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Procedural guidelines for use and
maintenance of a Petty Cash Fund
Effective March 1, 2000
Establishing a Petty Cash Fund
Custody and control of the Petty Cash Fund
Accounting for the Petty Cash Transactions
Replenishing Petty Cash Funds
Balancing Petty Cash Funds
Change of Custodian
Closing a Petty Cash Fund
Confirmation of Petty Cash Funds
Allowable Petty Cash Expenditures
Expenses not allowed through Petty Cash Fund
Overview and policy
Bradley University has established on campus a limited number of petty cash funds for use by departments and cash handling areas. Petty cash funds enable departments to pay cash for minor business expenditures that could not easily be paid through normal University procurement practices.
The University uses an imprest system for petty cash. An imprest system requires that the cash periodically issued by the Controller's Office to replenish the fund agrees with the amount of disbursements from the fund. Consequently, an imprest petty cash fund remains at a fixed balance. At any point in time the balance of the fund consists of cash, coin and disbursement support (invoices/receipts). These items should always be equal to the predetermined amount to be maintained as the fund.
A petty cash fund should be small enough to require replenishment at least monthly, and large enough to require no more than three replenishments per month. Too large a petty cash fund encourages abuses such as unauthorized "borrowing" and payment for costly items that should be handled through issuance of checks. Too small a fund requires excessive work through frequent replenishment.
Procedures
A. Establishing a Petty Cash Fund. A department which has a need for the following transactions may request a departmental petty cash fund: (1) frequent small cash purchases, (2) payment reimbursements, or (3) change funds for cash transactions. A petty cash fund can be established by submitting a purchase requisition to the Controller's Office for approval. The requisition should include a justification for the fund, the name of the fund custodian, the location of the fund, and the amount of the fund. The Controller's Office will, after review and approval of the request, authorize disbursement of the fund monies from the Cashiers' Window. The initial petty cash disbursement will not appear as a charge to the department. The petty cash funds are recorded on the University books as a temporary loan to the department. Charges are not made to the department's accounts until a purchase requisition is completed for replenishing the fund.
B. Custody and control of the Petty Cash Fund. Departments receiving petty cash funds must designate one employee as custodian of the fund. The custodian is responsible for safekeeping and proper use of the fund. Custodial responsibilities include the following:
- Prohibiting access to the fund by anyone for any reason, under any circumstances.
- Keeping the fund intact, physically separate, and not comingled with any other fund.
- Proper usage of the petty cash funds.
- Exercising caution in the administration and protection of the fund.
- Notifying the Controller's Office immediately upon being relieved of responsibility for the fund or upon discovering any discrepancies in the fund.
- Securing a receipt for each expenditure.
- Limiting individual transactions to under $25 each. (Simultaneous purchases to circumvent the $25 limitation are not allowed.) Any exceptions are to be approved by the Controller's Office.
- Reimbursing only for funds actually expended.
- Reconciliation of the fund balance.
To prevent access by anyone except the custodian, petty cash should be kept in a locked box in a desk or cabinet that is locked whenever the custodian is absent. Only the custodian should have access to the keys. In case of theft or mysterious disappearance, University Police must be notified as soon as the loss is discovered. A copy of the police report should be included with the petty cash receipts when reimbursement is requested.
C. Accounting for Petty Cash Transactions. Proper accounting for petty cash requires that custodians make payments for authorized expenditures only, obtain receipts, and record expenditures. All receipts must be original receipts, indicating vendor name, items purchased and date. Each receipt should be documented with the following information:
- Date reimbursed or payment issued.
- Signature of recipient
- Description and business purpose of each transaction amount
- University account number to be charged
The Request for Reimbursement requires approval signature by custodian of petty cash fund except in the case where it is the custodian being reimbursed. In that situation, signature approval is required by the custodian's supervisor.
In cases where revenues are received, these revenues should be periodically deposited, at least weekly.
