Federal Grants and Contracts Have Changed - Make Sure You Know What You're Signing

According to a recent Congressional Report, in FY2024, the federal government provided an estimated $1.1 trillion in federal grants to state and local governments.  These grants provided funding for a myriad of initiatives such as assistance to public safety organizations, infrastructure improvements, transportation projects, and community development.  As a result, most local governments likely received some sort of federal funding.  Whether it is from a direct grant or as some sort of pass-through entity, such as a sub-recipient on a grant, it is likely that some of your local government’s activities are funded by federal dollars.

While there have always been heavy strings attached to the use of federal funding on local projects, the current presidential administration is attaching requirements to federal funding programs in an unprecedented manner.  Regardless of your jurisdiction’s politics, it is critically important for you to understand the scope of what is being required in order to receive federal funding and whether your jurisdiction can actually comply with the evolving funding requirements.

For example, some federal funding agreements contain language that requires a jurisdiction to assist with the enforcement of federal immigration laws, which may be in conflict with state law restrictions.  Other contracts may include language seeking to limit diversity and inclusion efforts, without defining what those efforts are, or requiring strict compliance with the more than 170 executive orders that have been issued in 2025, regardless of any ambiguities that exist in such orders.  Most significantly, almost all of these funding programs utilize different contractual language and seek to impose different levels of compliance.

To complicate matters even more, there have been hundreds of lawsuits filed against the current administration, which may affect the ability of the federal government to require compliance with such funding requirements.

Due to the ever-evolving landscape as well as these ambiguities, it is crucial for local jurisdictions to closely review any agreements that provide federal funding, which include direct agreements with the federal government as well as sub-recipient agreements with the state, a county or even a nonprofit organization.  It doesn’t matter if the agreement relates to a funding program that your jurisdiction has participated in for years or if this is the first time you have an opportunity to receive funding.  Language in these agreements is changing on a seemingly daily basis, so it is vital to review each agreement line by line to ensure you can comply before signing and accepting federal funding.

Why is this important you might ask?  Specifically, the current administration has indicated that it plans to aggressively use the False Claims Act as an enforcement tool to ensure compliance with newly added funding requirements.  The administration has indicated it will utilize criminal actions when possible, and is encouraging private lawsuits to assist with enforcement.  In other words, if you agree to a requirement in a funding agreement and then fail to abide by such requirement, it is possible that the federal government or private attorneys may sue your jurisdiction under the False Claims Act, and in some situations, the federal Department of Justice may in fact seek criminal charges against individual officials.

For all of these reasons, our office is strongly advising clients to slow down and read the fine print.  Do not assume that the funding agreement you are signing is the same as every other year—because it likely is not!  Seek assistance from our office or your grant administration consultants as needed, but at a minimum, make sure you know and understand what you are signing.