A sponsored award issued in a foreign currency carries risk due to conversion rate fluctuations. The actual amount of the award in US dollars (USD) may not be determined until all payments in the foreign currency have been received and converted to USD. GCA recommends asking for payment in full at the start of the award. This will provide PIs and departments with a more accurate amount available to spend.
OSP will ask departments to provide an estimate of the USD equivalent when the eGC1 is created. This amount is only an estimate and may be months old by the time payment is received. See OSP’s web page on Proposals to Foreign Sponsors for information on how to convert foreign currency to USD.
Spending should be based on current exchange rates, not the initial exchange rate used to estimate the award amount. If the sponsor makes multiple payments, either for a cost reimbursable award or based on completion of milestone deliverables, the award and revenue amounts will be adjusted after all payments have been received. Use the receipt amount in Grant Tracker to monitor the USD value of payments received. Any discrepancies between payments received and expenses could result in a deficit for the PI/department.
When the dollar is strong and goes up in value, the value of foreign currency will decrease accordingly: it will take more of the foreign currency to equal $1.00. That means that when the sponsor pays us in foreign currency, that payment will convert to fewer US dollars, which will cause awards issued in foreign currency to be worth less than originally estimated.
Example: One Euro on 1/2/2014 was worth $1.34. On 3/6/2015, that same Euro was only worth $1.09. If you had an award for 10,000 Euros issued on 1/2/2014, the award would have been set up based on an estimated value of $13,400 US dollars. If the payment in Euros was received on 3/6/2015, it would be worth only $10,900 US dollars, a significant decrease in value.
When the dollar is weak and goes down in value, the value of foreign currency will increase accordingly: the stronger foreign currency will be able to "buy" more US dollars. That means that when the sponsor pays us in foreign currency, that payment will convert into more US dollars than originally estimated.