Imprest Cash/Petty Cash Fund Procedure
Contact: General Accounting, (205) 934-9330
It is sometimes necessary for a department to have on hand cash from which to pay minor emergency payments or make change. The Executive Director of Accounting provides for this by use of an imprest cash fund. A department should never create or increase an imprest cash fund from UAB revenues. Under the imprest system, a fixed sum is established as a petty cash or change fund. The exact amount depends upon the specific requirements of the department in question.
A petty cash fund is used to facilitate minor emergency payments that cannot be handled through any other UAB purchasing/payables procedures. This type of fund is used for expenditures and therefore only involves an outflow of cash, i.e. revenues should never be deposited into a petty cash fund. Periodically, or as needed, the petty cash fund is reimbursed to its original amount to replenish the cash previously spent. Petty cash funds cannot be used for such closely audited expenses as travel or entertainment. Petty cash funds should never be used to cash checks and should never include personal employee checks. Money should never be borrowed from a petty cash fund as an IOU. Cash advances from the petty cash fund are inappropriate; the expense should be incurred and then reimbursed. It is also inappropriate to use the petty cash fund for any purpose other than the specific purpose of the fund as outlined in the initial request for the fund. Purchases made with petty cash funds should follow University guidelines just as purchases made through normal channels would do. A specific valid Oracle account number must be available for each reimbursement charge. Additional requirements apply for petty cash funds for research study participants.
A change fund operates as a convenience to the department in conducting UAB cash business. This type of fund has neither income nor expense, so the cash balance remains constant. With the exception of the University Cashier's Office and Hospital Cashier's Office, the cashing of checks is not permitted from a change fund. The change fund custodian is simply authorized to exchange currency in order to acquire desired denominations of monies.
A petty cash fund or a change fund must be the definite responsibility of one individual named as fund custodian. The fund custodian is directly responsible for transactions and quarterly reconciliations and for the security and integrity of the fund. The fund custodian should be in direct supervision and in close proximity to the fund. The fund custodian may choose to delegate authority in the management of the fund; however, it is still the custodian who is ultimately legally responsible for the money.
A petty cash/change fund is requested by completing an Imprest Cash Fund Request form and forwarding it to the Director of General or Grants and Contracts Accounting. The form must specify which type of fund is being requested, justify the need for imprest cash funds, specify the account which will be charged when the fund is replenished if it is a petty cash fund, indicate the dollar amount required, name a fund custodian, and have the signature of the fund custodian and the school fiscal officer. To minimize the risk of potential loss to UAB, the amount of the fund should be limited to the absolute minimum necessary to carry on the work and keeping in mind that the fund should be replenished at least once every two weeks.
If a petty cash or change fund is approved as necessary for a departmental function, it is the responsibility of the fund custodian and the school fiscal officer to familiarize themselves with the imprest cash fund procedures. A UAB Payment Request is prepared by General or Grants and Contracts Accounting. The GL account in which the imprest cash value is recorded should be as closely related as possible to the account which will ultimately be funding the reimbursement expenditures. For example, if it is a GL account, it should be recorded on that account's balance sheet. This helps ensure that the fund will be properly closed if the reimbursement account is ever closed. The GA account and object code will always be 0000000.000.213012222.010000000.0000.1108010.
After the creating payment request is completely approved and coded it flows to Accounts Payable where a check payable to the fund custodian is produced. The fund custodian is then notified to personally pick up the check from the office of the responsible UAB accountant in General or Grants and Contracts Accounting. At that time, an Imprest Petty Cash and Change Fund Agreement must be completed and signed by the fund custodian. That creation check may be cashed at any local bank.
If the fund is of a petty cash type, UAB Petty Cash Vouchers are issued to be used as official evidence of expenditure. Each numbered voucher consists of an original and a copy. Original vouchers are used as receipts when requesting reimbursement. If the department chooses not to use the original vouchers a form created by the department could be used provided the information contained on the form includes at a minimum the information on the UAB Petty Cash Voucher.
Petty cash may be replenished to its original amount by preparing a UAB Payment Request for the total amount of documented petty cash expenditures. Petty cash reimbursement checks are payable to the fund custodian. The fund custodian is assigned a vendor number so that petty cash reimbursements do not commingle with payments to the individual. Original UAB Petty Cash Vouchers, invoices, and other applicable documents, should be scanned into WebIT. The custodian's UAB extension should be listed in the special instructions box for the check to be picked up. The Master File number assigned to the fund should be referenced on the request. After appropriate departmental approvals are made, the request then flows to the UAB accountant responsible for the Oracle Petty Cash reimbursement account number charged. The request will be audited by the UAB accountant responsible for petty cash and then processed for payment.
Petty cash/change funds are subject to periodic unannounced audits by auditors or other designated representatives. For petty cash funds, at any given point in time, available cash plus UAB Petty Cash Vouchers must equal the petty cash authorized amount. A change fund reconciliation must always show a constant balance of cash (plus checks cashed, if in the two official UAB cashier's offices). Department management should periodically review the status of petty cash/change funds and, if irregularities are suspected, UAB Internal Audit should be notified to request an audit. The fund custodian is responsible for completing a Petty Cash Reconciliation form quarterly verifying the imprest cash amount, and to confirm the name and address of the fund custodian. The reconciliation must be independently verified by the fund custodian's supervisor in addition to the custodian's verification. General and Grants and Contracts Accounting will maintain a database to monitor the consistent use of the fund. If there is no use of the fund during a six month period a letter will be generated to the fund custodian requesting that the account be closed. Annually, General and Grants and Contracts Accounting will send a list of open petty cash funds to the school fiscal officer.
When the original purpose for a petty cash/change fund ceases to exist, the fund should be closed immediately by the fund custodian. The fund custodian may close a fund by personally presenting the total fund amount to the UAB accountant responsible for imprest cash or to the Director of General or Grants and Contracts Accounting. Cash and personal check(s) resulting from the final reimbursement(s) are accepted. (All outstanding UAB petty cash vouchers must be reimbursed before closing the fund.) The UAB accountant will deposit the cash and/or check into the applicable Oracle account and close the fund. General or Grants and Contracts Accounting will also complete a Termination of Imprest Cash Fund form. The original is filed in General or Grants and Contracts Accounting and a photocopy is made available for the fund custodian. If for some reason, due to transfer, promotion, or termination, a fund custodian is required to relinquish responsibilities of the fund, the custodian should get a receipt from his/her supervisor, as the fund is turned over to the supervisor, and then attach that receipt to a memo identifying the new fund custodian in writing to the Director of General or Grants and Contracts Accounting and in this way terminate his/her responsibility for the fund. It is important that the supervisor reconcile the petty cash fund at the point it is received from the old custodian, because the supervisor is then responsible for it. The supervisor should reconcile it again when it is turned over to the new fund custodian. An Imprest Petty Cash and Change Fund Agreement will be promptly provided by General or Grants and Contracts Accounting to be completed by the new custodian.
Failure to comply with all imprest cash fund procedures or to respond appropriately to requests for information or review by auditors or by UAB Financial Management may result in immediate termination of the fund.