Cash Funds

Scope

This policy provides guidance on establishing, custodianship, controlling, replenishing, and termination of cash funds and provides guidance for safekeeping and appropriate uses.

Reason for Policy

To safeguard funds used for cash payment of minor items or to make change to customers and to assign accountability for those funds.

Policy Statement

Cash funds are established for specific purposes and are not to be commingled with other cash funds nor used for any purposes other than for which established. Cash funds can take the form of either a change cash fund or petty cash fund.  Departments that need a cash fund should request one through their campus Division of Finance.  The campus Division of Finance will consult with the UM System Treasurer’s Office regarding the establishment of new cash funds.  Departments should not use petty cash or change cash funds to cash checks.

The amount of a cash fund is limited to a reasonable amount necessary to carry out the essential activities for which the fund is authorized as recommended by the department and approved by campus Division of Finance or the UM System Treasurer’s Office.  A cash fund should be decreased when the total amount of the fund exceeds the requirements of the activities for which the fund is authorized. Cash funds can be established for a specific or indefinite period of time, depending upon the requirements for the fund.

When to Use Cash Funds
Change cash funds should only be used to make change at events or at retail locations and cannot be used for purchases.  Petty cash funds should only be used for small dollar purchases when it is not feasible or practical to use other procurement methods.  Documentation of the use of funds (i.e. sales receipt) must be obtained and used to request replenishment of the petty cash fund. Each cash fund should be kept separate from other cash funds; these funds are intended to stand alone and must not be combined with other cash.  

Petty cash reimbursement cannot be made for the following items:

• Purchases from University sources, such as: Campus Bookstore, Print Shop, Quick Copy Center, and Food Service;
• Items for personal loan or use, including, for example food, beverages, gifts or flowers,
• Hazardous or radioactive materials
• Logo/Licensed items
• Services rendered
• Items or services on exclusive term contracts through the UM System Supply Chain
• Sales tax - The University is exempt from sales tax on its purchases, including those made with petty cash
• Travel expenses

There must be a segregation of duties for cash funds, with different people assigned the responsibility for: receiving cash, recording transactions, depositing cash, and providing the beginning and ending readings of cash registers and pre-numbered receipts.  See University policy regarding segregation of duties for further details.

Establishing and Modifying a Cash Fund
All requests for petty cash funds must be submitted in writing (paper or e-mail) and must include:

1. Name of department
2. Amount requested
3. Name of employee to be designated as custodian
4. Anticipated period of time fund will be needed
5. Where fund will be kept (building and room number)
6. Description of security to be provided for the fund (e.g., locked file drawer, combination safe, etc.)
7. Reason for request (e.g., new fund, increase to existing fund, expanded authorization for an existing fund, etc.)
8. Purpose(s) for the fund (e.g., making petty cash purchases, making change, etc.) 

Subject to compliance with University standards, the campus Division of Finance has the authority to approve cash funds and increase or decrease the balance for the purpose of:

• Making change in normal sales transactions including change-making services incidental to vending machine operations.
• Making cash purchases in accordance with specified standards (Policy 26402 on Special Purchases).
• Making purchases of books for resale in accordance with specified standards.
• For small dollar, short-term, and temporary use

Source of Funds
Cash funds are established from the campus Division of Finance operating funds.   Money for cash funds (new or increases in amount) are issued by University check, made payable and mailed directly to the fund custodian in accordance with standard voucher procedures or held for pickup in the Campus Accounting Office. The fund custodian is responsible for cashing the check and securing the cash. 

Cash funds may not be established using funds from the following sources:

• Cash receipts
• Cash back on a bank deposit 
• Netting of a bank deposit 

Subject to other requirements for the establishment and use of cash funds, the campus Division of Finance may authorize the establishment of a cash fund for temporary use (usually for a week or less) to be issued in cash from the campus cash funds ChartField String. 

Terminating a Fund
The UM System Treasurer’s Office or campus Division of Finance may withdraw authorization for a fund at any time it is deemed to be in the best interest of the University.  Authorized terminations occur when:

• The original authorization period expires
• The need for the fund no longer exists
• The fund custodian is transferred or leaves the University, unless a change in fund custodianship is approved in writing

Cash funds are closed out by being deposited with the Campus Cashiers Office.  The fund should be balanced prior to being closed.  Shortages should be reported to campus police, UM Risk and Insurance, and UM Internal Audit.  Any overages or losses should be deposited to the department as sales.   

Definitions

Cash - includes coins or paper currency.

Change Cash Fund – Cash available for making change at events or stores for University locations with a business need.

Custodian – a designated employee that holds the University’s cash for safekeeping to minimize the risk of theft or loss.

ChartField – a PeopleSoft application field that stores the University’s chart of accounts and provides a basic structure to segregate and categorize transactional and budget data. 

ChartField String – reference used to describe the combination of ChartFields in an accounting transaction.  A ChartField String includes the follow chartfields:  Fund, DeptID, Program, Project, Class and Account.

Petty Cash Fund – Cash available for small dollar purchases only when it is neither feasible nor practical to use other procurement methods

Accountabilities

UM System Treasurer’s Office:

• Assist the campus Division of Finance with the establishment of cash funds
• Consult with campuses on establishment of cash funds
• Maintain policies and procedures regarding the operation of cash funds

Campus Division of Finance:

• Approve the establishment of cash funds

Campus Fiscal Services/Cashiers:

• Establish and maintain a current list of all fund custodians and the amount for which each custodian is responsible; verify annually by conducting surprise audits
• Reconcile the list of custodians and assigned cash funds to the petty cash ChartField string
• Report losses to UM Risk and Insurance Management and UM Internal Audit within 48 hours after discovery of the loss

Administrative Supervisor or Fiscal Officer:

• Approve the establishment of the cash fund
• Oversee the use of the cash fund
• Conduct at least quarterly audits of the cash fund, unless circumstances necessitate a more frequent review
• Assist with reporting theft or loss to the campus Division of Finance

Departmental Fund Custodian:

• Have access and effective control of the fund in accordance with University policies
• Be held individually accountable for the funds until properly relieved of responsibility
• Submit written request for change in custodianship of a cash fund for approval
• Balance the fund daily, unless an exception is granted by the campus Accounting Office
• Replenish petty cash funds at least monthly and change cash funds as needed for events
• Report a theft of any amount, or an error of $50 or more, to their administrative supervisor or fiscal officer, who will inform University police.  A Disappearance of Assets and Money form (UM 155) must be completed and forwarded to the campus Division of Finance within 24 hours after discovery of the loss.  

Additional Details

Forms

Related Information

History

The following former policies were combined into one policy:                                       

• Cash Receipts Manual 601 – Establishing Cash Funds (effective 4/27/2004)
• Cash Receipts Manual 602 – Changes in Fund Custodianship (effective 2/28/1997)
• Cash Receipts Manual 603 – Termination of a Cash Fund
• Cash Receipts Manual 604 – Controlling Cash Funds (effective 2/28/1997)
• Cash Receipts Manual 605 – Replenishing Cash Funds (effective 2/28/1997)
• Cash Receipts Manual 701 – Disbursements (effective 2/28/1997)
• Accounting Policy Manual 25.20 – Petty Cash (revised 8/1/2007)
• Business Policy Manual 206 – Petty Cash Funds (revised 3/1/2010)

Procedure