PETTY CASH ACCOUNTS

1.0 General Information

1.1 Statutory Reference

Sec. 3-112. Powers and duties. (a) The Comptroller shall: (1) Establish and maintain the accounts of the state government and perform such other duties as are prescribed by the Constitution of the state; ... (4) prescribe the mode of keeping and rendering all public accounts of departments or agencies of the state and of institutions supported by the state or receiving state aid by appropriation from the General Assembly; (5) prepare and issue effective accounting and payroll manuals for use by the various agencies of the state; (6) from time to time, examine and state the amount of all debts and credits of the state;

Sec 3-117. Claims against the state. (a)... Each claim against the state shall be supported by vouchers or receipts for the payment of any money exceeding twenty-five dollars at any one time, and an accurate account, showing the items of such claim, and a detailed account of expenses, when expenses constitute a portion of it, specifying the day when and purpose for which they were incurred."

1.2  Definitions

1.     Petty Cash Funds - A petty cash fund is a segregation of an advance of money from a fund to be used for incidental purchases and for explicit purposes explained in section 3.0 below. In Connecticut, all petty cash funds are operated as Imprest Petty Cash funds, i.e., an amount is advanced from the General Fund (or, if appropriate, from some other fund) to an agency and the agency must at all times account for this advance.
2.     Trustee Accounts - Trustee accounts and Activity/Welfare funds are different from Petty Cash accounts and can be operated by state agencies or by a trustee organization that falls under state agency administrative custody. For more information on Trustee Accounts and Activity/Welfare funds, see the State of Connecticut Accounting Procedures Manual for Trustee Accounts.
3.     Authorized Balance - The amount that an agency has been approved to have in their petty cash account.  At any time, the current cash on hand, bank balance, and outstanding vouchers should equate to the Authorized Balance approved by OSC CAP.
4.     Chief Fiscal Officer - The highest employee in an agency's fiscal services that reports directly to the Agency Head/Commissioner. For the purposes of this manual, if that employee is not managerial/executive level, then the Agency Head/Commissioner shall be responsible.
5.     OSC CAP -The Office of the State Comptroller, Central Accounts Payable Division, performs review of internal controls and annual review of petty cash accounts.
6.     OSC BFA - The Office of the State Comptroller, Budget and Financial Analysis Division, performs accounting entries during the replenishment and redepositing of petty cash funds.  They also perform functions during the creation and dissolution of petty cash accounts to adjust budget limits.
7.     OTT - The Office of the Treasurer, works with agencies and contracted banking entities to create, close, and manage physical bank accounts and investment funds for the state.
8.     CO-928 - The CO-928 (Annual Petty Cash Report) is filed with OSC CAP each year along with necessary backup documents to show that the agency is still operating their petty cash account within the approved Authorized Balance.
9.     CO-929 - The CO-929 (Bank Account Establishment Request) is submitted when an agency needs to open a new physical bank account as authorized by OTT.
10.  CO-1052 - The CO-1052 (Request to Open/Close/Transfer) should be filled out when an agency needs to open or permanently close a petty cash account, or when they need to transfer funds from one petty cash account to another.
11.  CO-1053 - The CO-1053 (Request for Amount Adjustment/Expenditures) should be used by agencies to request adjustments to a petty cash authorized balance, or when they need to make a single expenditure which is in excess of the approved amount specified in section 3.2 Acceptable Uses of Petty Cash Funds.
12.  TR-01 - The TR-01 (Cash Management Signature Card) is submitted to the Treasurer's Office when a new physical bank account is opened to have the signatures of the authorized users on file with the bank.  This form should be typed and then printed for final signature.  The original form bearing the wet signatures of authorized staff should be submitted by mail to the Treasurer's Office as described on the form.

 

2.0 Petty Cash Account Activities

2.1 Establishing/Opening Petty Cash Account
To establish a new petty cash fund, the agency must fill out a CO-1052, CO-929, TR-01, and produce an agency policy document for the fund. The agency policy document should explain the proper use of the new account, give guidelines on internal controls, and provide instruction for the eventual dissolution of the fund should it become obsolete in the future.
 
These forms should be emailed to the Office of the State Comptroller (OSC) at osc.pettycash@ct.gov. Once OSC has approved the CO-1052 they will inform the agency that the application has been forwarded to OTT for approval and establishment of the physical bank account per the CO-929. OTT may require agencies to submit a TR-01 form to establish agency authority to transact in the new account.
 
2.2 Increase Petty Cash Authorized Balance
To increase the maximum amount of funds in the agencies petty cash account (general or non-general), the agency must fill out a CO-1053 (Petty Cash/Trustee Account Request For Amount Adjustment/Expenditures) and email the request to OSC at osc.pettycash@ct.gov.

