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Basic Cash Control: Principles &

Practices

Search Finan
0

Student Business
Services
Financial Affairs
(Dept. Contact Info)
UC Santa Cruz
1156 High Street
University of
California
Santa Cruz, CA
95064-1077

1. Pre-condition 1: Cash handlers are authorized

2. Pre-condition 2: Maintain separation of duties
3. Dual custody
4. Summary of Pre-conditions for Effective Cash
Handling and Control
5. 5 Steps of Cash Handling

Welcome

o Step 1: Accept Cash and Endorse Check

Goals

o Step 2: Prepare Deposit

Background

o Step 3: Deposit Cash | Control Tasks

o Money
makes
the
world
go
'round'

o Step 4: Reconcile Deposits | Control Tasks

o Step 5: Report Losses
6. Summary /Exception/Avoid/Reference

What to Know
o A bit
of
history Pre-condition 1: Cash handlers are authorized
o Fiducia Three Major Control Tasks
ry
respon Unit supervisors and managers must ensure that all cash handlers
sibility are properly authorized to handle cash.

Terminology
o What
is
consid
ered
cash

Verify the employee's employment history (applicable to

new hires)

Request employee fingerprint/background check (applicable to all employees who handle cash unless the
dollar amount involved qualifies for one of the exceptions
allowed by campus policy)

File proper documentation (applicable to all employees

o Defini
who handle cash)
ng cash
handler
Employment Verification
s
o Cash
handler
s
o Cash
flow

o Cash
Handli
ng
Roles
Matrix
Critical Policy
Activities
o 1st
Activit
y-

Verifying the validity of statements on an applicant's

employment application provides a confirmation of that
person's honesty and integrity.

Background Checks

A fingerprint/background check is one way in which the

University ensures an employee's trustworthiness and it
also lays the basis for follow-up in case of cash loss,
misappropriation or outright theft.

Therefore, University policy states that a background

check is a pre-condition for delegating cash handling
responsibilities. Campus policy permits an exception for
staff, students and volunteers who routinely handle less
than $750 per week. Similarly, fund custodians are exempt
if the funds they are responsible for are less than $750.

For fingerprint/background check services or information

contact your Staff Human Resources team (see Campus
resources).

Roles
o Cash
Handli
ng
Roles

File Proper Documentation

While the University presumes the best ability and

intentions of those to whom we delegate this special

Accou
ntabilit
y
o 2nd
Activit
ySeparat
ion of
duties
o 3rd
Activit
yPhysic
al
Securit
y

responsibility, we also know that cash losses do occur. This

is why University policy states:
Individual accountability for cash shall be maintained
throughout all cashiering operations.
All transfers of cash accountability shall be documented on
appropriate forms.

All departments authorize in writing each individual who

will be responsible for handling cash in the unit by
attaching a list of that unit's cash handlers to the unit's
Verification of Change Fund which is submitted to the
General Accounting Office on a monthly or quarterly basis
(depending on the amount of the change fund.) As job
duties are reassigned, student workers and temporary
workers come and go, the monthly/quarterly list should
change.

o 4th
Control Tasks
Activit
y Verify job applicant's employment history prior to hiring
Reconc
when job duties include cash handling.
iliation
Conduct background/fingerprinting on everyone to whom
Petty Cash /
cash handling duties are delegated. (Note: campus policy
Change Funds
allows an exception for fund custodians when the amount
of cash in the fund(s) is less than $750 and for staff,
o Explan
students or volunteers who routinely process less than
ation
$750 per week.)
of
usage Back to topics list
Pre-condition 2: Maintain separation of duties
o 4
Critical One of the most important steps your unit can take to protect cash
policy -- and you the cash handler -- is to separate cash handling duties
activiti among different people. This way, no one person has control over
es
the entire cash handling process. This principle is called
Separation or Duties or Segregation of Duties.
Principles &
Principle - No one person should have complete control over a
Practices
transaction.
o PreConditi Practice - In separation of duties at least two people are involved
in any cash handling transaction.
on 1:
Cash
handler Control Tasks
s are

authori Separate cash handling duties, whenever possible, to different

zed
people.
o PreConditi
on 2:
Mainta
in
separat
ion of
duties

Next we'll discuss a special application of the Separation of Duties

principle, called Dual Custody. Practice dual custody when
transporting cash, counting large amounts of cash, and other risk
critical actions.
Back to topics list
Dual Custody

