U.S. Environmental Protection Agency—Application of Impoundment Control Act to the Administration of Community Change Grants

Decision

Matter of: U.S. Environmental Protection Agency—Application of Impoundment Control Act to the Administration of Community Change Grants

File: B-337485

Date: October 7, 2026

DIGEST

Congress appropriated amounts to the U.S. Environmental Protection Agency (EPA) to carry out the Environmental and Climate Justice Block Grants Program (ECJ Program) for fiscal year (FY) 2022 through FY 2026, as specified in the Inflation Reduction Act of 2022. To carry out the ECJ Program, EPA established several subprograms, the largest being the Community Change Grants Program (CCG Program), and obligated over $1.5 billion for CCGs. In early 2025, EPA decided to terminate the ECJ subprograms, including the CCG Program, paused payments to grantees, and later terminated the CCGs. Congress subsequently rescinded the unobligated balances of amounts made available to the ECJ Program as part of Public Law 119-21.

Unless Congress has enacted a law providing otherwise, executive branch officials must take care to ensure that they prudently obligate appropriations during their period of availability. The Impoundment Control Act of 1974 (ICA) allows the President to withhold funds from obligation or expenditure, but only under strictly limited circumstances and only in a manner consistent with that Act. The ICA was enacted to ensure that legislation passed by Congress and signed by the President is faithfully executed.

GAO's institutional role is to support Congress, including in Congress's exercise of its constitutional power of the purse. GAO's role is procedural—to protect congressional prerogatives and help ensure compliance with the ICA and appropriations law—and is not to be interpreted as taking a position on the underlying policies.

We find that EPA violated the ICA when the agency, without submitting a special message to Congress: (1) withheld funds from expenditure for the CCG Program after deciding to terminate the program; and (2) withheld funds from obligation by terminating the CCGs. These withholdings were impoundments subject to the ICA and not programmatic delays.

GAO is aware of ongoing litigation involving the termination of ECJ Program grants, including CCGs. We have included the most up-to-date information related to the litigation in this decision.

DECISION

Congress amended the Clean Air Act to establish the Environmental and Climate Justice Block Grants Program (ECJ Program) as part of Public Law 117‑169—‍commonly known as the Inflation Reduction Act of 2022 (IRA)—‍and appropriated five-year funds for the U.S. Environmental Protection Agency (EPA) to carry out the program.[1] EPA established several subprograms, the largest being the Community Change Grants Program (CCG Program), and obligated over $1.5 billion for CCGs.[2] In February 2025, EPA decided to terminate the CCG Program, paused expenditures for the program and then terminated almost all, if not all, CCGs. Congress subsequently rescinded the unobligated balances of amounts made available to the ECJ Program as part of Public Law 119-21—commonly known as the One Big Beautiful Bill Act (OBBBA).[3]

We received a congressional request to examine whether EPA's actions with respect to the CCG Program, including the termination of a specific grant, violated the Impoundment Control Act of 1974 (ICA).[4] As explained below, we conclude that EPA violated the ICA when the agency, without submitting a special message to Congress, withheld funds from expenditure for the CCG Program after deciding to terminate the program, and when it subsequently withheld funds from obligation by terminating the CCGs.

We note that there is ongoing litigation involving the termination of ECJ Program grants, including CCGs.[5] For example, a number of ECJ Program grantees brought suit in the United States District Court for the District of Columbia alleging that the termination of their grants violated the U.S. Constitution and the Administrative Procedure Act (APA).[6] On August 29, 2025, the court denied the plaintiffs' request for a preliminary injunction and dismissed their claims for lack of subject‑matter jurisdiction and failure to state a claim for relief.[7] The United States Court of Appeals for the District of Columbia Circuit recently vacated that order and directed the district court to assess whether Congress's rescission of the unobligated balances of amounts made available for the ECJ Program mooted the plaintiffs' claims.[8] Our decision does not address whether EPA violated the Constitution or APA. Instead, our decision addresses only whether EPA withheld funds in violation of the ICA.

