# The US Aid Freeze: Understanding the Mechanisms and Impacts

USAID Freeze
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January 27, 2025

This is Part 3 published on Jan 27th in my ongoing series examining the ongoing US Aid Freeze. For a better understanding, check out the other posts in the series, as I have tried to document this evolving situation:

The US aid freeze isn’t just a policy shift; it’s an earthquake ripping through the foundations of the global humanitarian system. Millions of lives hang in the balance. My previous posts explored the initial shockwaves and the immediate fallout. Now, we must dissect the legal framework underpinning this crisis and, crucially, translate that framework into its real-world consequences for organizations, beneficiaries, and the future of aid itself. (Disclaimer: I am not a lawyer, and the information provided below is based on my interpretation of publicly available documents and discussions with humanitarian experts in the field. It should not be considered formal legal advice. Consult with a legal professional for specific guidance related to your situation.)

To grasp the full impact of this aid freeze, we must understand the legal instruments being deployed. Here’s a breakdown of the key terms and how they are being used to enforce the new policy:

Executive Order (EO): This is the foundational document. An EO is a legally binding directive from the President that manages the operations of the federal government. The “Reevaluating and Realigning United States Foreign Aid” EO, issued on January 20, 2025, sets the policy direction for the aid freeze, ordering a 90-day pause on new obligations and a review of existing programs for alignment with the administration’s foreign policy.

Stop-Work Order (FAR 52.242-15): This is the hammer blow for many organizations. A Stop-Work Order, as defined in the Federal Acquisition Regulation (FAR), allows a Contracting Officer to unilaterally halt all or part of the work under a contract. USAID Contracting Officers are wielding this tool to immediately stop work on US-funded contracts. Key features include:

  • Immediate Cessation: Contractors must immediately stop all work covered by the order.
  • 90-Day Period: The order can last for up to 90 days (or less, as determined by the contracting officer), and can be extended.
  • Cost Adjustments: There are provisions for “equitable adjustments” to the contract if the stop-work order impacts costs or timelines. If the work is terminated for the government’s convenience, reasonable costs resulting from the order are allowed. If terminated for default, reasonable costs are allowed by equitable adjustment or otherwise. (Source: 52.242-15 Stop-Work Order. | Acquisition.GOV)

Award Suspension and Termination (2 CFR § 700.14): This regulation governs grants and cooperative agreements, not contracts. It empowers USAID to suspend or terminate awards if it determines that continued funding is not in the “national interest” of the United States or violates applicable law. If suspended, and the issue isn’t resolved within 60 days, USAID can terminate the award. Recipients cannot incur new obligations during a suspension, except as specified in the notice. (Source: Federal Register :: Request Access)

Notices on Implementation: These are official communications from USAID to implementing partners, providing guidance on complying with the EO. They are crucial for understanding how the policy is being operationalized. The two key notices issued on January 24, 2025, detail the scope of the pause, the process for existing awards, (Source: Notice on Implementation of Executive Order: Reevaluating and Realigning United States Foreign Aid? ) and the DEIA shutdown. (Source: Notice on Implementation of Executive Order: DEIA Activities Under Existing USAID Awards )

DEIA (Diversity, Equity, Inclusion, and Accessibility): This refers to policies and programs promoting fair treatment and full participation, particularly for historically underrepresented groups. The current administration has ordered the cessation of DEIA activities under all USAID awards, as outlined in the relevant Notice on Implementation.

Development Objective Agreements (DOAGs): These are formal agreements between USAID and partner country governments outlining shared development objectives. The relevant Notice on Implementation specifically pauses all new obligations and sub-obligations under DOAGs, impacting even funds allocated to specific activities within these agreements.

Title II and Title III Funding: These are categories of US foreign assistance funding. The pause applies to Title III (program accounts for foreign assistance, e.g., global health, development assistance) but excludes Title II (Operating Expenses and the Capital Investment Fund Account).

Apportionment: This is how the Office of Management and Budget (OMB) distributes funds to agencies, limiting obligations to specific amounts. The EO directs OMB to use its apportionment authority to enforce the pause, preventing USAID from spending allocated funds on new foreign assistance obligations. (Source: Principles of Federal Appropriations Law: Third Edition, Volume II | U.S. GAO)

Waivers: These are exemptions from a rule. The Secretary of State has approved waivers to the funding pause for:

  • Emergency food assistance and related administrative expenses.
  • Temporary salaries and related administrative expenses for personal services contractors.
  • Legitimate expenses incurred before January 24, 2025, under existing awards, or those associated with stop-work orders, suspensions, or pause-related amendments.
  • Exceptions approved by the Director of Foreign Assistance.

