Project Budget Contingency: Worked Examples and Checks

Contingency is a budget allowance for uncertain costs needed to deliver the agreed project. It is not spare money for extra activity, and it does not replace proper estimates.

Choose the allowance from your risks and the funder's rules. “All grants allow 5%” is not a safe assumption.

First separate three kinds of cost

| Situation | Where it belongs in your working budget | | --- | --- | | You already know you need interpretation | A costed access line | | A contractor expects a price increase before delivery | An explained inflation assumption where permitted | | Equipment might need an emergency replacement hire | A possible contingency risk | | You would like to add more workshops later | A change to scope, not automatically contingency |

If a supplier's quote includes an allowance, identify it. Adding a general percentage over a quote that already contains the same risk can count it twice.

Percentage of what?

Start with a clear base. If eligible costs before contingency are £20,000 and you add 5% of those costs:

• Contingency: £20,000 × 0.05 = £1,000.
• Total including contingency: £21,000.
• Contingency as a share of the final total: £1,000 ÷ £21,000 = 4.76%.

That is different from requiring contingency to be 5% of the final total. In that case, £20,000 ÷ 0.95 = £21,052.63, of which £1,052.63 is contingency.

Neither calculation tells you what a funder will accept. It only makes the basis visible. Use the wording and calculation required by the relevant application.

A risk-based example

For an illustrative touring project, the producer identifies:

| Risk | Allowance being considered | Reason | | --- | --- | --- | | Replacement sound equipment | £300 | One short-notice hire | | Extra delivery charge | £150 | A second collection may be needed | | Replacement printed materials | £100 | Limited reprint after an access change | | Total | £550 | |

These are examples, not prices to copy. Check current quotes and whether your project actually has these risks. If the venue contract already covers replacement equipment, remove that allowance or explain the remaining exposure.

A short budget note can state the total, the risks, the person authorised to approve use and the grant conditions governing changes.

Arts and heritage funds do not use one rule

For ACE, start with the current Project Grants guidance, not a percentage copied from another application.

For National Lottery Heritage Grants of £10,000–£250,000, the current application questions include a mandatory contingency heading and connect the allowance to project risks and scale. They also warn against including it again inside other headings.

Do not carry a heritage assumption into an arts or community application. For building works, discuss cost risk with the appropriate qualified professional.

When the project is funded

An allowance is not permission to change the approved project freely. Read the conditions before spending or moving money. The Heritage Fund's grant-management guidance explains when changes, including use of contingency, need discussion and approval.

Keep a simple record: original allowance, proposed use, approval required, amount used and balance remaining.

A five-minute check

1. Is every predictable cost already budgeted?
2. Is the percentage base or named risk calculation clear?
3. Have you counted any allowance twice?
4. Does the income cover the total including contingency?
5. Do you know who approves changes?

Use the ACE worked budget to check the arithmetic. For human feedback on how your budget fits the whole application, see Matt's review service. This guide is budgeting support, not financial or technical certification.