The Community Hall Refurbishment Budget
A community hall committee has a refurbishment budget of €48,000. Their cost sheet lists four work packages: roof repair at €16,800; heating upgrade at €12,600; kitchen refit at €9,400; and painting at €5,200. A grant covers 60% of the roof repair only. The committee also holds a contingency reserve equal to 8% of the total listed costs, kept outside the budget line until needed. At the AGM, three figures are quoted: the total listed costs, the amount the committee must fund from its own budget after the grant, and the contingency reserve. Two members suspect the contingency has been calculated on the wrong base.
1. Calculate the total listed costs, the committee's own-budget requirement after the grant, and the contingency reserve. State clearly on what base the contingency is calculated.
Read the worked answer
Total listed costs = 16,800 + 12,600 + 9,400 + 5,200 = €44,000.
Grant on roof = 60% × 16,800 = €10,080.
Own-budget requirement = 44,000 − 10,080 = €33,920.
Contingency = 8% × 44,000 = €3,520, calculated on total listed costs (not on the post-grant figure).
Note: own budget €48,000 comfortably covers €33,920 + €3,520 = €37,440, leaving €10,560 headroom.
2. A member argues the contingency should instead be 8% of the own-budget requirement. Quantify the difference and comment on which base is more defensible for a contingency reserve.
Read the worked answer
8% of own-budget requirement = 0.08 × 33,920 = €2,713.60.
Difference = 3,520 − 2,713.60 = €806.40 lower under the member's method.
A contingency covers unforeseen cost on the works themselves, so the full listed cost (€44,000) is the more defensible base - the grant does not reduce the risk of the roof costing more than quoted. The member's base understates exposure by €806.40.
3. Mid-project, painting comes in 25% over its quote while the kitchen refit comes in 10% under. Does the contingency reserve absorb the net overspend without touching the €48,000 budget?
Read the worked answer
Painting overrun = 25% × 5,200 = €1,300. Kitchen saving = 10% × 9,400 = €940. Net overspend = 1,300 − 940 = €360.
Contingency of €3,520 absorbs €360 easily, leaving €3,160 of reserve. The €48,000 budget is untouched. Answer: yes, comfortably.