Exchange rate differences arise when a beneficiary settles an expense in a currency other than the project currency and the exchange rate at the time the invoice was issued differs from the rate at the time of payment. In projects funded from EU funds, this is a practical problem when purchasing technology from abroad or using foreign services. The rules set out which rate is used to convert the expenditure for reporting purposes – usually the central bank's reference rate on a set date under accounting regulations. An exchange rate loss is not, in itself, usually eligible expenditure, so the beneficiary bears the difference from its own resources, while any gain is not reported into the project. The risk can be mitigated by agreeing a price in euros, by shortening the interval between the order and payment, or by hedging the exchange rate. Verify the procedure with the provider and your accountant in advance.
See also: Eligible expenditure, Project budget, Payment claim.
