Charities 'lose millions in foreign exchange deals'

UK charities that work abroad could be losing as much as 10 per cent of their overseas budgets by failing to implement effective currency exchange strategies, a major financial institution has warned.

A source at the institution told Third Sector that charities could avoid potential losses of millions of pounds by better planning.

"Although a lot of charities have sophisticated finance systems, they tend to do their foreign exchange transactions at spot rates, rather than booking rates in advance," said the source.

"Even though they know how much they will have to convert in advance, many organisations take the view that fluctuations in foreign exchange rates balance out throughout the year. But charities need to take a more commercial view."

David Causer, director of finance and resources at the British Red Cross, defended the use of spot transactions. He said: "We regularly review our procedures to ensure the exchange rates used are competitive."

Brendan Gormley, chief executive of the Disasters Emergency Committee, said if anyone produced "hard evidence" DEC members were not making the best use of funds, it would investigate.

Tim Childs, tax and treasury manager at Oxfam, said speculating in currencies had its own dangers. "Hedging is not a risk-free operation and forecasting currency movements is notoriously difficult," he said.

Phil Curley, UK business development manager at exchange specialists Custom House, blamed banks."Charities are not often exchanging sufficient volumes of currency for exchange providers to be interested in developing a good pricing structure," he said.

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