Truman State University

Petty Cash Fund Policy

July 2007

Purpose and use

Petty Cash refers to a small fund of a fixed amount that is maintained in offices for making small expenditures. The majority of Petty Cash funds are established to enable departments to make small emergency purchases where a purchase order is not cost effective or a University Procurement Card cannot be used.   Where possible, a University Procurement Card should be used for minor expenditures instead of Petty Cash.  

The Custodian of the Petty Cash fund is the individual with primary responsibility to maintain the fund at the departmental level.  The Petty Cash fund should be secured at all times in a locked place.   

Petty Cash funds may not be used for the following:

• Travel advance or travel expense reimbursements
• Payment to independent contractors or any payments for services or any payment that might be considered taxable
• Charitable donations
• Awards, gifts or prizes
• Loans (No IOUs)
• Any item not reimbursable under university policy
• Personal expense (for example birthday cakes, flowers, gifts)
• Cashing personal checks
• Subscriptions
• Snacks, office refreshments (except these may be allowed for student oriented programs with prior approval from their Department Head)
• Holiday cards

Who is responsible for the fund and what are his or her duties?

The Custodian is the person responsible for keeping accurate records of the fund and safeguarding the Petty Cash fund.  A Custodian must be a full-time faculty/staff University employee.  The duties/responsibilities are as follows:

• The custodian disburses cash from the Petty Cash fund.  Each time this happens, the Custodian should keep a record of the amount withdrawn, the individual who has been given the money, the purpose, the date, and a signature of the individual who has the money with the Custodian’s approval.  
• Once a transaction has been completed, the individual who received the Petty Cash money should return the paid sales receipt to document the business purpose and any change to the custodian.  The sales receipt should include the vendor’s name.  Adding machine tapes or scrap pieces of paper would not be acceptable documentation to support expenditures except in rare instances such as purchasing tokens to wash University vehicles where no such receipts are readily available.  
• At all times, cash on hand, plus paid receipts, plus amounts advanced to purchase items must equal the original amount of the fund.
• The Custodian may not approve a reimbursement to himself or herself from the Petty Cash fund. If the Custodian needs to be reimbursed, the reimbursement will need to be approved by the Custodian’s supervisor.
• The business purpose of all expenditures made from the petty cash fund must be documented.
• The Custodian should notify Public Safety and the Business Office, Accounts Payable section, in case of theft or misuse of Petty Cash funds
• Reconcile fund at least monthly.
• In the event that the Custodian transfers to another position within the University or leaves University employment, it is the responsibility of either the Custodian or the Custodian's Supervisor to reconcile and close out the petty cash/change fund as described below.

 How is a Petty Cash Fund established? 

Forward a requisition that includes a completed and approved Petty Cash Request Form.  The form will include the following information:   

-         Name of department.

-         Name of Fund.

-         Purpose of Fund.

-         Amount requested.

-         Where fund will be kept (building and room number).

-         Description of security to be provided for fund (e.g. locked file drawer, combination safe, etc.).

-         Custodian  

 The person approving the Petty Cash Request Form and the requisition may not be the Custodian of the Petty Cash fund.

 How is a petty cash fund reconciled?

Add all Petty Cash expenditure receipts on hand.

Add cash in the Petty Cash Box.

The amount of Petty Cash expenditures plus cash should equal the total amount of the fund.

For example, if a custodian is responsible for a $100 fund, then the Petty Cash expenditure receipts and the cash on hand should total $100.  

Are there internal control responsibilities associated with the Petty cash fund?

Both the Custodian and the Custodian’s supervisor are responsible for the segregation of duties with regard to the Petty Cash fund.  Where possible, the cash handling duties should be separated from the reconciliation of the fund. If this is not always possible, then the supervisor of the custodian should provide stronger management oversight.  

How does the petty cash fund get replenished?

 Replenishment of the Petty Cash fund should be done on a timely basis.  All funds should be replenished at the end of the fiscal year (June 30) so there are no outstanding receipts at year’s end. Replenishment of the Petty Cash funds may be made by preparing a requisition payable to the petty cash fund in care of the Custodian.  Attach all receipts and supporting documentation with the requisition.  A check will be issued to the Custodian to replenish the fund.  

