cash handling training manual

Cash Handling Training Manual

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Introduction 1 The Purpose of This Training Course 2 Cash Handling Training Manual 3 Why Do You Need Controls? 11

Internal Controls Defined 12 The Importance of Internal Controls 12 Limitations of Internal Control 13 Roles and Responsibilities for Internal Controls 14

Common Cash Receipting Practices & Procedures 16 Cash Handling Self-Assessment Questionnaire 21 Developing an Action Plan 26 Post Assessment Monitoring 28

1. Workshop Class Schedule

2. Separating duties for areas with two or three people to perform cash receipt procedures

3. Action Plan Format Sheet – Example 4. Guidelines in the Event of a Robbery 5. Be Alert – Be Observant Sheet 6. PowerPoint Presentation 7. Cash Handling Case Example, Trivia Questions, Quiz & Evaluation

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INTRODUCTION

Continuing toward the goal of increased customer service and performance standardization, the Finance Division has established a training program which will serve to educate cash handlers on the policies and procedures set forth in the manual. Many departments have adequate cash procedures in place, while other departments have minimum and/or insufficient cash procedures. We believe this variation is due to a lack of proper training and understanding about which cash procedures should be employed and why certain procedures are important to ensure the successful achievement of the City’s cash handling objectives.

The purpose of this Cash Handling Workshop is twofold: (1) to help employees better understand the types of controls that are present in an effective cash handling system, and (2) to help employees evaluate procedures currently in place in their department. In short, we believe that this program will enable employees to design, implement, and maintain an effective cash handling system. Our role will focus on providing education, information, and helping departments (employees) to assess their own areas. We have designed an improvement initiative to include the following:

Self-assessment training workshops to discuss cash handling procedures. The intent of these workshops will be to empower participants to recognize their own process weaknesses and develop action plans for sound cash handling systems;

Self-assessment surveys (checklists) to be filled out by applicable program areas as part of the training session;

Periodic (e.g., annual) self-assessments to be completed by each cash area;

On-call advice, support and answering of questions; Please let us know what you think. To help you improve your area, we need your feedback. Feel free to contact Becky Hudson, 822-4850 with any comments or questions.

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THE PURPOSE OF THIS TRAINING COURSE

In recognition of the importance of increased accountability and internal controls within the various cash handling operations, the Administrative Service Department (Finance Division) has developed a Cash Management Policies and Procedures in keeping with recommended practices of the Municipal Treasurers’ Association of the United States and Canada. This manual explains key concepts that are important to the achievement of the City’s cash handling objectives. Specifically, this booklet focuses on the concept of “internal controls” as it relates to the cash receipts function. The following pages include a discussion of:

The relationships between business Objectives, Risks, and Controls;

A definition of “internal controls”;

The importance of having good cash handling procedures or controls;

Benefits derived from employing certain cash handling procedures;

Limitations of internal controls; and

Organizational roles and responsibilities for internal controls.

The manual also contains some common cash receipting practices, a copy of the cash handling self-assessment questionnaire that is used in our training workshop, and information on developing an action plan.

HOW YOU C AN U S E OU R TR AI NI NG M ANU AL

This manual was written for use in the training workshop and contains forms and handouts we will be using today. In addition, it contains several sections that can be used as reference materials for day to day operations concerning cash handling. We encourage you to add this manual to your department library so that you can refer to the material even after you’ve completed our program.

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CASH HANDLING TRAINING MANUAL

GUIDELINES AND POLICIES ON CASH HANDLING

These guidelines and policies have been compiled by the City of Yuba City's finance office to

present an overview of our office procedures, banking functions and services, and to assist you in

working with the City’s Ordinance No. 009-05 on “CASH HANDLING GUIDELINES” Chapter 7

Sec. 3-7.501, 502, and 503. We welcome your thoughts, comments and questions.

OBJECTIVES AND PURPOSE

The goal of the City’s cash handling function is the accurate and secure receiving, receipting and

processing of payments received at various locations throughout the City. This includes payments

that are processed by the Finance office or any other City department, under a manual system or

through an automated system. The City Finance office offers support and training to City

departments and depositing agencies including guidelines and procedures for proper cash

receipting. The general purposes for cash management are:

A. To maximize the revenue accruing to the City through the investment of City funds and

trust monies to the extent allowed by law, ordinance, and contract.