Watch police officers on patrol, Loomis guards transporting cash,

o Dual
or a grocery clerk depositing cash to a safe. When working on
custod high risk tasks, they always work in pairs. One person carries the
y
cash and makes the deposit, the other monitors for safety and
keeps the other partner in view.
o Summ
ary of Involving two people in a critical cash handling task is a special
application of Separation of Duties called Dual Custody. At
preconditi UCSC, whether you are depositing cash to a drop box, counting
cash, or engaging in any such critical task, having two people
ons
engaged in that activity together is an important practice.
o 5 Steps
of cash
handlin
g
Practicing dual custody:
o Summ
ary /
Refere
nce

Audit

Campus
resources

Glossary

Encourages cash handlers to check each other

Reduces the opportunity for robbery and theft

If loss does occur, protects cash handlers from

unwarranted suspicion

Back to topics list

Summary of Pre-conditions for Effective Cash Handling and
Control

UC Santa Cruz
Maintained by:

You have just learned the two key pre-conditions for effective
cash handling and control. Let's review them here:

controller@ucsc.edu
Photo Credits

Pre-condition 1: Cash handlers are properly authorized

Control task: Verify job applicants' employment history.

Control task: Conduct fingerprint/background checks on

everyone to whom cash handling duties are delegated.

(Note campus exception for fund custodians, students and

volunteers who routinely handle less than $750 per week.)

Control task: Specifically authorize an employee to

handle cash by filing the appropriate form with the
Cashier's or Accounting Office. This will allow the campus
to keep track of and communicate with the staff members
who are actually handling cash.

Pre-condition 2: Maintain separation of duties and dual

custody

Control task: Separate cash handling duties, whenever

possible, to different people

Control task: Practice dual custody when transporting

cash, counting large amounts of cash, and other risk
critical actions.

We will now review the 5 steps of cash handling.

Back to topics list
5 Steps of Cash Handling
Step 1 - Accept Cash and Endorse Checks
Principle: Document cash and checks properly
Thousands of dollars exchange hands daily on campus, usually in
the form of cash, checks and credit cards. Cash transactions are
not things, but events that begin and end. Unless they're
documented, there is no way to track the movement of money.
This has big consequences.
Every time you receive cash, you must engage in three control
tasks:

Accept the payment. If payment is by check, ensure the

check is payable to either "UC Regents" or "The Regents
of the University of California." Note: A postdated check
is to be deposited without regard to the date.

Record the transaction with a receipt to the customer.

When not in use, place all cash in a designated secure

location.

Special Situations

A few campus units receive a large volume of payments by mail

rather than in person. Processing remittances present special risks,
since the payer is not standing in front of you waiting for his/her
receipt. Separation of duties requires that at least 3 employees be
involved in the processing of remittances.

One person opens the mail, endorses and logs the check,
including payment amount.

Another person processes the check (i.e. records the

payment).

The third person verifies that all checks received are

deposited and account coded correctly.

In this situation, when a receipt is not mailed to the payer, the

payment is recorded to the appropriate account. At the end of the
day, the logged remittance amount must balance with the amount
processed into either a cash register and/or an accounts receivable
system. In a campus unit/department that only occasionally
receives a remittance, the individual check is recorded directly
onto the cash collections deposit form.
An unidentified check
Sometimes a unit/department receives a check and it is not
immediately clear why the check has been sent. In this situation
the unit should photocopy the check, and proceed to process the
check for inclusion in the unit's next deposit to a main cashiering
station.

The amount of the check is debted to account 116010 Cash Received Undistributed-Cashier.

The photocopy is routed within the unit to identify the

purpose of the payment.

Once the purpose of the payment is identified, a transfer is

processed in FIS/Banner to move the payment to the
correct FOAPAL.

