CAST Project Management FG IV Practice Test

Losses from exchange-rate fluctuations are typically not considered eligible expenses in grant and public procurement due to the volatility and unpredictability they represent. These types of losses can arise from the natural fluctuations in currency values, which are often beyond the control of the grant recipient or contractor.

The rationale behind excluding such losses from eligible expenses is that public funding aims to provide financial support for specific, measurable project costs rather than accommodate risks associated with currency value changes. This ensures a more stable and predictable allocation of public resources, focusing on expenses that are directly related to the project objectives rather than financial risks that could lead to significant variability in funding needs.

Allowing exchange-rate losses as eligible expenses could open the door to challenges in budgeting and financial reporting, complicating the financial management of projects funded by grants or public procurement.