recipients of such funds should plan to receive communications to this effect, and prepare to assess the impact this will have on their programs and budgets. These EO's have already impacted the international development sector, and this will continue to evolve.
3. Ending Illegal Discrimination and Restoring Merit-Based Opportunity (January 21, 2025)
This EO orders "all executive departments and agencies to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements." It further orders "all agencies to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities."
Compliance with this EO will likely include updates to the hiring and employment practices of exempt organizations and universities, as well as those of other federal contractors, since previously required contract clauses relating to equal opportunity and affirmative action are likely to be excluded treated as unenforceable provisions.
More specifically, this EO seeks to end certain practices within the federal government and private sector, including rescinding past executive orders that are considered to impact "private-sector DEI preferences, mandates, policies, programs, and activities" in the following areas:
- Employment and Hiring Practices
Effective April 21, 2025, this EO rescinds EO 11246 issued in 1965, and also directs that "the employment, procurement, and contracting practices of Federal contractors and subcontractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation's civil rights laws." EO 11246 had prohibited federal government contractors from discriminating based on race, color, national origin, religion, sexual orientation, or gender; and required contractors to develop detailed affirmative action programs as outlined in its implementing regulations.
- Shift in OFCCP activities
This EO also directs the Department of Labor's OFCCP (Office of Federal Contract Compliance Programs) to stop: "promoting 'diversity;' holding Federal contractors and subcontractors responsible for taking 'affirmative action;' and allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin."
- New federal contract clauses
Another aspect of this EO is the requirement of new federal contract provisions that must be included in every federal contract or award:
- "Requir[ing] the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government's payment decisions for purposes of section 3729(b)(4) of title 31, United States Code3; and
- Requir[ing] such counterparty or recipient to certify that it
does not operate any programs promoting DEI that violate any
applicable Federal anti-discrimination laws."
It is not yet clear how these clauses will interface with the standard Federal Acquisition Regulation (FAR) clauses that are generally included in government contracts and grants, or the impact on funded programs that may specifically be for "DEI" activities.
- Enforcement Actions and Investigations
Of particular note, this EO includes specific investigative and enforcement directives to encourage the private sector to end illegal DEI discrimination and preferences and advance the policy of individual initiatives, excellence, and hard work.
These include directing "the heads of all agencies and the Attorney General, in coordination with the Director of OMB, to submit a report by July 8, 2025 (120 days) containing recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI." Further, "this report will include a proposed strategic enforcement plan, including a plan of specific steps or measures to deter DEI programs or principles (whether specifically denominated "DEI" or otherwise) that constitute illegal discrimination or preferences.
As a part of this plan, each agency is directed to identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars," as well as other strategies, litigation and potential regulatory action or sub-regulatory guidance.
Publicly traded companies, exempt organizations and universities that meet these criteria may want to consider the potential for a future compliance investigation in connection with their "DEI programs and principles" and anticipate review of the pending report with enforcement recommendations.
In Part 2 of this series, we cover more EOs expected to impact exempt organizations and higher education, including the Ending Radical and Wasteful Government DEI Programs and Preferencing and Additional Measures to Combat Anti-SemitismEOs.
Footnotes
1 For more details, the Council on Nonprofits is tracking EOs that specifically impact the nonprofit sector. The current administration also offers a complete list of EOs and actions on the White House website. And, for general background on executive orders, visit the Library of Congress' overview on Executive Orders.
2 The Office of Management and Budget (OMB) issued Memorandum M-25-13 on January 29, 2025, pausing funding for financial assistance programs that "may be implicated" by President Trump's recent Executive Orders. This memo was rescinded, and it and the related EO's regarding funding pauses are currently subject to ongoing litigation.
3 Note that the first clause includes a reference to the False Claims Act, however, it is currently unclear how the administration will use this to further enforce the directives in this EO.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
