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sHB5255 / File No. 321 1
General Assembly File No. 321
February Session, 2026 Substitute House Bill No. 5255
House of Representatives, April 1, 2026
The Committee on Government Oversight reported through
REP. DATHAN of the 142nd Dist., Chairperson of the
Committee on the part of the House, that the substitute bill
ought to pass.
AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE
AUDITORS OF PUBLIC ACCOUNTS CONCERNING OVERSIGHT OF
STATE AGENCY GRANTS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective October 1, 2026) (a) As used in this section: 1
(1) "Legislatively earmarked grants" means grants of state funds 2
specifically authorized in a special or public act of the General 3
Assembly, and includes appropriated funds and bond funds; 4
(2) "Subaward" means an award of legislatively earmarked grants 5
through a pass-through entity to a subrecipient for purposes of the goals 6
or objectives for which the state funds were authorized; 7
(3) "Subrecipient" means an entity that is receiving an award of a 8
legislatively earmarked grant from a state agency or other pass-through 9
entity; and 10
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(4) "State agency" means any department, board, council, 11
commission, institution or other executive branch agency of state 12
government, including, but not limited to, each constituent unit. 13
(b) Not later than December 1, 2026, the Secretary of the Office of 14
Policy and Management shall develop: (1) A standard contract template 15
for legislatively earmarked grant awards, including, but not limited to, 16
audit specifications and required terms for subawards, (2) general 17
requirements for recipients of legislatively earmarked grant awards that 18
provide a subaward using such legislatively earmarked grant awards, 19
including, but not limited to, verifying that the subrecipient is not 20
suspended, disbarred or otherwise not eligible to receive a legislatively 21
earmarked grant award and obtaining an authorization for the state 22
agency or other pass-through entity to access relevant records, financial 23
statements and performance reports for purposes of monitoring the use 24
of the legislatively earmarked grant award to ensure that the subaward 25
was used for authorized purposes and such use complied with any 26
terms and conditions of the subaward and achieved the performance 27
goals associated with the legislatively earmarked grant award, and (3) a 28
general training program for state agencies in best practices concerning 29
legislatively earmarked grant awards and subawards, including on 30
using the applicable template and the requirements developed under 31
this subsection. The secretary shall offer the training developed 32
pursuant to this subsection not less than quarterly. 33
(c) On and after January 1, 2027, all state agencies shall use such 34
contract template for legislatively earmarked grant awards and shall 35
ensure that any of their employees responsible for awarding 36
legislatively earmarked grant awards and subawards attend the 37
training developed pursuant to subsection (b) of this section. 38
(d) Not later than December 1, 2027, and annually thereafter, each 39
state agency shall submit a report of all legislatively earmarked grant 40
awards and subawards disbursed by the state agency during the 41
preceding year to the Office of Policy and Management, in a form and 42
manner prescribed by the secretary. Such report shall include any 43
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evaluations conducted by the state agency of the recipient or 44
subrecipients of such awards or subawards and any concerns the state 45
agency has concerning such recipients or subrecipients and may include 46
any requests of the state agency for additional staffing or resources for 47
purposes of complying with the monitoring requirements of this 48
section. Not later than January 1, 2028, and annually thereafter, the 49
secretary shall compile such reports into a summary of all such awards 50
and subawards categorized by agency and shall submit such summary, 51
in accordance with the provisions of section 11-4a of the general statutes, 52
to the joint standing committees of the General Assembly having 53
cognizance of matters relating to appropriations and the budgets of state 54
agencies, finance, revenue and bonding and government oversight. 55
This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2026 New section
Statement of Legislative Commissioners:
In Subsec. (b), "grantees" was changed to "recipients of", "legislatively
earmarked" was inserted before references to "grant" for consistency
and in Subsec. (d) a reference to "Office of Policy and Management" was
added for clarity.
GOS Joint Favorable Subst. -LCO
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The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of
the General Assembly, solely for purposes of information, summarization and explanation and do not
represent the intent of the General Assembly or either chamber thereof for any purpose. In general,
fiscal impacts are based upon a variety of informational sources, including the analyst’s professional
knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final
products do not necessarily reflect an assessment from any specific department.
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 27 $ FY 28 $
Policy & Mgmt., Off. GF - Cost 92,900 90,770
State Comptroller - Fringe
Benefits1
GF - Cost 37,700 37,700
Note: GF=General Fund
Municipal Impact: None
Explanation
Explanation
The bill requires the Office of Policy and Management (OPM) to meet
certain requirements associated with legislatively directed funds (LEGs)
which results in a cost of $92,900 in FY 27 and an annual cost of $90,770
beginning in FY 28 to OPM and correspondi ng fringe benefit costs of
$37,700 to the Office of the State Comptroller beginning in FY 27 for a
Fiscal Administrative Officer.
This position will develop a contract template, create requirements
for certain grantees of LEGs, develop a best practices training program
for state agencies, require state agencies to annually report to OPM, and
compile a summary of the agency reports as required in the bill.
Background on OPM Policy on Legislatively Directed Funds
1The fringe benefit costs for most state employees are budgeted centrally in accounts
administered by the Comptroller. The estimated active employee fringe benefit cost
associated with most personnel changes is 41.82% of payroll in FY 27.
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The bill is similar to the recently announced, statewide executive
branch policy on legislatively -directed or earmarked funds (LDFs).
