Since October 1, 2025, the U.S. federal government has been operating under a shutdown caused by Congress's failure to pass new appropriations. For organizations relying on federal grants - whether applying for new awards, awaiting reimbursements, or performing compliance tasks - the shutdown is already disrupting standard grant cycles. This post dives into concrete examples from October 2025, explains the mechanisms driving delays, and offers guidance on how to navigate the storm.
Real-World Cases of Delays & Disruptions in October 2025
Here are a few documented examples and sectors already facing strain:
IRS furloughs threaten delayed taxpayer-related grants and services
As the shutdown enters its second week, the IRS announced it will furlough nearly half its workforce, leaving only about 53.6% of employees active. This disruption could cascade into delays in grant-related tax credits, the processing of nonprofit or similar filings, and tax-dependent compliance documents.
Airport and FAA staffing shortages slow infrastructure and aviation-linked grants
The FAA and air traffic control operations are under stress: staffing cuts are leading to flight delays in major hubs such as Newark, Denver, Phoenix, Las Vegas, and Burbank because some essential workers (air traffic controllers, TSA personnel) must work without pay. Those delays aren't just inconvenient for travelers-they indicate that aviation grants tied to infrastructure, expansion, or modernization might see slowed reviews, contract approvals, or disbursements.
Layoffs in federal agencies may stall grant review pipelines
The White House has already initiated layoffs across key departments, including Treasury, Education, Commerce, HHS, and Homeland Security's cybersecurity unit. As staffing at grant-administering agencies shrinks, the administrative backlog (review of proposals, compliance checks, audits) will only intensify.
States bearing costs temporarily with uncertain reimbursement
Many federally funded programs (for example, food assistance, health services, and social programs) are being funded by states to ensure continuity, with hopes of later federal reimbursement. But nonprofit and local agencies that normally receive direct federal disbursements are left waiting in limbo-if those funds don't arrive promptly, cash-flow stress sets in.
Legal ambiguity over back pay for furloughed federal employees
A new memo from the Office of Management and Budget (OMB) claims that furloughed workers "are not automatically entitled to back pay" unless Congress explicitly appropriates funds. If agencies themselves are uncertain about financing or staffing, they may be more cautious in approving new grants or releasing funds.
Why Grant Delays Are Occurring: Underlying Mechanisms
To understand how severe and wide the impact may become, it helps to look at the underlying causes behind the delays:
1. Appropriation lapse
Without an active appropriation for FY 2026, agencies lack legal authority to make new spending commitments. This means new grant awards may be frozen, even if applications have already been submitted.
2. Staffing cuts and furloughs
Agencies are operating with limited staff focused only on essential operations. This leads to slower processing of proposals, audits, compliance reviews, and disbursements.
3. Limited carryforward funds
Some agencies are using leftover or multi-year funds to keep critical programs running, but this applies only to specific programs tied to national security, public safety, or emergency response.
4. Legal and policy uncertainty
Agencies may delay decisions to avoid violating the Antideficiency Act, which prohibits spending without approved appropriations. The result is a cautious, risk-averse approach that slows all discretionary grant activity.
5. State and local bridging
States or local governments are temporarily funding federal programs to keep services operational. However, downstream partners - such as nonprofits or local service providers - often face delayed or reduced reimbursements as they wait for federal funding to resume.
What Grant-Seeking Organizations Should Do Right Now
- Review award terms and contingency clauses: Check for any "availability of funds" or suspension clauses that might apply during a shutdown.
- Communicate with grant officers: Contact your program officer or agency representative to confirm contingency plans and expected timeline changes.
- Document everything: Keep detailed records of communications, notices, and delay confirmations.
- Manage cash flow carefully: Plan for delayed reimbursements and adjust project spending where necessary.
- Monitor official announcements: Follow updates from Grants.gov, the Federal Register, and OMB for formal notices about funding pauses or reinstatements.
- Diversify funding sources: Explore state-level grants, philanthropic foundations, or local initiatives to reduce dependency on federal funds.
- Advocate collectively: Join sector coalitions or associations to push for relief measures and emergency funding solutions.
Outlook and Key Metrics to Watch
- Shutdown duration: The longer the funding gap, the greater the backlog and financial strain on grantees.
- Congressional action: Any continuing resolution or budget deal will determine when and how quickly funding resumes.
- Agency priorities: Grants tied to public safety, defense, or infrastructure may continue while discretionary programs remain paused.
- Legal decisions: OMB or GAO rulings on appropriations and back pay will shape agency behavior.
- Sector-specific impacts: Research, DEI, climate, and arts programs may face deeper cuts than infrastructure or security-related grants.
The October 2025 shutdown is already reshaping the federal grants environment. Delays in approvals, disbursements, staffing, and compliance are rippling through agencies and recipients alike. For organizations dependent on federal awards, this period demands vigilance, flexibility, and proactive planning. With the right preparation, many projects can endure the disruption and resume smoothly once funding is restored.
Sources: Reuters, AP News, Washington Post, Stateline, OMB, and U.S. Department of Transportation.
In case you've missed those:
October 2025 U.S. Federal Grants Update: Shutdown Delays, Funding Reversals, and New Awards
Stay updated on the latest U.S. government grant news - shutdown delays, funding reversals, and new infrastructure awards announced in October 2025. [read more]
