Protecting Your Grant Awards in an Era of Increased Scrutiny

 

EXECUTIVE SUMMARY

Recent policy changes at the Department of Transportation have placed up to $51 billion in previously awarded but not yet obligated federal transportation grants at risk of rescission. This white paper outlines the current situation, explains the vulnerability points in the grant process, and provides actionable strategies for protecting your organization’s awarded funding.

Key Takeaway: The period between grant award announcement and obligation represents a critical vulnerability. Grant recipients must act quickly to advance projects to the obligation stage to secure their funding.

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THE CHANGING GRANT LANDSCAPE

New Policy Direction

A recent policy memo from Department of Transportation leadership has established a new review process for competitive grant awards that have not yet secured fully executed funding obligations. This unprecedented approach targets several categories of projects for potential funding removal, including:

• Bicycle infrastructure
• Green infrastructure
• Electric vehicle charging stations
• Projects with equity components
• Climate resilience measures
• Environmental justice initiatives

What makes this policy shift particularly concerning is that it differs from typical administration transitions where new priorities affect future funding decisions rather than revisiting already awarded grants. As noted by Transportation for America, “This administration is setting the precedent that any project not underway can be undone when there is a new president.”

Scale of Potentially Affected Funding

The scope of at-risk funding is substantial:

• The Federal Highway Administration, Federal Transit Administration, and Federal Railroad Administration have a combined $51 billion in unobligated funds for non-formula programs
• Safe Streets and Roads for All: Only $515 million has been obligated across 979 grants, leaving approximately $2.4 billion vulnerable
• RAISE/BUILD program: Of the $7.6 billion announced for fiscal years 2022 through 2025, only about $1.25 billion has been secured and obligated

This represents a significant portion of the transportation infrastructure funding pipeline currently in limbo.

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UNDERSTANDING THE GRANT FUNDING PROCESS

To effectively protect your grant funding, it’s essential to understand the distinct stages in the federal funding process:

1. Award Announcement: When DOT announces a grant selection, this does not constitute receipt of funding
2. Grant Agreement: The federal government and recipient must negotiate and sign a funding agreement that details project scope, schedule, budget, and demonstrates availability of required non-federal matching funds
3. Obligation: This represents a binding commitment to pay out money and can only occur after the grant agreement is signed and all permitting and regulatory requirements are met
4. Reimbursement: Most DOT grants operate on a reimbursement basis rather than upfront payments; recipients spend their own funds and then request reimbursement

Critical Vulnerability: The period between award announcement and obligation is where funds can be canceled or reclaimed. Once funds are formally obligated, they have significantly stronger legal protection.

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PROTECTING YOUR GRANT FUNDING: ACTION PLAN

1. Accelerate the Obligation Process

The most urgent priority for grant recipients is to advance their projects to the obligation stage as quickly as possible:

• Ensure all necessary documentation for the grant agreement is complete and promptly submitted
• Expedite completion of environmental reviews, permitting, and right-of-way acquisitions that may be required before obligation
• Demonstrate that the project can reasonably expect to have all grant funds obligated ahead of any statutory deadlines
• If your project contains multiple phases, consider prioritizing the obligation of initial phases

2. Ensure Strict Compliance with Grant Requirements

Recipients should review and ensure compliance with all grant conditions to avoid legitimate grounds for clawback:

• Maintain comprehensive documentation of all program processes, progress, and impacts
• Ensure all reporting requirements are met completely and on time
• Establish robust grant management and compliance programs
• For financial reporting, ensure all financial reports submitted to various systems match exactly

3. Maintain Open Communication with DOT Officials

Proactive communication with agency officials may help preserve funding:

• If delays in meeting requirements are anticipated, contact agency officials early and often
• Stay informed about new policy guidelines that may affect funding status
• Build relationships with program officers who can provide guidance on navigating the changing landscape

4. Consider Strategic Project Modifications

Some recipients may need to evaluate strategic modifications to preserve core funding:

• Assess whether project components specifically targeted in the memo could be modified or funded through alternative sources
• Consider whether project descriptions or documentation could be adjusted to emphasize aspects aligned with current priorities while maintaining overall project integrity
• Evaluate phasing options that might allow critical components to proceed first

5. Understand Your Legal Position

While legal challenges may be possible in some circumstances, understanding your position is crucial:

• Recipients with obligated funds have stronger legal protection than those with merely announced awards
• Document all communications and decisions related to your grant to establish a clear record
• Consider consulting with legal experts who specialize in federal grant law if your funding appears at high risk

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WHAT IS A CLAWBACK?

Clawbacks are provisions that require already disbursed funds to be returned due to failure to meet specific requirements attached to the money. These differ from standard refunds as they typically include penalties and can be triggered by various conditions:

• Failure to meet timely completion requirements
• Missed milestones
• Inadequate reporting
• Failure to comply with sourcing requirements
• Other specific grant conditions

The federal government maintains broad authority to recover grant funds:

• Grant arrangements are treated similar to contracts in legal contexts
• The government possesses a right to recover funds deemed to be “illegally or erroneously paid out”
• Payments made under a misapprehension that grant conditions are being observed are recoverable
• The terms of existing statutes and regulations are automatically incorporated into grant agreements

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CONCLUSION AND NEXT STEPS

The current policy direction represents a significant shift in how federal transportation grants are being handled. Previously awarded but unobligated grants face unprecedented scrutiny, particularly those containing elements related to climate initiatives, equity considerations, and alternative transportation infrastructure.

For grant recipients, the key protective measure is to expedite the obligation process wherever possible. Recipients should also ensure strict compliance with all grant requirements, maintain open communication with DOT officials, and be prepared to consider strategic modifications if necessary to preserve core funding.

Going forward, recipients should closely monitor policy developments, as the administration may expand its review beyond competitive grants to other funding programs if current approaches prove effective.

Working with BKF Grants and Funding Team

The BKF Grants and Funding Team specializes in helping organizations navigate complex funding challenges. Our team of experts can provide:

• Strategic assessment of your current grant funding vulnerability
• Accelerated obligation support and documentation preparation
• Compliance review and remediation
• Strategic project modification planning
• Ongoing grant management support

Don’t wait until your funding is at risk. Contact the BKF Grants and Funding Team today to develop a comprehensive strategy for protecting your transportation grant funding.

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KEY REFERENCES

• Transportation for America, “USDOT’s New Memo Requires a Review of Competitive Grant Awards,” March 14, 2025
• Department of Transportation, “Grant Application Process and Additional Guidance,” 2025
• Holland & Knight, “Trump Administration Pauses Federal Financial Assistance,” January 2025
• U.S. Department of Justice, “Civil Resource Manual: Grants Breach Conditions”
• CohnReznick, “Federal Grant Compliance Checklist for Avoiding Clawbacks,” 2024
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