Sneak Preview: Grantees, Agencies Prepare for Impacts from Federal Shutdown
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The inability of Congress to reach an agreement as of Oct. 1 on federal fiscal year (FY) 2026 spending legislation to fund government operations and agencies has led to a lapse in appropriations, along with a government shutdown that could severely hamper the work of grant recipients and their funding agencies, depending upon its duration.
In turn, the Office of Management and Budget (OMB) released an FAQ document to inform federal agencies how to oversee obligations for grants and contracts during the shutdown. The FAQ outlines federal statutes and requirements that impact government functions when there is a lapse of appropriations. It points out that the Antideficiency Act prohibits a federal agency from incurring — except in limited circumstances — a new obligation by signing a new grant, or by extending or renewing a grant, when the appropriation for that obligation has lapsed or not yet been initiated.
The limited circumstances — known as “excepted activities” — are when: (1) a statute expressly authorizes an agency to obligate funds in advance of appropriations; (2) the function addresses emergency circumstances, such that the suspension of the function would imminently threaten the safety of human life or the protection of property; (3) the function is necessary to the discharge of the president’s constitutional duties and powers; or (4) the agency must continue the function, in the absence of appropriations, because its continuation is “necessarily implied” from the continuation of other authorized activities. In these circumstances, an agency may incur the obligation, but it cannot reimburse the grantee until appropriations are enacted.
The White House, as of Oct. 1, is furloughing hundreds of thousands of federal employees due to the shutdown. The FAQ states that routine, ongoing operational and administrative activities relating to grant administration cannot continue at the federal level when there is a lapse in funding. Therefore, agency employees who are paid with annual appropriations and who perform an activity associated with grant administration (including oversight, inspection or accounting) should generally not continue to work during a lapse in appropriations. However, when performance under a previously issued grant is not impacted by such funding lapse, the grantee may continue to proceed with its work during this period, which led to the inclusion of federal employee oversight questions in the FAQ.
(The full version of this story has now been made available to all for a limited time here.)
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