Control Task: Endorsing Checks

Whenever you receive a check, you must endorse it on the back to
prevent it from being negotiated inappropriately before depositing
it with the main cashier's office or the bank.
Applying the principle of individual accountability, either the

stamp needs to identify the individual cash handler (with a unique

number or letter) or the cash handler can initial next to the
endorsement.
Since all monies become the responsibility of the Regents of the
University of California you must stamp endorse all checks
payable to: "Regents of the University of California" or to "UC
Regents"
Here's the information that is to be included on an endorsement
stamp.
1233 Pay to the order of 1233
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION

FOR DEPOSIT ONLY

THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA-UC SANTA CRUZ
Insert department name and cashier identification code here
12335-18190
Back to topics list
Take the exercises (5)
5 Steps of Cash Handling
Step 2 - Prepare Deposit
So far, you have endorsed the check(s), given a receipt to the
customer, and kept your cash in a locked and secure location. The
next step is to complete the proper deposit slip.
Staff working in a main cashiering unit, will complete the bank's
deposit slip for Bank of America. Staff working in all other
campus units will complete a Departmental / Sub Cashier Cash
Collections Deposit Form (sold in packets at the Bay Tree
Bookstore).
Control Task - Use the correct deposit form/slip and document
accurately:

Campus units run adding machine tape(s) of all checks

received and a separate tape for all credit card sales. Attach
the tapes to the corresponding checks and/or credit card
receipts.

Accurately provide all appropriate information on the

form. To provide individual accountability, the preparer
and reviewer sign or initial the deposit form.

Include other supporting documentation (e.g. cash

register's "Z" tape, copies of hand written receipts,

beginning and ending ticket numbers, etc.)

Back to topics list
5 Steps of Cash Handling
When completing deposit slips

Include adding machine tapes of the checks and credit card

receipts with your deposit to the cashier's office.

Practice dual custody by completing the deposit form/slip

with another person whenever possible.

Make sure you balance cash/receipts to your deposit.

Report any losses (including over or short amounts.)

Keep a copy for your records.

Back to topics list

5 Steps of Cash Handling
Step 3 - Deposit Cash
Control Task - Control Amount of Cash On-hand

What would you do if someone walked in and said, "Stick'em up!

Give me all your money!"?
Of course it's hard to hand over money with your hands still in the
air, but the robber won't quibble with you . . . she or he will want
the cash! The wise thing, of course, is for you to hand it over.
But, why give more than you have to? Keep just the minimum
amount of cash at your station by making regular cash deposits to
a main or sub-cashiering station or the night deposit. If using a
cash register, remove extra accumulated cash and store it in a
secure location until the deposit can be processed.
Back to topics list
5 Steps of Cash Handling
Step 3 - Deposit Cash - Control Tasks
Minimize the Risk
Count cash in a location where no one outside of the office/unit

can see you doing it. If others don't know that you have cash,
especially a lot of cash, they are less likely to be barging in
demanding the money.
At the end of the workday, secure all funds and leave the register's
cash drawer open so that it is obvious that the register contains no
cash.
When to Deposit Cash, Checks and Credit Card receipts
Subcashiering
stations
and
Cash
Handling
depts/units

To prevent too much cash from accumulating at

your in-take point, the University specifies when
you are to deposit excess cash at the Main
Cashier's office located on the first floor of the
Hahn building.

Sub-cashiers and cash handlers (unit personnel)

must deposit at least weekly or sooner if your
collections meet or exceed $500.
Back to topics list
5 Steps of Cash Handling
Step 4 - Reconcile Deposits
Control Task - Ensure cash and receipts balance
1. With each deposit - Cash = Deposit = Credit to bank
account

Whenever money changes hands or accounts, make sure

you record the exact amount. Then, balance accounts daily
and monthly to ensure that:
o cash received =

cash recorded =

cash deposited

The Accounting Office ensures that the above also

o = amount credited to our bank account.

2. On a routine basis

Regularly, compare the amounts reported on deposit slips

to the amounts recorded in the General Ledger (FIS).

All cash amounts recorded on receipts and deposit slips

must equal each other.

Therefore, if $10 was received,

o the receipt must record $10,

the deposit form must show $10,

and our bank records and the FIS

report must show that we received
credit for $10.

