Nova Southeastern University Internal Auditing Department Self-Audit Guidelines Petty Cash and Cash Controls Origination Date:

: 2-26-2003 Last Revision Date: 05-09-2008 (NOTE: Revised items are highlighted as: _________.) Objectives To safeguard cash assets and ensure that policies and procedures are being followed. To provide management and all employees guidelines of good business practices and controls to assist them in fulfilling their fiduciary duty to the organization. The periodic self-audit is a tool to help management and/or employees fulfill this fiduciary duty. Note: These self-audit guidelines may not be inclusive of all risks. Sound management judgment should be used to determine which additional controls should be incorporated within the selfaudit. Procedures Ensure that NSUs petty cash policies, procedures, guidelines, and/or practices used by the petty cash custodian are in writing and available for use. Ensure that staff is familiar with the Financial Operations Policies and Procedures and that the policies and procedures are being followed. NOTE: As of 2/28/2007, new policies and procedures are currently available in the Finance Operations website listed below. NSU Financial Operations Policies and Procedures Manual http://www.nova.edu/cwis/fop/forms/policies.doc http://www.nova.edu/cwis/fop/accntpay/peoplepay.html Identify Petty Cash Funds Determine if the department and/or any of its employees have a petty cash fund(s). Contact the Accounts Payable department to identify all petty cash funds that are recorded for the department and/or employee(s). Verify dollar amount, custodian name, and department managements approval of funds origination. (Note: The NSU Petty Cash Account form is used by Accounts Payable to approve and issue petty cash funds.) Verify continued need for the petty cash fund. 1

Security Over Funds Determine which individual(s) have the combination to the safe, and/or the key to the lock box. Ideally, the combination to safe and/or key to the lock box should be control by only two individuals, the custodian and one individual in management as backup. Transactions and control of the petty cash should only be under the approved custodian. The combination to the safe should be safeguarded and not written or maintained where it can be viewed by others. Ensure that the combination is changed periodically (example: annually), and always when turnover and/or change of custodian. Indicate date combination was last changed__________. Examples of unacceptable places to keep the safe combination are: on a desk calendar, inside a file cabinet or folder with common access, on shared computer files/server, in a place not locked but assumed others would not look, etc. Examples of where the combination can be secured if deemed secure/appropriate by the custodian are: in their wallet that is kept on their person but does not specify combination to safe, or within a desk drawer that is locked at all times that does not have common access. In addition, when closing the safe, be certain that the combination tumbler is turned several times after closing the safe door, and not left at the last combination number, to ensure that the safe is properly closed. Successful locking should be tested by hand.

The key to the lock box should be safeguarded and maintained in a locked desk/cabinet/etc that does not have common access by others. Periodic Petty Cash Counts Management above the custodian should perform unannounced counts at intervals during the year (example: monthly), varying the days and or dates. This ensures that the petty cash funds are accounted for. As an aid, the manager can complete the Cash Count Sheet when performing the unannounced count. The documentation of the unannounced count, such as the dated Cash Count Sheet must be retained. (Note: The Cash Count Sheet can be found at the end of this self-audit guideline.) Note: In addition, if deemed beneficial, management may also wish to maintain a log of the unannounced count dates for reference purposes. Petty Cash Count (Reconcile Fund to Accounting Records) Have petty cash custodian open safe and/or lock box and secure all contents. (Always make sure that the custodian is present during the entire time the contents of the safe and/or lock box are being handled. If custodian has to leave the area for any reason, have the contents placed back

