Written by Justo Torres, Director, Contracts and Grants
This month’s Finance Division Knowledge Base spotlight is on sponsored projects awarded in foreign currency
Accepting contracts and/or grants that stipulate that payments will be made in foreign currency is inherently risky, and we avoid doing so whenever possible. As you can easily imagine, the volatility of currency exchange rates can create a financial loss for the institution.
In those rare cases where acceptance of foreign currency becomes a deal breaker for our sponsor, we will accept the award. When we do accept foreign currency awards, the managing unit and Contracts and Grants must partner on the following processes:
At Point of Proposal
Use published conversion rates (e.g. OANDA.com) to estimate the USD equivalent of the foreign currency being requested. Include both the budget proposed in a foreign currency and the USD budget in the proposal record.
At Point of Award
The ledger 5 budget will be loaded in USD in an amount based on the current (date of set-up) conversion rate. Remember, this is still an estimate of the USD value of foreign currency to be received. The college must assume the risk of unfavorable currency fluctuations, wire fees and any transaction fees that apply.
If the sponsor will provide full payment when the award is issued, the account can be set up with or promptly revised to the converted USD amount for the award. This minimizes the college’s risk. Awards with a substantial payment after the final report or deliverable is received carry the greatest risk.
At Point of Payment
Revenue will be recorded in the actual USD received. If the sponsor pays in installments, each payment will be converted to USD when received, based on the conversion rate at that time. Contracts and Grants will apply the converted dollar amounts received in each payment.
At Point of Closeout
At account closeout, expenditures must be reconciled to total USD received for the project. Any shortfall is the college’s responsibility.