B. Minimize the clerical efforts required to handle, process, and account for all monies

received.

C. Maximize the accountability for monies received.

Departments are expected to provide secure surroundings for employees who handle cash and keep

them informed of all County receipt policies and procedures. Each department shall prepare and

maintain a fully documented procedures manual concerning all aspects of its cash handling policies

and procedures. All employees involved in the handling of monies are expected to be accurate and

efficient when processing customer payments, making change, or accepting checks. They are also

expected to safeguard City funds against loss, and to establish and maintain good customer relations.

This includes attending and receiving a certificate from the City’s Cash Handling Training stating that

they have read and understand the policies and procedures of the department in which they are working

as well as the “CASH HANDLING GUIDELINES ORDINANCE”.

All monies received in a day must be deposited in the form in which they were received. Monies

received must not be used to pay bills, cash personal checks, or be used in any other type of

transaction.

GENERAL GUIDELINES SECTION

SECTION 1: RECEIVING CASH AND CHECKS:

The function of receiving money is a very important one in the City. This function includes one or

more of the following distinct areas of responsibility:

To receive payments from customers which can be cash, check, or other form of money

To establish and maintain good customer relations

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To perform operations according to established City and departmental procedures To

protect the assets of the City through sound accounting, reporting and loss prevention

practices.

To deposit all monies received and complete all cash receipt forms promptly and

accurately and to balance cash daily.

Listed below is a summary of the major cash receipt policies that should be used as a reference.

Persons making payments shall be advised to make checks payable to the applicable office,

not to the person holding the office.

Foreign checks and travelers checks should not be accepted unless:

The words "U.S. Funds" appear on the check.

The check is drawn on a US bank.

The check is MICR encoded along the bottom edge with the 9-digit Federal

Reserve routing number.

Cash should not be given back as change to a customer for a personal check,

company check or cashier's check.

All cash, coin and checks received shall be immediately placed into a lockable

cash drawer for safekeeping.

If funds are held overnight, all cash drawers and or vaults shall be locked.

Check endorsement information, including the name of the department and

bank account number, must be placed on the back of the check at the top 1.5

inches. The rest of the check must be left clear for the bank's stamps.

Endorsement stamps are provided for each department by the Finance office

with the appropriate wording. Always double-check your balance tape and

revenue summary before depositing money in the bank or with Finance.

SECTION 2: RECOGNIZING CURRENCY AND COIN

The United States Treasury Department has the responsibility for issuing currency for the United

States. U.S. currency takes the form of notes engraved on special paper and comes in seven

denominations, each bearing a portrait of a different famous American.

These are as follows:

List of U.S. Currency Denomination Portrait

$1.00 George Washington

$2.00 Thomas Jefferson

$5.00 Abraham Lincoln

$10.00 Alexander Hamilton

$20.00 Andrew Jackson

$50.00 Ulysses S. Grant

$100.00 Benjamin Franklin

In addition, the face of a currency bill contains key elements: the denomination, Federal Reserve

Bank seal, serial number, and Treasury Department seal. The reverse side of a bill is similar for all

denominations. Each bill's value designation appears in ten places on the bill. The Great Seal of

the United States appears in the center of the bill, under the words "In God

We Trust." Look at a dollar bill and take special notice of the following parts as you handle it:

The value amount of each bill is numerically posted on all four corners on both sides.

The value is written out across the bottom of the face side.

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The Federal Reserve seal appears to the left of the portrait, which is embossed over the

written dollar amount.

The unique serial number of the bill appears in both the lower left portion and the upper

right portion on the face of the bill.

The number of the Federal Reserve district that issued the bill appears near all four corners

on the face of the bill.

Denominations of $20, $50 and $1 00 have a unique strip running the height of the bill just

left of the portrait. This strip can be seen by holding the bill to the light.

SECTION 3: COUNTING CURRENCY AND COINS:

To ensure consistent accuracy, the following method should be used to count currency. In a secure

area:

1.) Separate the cash and the checks.

2.) Separate each denomination of cash with faces of the currency going the same direction. 3.)