2.3 Replenishment of Petty Cash Funds
To replenish the Petty Cash fund, agency should complete a non-po voucher to send funds to Petty Cash account. The replenishment should be done at least quarterly. However, replenishment can happen more often depending on the dollar volume of expenditures in relation to the size of the fund authorized balance.  A copy of the CO-17RPC should be attached to the non-po voucher as backup documentation.

2.4 Redepositing of Excess Funds or Reducing Petty Cash Funds
If at any time it is determined that the funds in the Petty Cash Account exceed the authorized balance or the authorized balance should be reduced, a re-deposit of the funds should be completed.
 
A.    Make check payable to "Treasurer, State of Connecticut."

B.    Agency should "re-deposit" into state account.

        a.     Agencies who have access to deposit directly into the state account should deposit into the account.
       b.     An agency that does not have the access to deposit into the state account should email OTT at      OTT.AR@ct.gov to receive further instruction about sending the check to the Treasurer's office for re-deposit.

C.    The re-deposit must include the following information:
        a.      Revenue account "44378".
        b.     Title of Standard Account - "Petty Cash Returned".
                 i.   Reimbursed cancellation - "Petty Cash Returned - Cancellation".
        c.      Fund number to which deposit is made.
        d.     Agency business unit

Copies of the above documentation and deposits must be sent to the OSC Central Accounts Payable (CAP) Division at osc.pettycash@ct.gov and the Budget and Financial Analysis (BFA) Division's Rebecca.Salerni@ct.gov and Lauren.Baah@ct.gov. BFA will ensure that the transaction has been processed correctly for reducing an authorized petty cash balance.
 
If the agency is reducing its Authorized Balance for the Petty Cash account, then they should also fill out a CO-1053 and email it to OSC at osc.pettycash@ct.gov.
 
2.5 Transfer of Funds Between Petty Cash Accounts
If a transfer of funds from one account to another is required a CO-1052 must be filled out and sent to the OSC at osc.pettycash@ct.gov. The request should come from or be approved by the issuing agency's head or their manager level designee.
 
2.6 Closing a Petty Cash Account
Agencies wishing to close a petty cash account must submit a CO-1052 to OSC osc.pettycash@ct.gov for approval.  After receiving OSC approval and redepositing the funds to the General Fund (or other source fund if applicable) according to section 2.4 above. To physically close the account, agencies should send a memo to OTT requesting to close the account and attach the last bank statement for the month prior showing the balance.

3.0 Agency Records and Use of Petty Cash

Petty cash funds are used to pay for small expenditure items in which payment cannot be issued out of Core-CT or   purchased using a purchasing card. There are acceptable and unacceptable uses of petty cash funds, see 3.2 and 3.3 below.

3.1 Agency Records

Records for all transactions, including daily cash drawer reconciliations, must be kept at the agency in accordance with auditing and records retention guidelines. Agencies must maintain proper records related to their petty cash fund approvals, receipts and disbursements.  Accounting software such as QuickBooks, or an electronic journal kept in Excel or Access can sometimes meet the needs of the agency in recording all fund receipts and expenditures.  Agencies using accounting software for this purpose must have the system approved by OSC prior to use.  In the absence of accounting software, the journal/register must be maintained manually, and the physical security of the journals and registers must be maintained.  All internal records must be available for review by OSC or the state auditors upon request.

Other records that need to be maintained by the agency include, but are not limited to:

1. Receipts to document all disbursements of funds, i.e. for purchases from vendors, post office mailings, or advances for travel or other expenses.
2. Reconciled checking account statements.
3. Periodic reconciliations of the fund that include:

i.    Detailed counts of cash on hand; and
ii.   Cash in bank; and
iii.  Advances; and
iv.  Receipts for disbursements not yet submitted for reimbursement; and
v.   Outstanding vouchers submitted for reimbursement, but not yet received.

3.2 Acceptable Uses of Petty Cash Funds

Agencies do not need approval for single expenditures of $100.00 or less that comply with their agency policy for acceptable uses of petty cash funds. If the payment amount is between $100.01 - $500.00, the agency's Chief Fiscal Officer should approve the request. If the payment amount is greater than $500.00, a CO-1053 must be filled out requesting approval for a single expenditure. Completed forms should be sent to OSC at osc.pettycash@ct.gov for approval along with any documentation to support the request.

A. Funds for small incidental purchases and reimbursements - Small payments which aren't feasible to be made through CORE-CT (or the agency's approved financial system of record) or with the state purchasing card.

