Federal Funding Updates

On April 11, the Department of Energy issued a “policy flash” indicating a change in policy related to indirect cost recovery for institutes of higher education (IHEs). DOE has stated that they “will no longer use the negotiated indirect cost rate for grants awarded to IHEs. Instead, it is setting a standardized 15 percent indirect cost rate for all grant awards to IHEs.” APLU, AAU, and ACE have already filed a legal challenge to this policy change, and a temporary restraining order has been issued April 16. UCSC and UCOP are evaluating and will advise on next steps. If you have a pending DOE proposal, contact your OSP analyst with any questions.

Over the last few days we have received concerning news around dramatic cuts and funding rescission of existing grants and cuts to staff at the National Endowment for the Humanities (NEH). These cuts are targeting a range of programs at universities as well as scholarly societies and humanities councils.

Targeting the NEH, as well as the Institute of Museum and Library Services, impacts humanities and arts research at UC Santa Cruz that contributes vital perspectives to the university’s broader intellectual ecosystem. UC Santa Cruz is known for its interdisciplinary ethos and commitment to public and community engagement and scholarship and creative work that critically examines culture, history, ethics, and representation. This work, which crosses across all disciplines, not only advances academic knowledge but also enriches public discourse and informs more just and imaginative futures.

Much like we have seen with decisions from NIH, NSF, and other agencies that have had a direct impact on research, these decisions threaten not only individual research initiatives and fellowships, but also the infrastructure that supports cross-disciplinary collaboration and public engagement.

As we seek clarity on the actions being taken by NEH we ask principal investigators to contact the Office of Research by contacting research@ucsc.edu. If you receive any notice from a sponsoring agency that indicates a change or pause in your award, please forward it to ospdocs@ucsc.edu immediately.

On April 4, a federal district court judge issued a final judgment and permanent injunction blocking the Trump administration from cutting National Institutes of Health payments for research indirect costs. This action is related to litigation of three lawsuits, including the one detailed below. The government subsequently filed an appeal on April 8, 2025.

This follows the temporary restraining order issued on February 10, where the federal judge temporarily blocked the Trump administration from reducing health research grants based on a lawsuit filed in the U.S. District Court for the District of Massachusetts. In this lawsuit, the attorneys general of 22 states argued that NIH’s abrupt decision to set a 15% cap on payments for facilities and administrative costs (F&A) linked to research would cause major harm to institution budgets, jeopardizing critical operations and medical research. As the State of California is a party to this lawsuit, California state entities including the UC system are temporarily protected from this reduction.

On March 14, the Fourth Circuit granted a stay of the preliminary injunction described below, pending appeal. This stay means that the named agencies may continue with proceedings based on the EOs until further litigation is concluded.

This follows the action on February 21, 2025, wherein a federal district judge granted a preliminary injunction on parts of two executive orders: Ending Radical and Wasteful Government DEI Program and Preferencing (Sec. 2(b)(i) “Termination Provision”) and Ending Illegal Discrimination and Restoring Merit-Based Opportunity (Sec. 3(b)(iv) “Certification Provision” and Sec. 4(b)(iii) “Enforcement provision”).

Under the preliminary injunction, the named agencies could not “a. pause, freeze, impede, block, cancel, or terminate any awards, contracts or obligations (“Current Obligations”), or change the terms of any Current Obligation, on the basis of the Termination Provision; b. require any grantee or contractor to make any “certification” or other representation pursuant to the Certification Provision.”

The agencies named as defendants in this case include the Departments of Education, Labor, Interior, Agriculture, Energy, Transportation, Justice, and Health & Human Services, National Science Foundation, and the Office of Management and Budget.

On February 25, 2025, a federal district judge granted a preliminary injunction enjoining the administration from implementing, giving effect to, or reinstating under a different name the blanket freeze on disbursement of Federal funds.

On Friday, February 7 the National Institutes of Health released an update to its guide notice 2024 NIH Grants Policy Statement. The new guidance effectively lowers the Facilities and Administration (F&A) costs to 15 percent. It states that the guidance reflects “NIH’s updated policy deviating from the negotiated indirect cost rate for new grant awards and existing grant awards, effective as of the date of this Guidance’s issuance. Pursuant to this Supplemental Guidance, there will be a standard F&A rate of 15% across all NIH grants for indirect costs in lieu of a separately negotiated rate for indirect costs in every grant.”

