Currency Exchange on Foreign Awards

In most cases, awards from sponsors in the United States will be in U.S. dollars, or other foreign currencies from the relevant sponsor.

Because expenditures will generally occur in Canadian dollars and because the University’s accounts are maintained in Canadian dollars, the award is converted to Canadian dollars when the budget is established.

Rate of Conversion

The rate of conversion is the prevailing rate at the earlier of:

  • the award start date, and
  • the receipt of the first award installment for each funding/reporting year.

Exchange Rate Risk

In the case of installment awards (the usual funding arrangement) there is a risk that the actual Canadian dollars realized on subsequent U.S. dollar instalments will be less than the amount provided to the researcher in the award budget.

This risk for the first year of funding is assumed by the University, i.e. covered out of central funds. Conversely, if actual Canadian dollars realized on subsequent instalments exceed that provided in the research budget, the difference is retained centrally. Over time the accumulated gains and losses should offset each other although not necessarily for an individual project.

This is done so that the researcher knows at the outset the level of funding available for the research for the first year of funding. Had they been required to assume the exchange risk, the researcher might be faced with an unanticipated decrease in budget and, in fact, may not have sufficient remaining funds to cover this cost.

If the award has funding for more than one year, the amount of budget made available for those future years will be based on the exchange rates at the beginning of each of those award years.

Expenditures in Foreign Currency

Another source of foreign exchange risk occurs when significant expenditures are incurred in the same foreign currency as the funding. This is due to the foreign currency award being converted to Canadian dollars followed by expenditures being incurred in the foreign currency, but those transactions are being converted into Canadian dollars at different dates and exchange rates.

External Currency Hedging Arrangements

Since currency hedging arrangements are manual customized processes, contracts to buy or sell a foreign currency at future date with a predetermined exchange rate are only entered into when the amounts are significant (when one transaction is $200,000 (CDN) or above) and the timing and amount of the transaction are known with a reasonable amount of certainty.

Process for Requesting Forward Exchange (FX) Contracts

  1. Contact treasury.fs@ualberta.ca regarding FX contracts. A known amount and future payment date (generally based on an invoice and or PO) will be necessary. You may also contact rsoinvoice@ualberta.ca if you have any questions regarding the use of these FX contracts in a research project.
  2. Treasury will provide the contract and steps to complete the transaction. FX contracts should only be completed to provide budget certainty for a USD expense.
  3. The PI will assume the risk of the exchange loss as a result of an unfulfilled foreign contract.