News & Insights

Recent developments from the U.S. Supreme Court have significant implications for nonprofit organizations that rely on federal funding. A series of legal battles over the executive branch’s ability to halt federal disbursements have created uncertainty, affecting organizations with government grants and contracts. 

Supreme Court Halts Order to Release USAID Funds 

On February 27, 2025, Chief Justice John Roberts issued a stay on a lower court ruling that required the Trump administration to release nearly $2 billion in U.S. Agency for International Development (USAID) funds. This ruling temporarily blocks the order from the lower courts issued on February 25, 2025, setting a deadline of February 26, 2025 to complete all payments by a court-assigned deadline and allows the administration to continue reviewing the invoices received for work completed under USAID contracts and assistance agreements.  Plaintiffs, which include international aid organizations and others, must respond by the end of the week.  For nonprofit CFOs overseeing federal funding streams, this development reinforces the need for contingency planning, particularly for organizations dependent on USAID funding. The decision raises concerns about cash flow predictability and funding reliability for organizations working in global health, humanitarian relief, and international development. 

Other Legal Challenges to Domestic Federal Funding 

In addition to the cases regarding foreign aid freeze, multiple legal challenges are in progress for domestic funding freezes on federal assistance, with Democratic-led states filing lawsuits to block the Trump administration’s funding freeze. One notable case in Rhode Island involves a coalition of nearly two dozen states seeking a preliminary injunction against the domestic federal assistance funding pause.  The temporary restraining order (TRO) remains in place, citing concerns that the administration’s efforts: 

• Violate the constitutional separation of powers, as Congress holds the authority over federal spending. 
• Disrupt critical programs related to renewable energy, public services, and social programs. 

For organizations, this legal uncertainty means delays in federal grant disbursements and program funding. CFOs should assess how a prolonged legal battle could impact budgeting, liquidity, and service delivery.  Following legal challenges and political pushback, the situation remains fluid, with further court rulings expected in the coming months.  The concerns are a potential constitutional crisis, given that Congress controls federal spending while the executive branch is responsible for implementation. The administration initially described the halt as a brief delay, but challengers argued that such a move is both harmful and unconstitutional.  For nonprofit financial leaders, this underscores the importance of: 

• Monitoring federal policy shifts that could impact grant payments and contract renewals. 
• Diversifying revenue sources to reduce dependency on federal funds. 
• Engaging in advocacy efforts to ensure the nonprofit sector’s voice is heard in legislative and judicial proceedings. 

Key Takeaways for Nonprofit CFOs 

• Federal funding uncertainties remain a risk due to ongoing litigation and executive actions. 
• Short-term financial planning should include contingencies for potential delays or disruptions in grant disbursements. 

Legal outcomes may influence future nonprofit-government funding relationships, making compliance and contract oversight critical.  As legal proceedings unfold, nonprofit CFOs should stay informed and work closely with their legal and government relations teams to navigate this evolving landscape. 

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References 

Business Insider. (2025, February 27). The Supreme Court just handed the Trump administration a win on USAID funding freeze.   Associated Press. (2025, February 26). Supreme Court hands Trump first win over $1.5bn USAID payment freeze.   Associated Press. (2025, February 25). White House rescinds funding freeze amid legal battles.   CNN. (2025, February 27). Chief Justice John Roberts pauses order for Trump admin to pay $2 billion in foreign aid by midnight.    Written by Lee Klumpp. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com