Our practice when rendering decisions is to contact the relevant agencies to obtain factual information and their legal views on the subject of the request.[9] Accordingly, we contacted EPA to seek the agency's views,[10] and EPA provided its response on November 25, 2025.[11] In addition, we reviewed publicly available information, including spending data and documents submitted by EPA and grantees in federal court litigation.

BACKGROUND

Environmental and Climate Justice Block Grants Program (ECJ Program)

The Clean Air Act, as amended by the IRA, directed EPA “to award grants for periods of up to [three] years to eligible entities to carry out [specified activities] that benefit disadvantaged communities, as defined by” EPA.[12] To implement the program, Congress appropriated $2.8 billion to EPA to award grants and $200 million to provide technical assistance.[13] As originally enacted in the IRA, these funds were available through the end of fiscal year (FY) 2026.[14]

Eligible grant activities included: community‑led air and other pollution monitoring, prevention, and remediation, and investments in low- and zero-emission and resilient technologies and related infrastructure and workforce development that help reduce greenhouse gas emissions and other air pollutants; mitigating climate and health risks from urban heat islands, extreme heat, wood heater emissions, and wildfire events; climate resiliency and adaptation; reducing indoor toxics and indoor air pollution; or facilitating engagement of disadvantaged communities in state and federal advisory groups, workshops, rulemakings, and other public processes.[15]

To carry out the ECJ Program, EPA established several subprograms for different types of grants: the CCG Program; the Thriving Communities Grantmaking Program; the Collaborative Problem-Solving Cooperative Agreement Program; and the Government-to-Government Program.[16]

Community Change Grants Program (CCG Program)

In November 2023, EPA issued a notice of funding opportunity announcing the CCG Program (CCG NOFO), which the agency described as “the final and most comprehensive piece of EPA's implementation of [ECJ Program] IRA funding.”[17] The CCG NOFO described two separate tracks for considering applications: Track I, which would “focus on multi-faceted applications with Climate Action and Pollution Reduction Strategies to meaningfully improve the environmental, climate, and resilience conditions affecting disadvantaged communities”; and Track II, which would “facilitate the engagement of disadvantaged communities in governmental processes to advance environmental and climate justice.”[18] Between September 25, 2024, and January 20, 2025, EPA awarded over 100 CCGs and obligated over $1.5 billion for those grants, comprising over half of the total ECJ Program appropriation.[19]

In addition to the statutory authority for the program and the terms listed in the CCG agreements themselves,[20] the agreements were subject to the CCG Terms and Conditions,[21] EPA's FY 2025 General Terms and Conditions,[22] and the Office of Management and Budget's (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. part 200), as supplemented by EPA's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. part 1500).[23]

Contra Costa County Grant

The CCG awarded to Contra Costa County, California, provides an example of the types of projects funded by the CCG Program.[24] EPA awarded $19.1 million for the grant on January 6, 2025, with a project period of February 1, 2025, to January 31, 2028.[25] Projects funded by the grant included: building a community resiliency center; planting new trees; renovating properties and converting them to energy-efficient single-family homes; installing energy-efficient systems in homes; and demolishing blighted and vacant units and replacing them with community gardens.[26]

Pause and Termination of CCGs

On February 25, 2025, the EPA Assistant Deputy Administrator conducted a review of EPA grant programs “for consistency with [a]gency policy priorities” and “decided that certain grant programs . . . should be terminated for policy reasons.”[27] Among the programs slated for termination were the CCG Program and the other ECJ subprograms.[28] An internal EPA chart described future actions for the CCG Program as canceling any unawarded/unobligated actions and decommitting funding, terminating grants awarded prior to October 1, 2024, and making “[n]o new award actions” for grants awarded after October 1, 2024, but holding on any terminations until further discussion with EPA's Office of General Counsel.[29]

On March 7, 2025, EPA put a financial control in the Automated Standard Application for Payments (ASAP) system[30] for grants funded under programs identified for termination, including the CCG Program, to prevent recipients from drawing down funds between the announcement and execution of grant terminations.[31] Several CCG grantees confirmed that their access to funding was suspended on or after this date.[32] On March 10, 2025, the EPA Assistant Deputy Administrator distributed a list of grants “approved for cancellation” that included the CCGs.[33] The same day, EPA issued a press release stating that the EPA Administrator had cancelled 400 grants “across nine unnecessary programs totaling $1.7 billion in savings for the American people.”[34]

