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Basic Cash Control: Critical Policy Activities

What to Know
Critical Policy Activities

Business and Finance Bulletin BUS-49, the UC policy related to cash handling, defines the following four critical policy activities:

These four policies are the core of what is outlined in BUS-49, therefore it is important that everyone with cash handling responsibilities understand what these are all about and how they relate to your job duties. The interrelation between these key activities is the foundation for a strong control environment that protects both the University and you, as a handler of cash.

Here's an image of how these policies interact.

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1st Activity - Accountability

Accountability requires the person to have the authority to carry out the task. An employee receives a delegation of authority to handle cash either through his/her job description that includes cash handling responsibilities. Any person who has delegated a task to someone remains accountable for ensuring the task is properly performed. Tasks can be delegated to someone only if that individual:

  • Possesses the appropriate knowledge and technical skill
  • Is actively involved in the task being performed

Function Description
1. Individual Accountability involves delegation of authority Knowing who has access to cash and why they have access to cash
2. Cash Accountability involves security Knowing where an asset is at all times
3. Process Accountability requires documentation Knowing what has occurred from the beginning to the end of the process

Cash handlers' supervisors are accountable for ensuring that:

  • Cash handling staff are trained on what to do in the event of a campus emergency and
  • Cashiering operations are included in unit/dept. campus disaster recovery planning.
1st Activity - Maintaining Accountability

Have you ever seen a sign next to a cash register that states if you don't get a receipt, your purchase is free or $10 off?

Ensuring accountability is the main reason why a business posts this type of sign. Providing a receipt to each customer means that every sale has been recorded. As part of the recording process in issuing the receipt, the individual cashier has been identified, along with the form of payment (cash, check, etc.)

Accountability is present when:
Funds remain secure
Transfers are documented
Passwords are not shared
Keys are secured
All transactions identified to a specific cash handler
A receipt given to each customer
Cash drawer for each cashier
Safe combination not shared
Background checks are performed

Individual accountability for cash is to be maintained throughout all cash handling operations. This applies to all transfers of cash. The documentation involved in a transfer, must also document the type of cash (i.e. currency, checks and other forms of payment).

The two signatures on the transfer form indicate that each person has counted and totaled the amounts of each type of cash being transferred and both parties agree that the amount(s) listed on the form is the amount(s) actually transferred.

Whenever a handler of cash leaves the work area, however briefly, she/he is responsible for ensuring that the cash is secured by locking it in a drawer, desk, file cabinet, etc.

2nd Activity - Separation of Duties

Separation of duties protects you, the employee from allegations of wrong doing. Separation of incompatible duties and/or responsibilites provides assurance that one person is not able to conceal errors and/or irregularities when conducting their normal everyday duties.

Functions that need to be separated

The following functions are separated when a different employee performs each of these four major functions.  Often these duties are performed by different levels of personnel.

Record Keeping - Creating and maintaining department records

Is performed by individuals assigned the following roles:

    • Preparing deposit
    • Recording deposit to GL (performed by the main cashiering office)
Authorization - Review and approve transactions

Is performed by individuals assigned the following roles:

    • Reviews and approves voids, refunds, beginning and ending receipt numbers
    • Reviews and approves deposits
Asset Custody - Access and/or control of physical assets (i.e. cash and checks)

Is performed by individuals assigned the following roles:

    • Handling cash
    • Preparing deposits
    • Making cash deposits

Reconciliation - Assurance that transactions are properly recorded

Is performed by individuals assigned the following roles:

    • Comparing deposits to GL entries
    • Reconciling receipts to deposits

The duties and/or responsibilities of staff within a campus unit should be reviewed whenever processes are revised or functions are reassigned due to staff vacancies or departmental restructuring.

If management has inadequate staff to properly separate all duties, additional procedures can be designed in the system to help reduce the risks associated with inadequate separation of incompatible functions.  This is what is known as mitigating controls.

2nd Activity - Separation of Duties
Record Keeping Duties

Record keeping duties include all duties that result in the creation and maintenance of department records of revenue(s), expenditures and inventories.  These may be paper records or records maintained in automated computer systems.

The following are examples of record keeping functions or duties:

  • Ringing, processing, posting/validating transactions on a cash register
  • Recording sale transactions manually
  • Preparing cash receipt back-ups
  • Posting (ONLY) charges or payments to an Accounts Receivable system
    NOTE:  One person should not process both charges and payments
2nd Activity - Separation of Duties
Incompatible Record Keeping Duties

Record keeping duties include all duties that result in the creation and maintenance of department records of revenues, expenditures and inventories.  These may be paper records or records maintained in automated computer systems.