Count and bundle, if applicable, the cash as follows:

CURRENCY Denomination Bundle & Count

$ 1.00 $1x 25 by rubber band = $25.00

$ 5.00 $5 x 20 by rubber band = $100.00

$ 10.00 $10 x 25 by rubber band = $250.00

$ 20.00 $20 x 25 by rubber band = $500.00

$ 1.00 $1 x 100 by bank $ band = $100.00

$ 5.00 $5 x 100 by bank $ band = $500.00

$ 10.00 $10 x 100 by bank $ band = $1000.00

$ 20.00 $20 x 100 by bank $ band = $2000.00

$ 50.00 $50 x 20 by bank $ band = $1000.00

$100.00 $100 x 200 by bank $ band = $2000.00

**Note-Bank $ Bands can be obtained from the Finance office or your bank.

Counterfeit Currency

Assure yourself that each bill is genuine. Counterfeit currency will be confiscated by the bank and

charged back against your account.

Mutilated Money

There are specific federal banking regulations for redemption of bills that are unfit or mutilated. A

bill must be greater than 1/2 (50%) intact and in such condition that the denomination and full

serial number can be determined for it to be acceptable. Any bill without these minimum

characteristics should not be accepted. Mutilated coins that are punched, clipped, plugged or not

readily identifiable, as well as Canadian and other foreign coins should not be accepted. Customers

with mutilated money can be referred to: Dept. of the Treasury, OCS/BEPA, Room 344, and P.O.

Box 37048, Washington, D.C., 20013.

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COIN:

As with counting currency, establishing a set routine for counting coins will ensure accuracy.

When possible, coins are stored in coin wrappers, or rolls, for easier and more accurate handling.

These wrappers can be obtained from the Finance office or you bank. Count each coin. Do not

count by building a stack, then comparing the height of other stacks. When you open a wrapper of

coins, always empty the whole package into the coin drawer or coin machine, and verify its

contents. While you are not required to accept rolled coins as payment, inevitably you will receive

them. As a matter of courtesy, rolled coins may be accepted in a reasonable quantity.

Six kinds of U.S. coins are issued as follows: Value Name Metal Content Roll/Count

$ .01 Penny Bronze (copper/zinc) 50 in a roll = $.50

$ .05 Nickel Nickel and Copper 40 in a roll = $2.00

$ .10 Dime Copper/nickel alloy 50 in a roll = $5.00

$ .25 Quarter Copper/nickel alloy 40 in a roll = $10.00

$ .50 Half Dollar Copper/nickel alloy 40 in a roll = $20.00

$1.00 Silver Dollar Copper/nickel alloy 20 in a roll = $20.00

NOTE: Susan B. Anthony dollars are easily mistaken for quarters. Use caution.

CHECKS:

When preparing checks for deposit you may group all checks together in a bundle. Each bundle or

group can include up to 100 checks. For each bundle of checks run two calculator tapes. One tape

will stay with the group of checks with an endorsement stamp on the tape for delivery to the bank.

Each check must also be endorsed on the back with the stamp provided by the Finance office. The

second tape remains in the Finance office attached to the daily deposit recap.

SECTION 4: DEPOSIT SLIP OR RE VENUE SUMMARY

1.) Fill in the deposit slip or revenue summary as follows:

Currency: The amount of the total currency being deposited.

Coin: The amount of total coin being deposited.

Checks: For revenue summaries list the total amount of checks delivered. For bank

deposit list each bundle separately on the deposit slip. In the "list each

check" slot, write the total number of checks that are in each bundle and the

corresponding dollar amount.

2.) Put all the currency, coin and checks in deposit bag(s) along with the completed deposit slip or

revenue summary and give to the person responsible for making the deposit, either with the bank

or Finance office.

3.) After the deposit is made, the person responsible for making the deposit will bring back

either a bank receipt or a Finance receipt. The original preparer then checks for correct

posting and attaches the receipt to the appropriate copies for filing.

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SECTION 5: RECEIVING MONEY FROM A CUSTOMER

Receiving Checks, Currency and Coins

Following are the steps to be used when receiving currency and coins from a customer:

Put away all currency and coins from the last transaction before starting a new transaction.

Count all cash and coins in the presence of the customer.

Separate the currency from the coins.

Count the currency before the coins.

Count each currency denomination separately.

Separate coins into denominations.

Count each coin denomination separately.

Verify the grand total against the amount listed on the billing or invoice.

If any discrepancies exist between your total and the customer's total, count the money

again. If a discrepancy still exists, ask your supervisor to count the money.