The process for requesting additional waivers is forthcoming.

Irrevocably Committed Funds: These are funds legally obligated to a third party in a way that cannot be reversed without incurring liability. The USAID administrator mentioned that even under a suspension, these funds might still need to be honored.

(Disclaimer: Again, I am not a lawyer. This is my interpretation of the regulations and how they are being applied. Seek legal counsel for definitive advice.)

The Domino Effect: From Legal Framework to On-the-Ground Realities

Understanding the legal mechanisms is only half the battle. The true impact lies in how these instruments translate into tangible consequences for programs, organizations, and, most importantly, the people they serve.

Stop-Work Orders: Immediate Operational and Human Impacts

A Stop-Work Order represents more than just a bureaucratic pause - it triggers an immediate operational shutdown with cascading effects. Organizations must:

  • Immediately cease all activities without a wind-down period - Stop means Stop
  • Stop submitting required reports and compliance documentation
  • Halt any new financial commitments
  • Maintain sufficient organizational capacity to potentially resume work later
  • Document everything meticulously for future cost recovery

The human impact is already manifesting in critical contexts:

  • In Northern Syria, programs supporting displaced persons and ISIS fighters in camps have been suspended, creating immediate security and humanitarian risks
  • In Cúcuta, Colombia, where violence has been escalating between former FARC and ELN groups along the Venezuelan border, critical stabilization programs have been shut down, potentially compromising regional security
  • In Gaza, even humanitarian assistance that was part of recent peace agreements is struggling to receive waivers, impacting essential aid delivery
  • Programs addressing cholera outbreaks and water access have been suspended, directly threatening public health

The ripple effects extend far beyond immediate program beneficiaries:

Within USAID:

  • USAID Foreign Service Nationals (FSNs) - local staff employed directly by USAID missions - face uncertain futures as their positions are primarily funded through program accounts
  • Recently hired USAID civil servants, including about 50 new staff who just completed orientation, may be cut due to their probationary status
  • Institutional Support Contractors (ISCs) who provide critical technical and operational support within USAID offices have been suspended across the board

Among Implementing Partners:

  • Local NGO staff employed by USAID partners face immediate job insecurity, especially in organizations heavily dependent on USAID funding
  • International staff working for implementing partners must be maintained to ensure program restart capability, yet organizations lack funding to retain them
  • Small local organizations with fixed-amount awards face potential collapse as they lack the financial reserves to weather the suspension

At Community Level:

  • Local subcontractors and vendors lose their primary source of income
  • Community-based organizations that receive sub-grants face immediate operational challenges
  • Target communities lose critical support services without any clarity on when or if programs will resume

The suspension creates a particularly severe impact on local capacity, threatening years of investment in building sustainable, locally-led development infrastructure.

Organizations must now balance multiple competing pressures:

  • Maintaining enough capacity to restart operations if authorized
  • Minimizing costs during the suspension period
  • Managing ongoing commitments to local staff and communities
  • Preserving relationships with local partners and beneficiaries
  • Documenting all costs and impacts for potential future recovery

These aren’t just paused projects - they represent disrupted stability operations, suspended life-saving interventions, and broken commitments to communities. The human cost compounds daily as organizations struggle to navigate this unprecedented situation while essential services remain suspended.

Suspensions and Terminations: The Threat of Long-Term Damage

Suspensions, if unresolved within 60 days, lead to terminations – the complete end of funding and program closure. This creates immense pressure on organizations to demonstrate alignment with the vague notion of “national interest.” Programs deemed inconsistent with the new administration’s priorities, even if effective, could be terminated. A successful program promoting women’s economic empowerment might be axed because it doesn’t fit the narrower definition of “national interest.”

The Chilling Effect of “National Interest”

The undefined term “national interest” creates uncertainty and encourages self-censorship. Organizations may avoid proposing or implementing programs that could be perceived as controversial, even if they are needed. An NGO might hesitate to launch a program promoting LGBTQ+ rights in a particular country, fearing it could jeopardize their funding. This leads to a narrowing of the scope of humanitarian and development work, ultimately harming the most vulnerable.

