New U.S. State Department foreign assistance rules advance domestic policy priorities

Background

First announced by President Reagan in 1984, the Mexico City Policy has historically prohibited organizations that provide abortion as a method of family planning from receiving U.S. foreign aid. It has been rescinded and reinstated by successive administrations and varied in scope over time. President Trump broadened the scope of the Mexico City Policy in 2017, extending its reach to all global health assistance, and reinstated that policy when he returned to office in 2025, after it was rescinded by President Biden. The new PHFFA Policy arrives against the backdrop of the White House's 2025 executive orders addressing gender ideology and directing the termination of federal diversity, equity, and inclusion (DEI) programs, as well as other domestic policy initiatives across government to address those priorities.

The Promoting Human Flourishing in Foreign Assistance Policy (PHFFA)

The PHFFA Policy consists of three coordinated award-term rules that impose eligibility and compliance conditions on recipients and subrecipients of covered foreign assistance. Without trying to capture here the nuances of each new rule, the new award terms are generally consistent with the following:

• Protecting Life in Foreign Assistance (PLFA) – Implements the reinstated Mexico City Policy, which places restrictions on foreign assistance going to organizations that provide or promote abortion as a method of family planning overseas, and expands its reach by (i) applying it to all non-military foreign assistance, and (ii) extending relevant terms beyond foreign non-governmental organizations (NGO) to also cover U.S. NGOs, international organizations, and to a lesser extent foreign governments/parastatals.
• Combating Gender Ideology in Foreign Assistance (CGIFA) – Adds an award term which places restrictions on foreign assistance going to organizations that provide “sex-rejecting procedures” or promote “gender ideology”. The rule applies to all non-military foreign assistance and covers foreign NGOs, U.S. NGOs, international organizations, and to a lesser extent foreign governments/parastatals.
• Combating Discriminatory Equity Ideology in Foreign Assistance (CDEIFA) – Adds an award term which places restrictions on foreign assistance going to organizations that promote “discriminatory equity ideology” or engage in unlawful DEI-related discrimination in connection with covered foreign assistance. As with PLFA and CGIFA, the rule applies to all non-military foreign assistance and covers foreign NGOs, U.S. NGOs, international organizations, and to a lesser extent foreign governments/parastatals.

Key elements

Scope of foreign assistance

Across all three policies, “foreign assistance” is defined to include non-military assistance administered by the Department of State, encompassing global health programs, humanitarian assistance, development and economic assistance, stabilization assistance, democracy and civil society programming, migration and refugee assistance, and voluntary contributions to international organizations funded from foreign assistance accounts.

Furnishing foreign assistance

The policies define “furnishing foreign assistance” as providing foreign assistance funds to another entity under an award. It does not include the purchase of goods or services or the provision of technical assistance or training, unless the arrangement includes a subaward of foreign assistance funds.

Funding mechanisms covered

The PHFFA Policy applies primarily to grants and cooperative agreements. The new award terms will be included in new awards and in existing awards when amended to add new funding. The State Department indicates that corresponding clauses for foreign assistance contracts will be added pending rulemaking and notes that these rules currently apply to grants made under contracts.

Requirements by entity type

• Foreign NGOs – Must agree not to engage in the prohibited activities outside the United States and not to provide financial support to other entities that do so, as a condition of receiving foreign assistance.
• U.S. NGOs – Must agree not to engage in prohibited activities outside the U.S. or use foreign assistance funds for prohibited activities. The award term does not limit a U.S. NGO’s ability to promote otherwise prohibited activities in other programming so long as the U.S. NGO uses funds from sources other than the U.S. Government. However, the U.S. NGO must isolate these programs, projects, or activities, ensuring they are physically and financially separate from any programs, projects, or activities supported by U.S. foreign assistance funds, such that there is “objective integrity and independence.”
• International Organizations – Must agree not to engage in the prohibited activities outside the United States and not to provide financial support to other entities that do so, as a condition of receiving foreign assistance. International Organizations may be required to accept the new award terms as a condition of receiving voluntary contributions funded through foreign assistance accounts.
• Foreign Governments and Parastatals – Must agree not to use foreign assistance funds for prohibited purposes as outlined in the policies and to segregate U.S. foreign assistance funds from other program funds, if they engage in prohibited activities relying on funds from sources other than the U.S. government.

Monitoring and inspection

Under all three policies, recipients are subject to U.S. Government monitoring and inspection based on reasonable cause that the recipient may have violated its obligations under the award term.

Termination

The policies provide that foreign assistance must be terminated if an organization violates its obligations under the award term, with discretion for the State Department to determine other corrective actions. Potential remedies include suspension of payments and suspension or debarment. Recipients may be required to refund unexpended funds and an amount equivalent to the amount used to engage in prohibited activities.

Flow down to subrecipients

All three rules require recipients to flow down applicable policy requirements to subrecipients. Subrecipients must agree to the relevant award terms and are subject to similar monitoring, inspection, and termination provisions. The prime recipient may bear responsibility where it fails to conduct required due diligence or take corrective action in response to known violations.

Key compliance considerations

Existing programs may be out of compliance – Because the award terms apply to new awards and to existing awards when new funds are added, organizations with ongoing foreign assistance portfolios may find that previously permitted activities could become noncompliant once the new terms attach.

Programs may need to be restructured – The emphasis on program integrity—including physical and financial separation requirements for U.S. NGOs across the three policy areas—may require operational changes (e.g., separate personnel, facilities, and accounting) to maintain eligibility.

Unlawful DEI-related discrimination – For U.S. NGOs receiving foreign assistance, the applicable standard abroad for what is “unlawful DEI-related discrimination” is activity that would violate U.S. federal antidiscrimination laws if it occurred inside the United States. Host country laws do not figure in the award term.

Some organizations may have to decline foreign aid – The rules are framed as conditions of receiving covered foreign assistance. As a result, organizations that cannot meet the relevant conditions may conclude they must reject awards, decline amendments that add funding, or restructure delivery models to maintain compliance.

Next steps

Organizations affected by the PHFFA Policy should consider several compliance strategies:

• Conduct a comprehensive review of existing and anticipated foreign assistance awards to identify applicability of the new terms.
• Assess organizational structure and overseas activities to determine whether physical or financial separation measures are required.
• Update subaward templates, due diligence processes, and monitoring protocols to reflect the new flow down requirements.
• Evaluate whether waiver requests may be appropriate in limited circumstances identified in the rules.
• Note where the PHFFA Policy may conflict with legal obligations in foreign jurisdictions where they may operate.
• Monitor for future guidance and contract clauses implementing the PHFFA Policy.