Senate fiscal committee presses finance, grants office on large revenue variances and indirect-cost reimbursements

Saipan, Sept. 15 — At a Senate Fiscal Affairs Committee hearing on Sept. 15, senators raised repeated concerns about large variances between revenue projections used in the FY2026 budget product and actual collections, and they pressed the Department of Finance and the Office of Grants Management (OGM) for clearer accounting of indirect-cost reimbursements (IDCs).

The committee convened to consider House Bill 24-46, HD1, the FY2026 budget concurrent resolution. Committee leaders said the concurrent resolution lists identified budgetary resources for FY2026 and asked the Secretary of Finance and OGM officials to explain several line items and reporting variances during the hearing.

Why it matters: The committee said it uses revenue projections to decide appropriations across agencies, and wide differences between projected and realized revenues complicate funding decisions for education, public safety and other services. Senators singled out IDCs — reimbursements from federal grants that are split between OGM (35%) and the general fund (65%) under existing law — as a recurring source of variance the Legislature needs better information on before finalizing FY2026 appropriations.

Discussion highlights

Dan Alvarez, Director, Revenue and Tax, told the committee the FY2026 IDC projection is based on FY2024 actual collections. Alvarez said higher collections in FY2024 drove the increase in the FY2026 forecast, and that collections timing and the mix of grant spending affect IDC receipts. “The more the faster we spend, the more money we can collect,” Alvarez said, explaining that IDCs are realized only after grant funds are expended and liquidated.

OGM officials and committee members described three related problems: large year-to-year swings in certain revenue lines, forecasts that rely heavily on a single prior-year collection figure rather than an analysis of current active awards and expiration schedules, and unclear transparency about where collected IDCs are held and how rollovers are treated.

Specific figures and mechanics cited by witnesses and senators included: - A reported IDC estimate in a budget document of $460,126 versus an actual third-quarter collection reported at about $1,423,285 — a variance the chair characterized as roughly 209%. - OGM collects 35% of the IDC pool, with 65% allocated to the general fund under the statutory framework cited by witnesses. - OGM officials estimated their annual operating needs at about $900,000 and said a typical rollover balance in OGM’s account could be on the order of $200,000, though they agreed to provide exact figures to the committee. - For FY2024 the committee was shown an IDC collection of $2,680,000, while the FY2024 budget appropriation for IDC distributions showed a much lower appropriated amount; OGM said a $75,000 difference had been transferred to OGM in practice.

Committee members pressed Finance on forecasting approach. Senator Manny Castro and others argued the current practice — using a single prior-year actual as the basis for forward projections — misses the detail available in award schedules and project expiration dates. Alvarez acknowledged the office relied on FY2024 collections as the basis for the FY2026 projection and said the department did not perform a separate award-by-award roll-forward when preparing the forecast.

On accounting and transparency, OGM staff recommended isolating the 65% general-fund share into a single business unit or special fund so the Legislature can track how general-fund shares of IDC are spent. OGM staff and several senators said the current practice of collecting reimbursements and transferring funds without explicit appropriation clarity has caused confusion. When asked whether OGM had used excess IDC receipts above appropriated amounts, OGM said transfers to the office had been made and the office had used those funds.

Other revenue items discussed

Committee members also questioned large revisions and variances on other lines: business gross revenue (BGR), wages and salaries tax, cigarettes, admiralty and maritime fees, and poker machine fees. Finance agreed to provide breakdowns and documentation for several of those lines, including a request for a listing of projects contributing to IDC collections and a historical summary of OGM rollovers.

Guidance and next steps

Multiple senators called for (1) closer coordination among Finance, Revenue and Tax, OGM and recipient agencies when forecasts are prepared, (2) enforcement improvements at Revenue and Tax to reduce noncompliance and help meet projections, and (3) a review of how IDCs are treated in law and practice. OGM noted the federal Uniform Guidance (2 C.F.R.) allows different IDC rates and the government has options to change collection practice but would face trade-offs in general-fund receipts.

The committee did not take a final vote on the budget bill during the hearing. It recessed and asked Finance and OGM to provide itemized back-up documents — including a list of active grant awards, detailed IDC rollovers, and a reconciliation showing how FY2024 collections were used to produce the FY2026 forecast — when the committee reconvenes.