As you are aware, F&A costs support the specialized infrastructure for our research across campus, including facilities and instrumentation, IT services, compliance personnel and utilities. These costs are determined through a rigorous federal process.

As you are aware, F&A costs support the specialized infrastructure for our research across campus, including facilities and instrumentation, IT services, compliance personnel and utilities. These costs are determined through a rigorous federal process.

It is important to note that the new guidance does not impact the direct funds on NIH awards.

This is a major shift in federal funding and has serious implications for the biomedical research community. We are in close communication with our UC partners to understand the impacts and next steps related to this update.

As we seek clarity on this change, we ask principal investigators to refrain from taking any immediate action. For those with upcoming NIH submissions, the Office of Research will be updating this site with guidance for preparation of new budgets. For specific questions, please contact research@ucsc.edu.

• February 7: On Friday, February 7 the National Institutes of Health released an update to its guide notice 2024 NIH Grants Policy Statement. The new guidance effectively lowers the Facilities and Administration (F&A) costs to 15 percent. It states that the guidance reflects “NIH’s updated policy deviating from the negotiated indirect cost rate for new grant awards and existing grant awards, effective as of the date of this Guidance’s issuance. Pursuant to this Supplemental Guidance, there will be a standard F&A rate of 15% across all NIH grants for indirect costs in lieu of a separately negotiated rate for indirect costs in every grant.”
• February 6: The UC Office of the President has created a website that shares UC’s approach to the executive orders and other changes in the federal landscape. 
• February 3: On February 3, a temporary restraining order was filed, stating that the administration cannot “pause, freeze, impede, block, cancel, or terminate” its obligations to provide federal financial assistance, “except on the basis of the applicable authorizing statutes, regulations, and terms.” As of 2/3/25, ACM$, ASAP, and other federal payment systems are back online. Under this temporary restraining order, the judge affirms that any further award actions must follow the notice and procedural terms of each award. We expect further guidance, as the litigation is ongoing.
• January 27-29: On January 27, the federal Office of Management and Budget (OMB) sent a memo to federal departments and agencies putting a temporary pause on federal grants, loans, and other financial assistance programs effective 2 p.m. PT/5 p.m. ET Jan. 28. On January 28, OMB issued additional guidance clarifying that the only programs subject to the pause are those related to the listed presidential executive orders. On January 29, following an administrative stay by a federal judge, the administration rescinded the OMB Memo, but did not unfreeze payment systems.
• As outlined in the recent message by President Drake and the attached message from UC President of Research and Innovation Theresa Maldonado, the last few weeks have brought significant uncertainty in the research community, as a combination of Executive Orders and agency directives have impacts on grant funding. 

• The Office of Sponsored Projects will continue to submit proposals to federal agencies, unless submission portals are closed.
• Principal investigators, along with research development and proposal administrators, should review the funding announcements for in-progress proposals to confirm that they have not been revised or postponed. There have been examples where announcements have been revised for required elements and submission dates.
• As new versions of existing Notices of Funding Opportunities (NOFOs) are released, please read carefully. While NOFOs often make explicit the changes that occur with a reissue, not all changes in the wording may be highlighted. Please consult with the appropriate Program Officer if needed.
• Award decisions, study sections, and other grant review processes may be delayed, so monitor program websites and FAQs for any news.

• Continue to work on your grants and contracts unless you are notified directly by the agency or OSP. Do not stop work only on the basis of rumor or internal agency guidance. Agencies are required to notify UC Santa Cruz’s authorized official directly if there will be changes to your funding once the agreement is in place.
• Allowable expenses already incurred or encumbered prior to any notice are still reimbursable in accordance with the terms of our awards. Though the payments may be paused briefly, we expect these funds will be reimbursed.
• If PIs or RAs receive any award modifications or other notices, please forward them to OSP as soon as possible at ospdocs@ucsc.edu so that these can be reviewed and processed quickly.
• Notify OSP at ospdocs@ucsc.edu if you receive a “Stop Work” notice from a federal sponsor for an award. A stop work order typically means that all project work needs to stop immediately, and no expenses can be incurred on the project as of the effective date of the stop work notice.
• Try to remain in contact with your program officers, but be aware that some may have a pause on communications.
• Closely monitor obligated budget balances to avoid deficits while awaiting future obligations. Anticipated funding remains subject to availability of funds and should not be considered guaranteed.
• Continue to meet existing deadlines for technical reports or other deliverables.