When a signed Federal award isn’t a safe bet anymore

Will farmers, nonprofits, ag service providers and other rural organizations across America be kissing their federal funding goodbye before 2027?

The Office of Management & Budget (OMB) published a new rule in the Federal Register on May 29 to allow them to change the terms of a loan agreement after they’ve been signed, make more demands on ag administrators without increasing support, pull funding for any reason and disallow appeals. This rule will have a drastic impact on how many ag projects are planned, funded and those involved. The good news is that you have a say in this.

In a recent webinar about this rule, CEO of Farm Commons Rachel Armstrong detailed the concerns facing ag professionals today and what they can do to push back. Comments from the public on this new rule have the power to prevent it from taking root, but they must be submitted by July 13, so time is short. This article is not legal advice and is for educational purposes only.

You might be wondering what a “rule” is. A statute is a law passed by Congress; a rule is an instruction manual published in the Federal Register for how to carry out that law. After a rule is proposed it becomes open for public comment. If it passes it becomes a final rule, goes into the Code of Federal Regulations (CFR) and becomes legally binding.

There are five key issues with this rule which range from discouraging to alarming.

Issue #1: The looming threat of termination.

Federal agencies will now have the ability to cancel grants at any time for any reason, and you could be left holding the bill. The new rule grants the federal government the power to:

• Cancel your award whenever it determines it’s an unnecessary draw on their finances
• Terminate grants more easily than ever before
• Block you from appealing this termination
• Limit how much money you can recover if they cancel your project

If a project could vanish overnight, partners may not want to get involved at all. If there is never a point where federal funding is guaranteed, an ominous cloud hovers over all present and future ag related projects that depend on federal grants.

Issue #2: Affected programs are not clearly defined.

Armstrong said, “We can’t tell exactly which programs this rule applies to, so if programs in the uncertain pile apply to you, please comment.”

The ambiguity shipwrecks confidence in budgeting, hiring, signing leases, committing to partners and planning multi-year projects. This uncertainty alone can destabilize operations, discouraging trust and participation in federal programs, posing a greater risk to smaller organizations and creating greater administrative burden as they prepare as if it does apply, track updates and develop contingency plans.

Issue #3: Increased burden on administrators.

In the wake of these changes, administrators are being left with the burdens of E-Verify, increased documentation requirements for payment requests, no fixed-amount subawards (subgrant agreements where payments are based on meeting set requirements and not just the actual cost) and no increase in de minimis indirect cost rate to help cover all the extra administrative work.

Issue #4: Partnerships become riskier.

If someone involved in a project is involved in a scandal, it can lead to loss of the federal funding award, even if the scandal is not tied to the project in any way. The increased risk can cause organizations to avoid collaboration. For example, if a partner is found in violation of Diversity, Equity and Inclusion (DEI) policies, even if it’s not related to your project in any way, your funding can be pulled.

Issue #5: Post-award conditions can change without warning.

Soon they may change the terms of your agreement after the agreement has been signed and you’re halfway into your project. Under the new rules, requirements that were not part of your signed agreement can be added by the federal government, meaning they can pull your funding for not upholding terms you never even agreed to.

Crafting a Comment

Concrete examples of the real-life dilemmas this rule will cause you will strengthen your comment. Armstrong gave many suggestions for how to craft your comments, including:

• What investments do you make after you receive specific federal awards?
• How much time and money do you spend in reliance on federal awards, after you receive a signed award? For example, time and money spent recruiting new staff and putting partner MOUs in place or implementing project management?
• What contracts, loans, leases and other commitments do you enter into after you receive a signed federal award?
• What will (or has) happened to your entity if the project is terminated halfway through?
• What financial, reputational, mission and other losses would your entity suffer?

You may think your comment doesn’t matter when in fact, any comments you make on this rule shape the administrative record. Public opinion can be very influential on future changes even if the rule goes through in the present. The rule will be finalized on July 13, and by October we could be seeing the effects applied to current grants.

Your comments can also be sent to your congressional delegations. Since your comment will become part of the public record, don’t share any information you want to remain private.

Armstrong reminded us, “Your work matters. Your time and energy are valuable.” The time to act is now.

For more information or to request a comment worksheet, reach out to Farm Commons at 218.302.4030 or info@farmcommons.org.

by Joseph Armstrong