MAKING CHANGE

Giving change to a customer is one of the most important jobs of a cashier. If the amount given to

the customer is incorrect, either the customer will feel cheated or the department will lose revenue.

Either way, the cash drawer will be out of balance at the end of the day. To be certain that the

amount given to the customer is correct change should be counted at least two times. Once when

you count it out of the cash drawer and a second time when you count it back to the customer.

Below is an example of how to count back change:

Example: The customer's bill was $67.3 1 and he gave you $100.00

Golden Rule: Do not put amount received away prior to making change.

1.) Cashier: "Your bill was $67.31 out of $100.00. Your change is $32.69."

2.) Count $32.69 out of the drawer

3.) Count change back as follows:

(Count four pennies) 67.32, 33, 34, $ 67.35

(Count one nickel) $ 67.40

(Count one dime) $ 67.50

(Count two quarters) 67.75 $ 68.00

(Count two ones) 69.00 $ 70.00

(Count One ten) $ 80.00

(Count One twenty) and $100.00

“Thank you”

Give the customer the receipt.

Put the amount received in the drawer.

Close and lock the drawer.

CHECKS

A check is issued to transfer funds from one party to another.

The term "negotiable instrument" means that when properly endorsed, the check is payable

to the holder when presented at the issuer's bank.

The drawer or "maker" is the party issuing and signing the check. The drawer may be one

or more individuals acting on their own behalf, or the drawer may be one or more

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individuals authorized to act on behalf of a company, corporation, partnership or

municipality.

The drawee is the party upon whom the check is drawn, primarily a bank. The payee is the

party to whom payment is made.

The check can be payable to one or more individuals, to a business, corporation,

partnership, municipality, or government agency. When accepting checks for the City,

always ask the customer to write "The City of Yuba City” as the payee.

Personal Checks

Personal checks are the most common type of check. Personal checks belong to people who

maintain demand account balances at banks. Ensure that the maker's name, address and telephone

number appear on the check. No cash back may be given for a personal check transaction.

Company Checks

Company checks may appear similar to personal checks. Some have a carbon paper strip attached

for the company's internal bookkeeping system. Some are computer generated. Company checks

may also have stubs or copies attached. Many of these checks have special instructions printed on

them. Instructions may be "Look for the watermark on the back of this check before cashing", or

"The colors of this check change from top to bottom" or "Two signatures required." These

instructions are designed to assure that the payment is truly authorized. Failure to follow these

instructions may expose the City to loss.

Cashier's Checks

This is a check drawn by a bank on its own funds. Since only the failure of the bank would cause

the check to be dishonored, they are usually accepted readily. However, as with a personal or

company check, the payee should be "The City of Yuba City" and no cash should be given back as

change.

Personal Money Orders

A personal money order is a check purchased from a financial service vendor for cash. The

purchaser fills in the date, the payor, and the payee's name and address. Vendors usually restrict

the maximum amount for which they will issue a money order. This amount is printed on the face

of the money order. For example, on the money order may be printed the words "not to exceed

$300.00." If the amount of the money order is more than the "NOT TO EXCEED" amount, it

should not be accepted. Cash must be given back as change for a money order.

Traveler's Checks

These checks, sold by banks, are similar to money orders. They are signed by the purchaser on the

face of the check when purchased, and countersigned when cashed, either on the face or on the

back. When using a traveler's check at a City facility, the customer must countersign and write in

the payee in the presence of the cashier. Traveler's checks should be processed the same as any

other check. If the traveler's check is completed correctly, cash may be given back as change.

Foreign Items

No foreign items including checks, money orders, and travelers checks should be accepted unless

the words "US. Funds" or "US Dollars" appear on the check, and a Federal Reserve routing

number is MICR encoded at the bottom of the item. The Federal Reserve routing number is a nine

(9) digit number appearing on the lower left of the check. Generally, this number allows the item

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to be processed through the bank system. Without this code, the item is subject to bank collection

charges, which, in many cases, exceed the value of the payment. If there is any doubt about the

item, contact the Finance office for guidance. Any foreign items accepted are to be forwarded to

the Finance office for processing. DO NOT INCLUDE THEM IN YOUR REGULAR DEPOSIT

WITHOUT SPECIFIC AUTHORIZATION FROM THE FINANCE OFFICE. (Any collection fees

incurred for converting the item to US dollars will be charged to your department/agency.)

