Petty Cash Policies and Procedures
Petty cash funds are for the convenience of University departments but are not required. Seasonal petty cash funds can be set up if you only need petty cash for specific functions during the year. You may wish to discontinue your petty cash fund or reduce the amount of petty cash that you keep on hand and use the University purchasing card instead.
Petty Cash Funds
This section prescribes the policies and procedures relating to the establishment, administration, and discontinuance of petty cash funds.
Petty Cash Custodian: The employee in a department who has been authorized to make payments from a petty cash fund and who is directly responsible for the administration of the fund.
Security of Petty Cash Funds
Department Chairs/Directors are responsible for the proper safeguarding of petty cash monies entrusted to their departments. Cash and receipts for unreimbursed expenditures must be kept in a locked container such as a fire-proof file cabinet, safe, or other suitable device to which unauthorized access is difficult.
The petty cash custodian is personally responsible for the cash which was specifically issued to him/her. Therefore, access to the fund must be limited to the custodian.
Establishing a Petty Cash Fund
A petty cash fund may be established in a department to improve the efficiency of departmental operations. These funds are available to purchase minor items when it would be otherwise impractical to purchase items through the usual purchasing methods.
These funds are subject to periodic audits. Recurring audit findings may result in the petty cash fund being revoked.
The custodian is responsible for ensuring the cash on hand and receipts equal the authorized amount of the fund at all times. Petty cash funds must be kept separate from change funds, cash drawers, personal funds, and any other collected revenue.
The Department Chair/Director submits the following items to the Manager of Banking Operations and Auxiliary Accounting for approval:
- A memorandum justifying the need for a petty cash fund and designating the fund custodian. This should include the identification number and an original signature of the custodian.
- A check request payable to the designated fund custodian in the amount requested. The check request should include the department name and be signed by the Department Chair/Director.
The department custodian will receive a check payable to him/herself and the current petty cash procedures. Petty cash checks may be cashed at the Cashiers' Office.
Petty Cash Fund Purchases
Disbursements from petty cash funds must be properly documented and for a valid University business purpose.
The University does not reimburse Michigan sales tax. Therefore, to save time and confusion, it is wise to obtain the University's sales tax number from the petty cash custodian before making a purchase. Use of the University sales tax number when purchasing items for other than University purposes is prohibited and may result in disciplinary action.
Petty cash funds may NOT be used for the following:
- Items/receipts in excess of $200.00.
- Payment of sales or excise taxes on any purchases within Michigan since Michigan Technological University is a tax exempt organization and does not reimburse Michigan sales tax. The University is also tax exempt in Wisconsin and Florida.
- Cashing of personal checks or providing personal loans.
- Purchases which are required to be reported in a specific manner such as, but not limited to, personnel services, travel expenses, payroll advances, and business meals.
- Purchase of items which are prohibited under petty cash procedures:
- alcoholic beverages and tobacco
- animals (laboratory)
- automotive repairs (accident related)
- controlled substances
- cylinder gases and liquid nitrogen
- hazardous materials
- hospitality expenses greater than $5, such as meals or entertainment
- leases and rentals
- maintenance agreements
- Michigan sales tax
- personal items
- any items that are intended to be used or consumed by University Employees on or off campus for other than University use.
- professional services
- renovations or remodeling (on campus)
- seminars and memberships
- telephones and cell phones
- university letterhead, business cards, and envelopes
- weapons and ammunition
Financial Services and Operations has the authority to make exceptions to the above list when special or unusual circumstances apply. Approval for exceptions must be received prior to purchasing items listed above.
An employee purchasing items using petty cash funds does the following:
- Obtains prior approval from the Department Chair/Director, supervisor, or fund custodian.
- Obtains, when necessary, the University sales tax number from the petty cash custodian since Michigan sales tax is not reimbursable.
- Obtains, when necessary, a petty cash advance from the fund custodian. The advance
is provided to the employee only to purchase legitimate petty cash items. Each time
an advance is given, the custodian must maintain the following information:
- the amount of the advance
- the date
- the purpose
- the recipient
- the recipient's signature
- Makes the purchase, paying for the item with personal monies or with the petty cash advance and obtains an itemized receipt or cash register sales slip.
- Presents the original sales receipt or cash register sales slip to the petty cash
custodian. The receipt(s) must include:
- description of the item(s)
- date of purchase
- place of purchase
- itemized amounts
- signature of purchaser
- Receives reimbursement for the purchase from the petty cash custodian when personal monies are used or returns any unused portion of the petty cash advance to the petty cash custodian immediately after the purchase is made.
Replenishment of Petty Cash Fund
Replenishment of the petty cash fund should be done on a timely basis but will vary by department. All petty cash funds must be reimbursed at least once every 30 days during the fiscal year, regardless of the dollar amount to be reimbursed. In addition, all funds should be replenished at the fiscal year end so there are no outstanding receipts as of June 30.
The petty cash reimbursement request for the amount to be reimbursed must be completed and faxed to Accounts Payable (7-2119) along with a copy of the original receipts. Keep original receipts for seven days in case the faxed copy is not readable.
The reimbursement request should include the following:
- Name, Department, and identification number of the fund custodian
- Date of each receipt
- Banner index and account code to be charged
Each receipt should be listed individually with the index, account code, and amount included. The fund custodian's signature and department must also be completed.
A reconciliation of the petty cash fund must be done on a regular basis. Complete the Petty Cash/Change Fund Reconciliation Form to insure the receipts plus cash on hand is equal to the amount of the authorized petty cash fund.
If receipts plus cash on hand are less than the authorized amount, this is an overage and must be deposited in the Cashier's office crediting the original index with an account code of E909, cash over/short.
If the receipts plus cash on hand are less than the authorized amount, this is a shortage. If the amount is significant, it should be report to Public Safety immediately for investigation. If the amount is less than $25, report this on your petty cash reimbursement request, charging the original index with an account code of E909, cash over/short.
Transferring Petty Cash Fund Custodianship
The Department Chair/Director is responsible for reporting any changes in petty cash custodians to Financial Services and Operations.
- When a new custodian is to take charge of a petty cash fund, the former custodian replenishes the fund so that the fund has the established amount of cash on hand.
- The Department Chair/Director sends a memo to the Manager of Banking Operations and
Auxiliary Accounting which indicates:
- removal of the former custodian from the fund
- the new fund custodian's name and identification number
- signature of the new custodian
This memo must be sent to Financial Services and Operations prior to any petty cash replenishments to the new custodian.
Accounts Payable will not reimburse a petty cash custodian unless the name is on file as the current custodian.
Increasing/Decreasing/Closing Petty Cash Funds
Increasing a petty cash fund: When additional petty cash funds are needed, the Department Chair/Director sends a memorandum to the Manager of Banking Operations and Auxiliary Accounting justifying the increase. Submit a check request payable to the fund custodian in the amount of the requested increase.
Decreasing a petty cash fund: A petty cash fund should be reduced if the amount of the fund exceeds the actual needs of the department. The amount which is no longer needed should be deposited at the Cashiers' Office, crediting the original index with an account code of A001, along with a memo indicating the fund is being decreased.
Closing a petty cash fund: When a petty cash fund is no longer needed, the fund custodian should replenish the fund to the authorized amount. This amount must then be returned to the Cashiers' Office, crediting the original index with an account code of A001, indicating the fund is being closed.
Petty cash funds must NEVER be deposited into a revenue account code.