Finance 301: Petty Cash Funds

Purpose

To provide departments with guidelines to:

• Establish departmental petty cash funds.
• Encourage effective use of these funds.
• Safeguard the funds and related documents.
• Maintain satisfactory accounting controls

Reference

Statewide Accounting Manual , P-6

Introduction

Effort and administrative costs can be saved by using petty cash for small expenditures. Petty cash funds facilitate department payments for low-cost supplies that are needed promptly. Employees who make small cash purchases may be reimbursed from a petty cash fund. When the petty cash fund is reimbursed, the purchases will be summarized and charged to the department account.

Definitions

Petty Cash Fund: A petty cash fund may be thought of as a loan to a department. That loan is a fixed sum and is maintained by a fund custodian, the individual responsible for the petty cash fund. As the custodian makes payments out of the fund for small purchases, a receipt and voucher replaces the cash paid out. The custodian periodically replenishes the petty cash by submitting a reconciliation form and the receipt documentation to Accounts Payable for reimbursement. The total cash available and accumulated receipts must always equal the fund amount. Custodian: The individual who has the responsibility for the use, accountability and security of the petty cash fund.

Policy

Establishing a Petty Cash Fund

A department may obtain a fund by submitting a written request to the Accounts Payable Manager. The request should contain:

1. Name, office address, and telephone number of the custodian.
2. Proposed amount including a Direct Payment Form for that amount.
3. Estimated volume of activity.
4. Date required.
5. Intended use of the fund.
6. Safeguarding measures for the fund (see requirements elsewhere in this policy).
7. Approval of Dean or Director.

The request will be reviewed for reasonableness of need and amount. If denied, the request will be returned to the originator with an appropriate explanation. If approved or modified, Accounts Payable will write a check to set up the fund.
Requirements and Responsibilities

1. Separate petty cash or change funds must not be commingled.
2. Each petty cash fund will be the responsibility of a single person who will have sole access to the fund.
3. The fund custodian must secure all petty cash in a secure lockable cash box placed in a locking desk or cabinet. Keys and lock combinations should be restricted to the fund custodian. If the value of the fund is greater than $500, overnight storage in a safe should be considered. If the petty cash fund is lost or stolen, the fund custodian is responsible for filing a report the University Police and notifying the Accounts Payable Manager.
4. A Petty Cash Voucher must be prepared in ink and retained for each disbursement from the fund. Pre-numbered Petty Cash Vouchers are available at Cashiering at the University Center. The forms are not available on-line. The voucher must contain a complete description of the item purchased and must be signed by the person receiving the reimbursement.
5. Original receipts must be attached to the vouchers to support the expenditures, except for minor items (under $25) for which receipts cannot be reasonably obtained.
6. Expenditures and advances for expenditures must be approved prior to disbursement by an authorized individual other than the petty cash custodian.
7. Expenditures are limited to $100. The Accounts Payable Manager may approve expenditures for a larger amount in emergency situations. It is inappropriate to circumvent this limit by making multiple purchases of the same item on the same time and submitting each purchase on a separate voucher.
8. Petty cash funds must be counted periodically, at least semi-annually, on an unannounced basis by the custodian’s supervisor.

Prohibited Petty Cash Expenditures Petty cash expenditures must not be used for:

1. Travel advances or expenses, except for incidental parking and mileage reimbursements of less than $25.
2. Compensation for services rendered.
3. Capital expenditures (equipment).
4. Entertainment (except for representational and non-representational expenses that have been pre-approved by the Accounts Payable Manager. Entertainment includes any activity generally considered to provide hospitality, recreation, diversion, and amusement. Entertainment expense items include food, beverages, lodging, and theater and athletic tickets. Employees presenting unapproved entertainment expense items for petty cash reimbursement should be referred to the Accounts Payable Manager.
5. Making personal loans or cashing checks.
6. Items specifically prohibited by purchasing regulation, including: foodstuffs, coffee, flowers, pictures/framing, plants, gifts, and individual memberships.

Reimbursement Deficiencies Fund custodians who submit reimbursement requests that contain evidence of unauthorized use of petty cash funds or insufficient documentation may receive written notice of the deficiency, a copy of which will be sent to the department manager. Repeated deficiencies will result in the termination of the fund.
Transfer of Petty Cash Fund Custody To affect a transfer of the petty cash fund, the new custodian must submit a new petty cash fund request to the Accounts Payable Manager. Two alternative methods of transfer may be selected.

• Upon approval, the old and new cashier may arrange for the transfer, in which case the new custodian and his or her department accept responsibility for the fund and any discrepancies that may exist.
• If the new custodian and department prefer, the current custodian can close out the existing petty cash fund, and the new custodian can apply to establish a new petty cash fund.

Year-end Closing Consideration All expenditures applicable to the current fiscal year should be submitted and reimbursed by the year-end cut-off date for petty cash. That date will be published; however, it normally falls between June 20 and 25.

Effective: 07/10/2005