University of ColoradoDenver

Fiscal Policy

Title:Petty Cash or Change Fund

Source:Finance Office/Accounting Services

Prepared by:Controller

Approved by:Associate Vice Chancellor for Finance and Administration

EffectiveDate:August 1, 2008

Replaces:December 1, 2002

Applies:

______

A. Introduction

1.Purpose

The purpose of this policy is to establish guidelines concerning the use of a petty cash or change fund.

2.Reference

  1. State of ColoradoFiscal Rule6-2.
  1. Colorado Revised Statutes, 24-30-202, Paragraph 20.1.
  1. APS: Bank Accounts and Investments.
  1. UCD Fiscal Policy 1-3, Check Cashing.
  1. PSC Procedural Statement: Sensitive Expenses.
  1. PSC Procedural Statement: Health-Related/Human Subject Research.
  1. PSC Procedural Statement: Cash Advances.
  1. UCD Draft Fiscal Policy: Study Subject Payments
  1. PSC Procedural Statement: Payment Voucher Authorization and Use

3.Responsibility

It is the responsibility of the UCD Controller, UCD Finance Office, petty cash custodians, and change fund custodians to ensure compliance with this policy.

B.Table of ContentsPage(s)

A.Introduction1

1.Purpose1

2.Reference1

3.Responsibility2

B. Table of Contents2

C.Applicability and Definitions2-3

  1. Applicability 2
  2. Definitions2-3

D.Policy Statement3-6

E. Procedures7-9

  1. Attachments

Exhibit A – Request for Petty Cash or Change Fund

Exhibit B – Statement of Responsibility for Petty Cash and Change Fund Custodians

Exhibit C – Petty Cash/Change Fund Audit Count Sheet

  1. Applicability and Definitions
  1. Applicability

This policy applies to all who apply for, are granted, and make use of a petty cash or change fund at UCD.

2.Definitions

  1. Authorized Amount is the amount of the petty cash or change fund that was approved by the UCD Controller, and if applicable, the UCD Office of Grants and Contracts or Sponsored Projects Accounting for a particular speed-type. This amount is also recorded as an asset on the Balance Sheet for the speed-type. This is the amount that will be audited and that should exist in possession of the custodian at all times in either cash on hand, unreimbursed receipts, submitted Payment Vouchers for reimbursement, or a combination thereof. Normally the authorized amount of a petty cash fund will be the minimum necessary to fund one month of expenditures. Periodically, historical expenditures will be reviewed to ensure this amount is the minimum and will be reduced if necessary at the discretion of the Finance Office. A custodian may request an increase to the authorized amount if monthly expenditures justify it.
  1. Change Funds are established to facilitate making change by entities that accept cash receipts. Change funds are not to be used to pay expenses.
  1. Custodian is the individual responsible for a petty cash or change fund.
  1. Memorandum is a receipt used to transfer the responsibility of funds from the custodian to another individual. This individual will be responsible for the money and will either return it in cash, receipts, or a combination thereof.
  1. Petty Cash Funds are funds used for the payment of small, incidental expenses ($60 or less) when not otherwise obtainable by procurement card or other procurement methods. These funds may also be used for study subject payments, incentives, co-pays, or other patient related expenses that are in line with the originally stated purpose of the fund, as specified in the Exhibit A authorization.
  1. Receipts are used to account for expenditures from the petty cash fund.
  1. Reimbursement of Funds is the process of the petty cash fund custodian taking receipts that have been exchanged for cash and process a Payment Voucher through the Procurement Service Center (PSC). The PSC will issue a check to the custodian in order to replenish the cash. The total of the receipts submitted must match the amount requested on the Payment Voucher. The Payment Voucher amount can not exceed the fund authorized amount. A copy of the submitted Payment Voucher and receipts must be kept with the fund until the check is received and cashed by the custodian.
  1. Unreimbursed Receipts are receipts that have not been submitted to the PSC for reimbursement of cash to the petty cash fund. Unreimbursed receipts have the same value as cash when determining if a petty cash fund equals the authorized amount.
  1. Policy Statement

1.Approval. The Controller may approve a petty cash or change fund upon written request and provision of appropriate documentation by the campus department. To request a new or increase an existing petty cash or change fund the department must submit the “Request for Petty Cash or Change Fund” form (Exhibit A), the “Statement of Responsibility for Petty Cash and Change Fund Custodians” (Exhibit B), and a Payment Voucher.

2.Student Awards. Petty cash may not be used for student awards because all student awards must go through the Financial Aid Office for purposes of student financial aid tracking.

3. Dollar Limits. The authorized amount of a petty cash fund may not exceed $2,500. A custodian with multiple petty cash funds is limited to a total of $2,500. Payments from a petty cash fund are limited to $60 each.

4.Tax Reporting. If the petty cash fund is for study subject payments, incentives, or other patient related expenses they are considered “compensation” for time and inconvenience and are considered taxable income to the recipient per the Internal Revenue Code, regardless of the payment method or amount. See Study Subjects Payments policy for details on the custodian’s responsibilities for tax reporting.

