Navigating Federal Funding Uncertainty: Preparing for a Possible Government Shutdown in 2023
Federal funding is set to lapse at the end of the federal government’s fiscal year, meaning a government shutdown could occur on October 1, 2023. Shutdowns have become increasingly common in recent history, with 21 in the last five decades. While many past shutdowns lasted mere days, the most recent shutdown—from late December 2018 to late January 2019—was the longest in history, lasting for 35 days.
What might a shutdown mean for recipients of federal financial assistance? As a starting point, a grantee’s notice of award obligates the full amount of grant funding awarded, so absent a barrier to performance (such as inaccessibility of federal lands or facilities), the grantee will generally still be able to perform and incur allowable costs during a shutdown.
That said, while federal grantees are less likely than federal employees to be directly impacted by a lapse in federal funding, the possibility of a shutdown should not be taken lightly. Indeed, in recent remarks to the Congressional Black Caucus Foundation, President Biden called out research institutions and Head Start programs as among those a shutdown could detrimentally impact.
In preparing for a possible shutdown, federal grantees would do well to consider two areas of potential impact: (1) administrative grant management challenges; and (2) potential physical hurdles to project accomplishment.
The following table provides key considerations to assist in planning and preparing for the possibility of a shutdown:
| Government Shutdown Issue | Considerations |
| Administrative Grant Management Challenges | |
| Most grant managers in federal employ will be furloughed | Expect delays, at best, in prior approvals for routine matters. At worst, expect prior approvals will not be available.
For pending new awards or continuation applications, consider requesting (if possible) that award decisions be fast-tracked so that funds are obligated and available prior to any shutdown. |
| Payment systems | Payment systems through which grantees draw down federal funds (e.g., PMS and ASAP) will likely continue to be operational during a government shutdown.
However, payment systems are of such import that grantees should confirm their ongoing availability with their grants officer/project officer in advance. |
| Project Accomplishment Challenges | |
| Access to Federal Facilities and/or Lands | Where project activities take place in federal facilities or on federal lands, grantees should consider potential barriers to access.
Inaccessibility will likely occur on a case-by-case basis, dependent on factors including: the funding agency, the nature of the facility and/or land, and the extent to which federal staffing is essential to day-to-day access. If access to federal facilities or lands is needed by any contractors engaged to support grant-funded activities, grantees should also consider the impact to their contractual obligations. |
| Project performance delay | Keep in mind that, if access to federal facilities and/or lands inhibits project performance, federal grantees can:
|
| Impact of any delay on “deliverables” | Generally, grants are best-efforts agreements, i.e., the grantee is compensated for best efforts in performance of the agreed activities, always taking into account whether a grantee’s costs of doing so are reasonable.
Still, grantees should consider reviewing the terms of their grant agreements for any indication of firm deliverable obligations. If such language appears in an agreement, it could later be used to disallow costs for incomplete deliverables (despite the typical baseline “best efforts” rule). |
| Impact of any delay on current use and associated cost of personnel | A grantee’s lack of access to federal facilities and/or property may result in grantee personnel unable to perform their typical project-related work. In this case, the salaries/wages of such employees will not likely be chargeable to the awards that typically fund their work. All costs charged to an award must be both reasonable and allocable to that award. Where work depends on access to federal property, personnel costs are likely to be considered either unreasonable or not properly allocable to the award.
Grantees facing such a circumstance should consider the extent to which it might be possible to reorganize staff activities to take advantage of a possible carry-over request or no-cost-extension for when the government re-opens. |
| Impact of any delay on indirect costs | If a shutdown lasts for, at most, a week or two, the impact to indirect costs will be negligible. If a shutdown persists for longer, any resulting decrease in direct cost activities may knock a grantee’s indirect rate out of alignment with actual experience of costs incurred in the current period.
Consider engaging with your finance team in advance of any anticipated shutdown to plan for this possibility. Should project activities be suspended for a lengthy period, adjustments should be made. |
If you have any questions on matters of federal grants, please contact Rosie Dawn Griffin (rgriffin@feldesman.com) or Scott S. Sheffler (ssheffler@feldesman.com) or call 202.466.8960.