B. Funds for Travel Expenses and Workshops/Conferences - Authorized cash advances for employee travel expenses for whom such provision has been made in a collective bargaining or other agreement. To account for the cash advances, the petty cash custodian must obtain a CO-17XP-PR signed by the recipient, acknowledging:

a. The amount of the cash advanced.

b. That within 5 working days after return, the employee will submit a completed CO-17XP-PR, Employee Reimbursement Voucher with the required documentation, to the agency business office.

c. It is suggested that conference fees be prepaid on a state purchasing card, if available. Where time constraints exist, payment can be prepaid through petty cash.

C. Payments to outside contractors - Generally, outside contractors should not be paid through petty cash and payment should be processed on a voucher in Core-CT (or the agency's approved financial system of record). When circumstances necessitate payment from the agency's petty cash fund, the responsibility for IRS Form 1099 reporting still exists. To ensure compliance, the following procedures will apply to all such payment from petty cash to outside contractors.

1.     Agencies must obtain a completed IRS W-9 from the payee prior to issuing payment.
2.     All reportable payments from the agency's petty cash account must be summarized and forwarded promptly to the Comptroller's Central Accounts Payable Division, Special Processing at osc.1099@ct.gov.

a.      All payments made during the previous calendar year must be submitted to OSC no later than January 10th.
b.     Please include the payee's name, FEIN/SSN, complete mailing address and amount paid to each vendor during the calendar year.

 

c.      Forward copies of all IRS W-9 forms.
d.     It is each state agency's responsibility to comply with this requirement. Failure to properly report this information can subject the Agency to IRS penalties and fines.
e.      See Section 6.0 Federal Income Tax Reporting, Form 1099 of the Expenditure Section of this manual for further details.

3.     Checks issued in person to the payee shall be signed for in a check issued ledger.  The identity of the person receiving the check will be verified by the state employee issuing the check when the ledger is filled out.

D. Workers' Compensation "First" checks - Petty cash funds should be used for the splitting of "first" checks received for workers' compensation. A determination must be made as to the portion due the employee, if applicable, and/or the state's portion. The funds deposited from the "first" check are restricted funds and are not to be used for any other purpose. If it is determined that an overpayment has been made by the third-party Administrator, then a third check would be issued and sent to Department of Administrative Services.

Please direct questions and inquiries to: Compensation Issues - DAS/Personnel, Workers' Compensation Unit, 860-713-5002.

3.3 Unacceptable Uses of Petty Cash Funds

A. Regular invoices that can be processed in Core-CT.

B. Regular postage needs (except for small postage purchases, postage due, special delivery, and certified or registered mailings).

C. All payments of an allowance nature (ex. safety shoe, uniforms, etc.) paid to state employees will be treated as compensation and reported on IRS Form W-2. Therefore, such payments must be processed on payroll Form CO-17XP- PR and are not to be paid from petty cash.

D. Check cashing

E. Payroll transactions should not be processed in petty cash. Contact the Comptroller's Payroll Division at 860-702-3464 or email to osc.payroll@ct.gov for the proper payroll transaction procedure.

4.0 Petty Cash Loss and Recovery

A. The petty cash fund Custodian must report all losses to the agency head immediately. If a loss results from an apparent criminal act or under mysterious circumstances, the agency must immediately notify the local police department or if applicable, local security division, i.e. campus police, capital police, etc.

B. Upon discovery immediately complete and electronically submit Form CO-853 Report of Loss or Damage to Real and Personal Property to: osc.CO-853@ct.gov and to the Auditors of Public Accounts at CO-853@ctauditors.gov. 
If you have any questions regarding the reporting of losses, you should contact the Office of the State Comptroller at osc.CO-853@ct.gov.

C. For replenishment after loss, refer to 2.3 Replenishment of Petty Cash Funds. A copy of the loss report - CO-853 must be attached to the voucher, to substantiate the claim for replenishment. The loss must be charged to the custodial agency's appropriation, using Expense Account 54762 - Petty Cash Losses.

a. Account code 54762 - Petty Cash Losses (crediting the custodial agency's appropriation for current year recoveries).
b. Account code 44410 - Prior Year recoveries.
c. Title of Standard Account - "Petty Cash Loss Recovery".
d. Fund number to which deposit is made.
e. Agency business unit

Petty cash fund losses recovered under fidelity bond coverage will be treated by the Comptroller in the same manner as recoveries of other types of losses. For procedures to obtain the use of funds realized from an insurance settlement, see the Property Control Manual.

5.0 Check Cancellations

If a petty cash fund disbursement check is returned or lost, it must be cancelled, and the accounting records adjusted. The status of replenishment of the particular expenditure will dictate the portion of the cancellation procedure to be followed.

