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Trump sparks lasting panic with funding ban that ended in two days

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The memo dropped late on Monday evening after a weeklong flurry of executive orders from President Donald Trump, and was rescinded less than 48 hours later. But the mandate to pause all federal loans and grants has reverberated across the country, from tiny nonprofits to sprawling health agencies. 

Providers of community services struggled to access government funds and now question what they can rely on going forward. Medical researchers are unclear how grants will be affected. States are grappling with how to plan their budgets.

The directive from the Office of Management and Budget, calling for a freeze on all federal grants, was temporarily blocked by a federal judge and raised questions about the limits of the president’s power. Yet the chaos it unleashed previews the types of fights to come in an administration that has made clear that it plans to reshape the U.S. government and eliminate what it considers to be wasteful spending and policies at odds with its conservative agenda.

“It’s hard for people to plan for the future and maintain current program services if they don’t think there’s going to be funding for those services going forward,” said Susanne Byrne, executive director of the York Street Project in Jersey City, New Jersey. 

Her organization, which offers rental assistance and operates a homeless shelter and a childhood development center, was set to make rent payments coming due on apartments for 45 different families using federal funds from the Department of Housing and Urban Development on Tuesday. The staff found themselves locked out of HUD’s payment portal.

Byrne spent Tuesday on numerous calls with other housing groups and with local representatives of HUD. Not only were the families she works with at risk of eviction if landlords didn’t receive payments by early February, but she worried how her own staffers might fare if the organization had to pare back its activity or lay off workers. 

“If people lose their jobs, how do they support their families themselves? They’re going to end up being people who need the services they used to provide to others,” she said. The group eventually regained access to the portal.

The White House abruptly rescinded the funding freeze memo on Wednesday, a move Press Secretary Karoline Leavitt immediately muddied with a social media post that said the rescission of the memo doesn’t end the pause on government money flows. Judges overseeing two pending legal challenges could rule in the coming days providing more clarity on what — if any — funds could continue to be held up. 

The confusion added to turmoil among federal workers who were already grappling with an executive order last week that banned diversity, equity and inclusion policies from the federal government. The order said the administration would cut off funding for programs that support those efforts, though the exact impact is still unclear.

The Department of Government Efficiency, led by Elon Musk, is trying to find ways to slash more expenses. Trump is offering buyouts to federal employees who were warned that he’s seeking a “more streamlined and flexible workforce.”

Agency anxiety

Already, the planned cutbacks to DEI have raised concerns about funding for medical research programs. The Trump administration sent a memo this week to organizations that have received funding from the Centers for Disease Control and Prevention and ordered them to end “all programs, personnel, activities, or contracts promoting” DEI, according to the document seen by Bloomberg News. 

Georges Benjamin, executive director of the American Public Health Association, said multiple health departments received the memo, and it wasn’t immediately clear how far-reaching the impact could be. He said it could affect the future of a wide range of public health projects, including research into the racial disparities of heart disease and cancer or programs for the disabled or elderly.

“The challenge is we’re allowing people to redefine DEI as not being merit-based when that’s not what it’s about,” Benjamin said. “It targets services to people who are more in need than others.”

The prospect of cuts has led to confusion and anxiety at the National Institute of Health, which invests most of its nearly $48 billion budget in medical research. Almost 83% of that goes toward grants awarded to outside scientists, institutions and medical schools across the US, according to the agency.

Employees have been advised to refrain from promoting certain funding opportunities related to disadvantaged populations so as not to draw attention to them, according to a person familiar with the matter, who asked not to be named speaking about internal discussions. NIH staffers have been warned against making social media posts that could put a target on their offices, the person said.

The NIH said in a statement that the Health and Human Services Department has issued a pause on mass communications and public appearances that aren’t related to emergencies to allow the new team “to set up a process for review and prioritization.” Clinical trials are continuing, though no new studies are being launched.

Within the Commerce Department, officials in charge of a $700 million effort to remake economically depleted cities into hubs of technological innovation scrambled in the wake of this week’s funding freeze announcement. The so-called Tech Hubs project was on a spreadsheet circulated by OMB that listed grants under scrutiny, instigating confusion among recipients of the grant funding, as well as former and current officials who helped to put the plan together.

The Tech Hubs initiative, funded by the Chips Act and a subsequent defense spending bill, poured hundreds of millions of dollars into technological projects in more than a dozen states, including red states like Indiana, Montana, South Carolina, Georgia and Ohio. Many of the projects focus on industries that the Trump administration has identified as key national security priorities, such as semiconductor manufacturing, quantum computing and critical mineral processing. 

But some of the hubs have programs aimed at including more women and minorities in the workforce, while others include “equity” or “climate resilience” in their missions.

So far, the tech hubs haven’t received any guidance from the Commerce Department, said spokespeople for six of the hubs. People within the hubs are setting up meetings with their lawmakers and trading texts with staffers on Capitol Hill, seeking a full-throated commitment that they won’t lose funding. The Commerce Department didn’t immediately return a request for comment.

‘Unnecessary disruption’

At the local government level, the questions over federal aid introduce new uncertainty at a time many states are preparing their budgets for fiscal 2026, said Lucy Dadayan, principal research associate with the Urban-Brookings Tax Policy Center at the Urban Institute.

This has “caused unnecessary disruption and confusion, as well as considerable anxiety regarding the amount of federal funds that will be allocated to the states,” she said.

Local organizations are preparing for more shocks. The childcare industry, for one, is bracing for potential changes that could upend businesses already on the brink of collapse. Federal dollars are states’ main funding source for subsidies that help low-income families afford child care. Some 1.8 million children receive them each year, according to the U.S. Government Accountability Office.

Easterseals, a 106-year-old nonprofit that provides services to people with disabilities, senior citizens, veterans and their families, was concerned about funding troubles when its payment system portal shut off hours before the OMB memo was released, said Kendra Davenport, CEO of its national office. The group’s affiliates use this portal to access federal grants to cover operational costs and payroll. 

“It really was foreboding not knowing how quickly we were going to have to shut down programs that are 100% funded with federal funds and how quickly we would have to determine how many people we were going to lay off,” Davenport said.

After hearing about the freeze, Easterseals assessed whether it could maintain programs without federal funding but knew that most nonprofits, including its own, operate on tight margins. Most affiliates are so focused on programmatic work that they don’t have time to raise private funding that would fill gaps, Davenport said.

As the national office looks at future revenue, staff are scrutinizing nonessential expenses that can be taken out of the budget and put into reserves. 

“We now know we are operating in a very different federal funding climate,” Davenport said. “So we have been very careful.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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