Petty Cash
A petty cash fund may be established or increased by sending a Petty Cash Request (Form T-2) to the Treasurer. Petty cash advances are limited to departments that demonstrate a frequent need for such funds. Common uses of petty cash include postage, freight, and minor maintenance and repairs. (Note: A University procurement card is preferable to maintaining petty cash, as procurement cards are easier to administer and allow for the same types of purchases as petty cash.)
Key Terms
A petty cash fund is a cash advance from the Treasurer’s Office or the business office of a campus or institute to the department head or official custodian designated by the head. A petty cash fund may be in the form of cash or a checking account. Generally, petty cash is used as a fund for cashiering operations or to purchase minor items necessary for departmental business from sources outside the University (see “Restrictions”).
The petty cash custodian is responsible for all activities involving the petty cash fund, including safekeeping of the fund, obtaining proper documentation for expenditures, periodic and annual reconciliations, and preparing or entering requests for reimbursement. The department head may serve as custodian or designate another employee to act in this capacity.
Restrictions
Petty cash funds may not be used for the following:
- Individual purchases of $10,000 or more
- Sensitive minor equipment
- Items available from campus bookstores, central supply stores, or other University departments
- Check-cashing (with exceptions for campus or unit business offices)
- Items for personal use
- Loans or salary advances
- Payments to individuals on the University payroll
- Payments to independent contractors
Reconcilement
Petty cash funds should be reconciled frequently using the Reconciliation of Petty Cash (Form A) to ensure the cash on hand and expenditure receipts equal the amount of the fund. In addition, the Treasurer’s Office will send a report annually to each petty cash custodian requiring them to reconcile their account as of June 30. Failure to provide these documents in a timely manner may result in the account being cancelled.
Reimbursing the Fund
Departments may request reimbursement of petty cash expenditures from the Treasurer’s Office or the business office with a Petty Cash Reimbursement Request (Form T-44); however, departments are highly encouraged to process reimbursements directly in IRIS. The custodian should enter the required petty cash items in IRIS via the transaction ZAP_ENTRY. A line item must be entered for each receipt that is being submitted. Receipts should be scanned in the order they are entered in the document and attached to the document as one entry.
Consult with your campus or unit business office to determine if they allow reimbursements in this manner. If campuses do not permit electronic reimbursement, departments need to complete the Petty Cash Reimbursement Request (Form T-44). Each request should be accompanied by itemized receipts.
Departments are charged for purchases when the fund is reimbursed for expenditures or shortages. These charges will appear on the department’s ledgers after a reimbursement check is sent to the custodian. The custodian is responsible for depositing or cashing the check to replenish the fund.
On June 30th each year, a reimbursement request must be entered or submitted for all unreimbursed expenditures or shortages of the fund. This ensures transactions are recorded in the correct fiscal year. Departments must also reconcile their petty cash funds as of June 30th and submit documentation of the reconcilement to the requesting office.
The Entertainment section of this guide contains procedures for reimbursing petty cash used for entertainment expenses.
UT’s Tax-Exempt Status
The University is exempt from paying Tennessee sales tax. When paying by check on a petty cash account, a photocopy of the exemption certificate in Policy FI0410 should be presented to the vendor at the time of purchase.
Closing or Decreasing the Fund
To close a petty cash fund or decrease the amount, the custodian or department head must process a deposit to the central cashier of the campus or institute and file a completed Petty Cash Reimbursement (Form T-44) with the Treasurer’s Office or campus business office. If this action is not performed according to University procedures, the department will continue to be held responsible for the petty cash funds. Contact the business office of your campus or institute for specific instructions.
Your Role in Managing Petty Cash Funds
Your responsibilities include the following activities:
- Request the petty cash fund and any increase or decrease in the fund from the Treasurer’s Office or the business office of your campus or institute.
- Serve as custodian or designate a qualified custodian for the fund.
- Ensure that the designated custodian is properly trained to manage the fund in compliance with University policies.
- Review and approve petty cash reimbursement request forms to ensure the following:
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- Goods and services purchased are acceptable and allowable by University policies.
- The cost center or WBS element to be charged and all other information is correct.
- Funds are available for payment.
- If a petty cash bank account is needed, request the Treasurer’s approval prior to opening a checking account for the fund.
- Notify the Treasurer’s Office or the business office of the campus or institute when the custodianship of the fund change.
- Ensure that adequate facilities and procedures are in place to safeguard petty cash funds from theft or misappropriation. At least the following controls should be implemented:
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- Provide safekeeping facilities commensurate with the size of the fund.
- Limit access to the fund to as few employees as possible.
- Require frequent reconciliation of the fund by someone other than the custodian.
- Keep petty cash funds separate from other funds.
- Report shortages of $250 or more immediately to the internal audit department and campus or institute business office.
Detailed policies and procedures for managing petty cash funds are in University Policy FI0525.
Lesson Learned
The custodian of a petty cash checking account was given the responsibility of depositing checks issued to the University. He stole more than 10,000 by depositing the checks into the petty cash account and removing the corresponding amount in cash.
Proper separation of petty cash and depositing duties would have prevented this theft.