Written by Justo Torres, Director, Contracts and Grants.
When a sponsor declines to award funds in U.S. dollars (USD), a budget proposed in a foreign currency may not have the same value when awarded funds are paid in that currency and converted to USD.
How currency conversion rates are used during the project life cycle:
- At point of proposal: Use published conversion rates (e.g., OANDA.com) to estimate the USD equivalent of the foreign currency being requested and 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.
- When sponsor pays: 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.
- When payment is received: 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. The Office of Contracts and Grants will apply the converted dollar amounts received in each payment.
- At account closeout: At account closeout, expenditures must be reconciled to total USD received for the project. Any shortfall is the college’s responsibility.
- When managing awards: Managing awards in foreign currencies is a challenge. We try to avoid it when possible. When unavoidable, the steps outlined above will maximize the opportunity for success.