into the safe and/or lock box.) Count the petty cash fund(s), the optional Cash Count Sheet can be used. Differences (overage/shortages) between the total amount counted (cash and receipts approved by management) and the total amount approved for the fund must be noted. An over/short is to be recorded through Accounts Payable, account number 3790. Shortages are to be reported to NSU Public Safety Department as soon as possible, and prior to replenishing the fund. Have Custodian sign and date the results of the count. Note: A custodian may choose to use a petty cash log to track the running balance of the fund. The log would include the opening balance of the fund after reimbursement from Accounts Payable, with the date/amount/description of each disbursement, and the resulting running balance. Petty Cash Receipts Review all Petty Cash Expenditures forms and receipts for adherence to procedures. Petty cash should be used for allowable purchases, (i.e., purchases that are not subject to the requirements of the submission of a Check Request, Purchase Orders, Travel Expense Reports, etc.). (Note: The use of the petty cash fund may not be able to take advantage of the institutions tax-exempt status, since the vendor may require direct payment by NSU to avoid the sales tax.) Reimbursements should only be for items that have a business purpose and are supported by adequate receipts. When reimbursing employees, a petty cash receipt should be attached to the original store receipt. The employee is to acknowledge signed receipt for the disbursement of funds. Either a standard form from Office Depot, a standard departmental form, or a stamp can be used that contains the following information for the reimbursement: date, amount, Fund/Org/account to be charged, management approval, and signature of employee receiving the funds. All reimbursements REQUIRE management approval PRIOR to reimbursement to the employee. The documented management approval (signed and dated) is to be attached and retained with the original receipt. The methods described above fulfill this requirement. The expense should also have been approved by management prior to the expenditure of funds, although this may or may not be specifically documented in written form. Does the highest level employee submit the expense? (i.e.: Management does not approve an expenditure that a subordinate submits, if that approver/management benefits from the expenditure.)

Petty Cash Advances to employees for the future purchase of items is not encouraged, due to the additional burdens of the process. If a Petty Cash Advance for a purchase is given, the employee must sign a dated slip (such as a petty cash receipt) for the cash advance to account for the monies that are temporarily no longer within the petty cash fund. Petty Cash Advances should not be outstanding more than one business day.

The original Petty Cash Advance document is to be cancelled or destroyed in front of the employee who received the advance, upon returning a management approved store receipt and the remainder of monies. The management approved store receipt would then follow the routine process as described above.

For ease of reimbursement, items purchased for NSU should not be co-mingled with items purchased for the employee on the same store receipt. This reduces the work in documenting NSU portion of the purchase, and any calculation of state sales tax on the purchase. NOTE: Procure-to-Pay (P2P) system may change some of the processes for Petty Cash Reimbursement. Procedures are forthcoming. Petty Cash Fund Reimbursement Ensure Accounts Payable requirements are being followed when routine replenishment of the fund is needed. (Note: See the Accounts Payable web site for requirements.) At Fiscal Year-end, the custodian is to replenish the fund through Accounts Payable prior to June 30th, to ensure all expenses are recorded in the proper accounting year. Also, periodic reimbursement should occur to ensure expenses are being recorded in a timely manner. Periodically, review the frequency of reimbursements and determine if the fund amount should be reduced, or if the total fund should be returned to Accounts Payable. Determine if there is a continued need for the petty cash fund at least annually. This could be performed in conjunction with the annual verification of funds performed each year by Accounts Payable. Controls for Cash Sales Identify special events or areas within a department that collect cash/checks. Determine if the collection of cash/check adheres to written procedures and that controls are in place to safeguard the collection process. Review the process of cash/check collection, reconciliation, and recording to proper accounting records. Determine the cost/benefit of controls such as: (1) spool of double sided tickets to account for sales with reconciliation to cash received; (2) reconciliation of starting/ending inventory to cash received; (3) reconciliation of vending machine to cash received; and, (4) others as deemed appropriate. Determine which individual(s) is responsible for the collection of cash/check. Typically and ideally, one individual would be accountable for the cash/check until turnover to a second individual. At the turnover both individuals are required to count/reconcile the total fund. After turnover, the second individual is solely responsible for the funds. If possible, and if needed/beneficial, two individuals can count the funds and place them

within an envelope, which is then sealed. Both individuals are to sign and date the envelope, and list the dollar amount placed within the envelope. If only one individual documents the dollar amount of the envelopes contents (as in a drop safe with no second person on shift) two individuals are required to open/count the envelopes contents the first opportunity possible the next day. This needs to be performed before a single person has sole access to the safe and/or lock box. When a single person has access to funds without verification of transfer of funds, the chain of custody is broken and responsibility for discrepancies cannot be readily accounted for.

