Procedure Library

Foreign Currency

Purpose

Understand the additional responsibilities and risks of doing business with foreign sponsors and issuing payment in foreign currency.

Applicability

Principal Investigators (PIs) and administrators managing sponsored projects.

Many foreign sponsors want to use their own currency when issuing agreements. It is preferred that awards be made in U.S. Dollars and OSP will attempt to negotiate favorable language during the contract review but in the event this is not possible an award will be issued in a foreign currency. You must be aware that 1) currency exchange rates can fluctuate up or down and affect the amount of the award; 2) Value Added Tax or VAT will reduce your budget and should be adjusted for; and 3) the PI is responsibile for reductions resulting from fluctuations in exchange rates and/or VAT.

When payment is made to the University in a currency other than U.S. Dollars, this currency must be converted to Dollars, and the risk is that the value at the exchange time has decreased since the original budgeted/anticipated value. This is also known as foreign exchange risk.

At the time of award, OSP will attempt to address foreign currency awards by working with the department to set up a budget at (or below) the exchange value, depending on whether there is a reserve, and communicate about this foreign exchange risk. The PI and department are ultimately responsible for the project and foreign exchange risks.

For convenience, here is a currency conversion site to assist in determining the actual amount of an award.

Instructions

Proposal Development

• During the budget development process, be aware that the average foreign currency variation for sponsored projects is around 15%. Keep in mind that depending on fluctuations in exchange rates, you may be faced with up to 15% less funding than anticipated.

Award Negotiation/Acceptance

• During the award negotiation, OSP will attempt to negotiate favorable language for the University. Such language may include payment in U.S. Dollars, advance payment of all funds, an agreed upon exchange rate (based on the exchange rate at time of award), or an accelerated payment schedule to reduce the risk.

Award Management/Completion

• The department will need to provide OSP with a detailed budget in U.S. dollars at the time of project set-up. If we are unable to invoice for the full amount at the execution of the contract, OSP recommends a conservative approach. We suggest you anticipate a lower rate of return at set-up to reduce the risk of overspending. However, the department can use the present day conversion rates.
  • As an alternative to the standard award setup, and at OSP's discretion, we may establish a preliminary project and fund only the amount that is actually received (at the exchange amount when it is paid by the sponsor).
• The department will need to monitor cash receipts compared to the budget upon receipt of each cash payment from the sponsor.
• The department will need to monitor and track currency fluctuations.

Related Policies and Procedures

• Research Handbook > Other Conduct of Research Issues > International Contracting