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Policy: II.E.2x (inactive)

Issued: April 5, 1994

Owner: Accounting Services

Latest Revision: September 14, 2000

PETTY CASH, PETTY CASH CHECKING AND CHANGE FUNDS


**INACTIVE POLICY**

For Current Policies:
Policy Table of Contents

 

1.0 Purpose

This statement sets forth University policy for establishing and maintaining petty cash, petty cash checking or change funds.

2.0 Policy [Top]

2.1 General

Policy contained herein applies to all University departments and activities having a petty cash advance, petty cash checking advance or a change fund from Accounting Services or intending to request such funds.

Generally all departments and activities of the University must use the accounts payable system for making all disbursements. This system is administered by the Accounts Payable section of Procurement Services.

However, it is recognized that situations may arise where it is appropriate to establish a petty cash or petty cash checking fund to permit small cash purchases or to provide change necessary for normal operations.

No petty cash, petty cash checking or change fund shall be established without the prior authorization of the Director of Accounting Services.


2.2 Authority to Establish a Fund

The head of a University department or activity must approve any request to the Director of Accounting Services for the establishment of a petty cash, petty cash checking or change fund. Effective, July 1, 1994 fund balances in excess of approved limits will require approval from the appropriate Dean or Vice President.

The head of a Medical Center department or activity must approve any request to Medical Center Financial Services to establish a petty cash, petty cash checking or change fund.


2.3 Petty Cash and Petty Cash Checking Funds

A petty cash or petty cash checking fund is established by means of a cash advance from Accounting Services. The advance represents a LOAN to the department in the name of the custodian. At all times, the account custodian must be able to account for the full amount of the advance. For example, a department requests and receives a $100 petty cash advance. At any given time, cash on hand, reimbursements in process and outstanding items must equal $100. Petty Cash Checks should never be made out to "Cash". Instead, all checks must have a specific payee. Any change remaining from a petty cash or petty cash checking account transaction must be redeposited. The remaining change must not be used to operate an unofficial change fund. In addition, the account must be reimbursed at a minimum of every 30 days, regardless of the dollar amount of the reimbursement.

To request establishment of a petty cash or petty cash checking fund, a Request for Petty Cash, Petty Cash Checking, or Change Fund (Form UT-50) must be prepared and submitted in accordance with instructions. Checking account requests must be accompanied by a Bank Account Authorization.

See also Procedure 2-4, "Preparation of Bank Account Authorization."
See also Procedure 2-5, "Preparation of Request for Petty Cash, Petty Cash Checking, or Change Fund."


2.4 Change Funds

A change fund is established by means of a cash advance from Accounting Services. The advance represents a LOAN to the department for the purpose of making change. Unlike a petty cash fund, a change fund does not require periodic reimbursement. The amount of a change fund remains constant. To request establishment of a change fund, a Request for Petty Cash, Petty Cash Checking, or Change Fund (Form UT-50) must be prepared.

Change funds are not to be commingled with other cash funds nor are they to be used for making petty cash disbursements or other cash advances to employees. At the close of each day's business, the change fund is to be removed FIRST from the total cash in the register or cash drawer and be kept separately until used during the following day's operations; the remaining cash in the register or drawer is to be turned in as representing the current day's receipts. Thus, if the total cash at the close of the day does not agree with the sum of the established change fund and the recorded receipts, the difference is considered to affect that day's receipts--NOT THE AMOUNT OF THE CHANGE FUND.

See also Procedure 2-5, "Preparation of Request for Petty Cash, Petty Cash Checking, or Change Fund."


2.5 Department Reference

Accounting Services
924-4210

Questions and forms pertaining to establishment, increase, decrease, closure and change of custodian for petty cash, petty cash checking and change funds. Remittance of unclaimed petty cash checks (unclaimed property).
Procurement Services
924-4365
Questions regarding allowable expenses and reimbursement forms. Questions regarding 1099 reporting

 

2.6 Restrictions and Guidelines

Specifically, petty cash and petty cash checking funds can be used for any purchases which could be processed on a Limited Purchase Order (LPO) (see Policy VII.A.2), as well as for purchases of food supplies or restaurant meals that qualify as business meals. Purchases from these funds cannot be used to circumvent the University's procurement policies.

Payments which are allowable include:

Limited travel expenses for day trips, e.g. tolls, parking and mileage.