Note: When two individuals count the funds, they must each individually count the entire amount, they cannot each count a portion of the fund and add the two subtotals. Timely Deposit of Cash and Check Cash/Checks to be deposited are to be forwarded to the Bursar timely. Best practice is the same day or next business day, to provide enhanced security of the cash/checks, to reduce the exposure to theft/loss, to promptly record transactions, and to obtain the time value of the funds deposited. Timely deposits require both timeliness from transaction origination to the departments safe and/or record keeping, and then from the department to Bursar. Again, best practice is deposit the same day, or next business day. The deposit forwarded to the Bursar should be accompanied with a properly prepared Transmittal Form. As needed, the checks should be stamped with the appropriate for deposit only stamp, which can be obtained from Accounting. Note: If refunds are needed for events which are cancelled, contact Accounts Payable. If the required record keeping is maintained within the department, a payees social security number may not be required for a refund. In the event that a Center/department receives cash/checks for which the appropriate beneficiary is not readily determinable, the cash/check should be forwarded to Bursar for immediate processing (deposit). Bursar will make copy of check(s) are find the rightful owner for credit. Other Items in Safe or Lock Box If the safe and/or lock box contains other items in addition to the petty cash fund, such as funds from other departments, and/or other cash equivalents, such as gift checks, etc., these contents should be maintained under proper controls as outlined above (i.e., two individuals verify amount and seal; two individuals open safe, etc.). When the safe and/or lock box contains gift checks; the custodian should maintain a record of the numbering sequence of the checks received and record the date and recipient of the gift checks taken out of inventory. Return and/or Transfer of Petty Cash Funds Accounts Payable requires Petty Cash Funds to be returned when they are no longer needed, or 5

when a petty cash custodian will no longer be performing those duties. Funds in the name of a new custodian will be issued after location managements approval. Therefore, a department is not to permanently transfer the fund from one employee to another. If management deems a temporary transfers is needed and appropriate, such as to cover for vacations, both the leaving custodian and temporary custodian must both count the funds in the presence of each other. The temporary custodian must be fully versed in cash security and all other cash handling procedures. Credit Card Security Determine that credit card numbers are adequately secured and only available to those individuals that need to know. Determine that controls are in place for the handling of forms that include credit card numbers and information. Additional controls for credit cards are currently in development by Accounting. Record and Documentation Storage and Retention Records and reports should be properly secured and stored given the confidential nature of some information, and therefore made inaccessible to unauthorized staff. Data Access Data access, including the Banner system, should be appropriate for the users level of need to access data. Corrections to Written Entries on NSU Forms Corrections to written entries on NSU Forms are to be done by: (1) Placing a single line through the incorrect information; (2) Placing the correct information on the Form; and, (3) The correction initialed, at a minimum by the highest level of management signing the Form. (NOTE: "White-out" is not to be used to make corrections. If white-out was to be used, it is not possible to determine if the white-out was used before or after approval. Even if the white-out area is initialed by management, the potential exists that white-out could be used again to change a document after management approval. Therefore, the use of white-out is not acceptable under any circumstance.) NOTE: Some departments may allow corrections via a method that does not include use of an NSU Form. The above requirements may not apply to these other methods, if managements 6

written signature is not part of the alternate method of authorizing corrections. Inappropriate Transactions Departmental management is responsible for contacting Internal Auditing if inappropriate transactions are suspected within their department. Business Process Improvements (BPI) Consider creating a user group, steering group or other type of management group that meets regularly to discuss and identify problems, consider process improvements, and verify compliance with NSU requirements. (http://www.nova.edu/cwis/audit/) Questions or Comments Questions or comments on these self-audit guidelines can be addressed to audit@nsu.nova.edu

Nova Southeastern University CASH COUNT SHEET Center/Department _____________________________________ Location _____________________________________ Petty Cash Custodian _____________________________________ Supervisor _____________________________________ Petty Cash Account No. _____________________________________ Denominations $0.01 $0.05 $0.10 $0.25 $0.50 $1 $5. $10 $20 $50 $100 $Other # Of Currency Total

Total Currency Count + Total Petty Cash Receipts Total PC Balance Approved PC Fund Amount Over/(Short) Comments:

Custodians Signature: ________________________________ Date______________ Supervisors Signature: ________________________________ Date______________ Note: Overage/shortage are to be recorded to account 3790. Note: Thefts are to be reported to NSUs Public Safety Department.