5.4.4 Petty Cash Funds

The Office of the Treasurer is responsible for approving all Petty Cash Fund account requests. In general, the use of petty cash funds are discouraged and departments are strongly encouraged to use the Department Purchasing Card (P-Card) or the Oracle Financials Expense Requests system whenever possible.

The purpose of a Petty Cash Fund is to allow for the reimbursement or purchase of minor, unanticipated business expenses when the University's present procurement system is not cost effective and when the dollar amount is low.

The University has three types of Petty Cash Funds:

a. Petty Cash Fund
Petty Cash Funds are established for departmental use for incidental and emergency small-dollar purchases where the use of alternative means (e.g. P-Card) is not feasible. Reimbursement for properly approved expenses may be obtained directly from this fund. The size of a Petty Cash Fund will be determined by the business needs of the requesting department, and, unless special written approval is obtained from the Treasurer, a single fund will be limited to no more than $500 in cash on hand.

b. Petty Cash Checking Account
Petty Cash Checking Accounts may be established in departments that make small disbursements by mail (e.g. purchase of subscriptions), or must make immediate payment (e.g. C.O.D. (cash on delivery) payment for goods delivered by UPS). The size of a Petty Cash Checking Account will be determined by the business needs of the requesting department, and, unless special written approval is obtained from the Treasurer, a departmental Petty Cash Checking Account will be limited to no more than $2,500.

c. Change Fund
Change Funds may be established by a department and used to give change to customers when they are paying for goods and/or services and is reconciled daily. The size of a Change Fund will be determined by the business needs of the requesting department. A written request with the details of the business needs must be submitted to and approved by the Treasurer.

a. When Petty Cash May be Used
Reimbursements from petty cash are authorized for purchases and expenditures up to $100 per transaction. Allowable uses:
i. Delivery charges, minor office supplies needed for department operation and postage, totaling less than $100;
ii. Local transportation (e.g. taxi), parking and bridge tolls, totaling less than $100, that may arise as part of a day trip on official University business;
iii. Necessary and reasonable food (such as sandwiches and beverages) brought into the office for business meetings, totaling $100 or less, including tax, delivery and tip.

Special rules apply for the reimbursement of alcoholic beverages:

Alcoholic beverages: Purchases of alcoholic beverages may not be reimbursed by the federal government, either directly on a contract or grant account, or indirectly through the indirect cost rate calculation. When alcohol is served as part of a business meal, the restaurant receipt must identify the amount charged for the alcoholic beverages. List the alcohol amount, plus sales tax and tip, separately on the reimbursement documentation, charging the expenses to the appropriate unallowable expenditure type. If the supporting documentation for a meal is not itemized, then the receipt must note either “No Alcohol” or state the cost of any alcohol that was included in the purchase.

b. When Petty Cash May Not be Used
Petty cash may notbe used for:

• Payment for services performed by employees or non-employees
• Advances
• Gifts
• Personal loans and cashing personal checks
• Buying hazardous materials
• Stanford Faculty Club dues
• University parking permits (personal expense)
• Traffic citations
• Personal expenses
• Interest charges
• Social or travel club dues
• Expenses over 120 days (anything older than 120 days must be reimbursed through the Expense Requests system)
• Recurring expenses (e.g. employee business-related home internet or cell phone expenses)
• Amounts over $100, unless a department requests, and the Treasurer approves, a higher limit for the department
• Transactions involving student(s)

c. Accounting Accuracy
Reimbursement for petty cash must be the exact amount of the expense. Splitting one transaction in excess of $100 into several parts, or requesting reimbursement of less than the full amount of the expense is specifically not allowed.

a. One Petty Cash Fund Per Department
Unless the department is very large or geographically dispersed, a single petty cash fund per department is usually adequate for all its petty cash transactions. Reimbursements from one petty cash fund may be charged to any type of account (PTA) including sponsored projects. If more than one petty cash fund is needed, a written justification must be submitted to and approved by the Treasurer.

b. Size of a Petty Cash Fund
In addition to the fund limits set forth in sections 2 (a), (b) and (c) above, a petty cash fund should be established at a reasonable level based on the department's business needs. The fund level should be reassessed annually and modified as needed based on the volume of activity during the year.

c. Petty Cash Custodian
The department head must appoint an individual to be custodian of the department's petty cash fund. Petty cash custodians must be salaried employees of the University, and may not be undergraduate students, graduate students or temporary personnel. Custodians are required to complete Petty Cash Training and pass the associated certification test. The custodian remains accountable for the petty cash fund until another person is officially designated as the new custodian or the fund is closed.

