Imprest, Petty Cash and Other Revolving Funds

3 Accounting

3.8 Expenditures

3.8.8 Imprest, Petty Cash and Other Revolving Funds

3.8.8.10 Purpose

Guidance in this section applies to petty cash, imprest accounts, working funds, advance travel, stamp funds, change funds, or any other revolving funds set aside for facilitating minor disbursements, making change, and similar uses.

3.8.8.11 Budgeting

Imprest, petty cash and other revolving funds are not budgeted because they represent working capital (cash) for expenditures that are properly budgeted in other funds.

3.8.8.20 Controls

See BARS 3.1.3, Internal Control for general guidance on internal controls. The following are the minimum expected controls for these funds:

1. The governing body must take formal action to authorize each fund, i.e., resolution or ordinance. This requirement applies to subsequent increases or decreases in the authorized amount.
2. If the government elects to operate a fund in an account held at a bank, the governing body must approve the establishment of the bank account and specifically state the purpose of the account and the allowable use of the related ATM or Debit Card for the bank account’s purpose. Additionally, the governing body must establish internal controls and policies regarding ATM or Debit Card usage as well as follow all internal control procedures in place for all accounts in this section and for expenditures of government funds.
3. The governing body or its delegate must appoint one custodian of each fund who should be independent of invoice processing, check signing, general accounting and cash receipts functions.
4. The authorized balance should not exceed one month’s salary or the surety bond covering the custodian.
5. When a fund is abolished or an individual’s appointment as custodian is terminated, the fund must be replenished to the authorized amount, reviewed and certified as being turned over to the treasurer or new custodian.
6. No receipts may be deposited to the fund other than approved replenishments and increases to the authorized balance as described above.
7. Funds may never be used for personal cash advances, loans or expenditures.
8. Funds may never be used to provide check-cashing services for employees or others (except in cities that have approved a policy to cash employee’s checks in accordance with RCW 35.21.087 or RCW 35A.40.110; in which case a separate change cash fund should be created solely for this purpose with deposits of cashed items made daily). See the separate procedures applicable to advances for travel expenses.
9. See BARS 3.8.2.80, Employee Travel for additional guidance specific to advanced travel revolving funds.
10. See BARS 3.8.9, Confidential Funds for additional guidance specific to funds established for confidential investigative purposes.
11. A list of all authorized funds should be maintained. At a minimum, this list should include the type of account, purpose, authorized balance, custodian, and which Fund the cash is reported in. This list acts as support for controls and for the government’s bank reconciliation, which will include the authorized balance of all funds as a reconciling item between bank and general ledger. 
12. Reconciling and reporting is required for all authorized funds. See the accounting and reporting guidance below.

The following are the minimum expected controls for the custodian of the account:

1. As part of the appointment, the custodian should provide a receipt for expenditures to the treasurer, clerk-treasurer or auditor for payment processing. When it is not practical to hire additional personnel or to reallocate these duties among existing personnel, the governing body must establish a review process that accomplishes the segregation of duties objectives. For example, periodic monitoring of cash receipts and/or independent performance of the reconciliation may be adequate compensating controls for when complete segregation of duties is not possible.
2. For funds on hand (such as petty cash or change funds), the custodian must ensure cash is kept in a secure place, such as a locked drawer or box.
3. For monies deposited into a bank account where disbursements occur by ATM or Debit Card usage, the custodian must ensure the card is kept in a secure place, such as a locked drawer or box.
    

3.8.8.30 Accounting

On at least a monthly basis, the fund should be reconciled to the authorized balance and to the actual balance per bank statements or a count of cash on hand. If this reconciliation is done by the custodian, it should be checked or re-performed periodically by someone other than the custodian. It is recommended that independent checks should not be scheduled with the custodian but be done on a surprise basis. Expenditures should be recorded when the funds are replenished to their authorized balance.

The monthly replenishment should be done by warrant or check. The replenishment should be subject to the same review and approval as all other expenditures of the government. The replenishment must be supported with the appropriate receipts attached. The receipts should show the date, recipient, purpose, and amount of each cash disbursement. These receipts must be signed by the person receiving the purchased goods/services. The receipts should be identified by some appropriate means (i.e. a specific date) to prevent reuse. At the time of replenishment, the custodian should ensure that the balance remaining in petty cash, together with the amount of the replenishment voucher, equals the authorized balance.

All funds should be reconciled and replenished to the authorized balance as of fiscal year end to ensure expenditures are recorded in the appropriate fiscal year.

3.8.8.40 Reporting

The funds authorized balance should be reported as cash in the financial statements in the Fund deemed responsible for the fund, generally the Fund expenditures are normally paid from. Replenishments to funds should not be reported as revenues on the financial statements as the movement of the monies from one cash account to another does not constitute an inflow of resources.

The reporting of expenditures should occur when monies are disbursed for replenishment to the fund.