Petty Cash

Effective date: September 30, 2011

Revised January 2018

Relevant Legislation:

Not applicable to this policy.

Intent:

Not applicable to this policy.

Definitions:

Petty cash is a convenient, cost effective alternative for program staff to acquire goods or services whose cost and payment (for example, postage, delivery charges, ten tokens, etc…) that are too small to justify the use of a cheque.

Policy:

Petty cash funds are to be used for the direct acquisition and payment of small dollar items. The costs of a good or service should not exceed $100.00.

Petty cash is not intended for large cash purchases that occur on an irregular or regular basis. Every effort should be made to have vendors invoice the organization for purchases that occur on a regular basis. In cases where an arrangement cannot be made but it is a recurring purchase for a substantial amount of cash, then arrangements should be made with the accounting department to discuss an efficient and effective payment procedure. A cash advance should be requested for irregular large dollar purchases. (See procedures for Cash Advances – Section 3.)

The policy and procedures relating to expense accounts also apply to the petty cash fund (See section 1).

Procedures:

Creation/Increase of Petty Cash Fund

The program director should ensure that the custodian has read and understands the policies and procedures of expenses and petty cash.

The program director is required to forward a memo to the Accountant with the following information:

  • The amount of the requested fund/increase.
  • Name and signature of the fund’s custodian.
  • Name and signature of the approving officer.
  • The program (i.e. unfunded, LTC etc…) that the petty cash is to be used for.
  • The Accountant will forward a cheque payable to the custodian and establish a petty cash account with the program’s name.

Accountability

The custodian is accountable for:

  • The custody and safekeeping of all cash and vouchers which make up the fund.
  • Understanding the current policies and procedures relating to expenses the issue of cash from the fund.
  • The receipt of appropriate supporting voucher for each payment.
  • The preparation of claims for replenishment of the fund.
  • The reconciliation of the fund each time a claim for replenishment is prepared, or more frequently as circumstances dictates.
  • The reconciliation of the fund at year-end which will be forwarded to the Controller at year end to verify that the amount on hand is equal to the amount recorded in ledger.
  • Shortages, losses, thefts, etc., except where appropriate safekeeping precautions have been affected and the loss is beyond the control of the custodian.

The approving officer is accountable for:

  • Ensuring that the custodian is aware of any new changes to the policy and procedures of petty cash or expenses.
  • For the proper utilization of the fund.
  • Ensuring that the appropriate custodial/safekeeping controls are in effect.
  • Approving each claim for petty cash replenishment.
  • Ensuring that a regular reconciliation of the fund are completed and reviewed.
  • Advising the Accountant, via a memo, of any changes effecting the fund (i.e. change in custodian.)
  • Security

It is recommended that petty cash funds be kept in a lockable, fire retardant metal box. The custodian and/or approving officer should have a key to the box.

During the absence of the custodian and approving officer, the petty cash fund are to be securely stored (preferable under lock and key).

Expenditures

The recommended petty cash system that should be in place is a voucher system. Each supplier’s invoice has a pre-numbered petty cash voucher that indicates the amount, purpose of the purchase, who received the money and who paid the money. See page 5 for an example. The suppliers invoice would be attached to the voucher.

In situations where a voucher and invoice system is not feasible, then the invoice will be treated as the voucher.

If, for any reason a supplier’s invoice, such as a cash register tape, is not available, a petty cash voucher is to be used. The following information must be on the petty cash voucher: the dollar amount, purpose of the purchase, who received the money and who paid the money.

Replenishments

The custodian must prepare a claim form to replenish the petty cash fund see page 3. For the program’s convenience, the petty cash claim forms have been customized to meet the needs of the program and the accounting department. [Please speak to the controller about obtaining a customized petty cash claim form.]

At this time the custodian must also reconcile the petty cash fund, see page 4. If the fund does not balance, the custodian should discuss the discrepancies with their approving officer to determine the most appropriate action. The custodian should not use their own money to replace any missing funds, nor should they remove any money from the petty cash fund if there is more money than there should be in the fund.

The claim form should be completed as frequently as necessary to ensure that sufficient funds are on hand from the time the claim from is submitted to the accounting department and the custodian receives a cheque.

The vouchers and invoices are to be stapled on to the claim form.

The approving officer will review and approve the claim form.

Reconciliation

The custodian is responsible for reconciling the petty cash fund each time a claim form is prepared in order to replenish the petty cash fund. If necessary, reconciliation’s can be performed on a more frequent basis, as circumstances dictate.

The reconciliation will contain the following information:

Total cash on hand

Plus

Total amount represented by the vouchers

Equals

The amount of the petty cash fund

The custodian will retain a copy of the reconciliation and the claim form for reference and audit purposes.

At year-end, the custodian will complete a reconciliation form and forward a copy to the Controller. The Controller will verify that the amount on hand is equal to the amount recorded in the general ledger.