3. Monthly, balance accounts as follows:

Balance to General Ledger (FIS) at month's end

Report any discrepancies to General Accounting

Back to topics list

5 Steps of Cash Handling
Step 4 - Reconcile Deposits - Control Tasks
Control Task - Investigate all Cash Differences
There will be times when your cash and receipt amounts will be
different and won't balance the first time. This is very common
and most often due to clerical errors.
As a cash handler, you must investigate the differences to
determine its source. You must account even for small cash
differences, because over time they add up to large losses for the
University.
Find the Source of Cash Differences
To investigate cash differences, consider the following possible
causes:

Was the cash in the till counted incorrectly?

o Recount your cash, preferrably in dual custody

Was your arithmetic or keying incorrect?

o Run a second tape to double check the accuracy of

your 1st tape.

o Running two balance tapes daily is a good habit to
get into.

Was change counted incorrectly back to a customer?

o This is a loss and the reason needs to be
documented and reported.

Were numbers transposed on your receipt/deposit slip?

o If so, double check your figures and slow down
next time.

Is cash missing?
o If so, this is a loss and must be reported.

Back to topics list

5 Steps of Cash Handling
Step 5 - Report Losses
Though most cash differences can be traced to clerical errors, be
especially alert to mysterious losses or patterns of loss.

You must report any losses to your supervisor.

If you feel uncomfortable reporting a suspicious loss to

your supervisor, report it directly to the Director of Internal
Audit. See: Campus resources for contact information.

Back to topics list

Summary / Request Exception / Things to Avoid / Reference
Summary of Course
In this course, we intended to raise your awareness of important
cash handling principles and practices to support UCSC's core
values of Ethics and Integrity. We discussed your fiduciary
responsibility, i.e. your responsibility to protect the University's
cash assets. We outlined the Five Cash Handling and Control
phases:

Accept Cash and Checks

Prepare Deposits

Deposit Cash

Reconcile Deposits

Report Losses

For each phase, we provided simple, but key control tasks for you
to accomplish. A list of contacts is available under Campus
Resources. These tasks are summarized in the chart on the next
page which you can use for reference.
Request for Exception
In rare situations, a campus unit is physically/budgetarily unable
to provide the appropriate controls, e.g. separation of duties as
required by policy. Therefore, the campus has created a process
that allows a campus unit to request an exception. Requests should
be addressed to the campus' Cash Handling Coordinator, mail
stop: Accounting Office. Include the following information in a
request for an exception:

A brief description of your current procedures

A statement regarding the policy requirement to which you

are requesting an exception

An explanation as to why an exception is needed

Things to Avoid
Cash handlers are not to exchange checks for currency to make
change for each other. Nor are employees of a cashiering station to
cash checks for themselves or for co-workers. Also, it is not
appropriate to replace any portion of a deposit with a personal
check. If you need cash, you can cash a personal check up to $25
at the main Cashier's Office in Hahn. There are also ATM's
available near Bay Tree bookstore for Wells Fargo, Bank of
America and Bay Federal.
Do not take a deposit with you except when you are going directly
to the Cashier's Office.

Prerequisite Conditions

Principle
o Employment history verified, background check
and written authorization
Practice
o Cash handlers must be specifically authorized to
handle cash after verification of employment,
completion of a credit check (optional) and a
fingerprint/background check
Principle
o Separation of duties and dual custody
Practice
o Each cash handler must be assigned separate duties
that require coordinating with another cash handler
Step 1 - Accept cash/checks/credit cards

Verify check payee is "UC Regents" or "Regents of the

University of California"

Endorse check with appropriate stamp (UC Regents)

Give the customer a receipt

When appropriate, show correct posting campus

unit/department

Step 2 - Prepare deposit

Prepare a deposit form as soon as total of cash, checks and

credit card slips meet or exceed $500

Practice dual custody

Balance receipts to cash

Keep backups of deposit forms

Prepare journal entries as appropriate

Step 3 - Deposit cash

Deposit cash at least weekly or sooner

Cashier's Office (102 Hahn) - In-person window hours are

9am - 3pm. A 24-hour depository is located outside the
North entrance.

Note: Deposits made after 3pm will not be posted until the
following day.

Step 4 - Reconcile deposits

Balance to General Ledger report at month end

Step 5 - Report losses

Report losses to supervisor

If needed, report suspicious losses to the campus internal

auditor 9-2241 or e-mail dvlane@ucsc.edu

Back to topics list

Back to topics list | On to Audit