Subpart E: Cost principles 2024 Uniform Guidance · effective Oct 1, 2024

2 CFR 200.433: Contingency provisions

2 CFR 200.433 sets 3 requirements for organizations that receive federal grants and cooperative agreements. Applies when you build your application and budget, and to every cost you charge after award.

Shows up in your application: BudgetBudget: constructionBudget justificationIndirect costs

What 2 CFR 200.433 requires

1. Allowable costs

What you must do

Contingency amounts may be included in budget estimates only for possible events or conditions whose precise outcome is indeterminable at estimate time and likely in aggregate to add costs (typically large construction projects, IT systems, or other agency-approved items); they must be estimated using broadly-accepted cost estimating methodologies, specified in the budget documentation, and accepted by the Federal agency. Contingency amounts for major project scope changes, unforeseen risks, or extraordinary events must not be included in budget estimates.

When it applies

Budget contains a contingency line (typically construction or IT projects)

BudgetBudget: constructionBudget justification
2. Allowable costs

What you must do

Actual costs charged against an included contingency amount are allowable only if they comply with the cost principles and other requirements of the part (see §§ 200.300 and 200.403), are necessary and reasonable for proper and efficient accomplishment of project or program objectives, and are verifiable from the recipient's or subrecipient's records.

When it applies

Application narrative treats contingency as a discretionary reserve, management fee, or automatic drawdown

Budget justification
3. Allowable costs

What you must do

Payments to a 'contingency reserve' or any similar payment for events whose occurrence cannot be foretold with certainty as to time or intensity, or with an assurance of happening, are unallowable — except reserves permitted under § 200.431 (e.g., self-insurance, pension, severance) and § 200.447 (insurance).

When it applies

Budget or indirect pool includes contributions to a reserve fund

BudgetIndirect costs
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Sections 2 CFR 200.433 refers to

Regulation text of 2 CFR 200.433

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(a) Contingency provisions are part of a budget estimate of future costs (typically of large construction projects, IT systems, or other items approved by the Federal agency) which are associated with possible events or conditions arising from causes for which the precise outcome is indeterminable at the time of estimate and that are likely to result, in the aggregate, in additional costs for the approved activity or project. Contingency amounts for major project scope changes, unforeseen risks, or extraordinary events must not be included in the budget estimates for a Federal award.

(b) It is permissible for contingency amounts other than those excluded in paragraph (a) of this section to be explicitly included in budget estimates to the extent necessary to improve their precision. Contingency amounts must be estimated using broadly-accepted cost estimating methodologies, specified in the budget documentation of the Federal award, and accepted by the Federal agency. As such, contingency amounts are to be included in the Federal award. In order for actual costs incurred to be allowable, they must comply with the cost principles and other requirements of this part (see §§ 200.300 and 200.403), be necessary and reasonable for proper and efficient accomplishment of project or program objectives, and be verifiable from the recipient's or subrecipient's records.

(c) Payments to a recipient's or subrecipient's “contingency reserve” or any similar payment made for events the occurrence of which cannot be foretold with certainty as to the time or intensity, or with an assurance of their happening, are unallowable, except as noted in §§ 200.431 and 200.447.

Source: eCFR · checked Sep 17, 2026

Questions about 2 CFR 200.433

What does 2 CFR 200.433 require?

Contingency amounts may be included in budget estimates only for possible events or conditions whose precise outcome is indeterminable at estimate time and likely in aggregate to add costs (typically large construction projects, IT systems, or other agency-approved items); they must be estimated using broadly-accepted cost estimating methodologies, specified in the budget documentation, and accepted by the Federal agency. Contingency amounts for major project scope changes, unforeseen risks, or extraordinary events must not be included in budget estimates. Actual costs charged against an included contingency amount are allowable only if they comply with the cost principles and other requirements of the part (see §§ 200.300 and 200.403), are necessary and reasonable for proper and efficient accomplishment of project or program objectives, and are verifiable from the recipient's or subrecipient's records. Payments to a 'contingency reserve' or any similar payment for events whose occurrence cannot be foretold with certainty as to time or intensity, or with an assurance of happening, are unallowable — except reserves permitted under § 200.431 (e.g., self-insurance, pension, severance) and § 200.447 (insurance).

When does 2 CFR 200.433 apply?

Budget contains a contingency line (typically construction or IT projects). Application narrative treats contingency as a discretionary reserve, management fee, or automatic drawdown. Budget or indirect pool includes contributions to a reserve fund.

Plain-English summaries for information only, not legal advice. Always check the regulation text, your award terms and your agency’s guidance.