5. Single Purpose. Petty cash should never be used for any reason other than the originally stated purpose, as specified in Exhibit A authorization. Individual petty cash or change funds must not be commingled with any other funds. If it is in a restricted fund (fund 30, 31, 34), expenditures from the petty cash fund must benefit the restricted purpose authorized.

6.Internal Controls. Internal Controls over petty cash funds are required at all times. Each organizational unit must have written procedures in place that provide for the proper safeguarding of petty cash. The following internal controls at a minimum must be in place:

a.Custody.

  • A single individual must be designated custodian of the petty cash fund. This individual will be responsible for ensuring that all security, dispensing, tracking, and replenishing procedures are followed. Contact the Finance Office to permanently change a designated custodian.
  • There are times when the custodian must temporarily transfer cash to other departmental personnel prior to the actual expenditure. An example of this is where departmental personnel pay study subjects instead of the custodian. A memorandum indicating the amount and acknowledging the transfer of responsibility must be prepared, signed, and dated by both parties stating that the recipient agrees to be held accountable for the safeguarding of the funds and will dispense the payment in accordance with the approved business purpose. Each party to the agreement will receive a copy of the memorandum. The custodian’s copy must be kept in the petty cash fund container. Both copies can be destroyed after the responsible party returns the funds, receipts, or a combination thereof. This process will ensure that responsibility for the funds rests with a single individual at any point in time.

b.Securing. Petty cash and unreimbursed receipts must be secured at all times in a locked container that is secured in a locked cabinet, drawer, or safe.

c.Tracking. Study Subject payments should be documented by a prenumbered receipt book, log, or equivalent method designed to uniquely identify each payment. Standard receipt books are a two-part form available at office supply stores. Information to be included on each receipt or line of the log shall include at a minimum:

  • Study subject name or ID (the study subject ID is any number assigned by the department to identify the individual in order to protect their confidentiality),
  • Date,
  • Payment Amount,
  • Initialed by the study subject.

A copy of the submitted Payment Voucher and receipts must be maintained in the petty cash container until the reimbursement check is received and cashed.

d.Theft. Employees are held responsible for any funds in their possession that are lost or misplaced. Any shortage must be reported immediately to the Finance Office and the campus Police department. In the event of theft, contact the Finance Office immediately for help in giving notice to the Controller and the UCD Police. A copy of the police report will be attached to the Payment Voucher to reimburse the theft amount. The Payment Voucher will be sent to UCD Finance at campus box D129.

e.Reconciliation. A periodic reconciliation (at least quarterly) using the “Petty Cash/Change Fund Audit Count Sheet” (Exhibit C) of cash on hand and receipts to the authorized fund amount should be conducted at irregular intervals. It needs to be performed by an individual, in the presence of the custodian, who is not responsible for the replenishment or custody of the fund. The custodian should keep the most recent reconciliation with the fund.

7.Reimbursement. Petty cash funds should be replenished at least monthly or more often as the custodian finds it necessary to keep adequate cash on hand. Frequent reimbursements will keep sufficient funds on hand while keeping the authorized amount at a minimum. To replenish the fund, submit a payment voucher with receipts for payments made from the fund to the PSC. Custodians do not need to use the entire authorized amount before requesting reimbursement and there is no minimum amount before a reimbursement can be requested. It is the custodian's responsibility to keep track of which receipts have been reimbursed and which have not. Expenses on the reimbursement request should be in keeping with the authorized purpose of the fund.

8. Short / Over. Funds must be reimbursed immediately after discovery of any immaterial shortages in the petty cash or change fund amount. Conversely, funds shall be reduced by any amount in excess of the authorized amount. Excess funds shall be reduced by turning in the overage amount to the Bursar's Office on a cash receipt form, crediting the applicable speed-type, and using account code 552630 (Cash Over/Short). Shortages are reimbursed by use of a Payment Voucher chargeable to an unrestricted fund (10-29) using account code 552630 (Cash Over/Short) with an appropriate explanation. Material shortages shall be treated as theft; see section 6d.

9.Accounting Entries. Payments for study subjects, surveys, or other similar research or clinical incentives should be recorded as an expense to account 495102 “Honoraria Study Subjects”. Expenses for other expenditures should be recorded against the applicable expense account code.

10.Audit. The Finance Office will periodically audit records related to petty cash and change funds. Any department identified as not complying with fiscal policies will be subject to more frequent audits or loss of fund privileges. Depending on the type of fund audited records can include:

a.Cash on hand.

b.Unreimbursed receipts.

c.Payment Vouchers and related receipts.

11.Closing. Funds must be remitted when they are no longer needed for the original purpose. Funds cannot be transferred to another speed-type unless that speed-type is the continuation of the same grant. Contact the UCD Finance Office for the current process to transfer, reduce, or close a fund.

