Contingency reserve is not calculated in pre-financing payments and is not included in further pre-financing installments.
Contingency reserve can only be used for unforeseeable circumstances. The contracts do not authorize beneficiaries in advance to use the contingency reserve. It is subject to prior written authorization of the the Contracting Authority (is EUD under the direct management modality), who will make an evaluation and take a decision on a case by case basis.
When the use of the reserve is authorized, the corresponding amount will be split and allocated to the concerned budget headings according to the specific needs of the project. As the total amount of direct costs will be higher, the indirect costs will also consequently increase. This should be kept into consideration when using the contingency reserve because in any case the maximum amount of the grant as set in Article 3 of the Special Conditions cannot be changed.
For obtaining approval of contingency reserve, written request along with justification, ‘Addenda or Use of Contingency’ spreadsheet and all supporting documents such as official reports, statements, etc should be submitted to the Contracting Authority (is EUD under the direct management modality)
Situations produced by poor management by the beneficiaries may not be accepted as a reason to justify the use of the contingency reserve.
The below example is developed regarding which steps to be followed up by the beneficiary for making a request for usage of contingency reserve.
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You implement a 24-month project. The office was rented and a multifunctional printer for the project have been purchased. In 16th month of the project, the project office is robbed and the multifunctional printer is stolen. Just after this incident, you informed law enforcements and the official statement and minutes have been issued by officials. You are currently in need of a multifunctional printer to implement activities efficiently and effectively during the rest of the project.. At the same time, you can not make financial amendment amongst budget headings and items. Because, you have already allocated all of the amounts within each budget item to specific tasks and activities of the project. In your budget, you have an allocation of 6,500 EUR in the contingency reserve. For purchasing a new multifunctional printer, you need to have 1,500 EUR. Under the circumstances, you decided to apply for approval to use 1,500 EUR out of 6,500 EUR in the contingency reserve. |
Based on the above scenario, it’s recommended that the beneficiary prepares and submits following documents and information to the Contracting Authority (is EUD under the direct management modality) for approval of contingency reserve usage:
- Written explanation and justification about the incident that beneficiary faced with,
- The official reports, statements and minutes of law enforcements,
- The price and quotations of the new multifunctional printer,
- The filled out ‘Addenda or Use of Contingency’ spreadsheet.
While filling out the ‘Addenda or Use of Contingency’ spreadsheet, fill out all related cells and columns. Please enter ‘-1500’ to ‘Provision for Contingency Reserve’ cell under the ‘Use of Contingencies/Addenda’ column. And then, enter ‘1500’ to ‘3.3. Machines, tools, etc cell under the same column.
Based on the above scenario, the sampled spreadsheet of “Addenda or Use of Contingency” can be found here.
For more information, please check out Companion.
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