Exchange Rate Consideration
The exchange rate is the price of one currency expressed in terms of another currency. For example, as of November 2009, the exchange rate of 1 U.S. dollar for 1 euro was approximately 0.67, which means that 1 dollar can be exchanged for 0.67 euros.
Fluctuation in exchange rates have significant effects on the payments for sponsored research projects. All Georgia Tech units 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
OSP generally requires at least 50% advance payment from all foreign sponsors. To eliminate the risk associated with exchange rates, OSP establishes the agreement amount and payment terms in U.S. dollars. If the sponsor will not agree to establish the agreement’s price and payment terms in U.S. dollars, OSP will try to reduce the risk associated with exchange rates by requiring payment in full upon execution of the agreement or as much advance payment as can be mutually agreed upon. If the sponsor will not agree to advance payments, OSP will require a memo signed by the school chair stating that he or she understands the ramifications associated with payments made in a foreign currency, and that the school will be responsible for any cost overruns associated with foreign currency fluctuations.
The PI should prepare a budget in U.S. dollars and the currency of the foreign sponsor. OSP will process the budget for the agreement in U.S. dollars at the time an award is processed based on the current exchange rate. Grants & Contracts will notify the PI and OSP of the payment amount received to adjust the budget as necessary.
The PI’s school will be responsible for any shortfalls in the awarded amount due to fluctuations in the currency’s exchange rate. Therefore, the PI should stay abreast of the effect the exchange rate will have on the budget throughout the life of the research project.