12. Custodian Change. To change the custodian of a petty cash or change fund the new custodian must complete Exhibit B, Statement of Responsibility for Petty Cash and Change Fund Custodians. They must also complete Exhibit C, Petty Cash/Change Fund Audit Count Sheet, with the outgoing custodian to account for cash and receipts equal to the fund authorized amount at the time of transition. Forward both forms to UCD Finance at campus box D129 to process the custodian change.

13.Prohibitions. Under NO circumstances are petty cash or change funds to be used to:

  1. Cash personal checks or make loans to students, faculty, staff, or others.
  1. Open any type of bank account such as a savings or checking or deposit to an existing personal account.
  1. Pay payroll expenses.
  1. Purchase cash equivalents such as gift cards, money orders, etc. without prior approval from the UCD Finance Office.
  1. Pay employee travel expenses.
  1. Run a coffee club or flower fund.
  1. Pay for services.
  1. Make payment over $60 each.
  1. Reimburse employee purchases. When employees make small purchases of goods for the benefit of the university, the appropriate reimbursement method is submission of a payment voucher to the PSC.
  1. Pay other UCD departments.

15.Notifications. The custodian of a petty cash or change fund will notify the UCD Finance Office when:

  1. There is a need to change the custodian.
  1. The funds are no longer needed and the fund needs to be closed.
  1. There is a theft or loss of funds.
  1. There is a need to increase or decrease the authorized amount of the fund.
  1. The custodian needs to cancel a warrant (check) that was never received or needs to be reissued because the payee/amount is incorrect.
  1. When the address where funds will be located changes.

Performed by: / Action:
PART I -- Initial or Increase Request for a Petty Cash or Change Fund
Please allow two weeks processing time!
Requesting Employee /
  1. Prepare Exhibit A – Request for Petty Cash or Change Fund, Exhibit B - Statement of Responsibility for Petty Cash and Change Fund Custodians, and a Payment Voucher for the amount requested indicating the account 000200 for Petty Cash or 000300 for Change Fund. Fill in Payee as “name of custodian -- Petty Cash Custodian”. Sign the Payment Voucher in the Requester block.
  1. Obtain department authorization. Please refer to the PSC procedural statement Payment Voucher Authorization and Use for specific signature requirements.
  1. Submit forms to the Finance Office at campus box D129.

Finance Office /
  1. Review all forms and gather additional information from department as needed. For funds 10, 20, 26, 29 & 80 skip to step 7.
  1. For all restricted funds (funds 30, 31, and 34) forward the Exhibit A and Payment Voucher to the UCD Office of Grants and Contracts or Sponsored Programs Accounting for review and approval.

Office of Grants and Contracts or Sponsored Programs Accounting /
  1. Review petty cash or change fund requests for all restricted funds.
  1. If request is approved, sign the Exhibit A and Payment Voucher and return them to the Finance Office.
  2. If request is denied, provide the reason to the department and return the Exhibit A and Payment Voucher to the Finance Office.

Finance Office and Controller /
  1. Approve or deny request.
  1. If approved, copy Exhibits A and B and forward them along with the original Payment Voucher to the PSC for issuance of warrant to open the fund. Notify department of approval.
  2. If denied and not in fund 30, 31 or 34, notify department of the reason for denial.

Custodian /
  1. Receive and cash check. Checks are to be cashed at the UCD Bursar's Office, the Public Service Credit Union through a non-member account.
  1. Secure funds in a locked container which is stored in a locked cabinet, drawer, or safe.

PART II – Replenishing a Petty Cash Fund (not applicable to a Change Fund)
Please allow adequate processing time!
Custodian /
  1. Accumulate the original receipts from the cash disbursements made from the petty cash fund.
  1. Prepare a Payment Voucher for the amount of unreimbursed receipts.
  1. Complete the Payment Voucher:
  1. Fill in Payee as “name of custodian -- Petty Cash Custodian”
  2. Make sure to use the account code that matches the nature of the expenses the petty cash fund incurred.
i)Example: Fund is used to pay research participants, the Payment Voucher would indicate account code 495102 (Honoraria Study Subjects)
ii)Example: Fund is used to pay small incidental office expenses, the Payment Voucher would indicate account code 480101 (Office Supplies)
iii)Account Code 000200 (Petty Cash) is NEVER used on a Payment Voucher to reimburse petty cash funds - only on the initial setup or later increase of the fund.
4.Attach the original receipts to the Payment Voucher. The amount you are seeking reimbursement for must equal the total of the receipts attached to the Payment Voucher. The Payment Voucher amount can not exceed the fund authorized amount.
5.Sign the Payment Voucher as requestor.
6.Obtain department authorization on the Payment Voucher. Please refer to the PSC procedural statement Payment Voucher Authorization and Use for specific signature requirements.
  1. Submit the completed Payment Voucher with receipts to the PSC as indicated on the bottom of the Payment Voucher form.

Custodian /
  1. Receive and cash warrant. Warrants are to be cashed at either the UCD Bursar's Office, the Public Service Credit Union through a non-member account.
  1. Secure funds in a locked container that is stored in a locked cabinet , drawer, or safe.

Petty Cash and Change FundsPage 1

University of ColoradoDenver Fiscal Policy