Foreign Currency Awards

Exchange Rate Consideration

The exchange rate is the price of one currency expressed in terms of another currency. For example, the average exchange rate of the U.S. Dollar to the Euro for March, 2014 was 0.72. This means 1 U.S. Dollar was equivalent to 0.72 Euros.

Fluctuation in exchange rates can have significant effect on the payments for sponsored research projects. All UCSF departments should be aware of the risks, including potential loss of Dollars, involved in agreements containing payment terms in foreign currency.

Payment Terms for Foreign Sponsors

To eliminate the risk associated with exchange rates, the Office of Sponsored Research (OSR) should establish the award amount and payment terms in U.S. Dollars. If the sponsor will not agree, OSR will try to reduce the risk associated with exchange rates by requiring one of the following:

• Payment in full upon execution of the agreement
• As much advance payment as can be mutually agreed upon

If the sponsor will not agree to advance payments, OSR will require an informed consent memo signed by the school Chair or designee stating that he or she understands the ramifications associated with payments made in a foreign currency. The memo will further specify how the school will address the risk associated with foreign currency fluctuations, either by discretionary funding or budget adjustments (see below for more information).

The informed consent memo will be provided and maintained with the executed award document during award acceptance transfer from OSR to Contracts & Grants Accounting (CGA).

Award Budget and Sponsor Payments

The Principal Investigator (PI) should prepare budgets in both U.S. Dollars and the currency of the foreign sponsor.

OSR will process an award with the budget in U.S. Dollars based on the current exchange rate.

Upon each cash payment from the sponsor, CGA will adjust the award to reflect the current exchange rate, using the department’s elected option. The department will be notified upon adjustment.

Department Options for Addressing Foreign Currency Fluctuations

When a sponsor will not agree to establish an award amount and payment in U.S. dollars or pay in advance, departments will be required to choose one of the following options to address the risk associated with foreign currency fluctuations:

• Use of Discretionary Funding - With discretionary funding, the department chooses to fund the gain/loss in currency exchange with discretionary funds. This option does not change the award’s budget. Upon each cash payment from the sponsor, CGA will record the gain/loss in the provided department discretionary funding source.
• Use of Budget Adjustments - With budget adjustments, the award’s budget will change by the gain/loss in currency exchange. Upon each cash payment from the sponsor, CGA will adjust the award budget, both direct and indirect proportionally, to reflect the current exchange rate.

Since this approach creates the risk of shortfalls in the awarded amount due to fluctuations in the currency’s exchange rate, the PI should stay abreast of the effect the exchange rate will have on the budget throughout the life of the research project. If cost overages occur, these will be transferred to the department’s discretionary funding at the end of the award.

Contact [email protected] if you have questions about sponsored awards and foreign currency.