On April 15, 2025, the United States District Court for the District of Rhode Island issued a preliminary injunction enjoining EPA and other agencies “from freezing, halting, or pausing on a non-individualized basis the processing and payment of funding that . . . was appropriated under the [IRA] . . . and . . . ha[d] already been awarded” and ordering EPA and the other agencies to “take immediate steps to resume the processing, disbursement, and payment of already-awarded funding appropriated under the [IRA] . . . , and to release awarded funds previously withheld or rendered inaccessible.”[35] In an April 23, 2025, sworn statement describing EPA's compliance with the order, the EPA Deputy Assistant Administrator for Infrastructure and Extramural Resources explained that, prior to issuance of the order, EPA decided to terminate certain IRA grant programs, including the CCG Program and other ECJ subprograms, and had paused access to funds in the ASAP system for recipients of those soon-to-be-terminated programs.[36] The official further stated that EPA understood that continuing to pause those grants would comply with the court's order because the determination to pause was made prior to the entry of the preliminary injunction for reasons other than the fact that the grant funds were appropriated under the IRA.[37]

On April 25, 2025, the court ordered EPA to unfreeze those funds until the grants were terminated,[38] and EPA subsequently reported that it had restored access to funding in ASAP for recipients of the previously listed programs, including the ECJ subprograms.[39] Several CCG grantees stated that they were able to request funds through ASAP beginning April 28 or April 29, 2025, until their grants were terminated several days later,[40] while others stated they were unable to access ASAP prior to receiving notice that EPA was terminating their grant.[41]

EPA terminated almost all of the CCGs by the end of May 2025.[42] As previously noted, on July 4, 2025, Congress rescinded the unobligated balances available to carry out the ECJ Program as part of OBBA.

CCG Grant Termination Notices

EPA terminated Contra Costa County's CCG on May 1, 2025.[43] A number of other CCG grantees submitted their termination notices in litigation challenging those terminations.[44] Aside from certain grant-specific information such as the grant number, grantee, and grantee representative, the termination notices appear identical, and state, in relevant part:

The purpose of this communication is to notify you that the U.S. Environmental Protection Agency (EPA) is hereby terminating Assistance Agreement [XXXXX] awarded to [XXXXX]. This EPA Assistance Agreement is terminated effective immediately on the grounds that the remaining portion of the Federal award will not accomplish the EPA funding priorities for achieving program goals. The objectives of the award are no longer consistent with EPA funding priorities.

The EPA Administrator has determined that, per the Agency's obligations to the constitutional and statutory law of the United States, this priority includes ensuring that the Agency's grants do not conflict with the Agency's policy of prioritizing merit, fairness, and excellence in performing our statutory functions. In addition to complying with the law, it is vital that the Agency assess whether all grant payments are free from fraud, abuse, waste, and duplication, as well as to assess whether current grants are in the best interests of the United States.[45]

The termination notices go on to discuss the closeout procedures and the dispute process.[46] Several grantees also submitted the amendments terminating their grants, which state, in relevant part, that EPA was “asserting its right under 2 [C.F.R. §] 200.340 and the Termination General Term and Condition of this agreement to unilaterally terminate this award.”[47]

In an August 22, 2025, letter from EPA to the requester regarding the termination of Contra Costa County's CCG, the agency stated that the grant “provides funding for programs that promote or take part in [diversity, equity, and inclusion (DEI)] or environmental justice initiatives that conflict with the Agency's policy of prioritizing merit, fairness, and excellence in performing our statutory functions. The grant is therefore inconsistent with, and no longer effectuates, Agency priorities.”[48]

DISCUSSION

At issue here is whether EPA's actions with respect to the CCG Program in 2025 complied with the requirements of the ICA, given that the Administration did not send a special message under the ICA related to the CCG Program. Specifically, this decision focuses on EPA's determination to terminate the CCG Program and the pause in CCG Program expenditures pending termination beginning on or about March 7, 2025, and ending on or about April 28, 2025, as well as EPA's subsequent termination of the CCGs without reobligating the grant funds for other purposes consistent with the ECJ Program.

