A Watershed Moment for Federal Grants: HUD's Decision on Asheville's CDBG-DR Action Plan and What It Means for All Federal Grant Recipients

March 11, 2025

In a move that signals a significant shift in how federal grant programs will be administered under the new administration, HUD recently took action that could have far-reaching implications for grantees across the country. The agency indicated it would not approve Asheville, North Carolina's Community Development Block Grant - Disaster Recovery (CDBG-DR) Action Plan as published for public comment, marking the first broad indication of how federal agencies will begin aligning grant programs with the priorities set by President Trump's Executive Orders, This is not just about one city's action plan; it is the first clear example of what's to come for federal grantees nationwide.

To understand what happened, we have to go back to the origins of these funds. The money in question was congressionally appropriated through disaster recovery legislation in 2024 and made available to eligible recipients through HUD's Universal Notice issued by the HUD on January 8, 2025, As with all CDBG-DR funding, local governments and states were required to submit action plans that outlined how they would use these funds to address disaster-related needs, For Asheville, like many others, that meant structuring their plan in alignment with commonly understood HUD priorities-focusing on housing recovery, infrastructure resilience, and economic revitalization - with an implied focus on supporting historically marginalized groups and low-moderate income populations, It was a logical and expected approach, consistent with how CDBG-DR programs have been administered in the past - across both Republican and Democratic administrations,

However, with a change in administration comes a change in policy direction. As agencies begin implementing the priorities of the new White House, what was once considered a standard or preferred approach to disaster recovery funding may now be subject to new scrutiny. Asheville's pre-submission rejection, as proposed, is not an isolated bureaucratic decision; it is a message to all grantees that program alignment with federal priorities will no longer be assumed but must be explicitly demonstrated. This shift could impact not only CDBG-DR grantees but also any recipients of federal funding who may find their program criteria misaligned with evolving expectations.

This moment should serve as a wake-up call for all state and local governments, nonprofits, and other recipients of federal funds.

If Asheville's action plan - likely developed in good faith and in accordance with previous HUD guidance - can be delayed or rejected, then so can countless others. The question is no longer whether federal agencies will scrutinize alignment with administration priorities but how aggressive that scrutiny will become and how prepared grantees are to navigate it.

What Grantees Should Be Doing Now

1) Assess Existing Portfolio of Grant Funds

If you are a federal grant recipient, you should immediately begin conducting a thorough review of your active and pending grants to determine where you may be vulnerable to shifting federal priorities. This process should involve taking a full inventory of all disbursed and undisbursed funds and cross-referencing them with emerging federal policy shifts. Understanding where program criteria may no longer align is essential to getting ahead of potential funding delays or rejections.

Programs related to climate resilience, workforce development, and infrastructure - areas that had strong federal backing in the past administration - may now be at greater risk if their objectives do not align with the current White House's directives. Early engagement with federal program officers can provide valuable insights into whether additional guidance or policy adjustments are forthcoming. Identifying risks now will help you avoid last-minute disruptions and allow you to strategize accordingly.

Key Actions To Consider:

• Conduct a full inventory of awarded and pending grants, including both obligated and unobligated funds.
• Review funding agreements and program guidelines against new executive orders and agency priorities.
• Identify grants at risk due to misalignment with shifting policy directives.
• Engage federal program officers to clarify whether additional guidance or new approval requirements are expected.
• Assess whether upcoming draws or funding disbursements could be delayed by new administrative scrutiny.

2) Prioritize Based on Potential Impacts/ Funding Timing

Once risks are identified, you'll next want to establish a clear strategy for addressing potential misalignments. Programs should be categorized by urgency - high-risk grants where funding could be lost or delayed should be addressed immediately. In contrast, moderate-risk grants should be closely monitored for necessary adjustments.

Programs requiring imminent obligations or action plan approvals should take priority to ensure that federal agencies do not delay disbursements due to concerns over program alignment. Where necessary, you should explore alternative funding sources or shifts in project scope to ensure continuity. Effective communication with elected officials and state/local leadership is also crucial during this phase, as it may require policy adjustments or advocacy to protect critical funding.

Key Actions To Consider:

• Rank programs based on risk level: high risk (immediate funding delay or loss), moderate risk (potential policy misalignment), and low risk (no immediate concerns).
• Prioritize grants with upcoming deadlines for obligation or federal approval.
• Explore potential modifications to project scope to maintain compliance while keeping funding intact.
• Begin discussions with elected officials and key stakeholders about necessary programmatic adjustments.
• Identify backup funding strategies, including state and local resources, to cover potential federal funding gaps.

3) Modify Existing Programs for Alignment

With a clear assessment and prioritization in place, you should work with your administrative decision-makers (whether executive or elected officials) to take action on adjusting your programs where necessary. Grant narratives, performance metrics, and budget justifications may need to be revised to align with federal priorities. Rather than waiting for agencies to impose modifications, you should consider submitting amendments proactively to avoid prolonged negotiations or delays.

Strengthening compliance and reporting structures will also be critical, as agencies may now subject grant programs to more rigorous oversight.
Beyond immediate program changes, you may also want to consider implementing ongoing review mechanisms to ensure continued alignment with evolving federal policies. This will prevent future disruptions and allow organizations to maintain funding without unexpected administrative hurdles.

Key Actions To Consider:

• Revise project descriptions and performance measures to reflect current federal priorities.
• Submit amendments or revised action plans early to avoid funding delays.
• Strengthen internal compliance processes to meet evolving federal oversight expectations.
• Stay informed on federal announcements and executive orders that may impact grant funding.
• Implement regular portfolio reviews to assess ongoing compliance and necessary adjustments.

How Can We Help

Navigating shifting federal grant requirements can be overwhelming, but Ambipar | Witt O'Brien's has the expertise to help grant
recipients stay ahead of these changes. Our team specializes in grant compliance, program modification, and strategic realignment, ensuring that state and local governments, nonprofits, and other grantees avoid funding delays, maintain compliance, and maximize their federal awards. We provide tailored support, from assessing current grant portfolios and identifying risk areas to revising action plans, modifying programs for alignment, and engaging directly with federal agencies to secure approvals. In this rapidly changing environment, having a partner with deep experience in disaster recovery, housing, infrastructure, and compliance oversight can make the difference between stalled funding and successful program implementation. If your organization is facing uncertainty with federal grants, now is the time to act - let's work together to ensure your funding remains secure and your programs move forward without disruption.

A Watershed Moment for Federal Grants: HUD's Decision on Asheville's CDBG-DR Action Plan and What It Means for All Federal Grant Recipients

Authored by:

Matthew Erchull
Senior Managing Director, Government Advisory Services

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A Watershed Moment for Federal Grants: HUD's Decision on Asheville's CDBG-DR Action Plan and What It Means for All Federal Grant Recipients

Authored by:

Matthew ErchullSenior Managing Director, Government Advisory Services

Want More?

WITH YOU WHEN IT COUNTS

Matthew Erchull
Senior Managing Director, Government Advisory Services