The following are examples of record keeping functions or duties:

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  • Opening mail, endorsing checks, preparing cash transfers
    • The person performing these duties should not ring, process, post/validate transactions nor record sale transactions.
  • Maintaining inventory records
    • The person maintaining parking permit inventory records should not be responsible for point of sale transactions (i.e. selling parking permits).
2nd Activity - Separation of Duties
Authorization Duties

Authorization duties are normally performed by a supervisor, office manager, or department head and include the review and approval of transactions.

The following are examples of authorization functions or duties:

  • Approving voids, refunds, and other correcting entries
  • Approving departmental deposits
  • Approving cash transfers
  • Approving movement of assets such as cash, event tickets, parking passes, etc.
  • Approving anything that is unusual
  • Verifying the reconciliation of cash collections to the daily cash register ('Z') tape or computer generated summary report.
2nd Activity - Separation of Duties
Asset Custody Duties

The following are examples of asset custody functions or duties:

  • Access to any funds (i.e., cash)
  • Access to safes, lock boxes, file cabinets, etc. where cash or other assets are stored
  • Custodian of a petty cash or change fund
  • Access to or custody of returned checks
2nd Activity - Separation of Duties
Reconciliation Duties

The following are examples of reconciliation functions or duties performed at a supervisory level or by the Accounting Office:

  • Comparing funds collected to Accounts Receivable postings
  • Comparing collections to deposits
  • Comparing surprise count of cash or other asset inventory to appropriate records
  • Comparing departmental records to revenue (sales) to the General Ledger
  • Comparing ticket inventory changes to amounts purchased and sold during special events
  • Comparing (agreeing) cash collections to cash balancing report
3rd Activity - Physical Security

Assurance that the safety of people and assets (specifically cash) is maintained and controlled.

Function Description
1. Security Monitoring Proper controls to assure safety of staff and transport of cash or other assets
2. Physical Layout Placement, processing and storage of cash per Risk Management standards as listed in BFB BUS-49
3. Personnel Pre-Screening Employment history verified and Fingerprint/Background check conducted
4. Inventory Control Cash (or other asset) security and monitoring

Physical Security is effective when:
Assests are properly stored
Alarm system alerts police department
Shortages / Overages are reported
Keys are secured
Cash counting not visible
Safe combinations are changed
2nd employee present
Background checks are performed
Armored car or police used

Peak Periods

Policy related to safe and alarm requirements uses general and undefined terms such as "on a daily basis" and "regularly on hand". Many campus units have peak periods of 1 to 3 weeks duration up to 3 times per year when the amount of money they take in is substantially higher than the norm at all other times during the year. Managers need to evaluate the risk inherent in these peak periods to determine which of the physical security requirements are cost effective for their unit. One alternative is to minimize the amount of cash stored overnight by making more than one deposit per day to the main cashier's office.

General Policy

Alarm system requirements are applicable whenever a unit regularly has more than $2,500 in cash. See BUS-49 (Page 9) for further details.

It is best to open a safe in a way that prevents others from observing the combination. As much as is practical, a safe is to be locked between deposits. The safe's combination is to be changed whenever someone who knows the combination leaves the employ of the unit. At a minimum, the safe's combination should be changed at least annually. The change should be documented to show the date and reason for the change.

Especially in a main cashiering or sub-cashiering station, safety for both the employees and the cash is improved by having a second person present when the office is opened and again when it is closed for the day.

4th Activity - Reconciliation
 
Reconciliation requires assurance that:
  • Transactions are properly documented and approved
  • Competent and knowledgeable individuals are involved
Function Description
1. Transaction recording, documentation and follow-up Assurance that transactions are correct and that appropriate back-up is maintained
2. Authorization and approvals Review and approval by a supervisor or manager
3. Separation of duties Reconciliation process not performed by cash handlers
4th Activity - Reconciliation Levels

Reconciliation involves the following three levels of personnel:

Level 1 - Cashier/Sub-Cashier

  • Reconciles daily receipts by cross balancing the funds collected against the cash register totals, the receipts issued, and deposit documents received.

Level 2 - Manager/Supervisor

  • Reconciles to ensure that receipts were issued in numerical order. Verifies that register totals and beginning and ending readings are in order. Performs surprise cash counts to ensure the accuracy of staff and compliance with cash control procedures.

Level 3 - Accounting Office

  • Reconciles deposits by Major Cashiering sites to UC bank accounts. The reconciliation also ensures receipt number control, register transaction/dollar amount control; error/voids/refund control and authorization.
4th Activity - Reconciliation Verification

A reconciliation is performed to verify the processing and recording of transactions.

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Each of the following areas should be explored:

  • Was the transaction valid?
  • Was the transaction properly authorized?
  • Was the transaction recorded timely?

If the answer to any of these questions is NO, perform additional research.  This includes following-up on any differences or discrepancies.

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