The purpose of a petty cash fund is to provide cash to business units sufficient to cover minor expenditures. The use of petty cash funds should be limited to reimbursement of staff members and visitors for small expenses, generally not to exceed $50, such as taxi fares, postage, office supplies, etc. Wherever possible, local units should use the PCard instead of petty cash.
Risks commonly associated with petty cash
- Petty cash is the most liquid asset of an organization and is easily misappropriated if business processes and controls are not established.
Best practices include:
- Generally petty cash funds for orgs (local units) should be set up in amounts not to exceed $500
- Petty cash funds are not to be used as an operating fund (e.g., petty cash funds should not be used to pay invoices for goods or services, to pay salaries or wages or to make advances or loans)
- One employee should be assigned responsibility as custodian of the fund. The tub financial dean or equivalent must approve custodians
- Custodians should maintain a Petty Cash Log including receipts for each disbursement. All disbursements should state business purpose, reimbursee and date
- Petty Cash Log should be complete - petty cash on-hand plus receipts should always equal the original petty cash fund
- Custodians should replenish the fund when cash balance is low
- Prior to replenishing the fund, the custodian should make sure that cash on-hand plus receipts equals the original balance of the fund.
- A supervisor or manager should approve the replenishment request
- Custodians should close inactive petty cash funds
- Local petty cash custodians are responsible for safeguarding petty cash funds and maintaining receipts and detail records to support all transactions
- Local unit management should perform unannounced petty cash audits
- Petty cash funds should be maintained in a secure, area such as a locked drawer or small safe