Are there any special processes to follow at year end?

Each year at June 30, the Business Office will request verification of each Petty Cash fund amount, and name of Custodian.  Verifications must be signed by the Custodian and the Custodian’s immediate supervisor and returned to the Business Office. 

Is a Petty Cash fund subject to audit?

Petty Cash funds are subject to audit at any time by outside auditors or a university representatives functioning in an internal audit function.    

At least once a year, every Petty Cash fund should be audited on an unannounced basis by the supervisor of the Custodian or his or her designate.  In addition, Petty Cash audits should be conducted as part of the routine oversight of business procedures or when suspected infraction of university policy has occurred within a unit.  

How is a Petty Cash fund closed?

When a Petty Cash fund is no longer needed, the Petty Cash Fund should be closed.  The department should first process a requisition to replenish the fund to its authorized amount.  The second step would be to deposit that amount with the Business Office Cashier and attach the receipt to a complete Section B of the Petty Cash Request Form, selecting item 4, closing a Petty cash fund.  For example, if a fund authorized for $100 was to be closed, the first step would be for the department to process a requisition to replenish the fund back to the $100.  The second step would be to deposit that $100 at the cashier window into the appropriate organization number. The third step would be to process the Petty Cash Request Form, Section B, attaching the receipt from the cashier area for the $100 deposit.     

How do you change the Petty Cash Custodian?

 To change the custodian on a Petty Cash fund, submit to the business office, accounts payable section, a completed “Request for Change Custodian/Alternate or Supervisor Petty Cash Form.  

A complete reconciliation of the Petty Cash fund should be completed prior to a new Custodian assuming responsibility for the existing account.  

How do you add or change an Alternative Custodian?

For accountability purposes, the responsibility of a Petty Cash fund may not be shared.  However, the Custodian may have an Alternate Custodian to function when the Custodian is not available if approved by the Custodian and the Custodian’s Supervisor.  To set up an Alternate Custodian, complete and forward to the business office a Request for Change in Custodian/Alternate or Supervisor form, only completing the sections applicable to the set up or change of an Alternate. 

How do you change the Petty Cash Fund Supervisor?

If the Supervisor of a budget with an established Petty Cash Fund changes, then the form entitled “Request a Change in Custodian/Alternate Custodian or Supervisor from needs to be processed and forwarded to the business office.   

How do you transfer the Petty Cash Fund to a different Budget?  

If a budget no longer needs a petty cash fund, the fund should be closed and a new fund should be established for the new budget number.  Review the Sections of this policy “How a Petty Cash fund is established” and “How is a Petty Cash fund closed”.   

How do you increase or decrease the amount of the Petty Cash Fund?

To increase the dollar amount of a Petty Cash fund, complete Section B of the Petty Cash Request Form.  The form will ask for the old amount and the new requested amount, along with the purpose of the request. This completed form should be attached to a requisition for the amount of the increased request. For example, if a unit is requesting that the Petty Cash be increased from $50 to $75, then a requisition for $25 would be included with the request.    

To decrease the dollar amount of a petty cash fund, complete section B of the petty Cash Request Form.  Bring the excess Petty Cash to the business office Cashier window, and attach the cashier receipt to the completed form.  For example, if a unit is requesting that the Petty Cash be decreased from $75 to $50, then they would deposit $25 at the business office cashier window and attach the receipt to the completed Petty Cash Request Form, with Section B completed.    

What should the Custodian do if there is a theft or loss of Petty Cash?

If a theft occurs from a petty cash or change fund in any amount promptly notify the Business Office, accounts payable section and Public Safety. 

Under what conditions could the Petty Cash fund be closed by the business office?

A petty cash fund can be terminated by the business office if the Custodian and Supervisor do not follow the Petty Cash Policies as agreed to upon the initiation of the fund.  

How can I make recommendations to change the Petty Cash fund Policy?

This policy is reviewed on an annual basis by the University.  Recommended changes should be submitted to the Controller, at McClain 105.  

Questions?

Contact the Accounts Payable department.