What are three benefits to the use of contingency funds?

What will be an ideal response?

Use of contingency funds is at first glance not a cause for celebration; however the author identifies three benefits derived from the use of these funds. The first benefit is that their use recognizes that the future contains unknowns and the problems that arise are likely to have a direct effect on the project budget. The project has a cushion of contingency to combat the time and money variance. The second benefit is that the company has already made provision for extra expense and as these funds are used, it opens management's eyes to the possibility of a significant budget increase on the horizon. Finally, application to the contingency funds gives an early warning signal of potential overdrawn budget so management can take a close look at the project and begin formulating additional plans in case the negative trend continues.