DEIA: From Principle to Prohibited

The ban on DEIA activities creates immediate challenges requiring careful navigation:

Programmatic Impacts:

  • Gender programming faces uncertain categorization - while gender equity activities may be suspended, economic empowerment programs for women may be permitted to continue
  • Questions remain about whether protection activities could be classified as “inclusion” and therefore suspended, potentially affecting life-saving gender-based violence programs
  • Programs supporting educational pathways and recruitment for diverse young graduates into the development sector face disruption

Implementation Challenges:

  • Organizations must provide formal certification to USAID that they have stopped all DEIA-related costs, yet the scope of what constitutes DEIA activities remains poorly defined
  • Partners face legal risks around these certifications, as false statements could result in penalties or claims for damages
  • Programs must carefully document which activities they determine fall outside DEIA definitions to protect themselves from future audit or investigation

Strategic Considerations:

  • Organizations are reviewing their communications and websites to ensure alignment with new requirements while maintaining their core work
  • Internal organizational DEIA initiatives that don’t use federal funding can continue, but must be clearly separated from USAID-funded activities
  • Partners are being advised to include explicit explanations in their certifications about which activities they’re continuing because they fall outside DEIA definitions

This situation requires organizations to carefully balance maintaining their institutional commitments to equity while ensuring compliance with new federal requirements. The lack of clear definitions around what constitutes DEIA activities adds additional complexity to an already challenging implementation environment.

The Subcontracting Squeeze

Local NGOs, heavily reliant on subcontracts from larger organizations, are particularly vulnerable. As prime recipients face cuts, they will inevitably pass those cuts down to their subcontractors. A local NGO providing community health services under a larger INGO’s grant might lose its funding and be forced to close, leaving a void in essential service provision.

Navigating the Uncertainty: Action Guide for Humanitarian and Development Organizations

As humanitarian and development organizations, we face a complex challenge: maintaining our commitments to humanitarian principles and beneficiary communities while ensuring organizational survival. Here’s how to navigate this period:

Protect Core Humanitarian Operations

  • Assess programs against humanitarian principles - neutrality, impartiality, independence, and humanity
  • Document how your programs directly save lives and meet critical needs
  • Pay special attention to programs that could qualify under emergency food assistance waivers
  • For humanitarian programs, emphasize aspects that align with immediate security concerns (e.g., stabilization in conflict zones, displacement response)
  • Consider how protection activities can be framed as life-saving rather than inclusion-focused

Manage Staff and Partner Relationships

  • Maintain transparent communication with local staff and partners about the situation
  • Document why retaining key local staff is essential for program continuity and beneficiary trust
  • For international staff, assess minimum retention needs to maintain operational capacity
  • Support local partner organizations who may be more financially vulnerable
  • Consider converting grants to cost-reimbursable status where possible to protect local partners

Navigate Funding and Compliance

  • Respond promptly to stop-work orders with clear documentation of: Life-saving activities that cannot be suspended Local labor law requirements affecting staff retention Critical protection concerns for vulnerable populations Costs necessary to maintain restart capability
  • Direct all communications through Agreement Officers (AOs) and Contracting Officers (COs)
  • Maintain detailed records of all decisions and their humanitarian justification

Frame Program Value Strategically While Maintaining Principles

For waiver requests and program reviews, emphasize:

  • Direct life-saving impacts
  • Protection of vulnerable populations
  • Stability and security implications
  • Critical humanitarian access
  • Essential service delivery While maintaining focus on:
  • Humanitarian principles
  • Accountability to affected populations
  • Do No Harm principles
  • Protection mainstreaming

Build Resilience

  • Explore alternate funding sources while maintaining principled approach
  • Connect with peer organizations to share strategies and resources
  • Document impact on beneficiary communities to support advocacy efforts
  • Consider forming consortia with other organizations to maintain critical programs
  • Maintain relationships with other donors who might be able to fill critical gaps

Remember: Our primary accountability remains to affected populations. While we must navigate these administrative and financial challenges, we should do so while upholding our core humanitarian principles and commitment to those we serve. Document not just the financial impacts, but also the human consequences of program suspensions on vulnerable communities.

