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Foreign Exchange Policy

Category Finance
Type Policy
Approved by University Council
Date Policy Took Effect 10 February 2005
Last Approved Revision 23 April 2018
Sponsor Chief Financial Officer
Responsible Officer Treasury Accountant
Review Date 12 September 2022

Purpose

To minimise foreign exchange exposure and risk in the University and to comply with all relevant legislative requirements.

Organisational Scope

This policy applies to all dealings in foreign exchange by the University.

Policy Content

1. The University will hold foreign currency received from trading in a foreign currency denominated New Zealand bank account up to an amount that covers:

(a) all forecast and known purchases of goods and services in the calendar year that the foreign currency is received, and

(b) any known, foreign currency liabilities that are unavoidable and will mature anytime in the twelve month period following the receipt of the foreign currency (the natural hedge).

2. The University will sell forward all sales of goods or services denominated in foreign currency and not required for the natural hedge immediately the sale becomes an unavoidable asset to the University.

3. The University will purchase forward cover for all purchases of goods or services denominated in foreign currency and not covered by the natural hedge immediately the purchase becomes an unavoidable liability to the University and exceeds $NZ50,000 in value. Purchases under $NZ50,000 may be hedged at the discretion of the contract authorisers.

4. The University will purchase forward cover for all liabilities denominated in foreign currency and not covered by the natural hedge immediately the liability becomes an unavoidable liability to the University.

5. For the purposes of clauses 3 and 4, any purchase or liability which is

(a) included in the budget approved by University Council, or

(b) is recurring in nature and has been included in the budget approved by Council in each of the last 5 years, and is included in the budget that has been approved by the Vice-Chancellor but has not yet been approved by Council will be considered to be an unavoidable liability.

6. When the settlement dates for foreign exchange purchase agreements are not able to be met, and the unavoidable liability still exists, the University will purchase the contracted currency and deposit those funds into its foreign-currency-denominated New Zealand bank account to be used when the liability falls due.

7. All foreign exchange contracts must be authorised by any two of the Chief Financial Officer, Financial Controller and the Chief Operating Officer.

8. This policy is subject to the following conditions:

(a) The value of foreign exchange contracts in place must not exceed the value of funds to be paid or received.

(b) The funds held in foreign currency can be sold where the University has a demand for cash.

Related Policies, Procedures and Forms

Contact for Further Information

If you have any queries regarding the content of this policy or need further clarification, contact the Treasury Accountant, Financial Services Division on treasury.accountant@otago.ac.nz