As explained below, we conclude that EPA withheld funds from expenditure when it paused payments to CCG grantees after deciding to terminate the CCG Program and that the agency withheld funds from obligation when it subsequently terminated the CCGs. We further conclude that these withholdings constituted impoundments under the ICA because EPA had no discretion to withhold funds under the IRA and did not withhold them for programmatic reasons. Because the Administration did not submit a special message proposing to rescind[49] the CCG funds, EPA's actions violated the ICA.

It is important to understand the constitutional and historical underpinnings of the ICA with respect to the critical role of Congress in exercising its constitutional powers. The Constitution specifically vests Congress with the power of the purse, providing that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”[50] The Constitution also gives Congress the exclusive power to legislate, and sets forth the procedures of bicameralism and presentment, through which the President may accept or veto a legislative bill passed by both houses of Congress, and Congress may subsequently override a presidential veto.[51] This process does not grant the President the authority to pass his own laws or to ignore or amend a law duly enacted by Congress.[52] Instead, the President must “faithfully execute[]” the law as Congress enacts it.[53]

Once enacted, an appropriation is a law like any other, and the President must implement it by ensuring that appropriated funds are obligated and expended prudently during their period of availability unless and until Congress enacts another law providing otherwise.[54] In fact, Congress was concerned about the failure to prudently obligate according to its congressional prerogatives when it enacted and later amended the ICA.[55]

The Constitution grants the President no unilateral authority to withhold funds from obligation.[56] Instead, Congress has vested the President with strictly circumscribed authority to impound, or withhold, budget authority only in limited circumstances as expressly provided in the ICA.[57] The ICA separates impoundments into two exclusive categories – deferrals and rescissions. First, the President may seek to temporarily withhold funds by proposing a “deferral.”[58] Second, the President may seek the permanent cancellation of funds for fiscal policy or other reasons, including the termination of programs for which Congress has provided budget authority, by proposing a “rescission.”[59]

In either case, the ICA requires the President to first transmit a special message to Congress outlining the amounts in question and the reasons for the proposed deferral or rescission.[60] These special messages must provide detailed and specific reasoning to justify the withholding, as set out in the ICA.[61] The burden to justify a withholding of budget authority rests with the executive branch.[62]

While the ICA does not circumscribe when funds can be proposed for rescission, it only permits deferral of budget authority in a limited range of circumstances: to provide for contingencies; to achieve savings made possible by or through changes in requirements or greater efficiency of operations; or as specifically provided by law.[63] With respect to deferrals, the ICA specifies that the funds at issue are only temporarily withheld and must still be obligated before expiration.[64]

GAO's institutional role is to support Congress, including in Congress's exercise of its constitutional power of the purse. This includes GAO's functions under the ICA, such as reviewing special messages and reporting impoundments the President has not reported.[65]

Application of the ICA to EPA's Actions Related to the CCG Program

When examining whether an agency complied with the ICA, we consider the extent to which the relevant statutory authority affords the agency discretion to withhold or delay the obligation or expenditure of funds.[66] We also examine whether there was in fact a withholding or delay; if not, the ICA does not apply.[67] If there was a withholding or delay, we next determine whether such action constituted an impoundment covered by the ICA or merely a “programmatic delay.”[68] If the agency's action constitutes an impoundment and the agency did not submit a special message under the ICA proposing to defer or rescind the affected funds, then the agency's actions violate the ICA.[69]

(1) Statutory Framework

The Clean Air Act provision establishing the ECJ Program states that the EPA Administrator “shall use [the] amounts made available . . . to award grants for periods of up to [three] years to eligible entities to carry out [specified activities] that benefit disadvantaged communities, as defined by” the EPA Administrator.[70] The statute thus required EPA to award such grants,[71] although it neither mandated particular awards to specific grantees nor prohibited EPA from terminating individual ECJ awards or withholding payments to individual grantees.[72]

