How the Government Shutdown Affects Federal Grants

The federal government shutdown has had a significant impact on varying national interests and departments, among them, the federal grants that are distributed to states, universities, organizations, and veritably all grant recipients. During the shutdown period, grant applicants and recipients should remember that the majority of government departments that oversee these grants are closed, however, there are some guidelines set forth by the Division of Research & Economic Development that were put in place before the shutdown that may answer some general questions.

Please remember that the following are generalizations, and each specific division of the government, such as the Department of Agriculture (USDA), the Department of Energy, and the Department of Defense may have individual rules of operation during the government shutdown.

For the most part, funds distributed to existing grantees should continue as planned, in that any existing funds that were obligated to the grantee before the shutdown occurred are still available and will be distributed as planned for the current year. Unfortunately, planned funding for the following years (2014 and beyond) will not be processed, and there are certain amendments to consider for this general rule.

For example, the National Science Foundation (NSF) will not be processing any payment requests during the shutdown, while the National Institutes of Health (NIH) will reportedly process some, but not all of the payment requests garnered during this time due to a limited staff. Extensions or alterations to an existing funding request, such as supplements or budget revisions, will also not be considered.

The federal government shutdown will have the most impact on new applicants and new grant proposals. Essentially, for all grant proposals submitted before October 1, 2013, the review process will be delayed. Grant applicants who have not yet submitted a proposal are advised not to send in a new proposal until the shutdown is resolved, due to the limited number of staff available to process any new queries. Most likely, existing deadlines for specific grants with an already specified deadline or required timeframe will be extended due to the current situation, although for the majority of grants, this extension is not set in stone just yet. Individual program officers will not also be available by phone, email, or any other means of communications during the shutdown, however, the Federal Grants' blog on their website, Grants.gov, has stated that they "will remain in an operational status, but with reduced federal support staff presence, should a lapse in appropriations occur. In addition, we anticipate that the Grants.gov Contact Center will remain available, and provide assistance to callers."

Basically, this means that all federal grants questions should first be directed to the general federal grants department instead of the individual program to ensure a timely response.

That said, virtually every federal department that distributes grants has its own unique contingency plan in place in the event of a shutdown, and applicants as well as current grantees that are funded by a specific department or program may want to review the individual agency contingency plans. Most of the agencies' plans have been updated in the past 60 days or so in anticipation of the government shutdown, ensuring that concerned parties are receiving up-to-date material. For more information, a detailed list can be found at http://www.whitehouse.gov/omb/contingency-plans.

Though there is still limited time to avoid the debt crisis, grantees will also feel some aftershocks if the debt ceiling is not raised due to the government shutdown and stalemate. In order to pay debts due, (over two-thirds of which are within the United States to individual bondholders or institutions), the government needs a certain allotted amount of funds available to distribute. Prioritizing which lenders should be paid is key, and without a higher debt ceiling, the available funds to federal grant programs can potentially dry up, with grants distributed to both states and individuals or organizations indefinitely put on hold as well. This can domino to affect consumers, investors, and other parties involved.

As an example, even vendors who don't serve the federal government but instead sell to state and local governments who receive federal grants and loans could potentially see sales dry up as these entities cut back their own purchases due to the shocks to their revenues and their borrowings.

Hopefully, a resolution will be put in place before too many institutions are affected, and current grant recipients lose any promised or recurring funds. However, both existing grantees and potential applicants should be aware of the issues involved with the government shutdown to ensure that nobody, regardless of what stage of the grant process they're in, gets caught off guard.