If receipts are not available (i.e., receipts are not typically given), a handwritten note describing the item paid for will suffice. However, all of the above information needs to be included.
D. Replenishing Petty Cash Funds. A purchase requisition can be used to request reimbursement or replenishment of the fund. This reimbursement should occur at least monthly. Receipts must be attached, grouped and totaled to the form. These receipts must be reviewed and approved by the person who has signature authorization for the departmental accounts. Departmental accounts and subcodes must be assigned to all groupings of expenditures. These petty cash expenditures are reported to departments on their monthly account reports by account number and expense classification. The requistion requesting replenishment of the fund is then reviewed and approved by the appropriate person in the Controller's Office. Once authorized for payment, the custodian can receive the funds at the Cashiers' Window.
E. Balancing Petty Cash Funds. When reimbursements by the custodian deplete the amount of cash, receipts are added to account for the expenditures and keep the petty cash fund in balance. At any time, the total cash on hand plus the total receipts and reimbursement requests in process should equal the original amount of the petty cash fund. If the fund does not balance, the Controller's Office should be contacted for assistance. A petty cash fund should always be balanced before a request is made for replenishment. Balancing and replenishment must be done for year-end, May 31.
Overages and Shortages. Money lost because the custodian has failed to safeguard the fund or allowed it to be improperly used is the custodian's liability and must be repaid by the custodian. Money lost due to circumstances beyond the control of the custodian is repaid from the department's budget or other available operating funds. Overages in the fund must be deposited with the Cashiers into a departmental account.
F. Change of Custodian. One custodian may not transfer a fund to a new custodian. The department head, however, may transfer the petty cash fund after serving notice to the Controller's Office. The fund must be counted and reconciled prior to transfer. The fund must be in balance before the new custodian accepts it. If a custodian leaves employ prior to the designation of a new custodian, he/she needs to close the fund with the Controller's Office.
G. Closing a Petty Cash Fund. If a petty cash fund is no longer needed, the custodian must close the fund by taking the cash to the Cashiers' Window. The Cashiers' Window will prepare a cash receipt with a credit to the Petty Cash Account, 11-00000-1101, give the custodian a copy and forward a copy to the Controller's Office. In cases where a custodian leaves without closing the fund and there are no receipts or records, any cash shortage may be charged to the operating budget of the custodian's department, reported to the IRS as income to the custodian, and reported to Internal Audit or the police for investigation.
H. Confirmation of Petty Cash Funds. Surprise periodic audits of the petty cash funds will be performed by the Controller's Office to ensure compliance. Additionally, several funds are selected each year for audit by the Internal Auditor's Office. The Controller's Office reserves the right to reduce or eliminate a petty cash fund based on the fund inactivity or violation of petty cash handling procedures.
I. Allowable Petty Cash Expenditures:
- Purchase of nominal cost items not to exceed $25 per item.
- Use as a change funds for sales type transactions (telecom, theatre).
- Office supplies not available from University inventories
- Books or operating manuals
- Emergency repairs
- Art supplies
- Hardware
- Bridge tolls, parking and local transporation
- Refreshments, food items (i.e., donuts, snacks for staff meetings)
J. Expenses not allowed through the Petty Cash Fund:
- Employee check cashing or borrowing from the fund
- Single purchases which exceed $25
- Items for personal use of staff (e.g., beverages, parking permits)
- Payment for services performed by employees or nonemployees
- Traffic citations
- Simultaneous purchases (stringing) made to circumvent the $25 limitation.
- Travel expenses, meals.
- Dues, memberships, subscriptions
- Conference fees
- Entertainment items
- Office decorations
- Alcoholic drinks
- Electrical appliances (space heaters/fans/coffee pots)
- Mileage, gasoline, per-diem payments
- Personal phone bills
- Postage stamps
- Gifts, flowers
- Utility bills
- Vehicle maintenance
- Catering services
- Use of fund to absorb cash overages and shortages of other cash receipting activities
- Items that should be requisitioned through Purchasing such as coffee supplies.