The permanent secretary at the Northern Ireland Office (NIO) said introducing a second budget for Northern Ireland could be on the cards.
Sir Jonathan Stephens was speaking at the Northern Ireland Affairs Committee.
He told MPs that while the restoration of Stormont was the main priority, if there was no deal another budget "may be necessary".
He also said there was a "potential contingency" of another election.
'No white lines in two years'
Secretary of State Karen Bradley, who also appeared before the committee, told MPs her focus is the restoration of devolution.
Pressed by the North Antrim DUP MP Ian Paisley if there would be an assembly poll this year she said she would "not speculate" on the possibility of another election.
She confirmed that there would be round-table talks next week and said she would give an update on Wednesday 7 February to the House of Commons.
The secretary of state said everyone she spoke to in Northern Ireland wanted to see devolution restored.
She told MPs even "the girl who did my make-up at the television said we all want this to work".
Conservative MP Bob Stewart also expressed frustration at the lack of a working assembly and described the absence of devolution since January 2017 as "absurd".
Fellow committee member Strangford DUP MP Jim Shannon voiced his concerns about how a lack of devolution was impacting road maintenance.
He said "white lines have not been done in my constituency for two years".
He also said it would be a "miracle" if a budget was agreed next week but said if that did come it would be a "Christmas present".
IT was Karen Bradley's first appearance in front of the Northern Ireland Affairs Committee since she was appointed as secretary of state earlier this month.
She told the cross-party committee that in her previous role as culture secretary she could not visit the Game of Thrones set in Belfast because she was advised that there were sensitivities around talks to restore devolution.