Eligible Costs calculation when paid with other than EUR currency

Area: Useful tips

Topic: Eligible Costs calculation when paid with other than EUR currency

Author: Project Compliance and Reporting Officer Simas Stankaitis

After the project co-financed by the European Union (hereinafter – EU) Structural Funds is started, project owners often face uncertainty for recalculating experienced eligible costs that were paid with other than EUR currency. This comment we will cover:

1. Which currencies are suitable to declare experienced costs?

2. Which exchange rate date is suitable to be used?

3. Main recommendations for costs declaration in foreign currencies?

Before answering to the above questions, we would like to note that costs declaration in foreign currency for projects implemented by the 2014-2020 EU structural funds action program are regulated by:

• Project administration and financing rules (hereinafter – PAFR);
• 22nd business accounting standard „Foreign currency rate exchange“ methodical recommendations (hereinafter – Recommendations).

The answer to the first question is clear and non-negotiable. All project costs must be declared by local currency which is euros. Undoubtedly, it would be much easier for project owners to declare costs in the currency they were experienced, and EU would compensate it in euros. However, currently there is no possibility of automatic conversion according to submitted supporting documents for expenditure (although it would be effective way to avoid recurring currency conversion mistakes).

According to PAFR article 421.4, costs that appear due to positive difference after currency conversion are not eligible for compensation. Also, project owners  constantly face a dilemma which date rate of exchange to apply. The date of the contract, proforma date, invoice date or actual payment date?  In all possible cases proforma date is eliminated. Contract date is applied only when provided services are not invoiced. While choosing between invoice date and payment date, the date with lower exchange rate must be chosen.

For conclusion, some recommendations regarding foreign currency costs declaration:

1. It is necessary to use official Lithuanian Bank exchange rates.

2. Before signing contracts with suppliers, we advise to use euro currency which means you diminish possibilities to experience losses regarding exchange rate fluctuations (in some ways it may reach even up to five-digit amounts).

3. Check exchange rate before paying in foreign currency. Maybe it is worth to delay payment to seek for better exchange rate.