Reimbursements for meals incurred locally or during day trips which qualify as BUSINESS MEALS. Generally, if an employee is acting as an official representative of the University, a meal can be deemed a business meal. This situation requires that the employees act as an official representative when discussing business WITH representatives of the State, with employees of other agencies, with private consultants, or with prospective employees or students, etc. The expenses must be commercially rather than socially motivated and more than one person must have attended the meal. See Procedure 6-25 and 6-26 for further details.

BUSINESS MEALS as defined above paid through petty cash funds should have the receipts attached, an explanation of the business purpose of the meal and a list of the attendees shown on the petty cash slip. For meals incurred during day trips outside the employee's home area, the supervisor's signature is also required. Object code 34551 - Meals, Day Trips or Object code 36835 - Meals, Non-Travel, should be used when reimbursing the petty cash fund to ensure these payments are not picked up as reportable income on a W-2.

Internal Revenue Service (IRS) 1099 reportable payments such as rents, royalties, awards and personal services can only be made with petty cash funds if the payment is to a corporation or a non-profit organization. Corporations and non-profit organizations are exempt from IRS 1099 reporting. The petty cash custodian is responsible for verifying the business' non-profit or corporation status. This can be done by either referencing a CAPPS vendor number on the petty cash slip (provided an N or C entity code is listed on the vendor file) or attaching a completed W-9 form.

Payments such as subscriptions, registration fees, supplies and Federal Express/UPS charges are allowable from petty cash funds and are not restricted as to type of vendor. These categories of expenditures are not 1099 reportable.

Human subject payments are the ONLY personal service that may be paid through petty cash. However, a consent form detailing the payee's name, address, tax identification number and signature or a Form W-9 showing the same information must be attached to the reimbursement request. In addition, the custodian will be asked to provide a listing of human subject payments on a quarterly basis to Procurement Services. This listing should preferably be in an automated format and should contain the payee's name, tax identification number and the amount paid. Procurement Services will issue quarterly requests for this information with more specific guidelines included. Should a human subject payee exceed the $600 reporting requirement, the petty cash custodian will be asked to provide their address as well.

NOTE: Failure to provide this information in a timely manner can result in the closing of the petty cash or petty cash checking fund.

Payments in the following categories ARE NOT ALLOWABLE from petty cash and petty cash checking funds:

Personal services other than human subject payments.

Advances to employees, check cashing or other non-operating disbursements.

Gifts, cards or flowers for an employee or non-employee. These payments must be processed using a Payment Voucher form.

IRS 1099 reportable payments including rents, royalties, awards and services paid to OTHER THAN a non-profit organization or corporation.

Any expenses incurred during overnight travel. These must be reimbursed using a Travel Expense Reimbursement Voucher.

Meals that do not qualify as BUSINESS meals. These must be reimbursed using a Travel Expense Reimbursement Voucher and are tax reportable income to the recipient according to the IRS.

Other restrictions involving petty cash and petty cash checking funds include:

Keep petty cash and petty cash checking funds apart and separate from all other funds.

Do not combine petty cash and petty cash checking funds with personal funds, miscellaneous cash receipts, or collected revenue of any type.

Do not use petty cash and petty cash checking funds as a means of bypassing the University's procurement policies.

NOTE: If an unallowable purchase is made through petty cash funds, the custodian will be held personally responsible for reimbursing the petty cash fund.

Petty cash, petty cash checking and change funds are established for the specific period of time the funds are ACTUALLY NEEDED. They may be established for an indefinite period of time if the requirements for the funds are of a permanent and continuing nature.


2.7 Overall Responsibilities

It is the responsibility of both the fund custodian and the department or activity head to:

Limit the use of the fund to legitimate and allowable University related revenue refunds and/or expenses.

Provide for the balancing of the fund at a minimum of every 30 days regardless of the dollar amount of the reimbursement.

Acquire a thorough knowledge of these policies and related procedures.


2.8 Responsibilities -- Petty Cash, Petty Cash Checking and Change Funds

All petty cash, petty cash checking and change funds shall be subject to periodic audit by the University's external auditors and by the University's Internal Audit Department.

The head of each department or activity must designate a specific individual(s) to act as custodian of the fund. Custodians must be salaried employees of the University of Virginia. Custodians may not be undergraduate students, graduate students, wage or temporary personnel. The custodian shall be responsible for acquiring a thorough knowledge of these procedures and for maintaining the fund in accordance with the guidelines contained herein. Access to the fund should be restricted to the custodian only. Petty cash funds are non-transferable, i.e., anytime there is to be a change of custodian, a new request (Form UT-50) should be submitted to Accounting Services PRIOR to the time the predecessor custodian is to be relieved of responsibility. The Accounts Payable section of Procurement Services will not reimburse a petty cash fund unless a Request for Petty Cash, Petty Cash Checking, or Change Fund is on file indicating the name of the CURRENT custodian.