Endorsements

All checks should be endorsed upon receipt. The endorsement is written or stamped in the area

indicated on the back of the check. (Refer to "Accepting Cash and Checks," Item 3).

SECTION 6: RETURNED ITEMS

Frequently, checks deposited are returned unpaid by the maker's bank. The reasons for return

checks include:

Insufficient Funds (NSF)

Account Closed

Payment Stopped

Unable to Locate

Signature Missing

Refer to Maker

When a check is returned, the City’s account with the bank is charged for the item. The Finance

Office will automatically redeposit the returned item unless specifically instructed otherwise,

either by the maker or by the originating department. If the item is returned a second rime, finance

will determine from which department the check came, and create a reversing Journal Entry,

charging that department for the Returned Item and any associated bank charges. It is then the

department's responsibility to adjust their records and, following departmental procedures, attempt

to recover the original payment amount along with any fees charged the City by the returning bank.

SECTION 7: WHAT MAKES A CHECK VALID?

Several requirements must be met to make a check negotiable or valid.

The check must have a current date. The check should neither be stale-dated nor post

dated. A stale dated check is a check dated 180 or more days in the past. A check dated in

the future is a post-dated check.

The check must have a maker. A maker is a company or individual who is paying for a

City service. The City prefers that the name and address of the maker be pre- printed on the

front of the check. The check cannot have a second endorsement (two party checks).

The amount must appear twice. It must be both spelled out and printed in numbers. If there

is a discrepancy between the written amount and the amount in numbers, the written

amount supersedes the amount in numbers.

The maker or drawer must sign the check.

The City must have certain information about the person writing the check. This

information is:

Full name of Maker

Address

Telephone number

Finally, if the routing number and account number are not pre-printed at the bottom of the check, it

should not be accepted.

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SECTION 8: ELECTRONIC PAYMENTS

Customers sometimes want to pay electronically through the Fedwire system or Automated

Clearing House (ACH) system. An example of an ACH payment is the Direct Deposit payroll

received by most City employees. The federal government has mandated that all federal payments

be made electronically by January 1, 1999. Should your customer wish to use electronic payment

systems in remitting funds to the City, the Finance office will provide you with:

The appropriate banking and routing numbers

A standard form to send to the Finance office for submitting the following:

The amount expected

Whom the amount is coming from

The General Ledger account number to be used when the deposit is

received

The person to receive the Finance Receipt when issued

CREDIT CARDS

The Finance Office has a contractual agreement with our bank for credit card payment of City fees.

Please contact the Finance Office if you wish to establish a credit card account for your

department.

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WH Y D O YOU NE E D C ONTR OLS ?

There are three components to the activities of every government and business entity:

1. Objectives

2. Risks

3. Controls

There are many definitions of these three terms and much discussion as to what they mean in today’s environment. But you can define what these terms mean to your department by asking the following questions: Objectives – What is our department trying to accomplish in our cash handling operations? Risks – What things prevent us from reaching our cash handling objectives? Controls – What are we doing to overcome these risks in our cash handling cycle?

Cash Handling Objectives

In a broad sense, all City departments that handle cash have similar objectives. These are:

Safeguarding of City assets, in this case, cash balances and cash receipts

Reliability and integrity of City financial information

Economic and efficient use of City resources

Compliance with laws, regulations, and policies

Cash Handling

Risks

Similarly, City departments face similar risks in trying to meet these objectives:

Misappropriation of assets (cash, checks, and credit card data)

Loss of funds through errors or irregularities

Misstated cash account balances

Waste of City resources through inefficient use

Internal Controls are policies, procedures and practices that your department puts in place to effectively help you overcome the risks that keep you from meeting your department’s objectives.

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I NTE R NAL C ONTR OLS – D E F I NI TI ON, I M P OR TANC E , B E NE F I TS

Included below is a discussion about the nature of internal controls. We have “our” definition, The benefits and importance of internal controls, and how people use controls in their personal lives.

Definition

Internal controls used in the cash handling area can be defined as the policies and procedures established by management to effectively receive, process, deposit, and safeguard the City’s cash.

Personal Internal Controls

There are things that you do in your personal life which, in essence, are practicing good controls. Activities like:

Balancing your checkbook;

Storing and locking up valuable personal belongings;

Keeping copies of your tax returns; and

Matching credit card receipts to monthly statements,

are all controls. These procedures are controls because they are performed by individuals to protect their assets from potential loss.

