Budget Preparation and Project Managing in Foreign Currency
The University is frequently engaged in international projects related to its educational and research mission. In respect to such projects this section provides:
- Guidelines with respect to estimating expenditures in an international market.
- Special considerations for managing overseas projects.
This section will address only the special considerations with respect to preparing a budget proposal for an overseas project. Refer to developing a budget for research awards for general guidelines for preparation of proposal budgets.
Estimating Foreign Purchases
For project expenditures which will occur in a foreign location, it is necessary to consider the following:
- the cost of such items in the overseas market, i.e. is the price of an item or service in the foreign market commensurate with the price in the Canadian market?
- the currency which will be used for payment, i.e. the currency of the foreign country or U.S. dollars?
- the cost of buying the foreign currency, whether U.S. dollars or other.
Guidelines with Respect to Currency
In selecting the currency of payment, the following should be considered:
- the stability of the currency
- Though the currency of the country where the project will take place may cost less than U.S. dollars at the time of budget preparation, this may change dramatically by the time expenditures are incurred due to currency instability.
- because of the general attractiveness of U.S. dollars, their use may significantly facilitate expenditures in the foreign country
- the currency in which the award funds will be received:
- if the funds are received in U.S. dollars, U.S. dollars can be purchased for expenditures without incurring any exchange loss.
- Refer to Currency Exchange on USD Awards.
To estimate the cost of foreign currency (whether USD or other) use the exchange rate prevailing at the time of budget preparation. Include a contingency amount to cover fluctuations in exchange rates. Please consult with the Funding or Partnership Officer in charge of the Fund (indicated on the FReD)to determine an appropriate contingency rate to use, given the economic conditions in effect at the time of budget preparation.
A University allowance refers to an amount provided to an individual for travel and related expenditures for which there is no requirement to account for specific expenditures.
The University travel policies and guidelines include three such allowances:
- meal per diem
- allowance for use of employee owned vehicle
- allowance for gratuitous accommodation
Refer to Reimbursement Rates for the current allowances.
In the case of meals, the allowance does not represent a maximum but simply the limit which will be paid without receipts. All other expenses for travel are reimbursed only upon submission of original receipts.
Considerations when using Per Diems:
- In the case of meals, in particular, the amount of the University allowance may not be sufficient to cover daily meal expenses and yet it may not be possible to obtain receipts for meals.
- The University has no allowance for accommodation which means that all accommodation expenses must be supported by original receipts.
- Most federal government awards are subject to Treasury Board travel guidelines.
Include in the budget proposal a request for allowances for accommodation and meals and any other expenses for which an allowance might be appropriate.
Where the sponsor provides for allowances which differ from those of the University, the sponsor’s allowances will apply.
Ensure that the allowances will be sufficient to cover the expected costs.
It should be clear to the sponsor that the allowances will be paid to an individual based on the number of days the individual is engaged in approved project activity and no further accounting of the expenditures funded by the allowances will be required.
Refer to Travel and Other Reimbursable Expenses for guidelines on these expenses and how such claims are reimbursed. It must be noted that in all cases, the more stringent policy (sponsor vs. University) should apply.
The proposed budget should include a provision for the cost of health insurance for individuals travelling to foreign countries and for foreign visitors travelling to Canada.
In preparing the budget proposal, it will be necessary to identify expenses which relate to the way of doing business in the foreign country, i.e. costs which would not be incurred if the project were being carried out in Canada.
The approval process with respect to international applications is the same as for other applications administered by the University.
Project Management in Foreign Currency
The sponsors of international projects frequently have very detailed budgeting and reporting requirements that cannot be accommodated by the University’s existing coding structure. As a result, often there is a need for fund managers – the Principal Investigator or project director and Business Officer — to develop supplementary accounting records for the project.
The need to reconcile the information in the supplementary records with the University records presents a special challenge for fund managers.
Paying Individuals for Services – Canadian Resident
Under the Federal Income Tax Act, a Canadian resident is taxed on his world income regardless of where that income is earned. In order to meet legislative requirements, therefore, all payments to Canadian residents in respect to the project must be made through the Payroll Department.
Paying Individuals for Services – Non-resident
A non-resident is taxed only on amounts received for services rendered in Canada. Therefore, payments to non-residents providing services in Canada must be made through the Payroll Department.
Payments to non-residents providing service outside Canada should be made through departmental Accounts Payable processes. Ensure a proper invoice is received to support the payment. Refer to the GTFM section Certified Invoices.
Payment in Foreign Currency
It is important to select the most appropriate payment mechanism and allow sufficient lead time to satisfy requirements or expectations of the payee. See Foreign Payments for payment alternatives.
See FAQ – Cheque Production for Financial Services Department processing schedules for CAD cheques, USD cheques and foreign drafts.
Last revision November 2015