NOTE: This process is required for temporary changes as well. The former and new custodians should perform a petty cash fund reconciliation at the time of transfer, and both should sign the reconciliation form.

Both the head of the department or activity and the custodian of the petty cash fund shall be jointly responsible for insuring that the funds are properly safeguarded. When not in use, the funds should always be stored in a secure, locked container. If a loss of these funds occurs, such loss, depending upon the circumstances, may have to be paid from the department's own funds. The University Police Department should be contacted for advice on the proper methods for safeguarding the fund. All thefts MUST be reported to the University Police Department, Office of Risk Management, and the Internal Audit Department immediately.

Petty cash funds must be reimbursed, by direct deposit, no less often than every 30 days during the year. All petty cash funds must be reimbursed at fiscal year-end, so that no unreimbursed vouchers remain outstanding at June 30. The custodian and the head of each department or activity will be required to confirm to Accounting Services the amount of petty cash currency and coin on hand as of June 30 each year. Surprise counts of petty cash funds will be made periodically by the Internal Audit Department. All petty cash funds must also be reimbursed by December 31 to allow for proper reporting of taxable payments.

All unclaimed checks from petty cash funds are considered unclaimed property. If any check is not cashed by the payee within the designated time, and the payee cannot be contacted for disposition, the funds must be remitted to the Commonwealth. Remittance of unclaimed checks is to be coordinated through Accounting Services.


2.9 Increasing, Decreasing, or Closing Funds

Increasing a Fund
The amount of a petty cash, petty cash checking or change fund may be increased by a supplemental request provided the increase is justified. The justification must show that the fund is not adequate even though the policies on restrictions and frequency of reimbursement are being met.
See also Procedure 2-5, "Preparation of Request for Petty Cash, Petty Cash Checking, or Change Fund."

Decreasing a Fund
A petty cash, petty cash checking, or change fund must be reduced whenever the total amount of the fund exceeds the actual needs for the department or activity. That portion of the fund in excess of the department's needs should be returned to Accounting Services with a supplemental request indicating the amount by which the fund is being decreased.
See also Procedure 2-5, "Preparation of Request for Petty Cash, Petty Cash Checking, or Change Fund."

Closing a Fund
All petty cash, petty cash checking or change funds, regardless of whether established for a specific or an indefinite period of time, must be returned to Accounting Services when the funds are no longer needed. Petty cash funds must be reimbursed before being returned. Under no circumstances should a petty cash fund be deposited into a departmental account.
See also Procedure 2-5, "Preparation of Request for Petty Cash, Petty Cash Checking, or Change Fund."

Change of Custodian
Accounting Services must be notified whenever a change of custodian occurs.
See also Procedure 2-5, "Preparation of Request for Petty Cash, Petty Cash Checking, or Change Fund."

Operation of a Petty Cash Fund
For a petty cash transaction to be complete, it must include a petty cash reimbursement voucher and documentation of expenditures. A detailed explanation of these subjects is contained in Procedures 2-2, "Preparation of Petty Cash Voucher" and 2-3, "Preparation of Petty Cash Reimbursement Voucher."

3.0 Definitions [Top]

PETTY CASH FUND: This is the most common of the three types of funds. The actual currency and coin are kept on hand. Effective JULY 1, 1994 the dollar limit on petty cash fund requests is set at $500. Any requests requiring a fund balance greater than $500 require special written approval from the appropriate Dean or Vice President.

PETTY CASH CHECKING FUND: A petty cash checking fund is basically the same as a petty cash fund, except that monies are kept in an Accounting Services approved checking account. All requests for petty cash checking funds must have a "Bank Account Authorization" attached. Effective JULY 1, 1994 the dollar limit on petty cash checking fund requests is set at $2,500. Any requests requiring a fund balance greater than $2,500 require special written approval from the appropriate Dean or Vice President.

CHANGE FUND: Change funds are similar to petty cash funds in that currency and coin are kept on hand. Change funds are most commonly used by departments involved in some type of cashiering activity. Unlike petty cash funds, the balance in a change fund does not vary and need not be reimbursed on a monthly basis. Effective JULY 1, 1994 the dollar limit on change funds is set at $200. Any requests requiring a fund balance greater than $200 require special written approval from the appropriate Dean or Vice President.

4.0 References [Top]

5.0 Approvals and Revisions [Top]

       Previous version in effect from 4/5/94 to 3/7/00 available in policy archive.


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