The Importance of Internal Controls

Internal controls are important for the accurate recording of cash transactions and the preparation of reliable financial reports. Adequate controls ensure the proper recording of transactions, the reliability of financial data, and the ability of management to make informed decisions and maintain its credibility with the public.

Proper cash handling procedures and controls are also important to:

Ensure accountability;

Encourage proper management practices; and

Prevent the loss of assets through theft or other means.

The Benefits

of Internal Controls

An effective system of internal control can:

Help your department achieve its performance targets;

Safeguard assets and document transactions; and

Protect employees in the event of lost or stolen cash.

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L I M I TATI ONS OF I NTE R NAL C ONTR OLS

Cash handling policies and procedures, no matter how well defined and operated, can provide only reasonable assurance to management regarding the achievement of its objectives. Achievement is affected by limitations inherent with all policies and procedures. These include:

Employees

Human nature can limit the effectiveness of established controls either by unfamiliarity with procedures or through a tendency to cut corners and take shortcuts.

Management Override

Managers are often in a position to override prescribed policies and procedures with the intent of personal gain, misrepresentation of an entity’s financial condition or compliance status.

Collusion

The collusive activities of two or more individuals can result in control failures. For example, there may be collusion between an employee performing important cash handling procedures and a customer, supplier, or another employee.

Cost

The expense of implementing certain procedures may be so costly as to outweigh the benefits that would be derived from implementing the control.

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OR G ANI Z ATI ONAL R OLE S & R E S P ONS I B I LI TI E S

Internal control is affected by a number of groups, each with important responsibilities. The City Council, Management, Internal Auditors, External Auditors, and other personnel all contribute to an effective internal control system. These roles vary in responsibility and involvement and are discussed below.

City Council

The City Council provides governance, guidance, and oversight in setting policy for internal control. The Council’s role is high-level objective setting and strategic planning.

City Management

The City Manager is ultimately responsible to the City Council for the City’s operations. The City Manager fulfills his responsibility by providing leadership and direction to City Directors and reviewing the way they’re controlling the City’s business. City Management has primary responsibility for establishing and maintaining a sufficient system of internal controls. Directors, in turn, assign responsibility for the establishment of more specific policies and procedures to employees responsible for carrying out the unit’s day to day operational activities.

City Employees

Employees form the largest group that have internal control responsibilities and, in carrying out their work assignments, perform the duties responsible for implementing controls put in place by management. In addition, employees have a responsibility to communicate to management any problems they may encounter while performing their work assignments.

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OR G ANI Z ATI ONAL R OLE S & R E S P ONS I B I LI TI E S

Internal Auditors

Internal auditors provide the City Council with an independent assessment of the City’s internal controls. The internal audit function does not have primary responsibility for establishing or maintaining the City’s policies, procedures, or controls.

External Auditors

External auditors play an important role in contributing to the achievement of the City’s financial objectives. External auditors provide useful information to management in carrying out their internal control-related responsibilities by communicating audit findings regarding deficiencies in internal control that come to their attention, and making recommendations for improvement.

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CASH RECEIPTING PRACTICES

Cash generally includes coin and currency on hand, such as petty cash and cash receipts not yet deposited (e.g., checks, money orders, credit card receipts, etc.). Cash receipts received directly by the City include:

Tax revenues

Charges for services

Licenses and permits

Fines and forfeits

Grants, and

Other types of fees and concessions.

Because of the importance of achieving the City’s objectives for the cash receipts cycle, the City should have a cash management program to safeguard cash and provide accurate reporting. An effective cash management program should include procedures for

Receiving

Processing

Depositing, and

Accounting for cash receipts. This section includes information on internal accounting procedures and controls for cash receipts.

Internal procedures should be tailored to the specific environment of each department. The procedures in this section are recommended and are provided as examples of an effective accounting system and sound financial and administrative practices. Other procedures may be used if they provide the same level of internal accounting control. The following represent some common “Do’s and Don’ts” of the procedures commonly examined when evaluating the effectiveness of a cash receipting function. This list is not intended to be all-inclusive, however, they can generally be considered applicable to all departments that receive cash, or cash equivalents.