d. Establishing, Changing or Closing a Petty Cash Fund
Department heads may request a new petty cash fund, an increase or decrease in an existing fund, or cloure of an existing fund by sending a request to the Financial Support Center (finhelp@stanford.edu or 3-2772) and Cash Management (cashmanagement@lists.stanford.edu) in the Office of the Treasurer. Specifics of the request should include:
i. Establishing a New Petty Cash, Petty Cash Checking or Change Fund
The request should include:

• The department name, location and physical address;
• The type of fund requested;
• The reason the fund is needed;
• The types of transactions that the fund will be used for;
• Reason that alternative payment methods are not feasible;
• The amount requested for the fund;
• The name of the petty cash custodian;
• The name and contact information for the individual(s) that will have signature authority on the Received of Petty Cash Form;
• If requesting a Petty Cash Checking Account, the name of the individual(s) that will have signature authority on the account (should not be the petty cash custodian);
• The department PTA that will be used when replenishing the fund

ii. Requesting an Increase or Decrease to a Petty Cash Fund
The request should include:

• The Petty Cash Fund number (08XXX)
• The department and location
• The custodian name
• The reason for the increase/decrease in fund size
• The requested dollar amount of the increase/decrease in fund size
• If requesting an increase in fund size, a justification for the increase in fund size will need to be provided and approved by the Treasurer

iii. Closing a Petty Cash Fund
The request should include:

• The Petty Cash Fund number (08XXX);
• The department and location;
• The custodian name;
• The reason for closing the fund

Note: For more information, please refer to sections 7(a) and 7(b).
 

a. Assignment of Petty Cash Funds to Custodian
Following certification that the identified custodian has successfully completed the petty cash training and passed the associated certification test, the Petty Cash Administrator will assign a Petty Cash Fund number to the new fund. This custodian must use this number in all transactions relating to this fund. The custodian remains accountable for the petty cash until another person is officially designated as the new custodian or the fund is closed.

b. Protection of Petty Cash
The petty cash custodian is responsible for managing the department's petty cash fund and should be the only person in the department to have access to the locked petty cash box and to disburse actual cash. To prevent access by anyone but the custodian, petty cash should be kept in a locked box in a desk or cabinet that is locked whenever the custodian is absent. Only the custodian should have access to the keys.

c. Loss or Theft of Petty Cash
In the case of theft or mysterious disappearance, the Stanford Police and the Office of the Treasurer must be notified as soon as the loss is discovered. A copy of the police report should be included with the petty cash receipts when reimbursement is requested.

d. Reconciliation and Replenishment
The custodian is also responsible for the reconciliation and replenishment of the Petty Cash Fund. The frequency of reconciliation depends on the type of fund:
i. Petty Cash Fund
A department Petty Cash Fund must be reconciled and replenished on a monthly basis. The reconciliation should be done at the time of replenishment and a "Petty Cash Reconciliation Form" must be completed and signed by the department head. The department head may designate, in writing, the ability to approve the monthly reconciliations to someone other than him/her self (but it may NOT be the custodian). These monthly reconciliation forms should be kept in departmental files and made available to the Petty Cash Administrator if requested during an on-site audit.
ii. Petty Cash Fund Checking Account
A Petty Cash Fund Checking Account must be reconciled and replenished on a monthly basis and a "Petty Cash Checking Account Reconciliation Form" must be completed and signed by the department head, or an authorized check signer for the account, but not the custodian. These monthly reconciliations, along with a copy of the most recent bank statement, must be submitted to the Petty Cash Administrator each month.
iii. Change Fund
A Change Fund is used exclusively for making change, it must be reconciled on a daily basis. Any records should be kept in a departmental file and made available to the Petty Cash Administrator if requested during an on-site audit.

e. Annual Confirmation of Petty Cash Funds
The Office of the Treasurer conducts an annual confirmation of balances for all Petty Cash Funds and Change Funds. In August of each year, the Petty Cash Administrator will send out the request for the Annual Confirmation of Petty Cash Funds to all custodians, along with the"Annual Petty Cash Reconciliation Form. The custodian must reconcile the account and fill out the form. The department head MUST sign the annual confirmation form, not their designee. The annual reconciliation form will also include an "Ongoing Practices Statement" that must be acknowledged and signed by the custodian. Since monthly reconciliations are submitted for all Petty Cash Checking Accounts, the custodians do not need to complete the annual confirmation request.

