Petty Cash Reimbursement System

By: Merine Tulloch, FCCA

 

The petty cash system has been noted as the single system that is responsible for the most fraud in any industry or organization.  It is always high on the priority list of both external and internal auditors to ensure that appropriate controls are in place.  Now, depending on the needs and circumstances of the organization the petty cash fund could range from $100 to $1,000 so here are some of the basic controls that need to be in place to reduce the possibility of the misuse of the organization’s Petty Cash.

and the following ground rules

To maintain proper control over the petty cash fund, it important that;

• There must be one designated person who is authorized to handle the petty cash.
• Everyone who needs to use petty cash funds is aware of the governing the fund works. For example, if the petty cash fund is set up to purchase gas, it should not be used to purchase stationery.

 

Petty cash Procedures

Firstly, the petty cash officer or custodian needs to have a voucher book on which to record the usage of the funds.  This can be customized and printed with specific company details or one purchased from your local stationery place.  In either case, you will need to ensure that the petty cash voucher book is spiral bound with carbon copy included.

Disbursement

1. Before funds are you need to ensure that the request authorized by the appropriate person.
2. Complete the petty cash voucher with the date, the reason for the funds, the amount, and the name of the person who is collecting the funds.
3. The person receiving the funds must sign the voucher indicating that they indeed received same. The authorization must be attached to the voucher for reimbursement purposes.
4. The proof of purchase or receipt along with any change is to be returned to the Petty Cash custodian by end of business day where an advance is provided.
5. The petty cash officer must ensure that the petty cash receipt, the store receipt and change match. Just to be clear, If the person got $15 to purchase envelopes, the receipt must be for envelopes and receipt and change must add up to $15.
6. The petty cash custodian must be provided with original receipts only.
7. The custodian must then indicate on the petty cash voucher how much change was received and then adjust the final total of the disbursement. This is the amount that will need to be reimbursed.
8. The store receipt is attached to the petty cash receipt and locked away until the petty cash officer is ready to prepare the reimbursement.

Reimbursement

The organization may indicate a reimbursement limit. For example, if the cash balance is 10% of the total fund.  A reimbursement check is requested that will cover the total of the funds already issued out.

1. The petty cash officer lists each petty cash voucher used in detail indicating actual amount spent, the budget or expense code and the amount.
2. The amount of each voucher is added up to arrive at the total amount spent.
3. The remaining cash is then added and a reconciliation sheet prepared. This sheet will indicate the total of all the petty cash vouchers, whether awaiting supports or being reimbursed and detailed denomination of cash in hand (currency and coins).
4. The reimbursement request is then forwarded to the accounts department for check processing.

These are the basic steps in handling petty cash and these simple internal control procedures will greatly assist in ensuring that the funds are correctly and properly accounted for. Your organization can implement different levels of control in the areas that they see fit but this is a good plan to have at the very beginning.

 

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