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COMMON CASH RECEIPTING PROCEDURES

Do’s and Don’ts Explanation

DO deposit all monies in a timely manner and retain the applicable deposit slip. Deposits should be made using a tamper proof (i.e., sealed) bag.

Monies should be deposited on a daily basis, if significant (e.g., >$100), or at least weekly. A copy of each deposit slip should be obtained and filed within the depositing department.

DON’T allow one employee to handle cash,

prepare billings, AND maintain your area’s cash receipt records. Additionally, the person responsible for receiving cash should be prohibited from signing purchase and payment requisitions.

Separate individuals should perform these duties. Department supervisors are responsible for designating employees to perform specific cash handling tasks. As few employees as possible should have access to cash. (Suggestions for separating duties can be found in Appendices 1 and 2.)

DO use pre-numbered cash receipt forms to record all cash receipt transactions. Numerically account for these forms.

Cash receipts should be issued and offered to all persons making payment. These receipts should be numbered (i.e., 1001, 1002, etc.) so that all receipts can be accounted for. To keep track of receipts, a log could be used to record the numbered receipts issued (i.e., 1001, 1002, etc.), date issued and to whom issued. This log should be reviewed periodically to keep track of all cash receipts. Unused receipt forms should be kept in a secure location.

DON’T throw away voided cash receipts. Do not destroy cash receipts.

To void cash receipts normally given to the customer, write “VOID” across the receipt. Keep these receipts in a voided receipt file or attach them to the batch of cash receipts for the day in which the receipt was voided. Supervisors should review all voided transactions.

DON’T leave credit card payments unprotected.

If credit card payments are received, safeguard the documents containing credit card numbers to prevent unauthorized use. For example, securely store these documents when not in use or no longer needed.

DO secure electronic transfer payments.

If electronic transfers are used as a means of accepting payment, ensure that these transactions are secure from unauthorized use.

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COMMON CASH RECEIPTING PROCEDURES (Cont’d)


DO reconciliation to cash receipt reports each day to promptly identify and resolve any discrepancies.

Use your department’s cash receipt records to reconcile your cash drawers to ensure that the cash has been received and posted to the proper revenue account. Resolve any differences.

DON’T have receipts which are received in the mail, processed by employees who are responsible for maintaining cash receipt or other financial records (e.g., ledgers, accounts receivable, etc.), or preparing deposits.

Ideally, have two employees present when the mail is opened. Immediately upon receipt, all checks, drafts, and money orders should be restrictively endorsed “City of Yuba City- for deposit only and account number.” A listing or log of all cash receipts should be prepared with the following information for each receipt:

the name of the person or organization remitting the cash,

the purpose of the remittance,

the amount of the remittance, and

the form of the remittance (cash or check). Both employees should sign and date the listing to document responsibility for verifying the receipts and preparing the listing. At the end of the day, the mail receipts listing may be used as an aid in preparing the daily cash receipts summary and reconciling cash collections to total receipts less refunds.

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DON’T make a deposit without preparing a daily cash receipts summary. This summary should include all mail and over-the-counter receipts including batches (an over-the-counter receipt summary may be computer generated) at the end of the day, and upon receipt of mail receipts and the mail receipts listing.

Ideally, this summary should identify the:

amount received,

type of cash receipt (e.g., check, cash, money order, credit card, etc.),

name of the person making the payment,

cash receipt number issued,

type of payment received (e.g., fee, service, etc.), and

total of receipts collected that day. This summary should also be used to reconcile cash collections to total receipts less refunds.

DO have the daily cash receipts summary signed by the unit cashier as preparer, and have the unit cashier prepare a deposit slip.

The unit cashier should submit the cash receipt forms, mail receipts listing, daily cash receipts summary, copies of all checks received, and deposit slip to his/her supervisor for review. The supervisor should review the summary and deposit slip for accuracy and completeness, and sign the summary to document the review. The supervisor should retain a copy of the deposit slip and checks received, and submit the daily cash receipts summary along with the deposit slip and supporting documentation to the unit cashier.

DON’T deposit the cash without counting it. Have each cashier count his/her cash drawer separately, out of public view. When preparing the day’s total cash summary, include cash received in the mail by recording this amount on the cash summary noted above.