There are potential fiscal impacts associated with that policy which are
noted below.
The implementation of the policy may increase an agency's
administration workload based on (1) the volume of LDFs, (2) the
complexity of any particular L DF, and (3) agency resources already
dedicated to managing LDFs. Some additional staffing (e.g., temporary,
part-time or full -time) may be required by certain agencies to
accommodate this workload.
For context, PA 25 -168, the FY 26 and FY 27 budget, includes 321
LDFs across sixteen executive branch agencies totaling approximately
$89 million in FY 27. The number of LDFs each such agency administers
in FY 27 ranges from one to 200 administered by the Department of
Economic and Community Development (DECD).2
To the extent that some designated recipients are unwilling or unable
to comply with the new requirements under the policy, some L DF
appropriations in FY 27 and beyond may go unspent and lapse.
The Out Years
The annualized ongoing fiscal impact identified above would
continue into the future subject to inflation.
2 The Governor's recommended revised FY 27 budget includes three additional
positions within the DECD to enhance oversight of LDF grants and contracts.
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OLR Bill Analysis
sHB 5255
AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE
AUDITORS OF PUBLIC ACCOUNTS CONCERNING OVERSIGHT OF
STATE AGENCY GRANTS.
SUMMARY
This bill addresses the management and oversight of legislatively
earmarked grants (LEGs) by creating requirements for LEG recipients
and subrecipients (those that receive a LEG award from a state agency
or other pass-through entity), state agencies (executive branch entities,
including constituent units of higher education), and the Office of Policy
and Management (OPM).
The bill defines LEGs as grants of state funds specifically authorized
by the General Assembly in a special or public act, including
appropriated and bond funds.
Specifically, the bill requires OPM to:
1. develop a contract template, which state agenc ies must begin
using on January 1, 2027;
2. create requirements for grantees who provide a LEG subaward
(a LEG awarded through a pass-through entity to a subrecipient
for the same goals for which the funds were authorized) ,
including verifying subrecipients’ eligibility and getting
authorization to access records and financial statements to
monitor and ensure compliance;
3. develop a best practices training program for state agencies;
4. require state agencies to annually report to the OPM secretary on
LEG awards and subawards; and
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5. compile the agency reports and send a summary of them to the
Appropriations; Finance, Revenue and Bonding; and
Government Oversight committees.
EFFECTIVE DATE: October 1, 2026
OPM POLICIES AND PROCEDURES
OPM Template
The bill requires OPM, by December 1, 2026, to develop a standard
contract template for LEGs that includes audit specifications and
required terms for subawards. On or after January 1, 2027, the bill
requires state agencies to use the template for all LEG awards.
OPM Training Program
The bill also requires OPM to create a training program for state
agencies on LEG best practices, use of the contract template, and any
other grant requirements. The training program must be developed by
December 1, 2026 , and state agencies must ensure that any employee
responsible for awarding LEGs attends the training on or after January
1, 2027. OPM must provide the training at least quarterly.
Requirements for Grantees
The bill requires OPM, by December 1, 2026, to develop requirements
for grantees that provide a LEG subaward, including (1) verifying the
subrecipient is eligible to receive the grant ; (2) receiving authorization
from the state agency or pass-through entity to access records, financial
statements, and performance reports; and (3) using those documents to
monitor the grant to ensure it was used for authorized purposes,
complies with any terms and conditions, and achieves any associated
performance goals.
REPORTING REQUIREMENTS
State Agency Annual Report
The bill requires state agencies to submit annual reports beginning
by December 1, 2027 , detailing all LEG awards and subawards they
disbursed in the past year, in a form and manner set by the secretary.
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The report must include state agency evaluations of the recipient or
subrecipient and any state agency concerns, and may include any state
agency requests for additional staffing or resources.
OPM Annual Summary Report
Under the bill, the OPM secretary must compile all the state agency
reports into a summary and submit it annually, beginning by January 1,
2028, to the Appropriations; Finance, Revenue and Bonding; and
Government Oversight committees.
BACKGROUND
OPM Policy on Legislatively Directed Funds
OPM published a General Letter on January 20, 2026, titled
“Legislatively Directed Funds Administration Policy. ” It addresses
legislatively directed funds (LDFs), a concept similar to legislatively
earmarked grants. The letter addresses LDF administration, state and
federal compliance requirements, best practices, communication, and
risk mitigation. The policy requires agencies to, among other things:
1. request information, if not already included in a public act, from
legislative leadership about the legislative intent of the LDF,
whether a subaward is permitted, and the name and address of
the recipient and any subawardee;
2. document information on an intake form about the recipient or
subawardee for state agency review, including general recipient
information, the intended use of the LDF, the budget related to
the LDF, organization documents, risk assessment, and any other
necessary information;
3. conduct an internal review and approval process, including
management and fiscal office validation, issuing final grant
approval letters, and withholding LDF s if the recipient or
subawardee fails to comply with various policies;
4. use a standard process for making payments on an invoice basis;
and
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5. follow other OPM best practices for LDFs.
Related Bill
HB 5039 (File 66) contains similar provisions addressing the
management of LDFs by creating requirements for LDF recipients,
administering agencies, and OPM.
COMMITTEE ACTION
Government Oversight Committee
Joint Favorable
Yea 12 Nay 0 (03/17/2026)