f. Periodic On-Site Audits of Petty Cash Funds
The Office of the Treasurer will conduct several on-site audits of selected department Petty Cash Funds, Petty Cash Checking Accounts and Change Funds each year. The funds will be selected randomly and the custodian for the selected fund(s) will be notified and an appointment to conduct the audit must be made within 72 hours. For an audit, the custodian will need to provide the auditor with copies of their monthly reconciliations, reimbursement receipts showing the types of reimbursements being made with the fund, and provide evidence that the fund is being stored securely when not in use.

g. Mishandling of Petty Cash Funds
Failure to properly safeguard, reconcile and administer petty cash funds may lead to revocation of the petty cash fund from the department and/or disciplinary action up to and including termination.

a. Absences of the Custodian:
i. Brief Absence: If the absence will be less than two weeks, the fund should be secured and no reimbursements should be allowed during the absence. During an absence or vacation that will last more than two weeks, a custodian may place the petty cash fund with a temporary, certified custodian. The temporary custodian must complete the petty cash training and pass the associated certification test before assuming the responsibility of the fund. The temporary and regular custodian will need to reconcile the fund at the time of transfer, as well as upon the return of the regular custodian. Both the temporary and regular custodian are required to sign the reconciliation forms.
ii. Absence During Which Fund Needs Replenishing: A temporary custodian may not replenish a petty cash fund. The fund must be replenished before the regular custodian's absence. If a regular petty cash custodian's absence will last more than one month, a new custodian will need to be appointed by the department head, following the steps in 6(b).

b. Change of Custodian
The department head may transfer the petty cash fund to a new custodian at any time. The new custodian must complete petty cash training and pass the associated certification test before assuming responsibility for the fund. The fund must be counted and reconciled prior to transfer. Except on a temporary basis described in paragraph 6 (a) (i) above, one custodian may not transfer a fund to a new custodian. The petty cash fund must be in balance before the new custodian accepts it.

c. Accounting for Petty Cash Transactions
Proper accounting for petty cash requires that custodians make payments for authorized expenditures only, obtain receipts, and record expenditures.
Note: There must be a sales slip, cash register tape, or other receipt attached to a Received of Petty Cash form for each expenditure. The only exception is reimbursement for mileage where a log with odometer readings, date, destination and business purpose serves in lieu of a receipt. When a receipt is not available, it must be indicated when requesting replenishment in the Expense Requests system. The Received of Petty Cash form must be signed by the person being reimbursed and approved by someone who has signature authority for the account (PTA) charged. The approver may be the custodian of the petty cash fund, except that the custodian may not approve his/her own expenses and may not approve expenses for an individual to whom he/she reports either directly or indirectly.

d. Balancing Petty Cash Funds
When reimbursements by the custodian deplete the amount of cash, receipts are totaled to account for the expenditures and keep the petty cash fund in balance. At any time, the total cash on hand plus the total receipts and reimbursement requests in process should equal the original amount of the petty cash fund. If the fund does not balance, contact the Financial Support Center (3-2772) for assistance. A petty cash fund should always be balanced before a request is made for replenishment.

e. Replenishing Petty Cash Funds
i. Approval
The Petty Cash Reimbursement request must be reviewed and approved by a person who has online signature authority for the departmental accounts (PTAs) to be charged (see Guide Memo 3.2.1: Authorizing Expenditures). This person could be the department head and must be someone other than the custodian or someone who reports to the custodian. The approver may not approve his/her own expenses and may not approve expenses for an individual to whom he/she reports either directly or indirectly.
ii. Check Printing
Replenishment checks are sent to the custodian. If special handling or "Will Call" service is requested, a special handling fee will be charged.
iii. Cashing of Replenishment Checks
The preferred bank is Stanford Federal Credit Union and special arrangements have been made with the credit union to cash replenishment checks as long as the payee has a Stanford Identification Card.

f. Reports of Petty Cash Expenditures
Petty cash expenditures are reported to departments on their monthly expenditure statements by account number (PTA) and expense classifications.

This policy should be read in conjunction with the following related policies and procedures:

a. Petty Cash Fund Administration and Procedures
b. Petty Cash Fund Checking Account Administration and Procedures
c. Guide Memo 3.2.1: Authorizing Expenditures
d. Guide Memo 5.4.3: Reimbursement of Expenses

Related Forms:
a. Petty Cash Monthly Reconciliation Form
b. Petty Cash Checking Account Monthly Reconciliation Form