Key Steps For Traversing Federal Grant Terminations - read and take action

Sep 13, 2026

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Guidance explains how recipients should triage federal grant terminations after receiving a written notice from the relevant agency. It outlines obligations under the Code of Federal Regulations, including confirming the termination reason and effective date, stopping terminated work, and promptly addressing any notice ambiguities. It also covers coordinating with subrecipients and contractors, documenting costs and impacts separately, and considering advocacy or scope modification. The material further compares challenging the termination through APA judicial review versus proceeding with closeout to recover allowable costs.

LanguageEnglish

CategoryLetters

FormatPDF

Pages5

Reading Time2 min

AccessFree to download

Initial Triage Efforts Upon Receipt of Termination Notice

Advocacy Efforts to Consider

Determining Whether to Challenge the Termination or Proceed With Closeout

Challenging the Grant Termination

Key Steps For Traversing Federal Grant Terminations By Amy Fuentes and David Black (May 28, 2025) Following implementation of the U.S. Department of Government Efficiency's cost efficiency initiative the Trump administration terminated billions of dollars in grant and cooperative agreement awards across various federal agencies. Recipients of these federal agreements cover a range of industries, and include companies, nonprofits, and universities and colleges. Such widespread terminations are unprecedented. For grantees, the unexpected terminations or alterations in funding may have significant consequences, and necessitate a thorough understanding of the legal rights and obligations involved, either in challenging such terminations or engaging in grant termination settlements and closeout procedures. The following guidance is designed to assist recipients as they triage their options upon receipt of a termination notice and decide whether to dispute it or proceed to grant closeout. 1. Initial Triage Efforts Upon Receipt of Termination Notice The recipient should first ascertain the reason for the grant termination. Under Title 2 of the Code of Federal Regulations, Section 200.341(a), federal agencies are required to provide a written notice detailing the specific reasons for the termination, the effective date and, if the termination is partial, the portion of the award to be terminated. Any omissions or ambiguities should be promptly addressed in writing. Upon receipt of a termination notice, the recipient should stop all terminated project work immediately, as the government has no obligation to reimburse the costs of work performed after the effective date of the termination. The recipient should notify all potential partners, such as subrecipients and contractors, of the grant's termination and provide clear instructions consistent with the government's termination notice. The recipient should state clearly that future work under subawards and contracts will not be paid. The recipient should obtain a written confirmation of receipt of the termination notice from all parties involved. After stopping work, a recipient should thoroughly document all costs and impacts associated with the termination. Ensure costs incurred responding to the termination are accounted for separately from regular operational expenses. This includes costs related to legal advice, storage or disposition of government property, transportation of employees, and settlement or termination of subrecipient agreements. Separate timekeeping numbers or codes should be established to collect the costs of employee time spent responding to the termination. As with other allowable costs under the applicable federal cost principles, the recipient must collect documentation and proof of costs to seek reimbursement, either through a modification of the agreement, if advocacy efforts succeed, or through the grant closeout process. Amy Fuentes David Black 2. Advocacy Efforts to Consider When faced with a termination notice for a federal grant, recipients should consider whether the agency might be open to negotiating a scope change before proceeding with project termination and closeout. This strategy can help preserve valuable components of the project, especially if there is a business interest in maintaining certain elements. Agencies may be willing to modify the project's scope after issuing a termination notice, particularly if the modifications can be shown to align with current administration priorities. This flexibility can potentially allow recipients to retain significant portions of their projects. Moreover, recipients should not overlook the possibilities of political and policy advocacy. Engaging with members of Congress and governors, especially those from the affected districts or states, or those aligned with the president's party, can result in a reconsideration and reversal of a grant termination decision. These fi

FAQs

What must recipients do immediately after receiving a federal grant termination notice?

Recipients should determine the reason and effective date stated in the written notice, stop terminated project work immediately, and promptly address omissions or ambiguities in writing.

How should costs and impacts be handled during a grant termination?

Recipients should document all termination-related costs and impacts separately from regular operating expenses, keep supporting proof of costs, and collect evidence for reimbursement through an agreement modification or grant closeout.

Should recipients challenge a termination or proceed with grant closeout?

Recipients must weigh whether to contest the legality of the termination via APA-related judicial review or accept the decision and pursue recovery of allowable costs through the closeout process.

Sep 13, 2026

Upload by Ben