The scope of EPA's discretion under the statute was recently addressed in Green & Healthy Homes Initiative, Inc. v. EPA, in which the court examined EPA's termination of grants under a different ECJ subprogram, the Thriving Communities Grantmaking Program.[73] The court concluded that EPA exceeded its authority under the statute “because it cancelled [those] grants precisely because they [were] ‘environmental justice' programs.”[74] The court explained that while the statute did not require EPA to fund the plaintiffs or any particular grantee, it did “require that the grant program exist and that these grants support ‘environmental justice' in some way, as defined by the EPA.”[75] The court further stated that the statute “prohibit[ed] precisely what EPA did [in that case]: expressly terminating grants because they [were] for programs that Congress mandated EPA to fund.”[76] Applying this reasoning to the CCG Program, the statute did not grant EPA discretion to withhold CCG funds from obligation or expenditure because the agency disagreed with the overarching statutory purposes of the ECJ Program.

(2) Withholding or Delay

EPA withheld funds from expenditure when it paused CCG Program payments from March 7, 2025, until late April 2025. In addition, EPA withheld funds from obligation when it terminated almost all, if not all, CCGs.

By its plain terms, the ICA applies to both obligations and expenditures,[77] and we have previously determined that an agency withholds funds from obligation or expenditure when it pauses obligations or expenditures for an entire program.[78] For example, in several recent decisions, we examined actions taken by other agencies in 2025 to implement various Executive Orders.[79] Each agency paused obligations and expenditures funded by the IRA or other laws cited in the Executive Orders and applied the pause to the program under review in the decision.[80] We determined in each case that the agency had withheld funds from obligation, expenditure, or both, though we concluded that some of those pauses constituted permissible “programmatic delays” rather than impoundments.[81] Here, EPA withheld funds from expenditure when it paused CCG Program grantee payments in March and April 2025 as part of a broader pause in payments for grant programs slated for termination.[82]

With respect to obligations, we have recognized that a large-scale termination of grants can represent withholding funds from obligation.[83] For example, in B‑337375, June 16, 2025, we determined that the Institute of Museum and Library Sciences (IMLS) withheld funds from obligation and expenditure when it terminated approximately 1,200, or 90 percent, of its competitive grants.[84] Likewise, in B‑337203, Aug. 5, 2025, we determined that the National Institutes of Health withheld funds from obligation when it terminated 1,800 grants and paused the award of new grants.

In this case, EPA terminated almost all, if not all, CCGs, representing over $1.5 billion in obligated funds and over half of the total $2.8 billion appropriation available for grants under the ECJ Program.[85] This meant that EPA would likely have needed to reobligate most of these funds[86] in order to implement the ECJ Program.[87] Consistent with our previous decisions, we conclude that these terminations constituted withholding funds from obligation.

(3) Type of Withholding or Delay

Not all delays in the obligation or expenditure of budget authority constitute impoundments under the ICA.[88] For example, “when an agency is taking reasonable and necessary steps to implement a program or activity, but the obligation or expenditure of funds is unavoidably delayed,” that delay is a “programmatic” one, not an impoundment.[89] Such programmatic delays include delays in the obligation or expenditure of budget authority that result from agency compliance with statutory requirements.[90] On the other hand, when an agency lacks discretion to take the action that results in a delay, the delay is an impoundment and not a programmatic delay.[91] As discussed above, EPA did not have discretion to withhold CCG funds from obligation or expenditure because it disagreed with the overarching statutory purposes of the ECJ Program.

When assessing whether a withholding or delay occurred because the agency disagreed with the statutory purpose of the funds at issue, our decisions have examined the agency's reasons for the withholding or delay and the agency's efforts to obligate or expend the funds within the period of availability.[92] For example, in B‑337375, June 16, 2025, we concluded that IMLS's actions, including the termination of 90 percent of its grants, constituted an impoundment because the goal was to prevent spending for purposes “counter to the administration's priorities,” and the agency was not seeking to repurpose or reobligate the funds for other mission activities.[93] We noted that IMLS's actions were “contrary to the amounts directed in the [agency's] FY 2024 and FY 2025 appropriations.”[94]

