AI and Federal Funding: How ChatGPT Led to a Grant Cut at North Carolina Central University
The intersection of artificial intelligence and government oversight has reached a controversial flashpoint. Recent discovery documents reveal that the Department of Governmental Efficiency, commonly known as DOGE, used ChatGPT to determine whether federal funding for North Carolina Central University (NCCU) should be terminated. This move has sparked a legal battle over the apply of AI in government decision-making and the targeting of diversity, equity, and inclusion (DEI) initiatives.
The Role of ChatGPT in Funding Decisions
According to discovery documents from an ongoing lawsuit, staffers connected to DOGE used ChatGPT to screen federally funded programs for potential cuts. The AI was specifically tasked with evaluating whether certain projects related to DEI. In the case of North Carolina Central University, an HBCU in Durham, the government used the chatbot to assess if a specific humanities grant met these criteria.
The prompt provided to ChatGPT described a project where faculty and staff from the College of Arts, Social Sciences, and Humanities would use materials from the NCCU Archives and Digital NC to develop teaching resources and course modules. The project also aimed to engage Durham residents and the broader university community. ChatGPT concluded that the initiative did relate to DEI, stating that it promoted diversity, equity, and inclusion through community engagement and archival materials.
Financial and Academic Impact on NCCU
Following the AI’s assessment, the federal grant was terminated in April 2025, as reported by NCCU spokesperson Quiana Shepard. The award had totaled $89,110 over a four-year period. Because the school had already spent the majority of the funds by the time of the termination, only $5,977 remained unused. Even as the university isn’t required to pay back the spent funds, the abrupt end to the grant disrupts the project’s long-term goals.
Legal Challenges and Constitutional Concerns
The termination of the grant is now the subject of a lawsuit filed by four prominent organizations:
- The American Council of Learned Societies
- The Authors’ Guild
- The American Historical Association
- The Modern Language Association
These groups are seeking to restore funding from the National Endowment for the Humanities (NEH). The plaintiffs argue that the federal government’s reliance on ChatGPT violated constitutional protections, specifically regarding equal protection and free speech. Court filings allege that DOGE staffers bypassed the NEH’s established review processes by relying on an AI tool to influence decisions on congressionally approved grants.
Key Takeaways: AI in Government Oversight
- AI as a Screener: The Department of Governmental Efficiency used ChatGPT to identify programs related to DEI for the purpose of cutting funding.
- Targeted Institution: North Carolina Central University lost a humanities grant after ChatGPT flagged its archival and teaching project.
- Limited Financial Loss: Of the $89,110 total award, only $5,977 remained at the time of the cut.
- Legal Precedent: A coalition of academic and literary organizations is challenging the legality of using AI to override established federal review processes.
The Broader Implication for AI Ethics
This case highlights a critical tension in AI ethics: the delegation of administrative judgment to Large Language Models (LLMs). When government agencies use AI to interpret the intent or nature of academic work, it raises questions about transparency, accountability, and the potential for algorithmic bias. As AI tools develop into more integrated into federal operations, the legal system must now determine if a chatbot’s output constitutes a valid basis for terminating public funding.