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What is the role of contingency and buffers in budgets?

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Contingencies are amounts included to cover uncertainty and unforeseen events. Modest, transparent contingencies aid resilience, but excessive or hidden buffers are budgetary slack that wastes resources and distorts control. Good practice makes contingencies explicit, justified, and controlled rather than padded into line items.
Real-world example An explicit 2% contingency line is approved, rather than managers hiding padding across their budgets.

Common follow-ups: How do contingencies differ from slack? | Why make contingencies explicit?

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All 34 The Budgeting Process questions