Here, EPA's reasons for terminating the CCGs and the fact that the agency did not reobligate the funds indicate that EPA took such action because it disagreed with the statutory purposes of the ECJ Program. Specifically, the EPA Assistant Deputy Administrator decided to terminate all the ECJ subprograms, including the CCG Program, “for policy reasons.”[95] Similar to the reasons stated by IMLS in B-337375, the CCG Termination Notices explained that the grants would “not accomplish the EPA funding priorities for achieving program goals” and “[t]he objectives of the award[s] [we]re no longer consistent with EPA funding priorities.”[96] The CCG Termination Notices described various agency priorities including “ensuring that the Agency's grants do not conflict with the Agency's policy of prioritizing merit, fairness, and excellence in performing [EPA's] statutory functions,” “assess[ing] whether all grant payments are free from fraud, abuse, waste, and duplication,” and “assess[ing] whether current grants are in the best interests of the United States.”[97] However, the notices did not specify which of these priorities were at issue with respect to the CCGs.[98] EPA's August 2025 letter to the requester clarified this point with respect to Contra Costa County's CCG, stating that the award “provide[d] funding for programs that promote or take part in DEI or environmental justice initiatives that conflict with the Agency's policy of prioritizing merit, fairness, and excellence in performing [EPA's] statutory functions. . . . [and was] therefore inconsistent with, and no longer effectuate[d], Agency priorities.”[99] As noted above, the purpose of the ECJ Program was to fund “environmental justice initiatives,” [100] and EPA's letter implies that the agency disagreed with that purpose.

In addition, the evidence indicates that EPA did not intend to reobligate the CCG funds for other grants consistent with the statute, and its actions appeared to foreclose such reobligation. Although EPA stated in its response that it had been working “on plans to fulfill statutory requirements and spend these funds as directed by law” after terminating the CCGs and prior to enactment of the OBBBA, EPA's response did not describe what those plans were and we did not find any other publicly available information demonstrating such plans.[101] In addition, the EPA Administrator's statement that the termination of the CCGs and other grants amounted to “savings for the American people” suggests that the agency did not intend to reobligate the funds for other purposes.[102]

Moreover, the agency's decision to terminate almost all, if not all, CCGs likely foreclosed reobligation of the funds. Per the terms of the CCG agreements, EPA was required to reobligate uncommitted funds from terminated CCGs to “another [CCG] recipient receiving an award pursuant to” the CCG NOFO.[103] Given these restrictions, EPA's actions appear to have effectively precluded the obligation of the CCG funds.[104]

Based on the foregoing, EPA's actions did not constitute the type of unavoidable delays or efforts to comply with statutory requirements that we have previously recognized as programmatic delays. EPA did not have discretion to pause CCG program expenditures or terminate the CCGs because it disagreed with the overarching purposes of the ECJ Program and Congress's mandate to fund the specified activities. But the available evidence indicates that EPA did just that. Accordingly, EPA's actions constituted impoundments rather than programmatic delays.[105]

The ICA does not allow deferrals for policy reasons.[106] Accordingly, EPA's actions to terminate the CCGs and pause the expenditure of funds pending termination would have only been permissible under the ICA if the Administration had submitted a special message proposing to rescind those funds, which it did not do. Therefore, EPA violated the ICA.

CONCLUSION

Based on the information available to us, we conclude that EPA violated the ICA when the agency, without submitting a special message to Congress, withheld funds from expenditure for the CCG Program after deciding to terminate the program and when it withheld funds from obligation by terminating almost all, if not all, CCGs.

GAO's institutional role is to support Congress, including in Congress's exercise of its constitutional power of the purse. This includes GAO's functions under the ICA, such as reviewing special messages and reporting impoundments the President has not reported. Our analysis and conclusions regarding EPA help ensure compliance with the ICA. We do not take a position on EPA's policy goals, and this decision is not to be interpreted as taking a position on the underlying policies entailed. Congress has since rescinded the unobligated balances available for the ECJ Program and further changes can be addressed through the legislative process with Congress and the Administration.[107]

Edda Emmanuelli Perez
General Counsel