For Protection Mainstreaming:

  • Keep detailed records of protection risks created by program suspensions
  • Document how program continuity relates to protection outcomes
  • Maintain essential protection referral networks where possible
  • Consider how to maintain critical protection activities under different frameworks

The humanitarian community has faced funding challenges before. By working together while maintaining our principles, we can navigate this period while continuing to advocate for those we serve.

USAID Bangladesh: A Case Study in Real-Time Impact

The January 25, 2025 Stop-Work Order issued by USAID Bangladesh that was shared online provides a stark example of how the legal mechanisms are creating immediate disruptions across the global aid landscape. The directive illustrates several key points about the implementation:

Comprehensive Scope: The order affects all forms of USAID agreements in Bangladesh - contracts, task orders, grants, and cooperative agreements. This blanket approach shows how the aid freeze is impacting entire country programs, not just select initiatives.

DEIA Certification Requirements: The letter reveals a new bureaucratic hurdle - implementing partners must explicitly certify the cessation of all DEIA-related activities. This demonstrates how the administration is actively enforcing the DEIA shutdown across its global operations.

Cost Minimization Mandate: Partners are instructed to “take all reasonable steps to minimize the incurrence of costs” - a requirement that puts organizations in an impossible position. They must simultaneously:

  • Maintain enough organizational capacity to resume work when authorized
  • Reduce costs to comply with the order
  • Manage ongoing commitments to local staff and communities

Chain of Implementation: The rapid cascade from Executive Order to field-level directives (January 20 to January 25) shows how quickly the policy is being operationalized. USAID missions are not waiting for complete guidance before acting, creating potential inconsistencies in implementation across countries.

This real-world example from Bangladesh underscores the immediate operational impacts of the aid freeze. Local implementing partners, who often operate on thin margins and rely heavily on USAID funding, must now navigate an indefinite period of uncertainty while maintaining their organizational capacity and relationships with beneficiary communities.

The Bangladesh case also highlights the challenge of managing donor-government relationships during the freeze. As a major recipient of US foreign assistance, Bangladesh’s development initiatives across health, education, and economic growth sectors may face significant disruption, potentially straining diplomatic ties and development cooperation between the two nations.

The Future of Aid: A Call for Reimagination and Resilience

This crisis exposes the fragility of a system overly reliant on a single donor. It’s a wake-up call for systemic change.

  • The Need for Systemic Change: We need a more diversified and sustainable funding model for humanitarian and development aid, less dependent on the political whims of individual governments.
  • The Importance of Localization: Empower local organizations and shift resources directly to the front lines. Strengthen local capacity and build more equitable partnerships.
  • Promoting Transparency and Accountability: Greater transparency in funding decisions and program evaluations is needed, from the US government and other donors. We need mechanisms to ensure aid is effective, efficient, and responsive to beneficiaries’ needs.
  • A Renewed Focus on Prevention: Invest more in conflict prevention, disaster risk reduction, and building resilience. A proactive approach can reduce the need for costly humanitarian interventions.
  • A Collective Responsibility: Addressing global challenges requires a collective effort. We need a renewed commitment to multilateralism and international cooperation.

Conclusion

The US aid freeze is a turning point. The challenges are immense, but they also present an opportunity to reimagine and rebuild a more resilient and equitable system. We must move beyond simply reacting to this crisis and start building a future where aid is driven by need, not politics, and where local communities are empowered to lead their own development.

The clock is ticking. We must act now to mitigate the damage, support those on the front lines, and advocate for a more just and sustainable approach to global aid. Here are some actions you can take today:

  • If you are American contact your Congressional representatives: Urge them to oppose the aid freeze and support the restoration of funding.
  • Support organizations working on advocacy: Many organizations are fighting to protect humanitarian aid. Donate to or volunteer with them.
  • Learn more about alternative funding models: Research participatory development, trust-based philanthropy, and other innovative approaches to aid.
  • Stay informed: Follow this developing situation closely and share information with your networks.

(Disclaimer: As mentioned throughout this post, I am not a lawyer. This analysis is based on my understanding of the available information and should not be taken as legal advice. Consult with a qualified legal professional for specific guidance.)

What are your thoughts? What strategies are you employing? Share this post and join the conversation using #HumanitarianAid #AidFreeze #ReimagineAid. Let’s work together to navigate this crisis and build a better future.