5.1 Check Cancellation - Expenditure has NOT been submitted to Comptroller for reimbursement

A. Void the check and attach it to the stub in the checkbook.
 
B. In the agency's petty cash journal, reverse the original disbursement entry and increase the balance in the account. Explain the entry in the description column making reference to the cancelled item.
 

5.2 Check Cancellation - Expenditure has been submitted to Comptroller for reimbursement and is either in transit or has already been received by the agency.

A. If the check is returned, void the check and attach it to the stub in the check book; or if the check is outstanding for an extended period of time and it is certain that it cannot be cashed, issue a stop-payment notice to the bank. In the petty cash fund account book, reverse the original disbursement entry and increase the balance in the description column making reference to the cancelled item.

B. When the replenishment is received, you will have excess cash. Follow the instructions provided in 2.4 Redepositing of Excess Funds or Reducing Petty Cash Funds.

6.0 Internal Controls

Internal controls may vary according to the size of the fund, the size of the agency and varying agency needs. Internal controls should be memorialized in an agency's petty cash policy or procedures.  The following general rules are to be applied to all petty cash funds.

A. The petty cash fund custodian should have no other cash handling responsibilities.

B. Petty cash funds should be kept separate from all other funds received by an agency, except as authorized in writing by the Office of the State Comptroller. Requests for authorization can be sent to osc.pettycash@ct.gov.

C. While the authorized balance of the petty cash fund should be sufficient to adequately meet the needs of the agency, the authorized balance of the fund should be kept to the lowest amount possible. It is highly recommended that agencies use a state purchasing card instead of petty cash where possible.

D. Expenditures should be kept within the restrictions set in section 3.0.

E.  Every transaction must be tangibly documented, in accordance with CGS 3-117(a), with forms such as, but not limited to, vendor's invoice, cash register tape, petty cash receipt or post office receipt. Each such document must be itemized and detailed, to the extent possible, showing quantity, description, prices and total. Alterations or additions are unacceptable.  Individuals responsible for producing transaction documentation should not be the same as those verifying it or recording it in petty cash journals.

F. Every item listed on the Form CO-17 RPC, Request to Replenish Petty Cash Fund must have an original supporting document attached to the Form CO-17 RPC when required.

G. Petty cash fund custodians must submit to the agency's Chief Fiscal Officer a monthly status report on the activities of the fund. The report should include: 

1. Cash on hand
2. Advances
1. Date advanced.
2. To whom.
3. Reason.
3. Outstanding vouchers
1. Not yet submitted for reimbursement.
2. Submitted for reimbursement.
4. Total amount authorized

H. A periodic detailed examination of the petty cash fund should be made by the Chief Fiscal Officer to verify the following:
 
a. Perform a cash count in the presence of the custodian, to verify that the cash on hand, cash in bank, advances and unreplenished vouchers reconcile to the current authorized balance.
 
b. In addition to the cash, verify all other items included in the balance such as checks, vouchers, etc.
 
c. All checks included in the balance are being cashed or deposited promptly.
 
d. That checking account bank statements are being reconciled monthly by a person other than the custodian and/or someone who has the authority to sign checks.

I. The Chief Fiscal Officer should also examine, at random, checking account reconciliations for:
a)     Assessment of adherence to proper procedures including segregation of duties protocols.
b)     Math verification.
c)     Receipts compared with deposits.
d)     Timely deposits.

J. The Chief Fiscal Officer should also obtain the checking account statement from the bank and perform a verification of all checks for proper endorsements and to see that those written during a prior statement period were listed as outstanding. They should question items that have been outstanding for more than one month.

7.0 Year End Closing and Annual Reporting

7.1 Year End Closing

All expenditures should be recorded in the fiscal year in which they occur. A final reconciliation of the account should be performed prior to June 30 each year.  This should be done far enough in advance to allow for transactions to be processed in Core-CT, before FYE shutdown, to replenish necessary funds or correct errors found in the account. 
           
7.2 Annual Reporting
A petty cash fund report, CO-928, is required for each petty cash account, regardless of fund, authorized by the State Comptroller. A statewide memorandum is issued each fiscal year with the petty cash fund report and the detailed instructions. The CO-928 Annual Petty Cash report will be as of June 30th and due in the Office of the State Comptroller, Central Accounts Payable division no later than August 1st of each year. A copy of the June bank statement for the Petty Cash Account must be attached to the CO-928 Annual Petty Cash Report. The CO-928 form needs to be signed by the Agency Head or their designated manager level employee. The Prepared By signature must be different from the authorized signor. If there are any questions on the preparation of this report, contact the Central Accounts Payable via email osc.pettycash@ct.gov. After receiving annual reports from agencies, the Office of the State Comptroller will select random agencies and conduct full audits of their Petty Cash Account journals.