The amount of your change fund should be deducted from your cash count to arrive at total cash collections for the day. Your count should be completed with the net cash receipts amount shown on the summary. Differences should be identified as cash over or short. The differences should be investigated and explained on the summary. Supervisors should make note of these differences, treating them as performance issues.

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DON’T throw away your records.

The cash receipt transmittals should be assembled in numerical order, by date, and then filed by date.

DO post financial policies in a location where customers can see them.

For areas that receive cash on a regular basis, post the following financial policies in a conspicuous location:

The methods of payment that will be accepted;

A receipt will be issued for every payment made in person;

The department’s non-sufficient funds (NSF) check policy; and

A statement that the receipt is proof of payment.

DON’T commingle personal monies with monies received (i.e., cash receipts).

Employees should not cash personal checks or make personal change or place IOUs from (in) the change fund or cash receipts. Do not make change for payments received with personal monies.

DO establish a fund for making change. (A change fund is your opening cash drawer and/or a fund of small currency and coins set aside used to exchange large currency from the cash drawer.)

Designate employees with primary and back-up responsibility for the change fund. Determine the amount of money needed for the change fund, limiting the amount per cash drawer to the amount necessary for daily operations. As needed, have the large currency in the change fund converted into coins and smaller currency.

No loans should be made from the change fund;

The change fund should not be used to cash personal checks or purchase supplies;

Reconcile the change fund daily. The beginning balance of the change fund should remain constant.

Deduct the amount of money maintained in the change fund from the total cash on hand. The amount remaining is the amount of money collected.

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CAS H H AND LI NG S E LF AS S E S S M E NT

QU E S TI ONNAI R E

Instructions for filling out the cash handling self-assessment questionnaire:

Please respond to each item by answering with a “yes”, “no”, or “n/a” response. If you don’t

know the answer to a specific question, please respond by checking the “?” box and note in the

“Comments” column with whom follow-up should be made. For all answerable items, please

consider providing us with comments or information that will assist us in understanding your

area. If you need additional space, please use the back of the questionnaire.

Yes No N/A ? Comments

Physical Safekeeping of Cash and Checks

1. Are secured physical facilities (e.g., locked rooms, safes, locked drawers) used to store cash including un-deposited cash receipts?

2. Are unused cash receipts forms protected against unauthorized use? For example, are unused receipts locked in a secure location when not in use?

3. If secure areas are provided, such as safe or locked boxes, are the safe combinations and keys restricted to a minimum number of employees?

4. a) Are lists maintained by appropriate individuals which identify who knows safe combinations and who has keys to locked boxes and areas?

b) If “yes”, are the lists maintained in a secure area?

5. Are safes and cash areas locked at all times when unattended?

6. Are safe combinations and keys changed at the transfer or termination of key employees or based on other security reasons? If “yes”, please

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provide the date last changed.

7. Are the keys to cashier/cash receiving areas stamped with “Do Not Duplicate”?

8. Are only authorized individuals allowed in the cash handling areas?

9. Does the person(s) receiving cash have access to a security alarm or buzzer that would alert management or security personnel of robberies or other threatening activities?

10. If credit card payments are received, are documents with credit card number imprints (e.g., receipts) safeguarded to prevent unauthorized use?

11. If credit card payments are received, are documents with credit card number imprints (e.g., receipts) securely stored when not in use or are no longer needed?

12. If electronic transfers are used as a means of accepting payment, are there safeguards in place to ensure that these transactions are properly recorded? If no, please describe.

Segregation of Duties

13. Are individuals who are responsible for receiving cash prohibited from signing purchase and payment requisitions?

15. Are incoming mail pieces individually listed/recorded on a sheet for comparison with amounts deposited?

16. Does the person opening the mail restrictively endorse all check remittances

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17. Is all incoming cash recorded on cash register receipts or pre-numbered receipt forms?

18. Which of the following methods do you use to receive cash:

i. cash register that produces end of the day close-out totals

ii. cash register that does not produce summary reports

iii. cash receipts iv. other (please describe)

19. Do persons receiving cash record all transactions (e.g., in the cash register, on a receipt, etc.) immediately upon receiving money?

20. Do employees receiving cash offer receipts to all customers?

21. Are signs placed in the cashier’s area which advises the public that a receipt will be issued?

22. Is each cashier assigned a cash drawer?

23. a) Is a password required to access the cash drawer/register?

b) Do cashiers each have their own key?

24. Are drawers/registers only used by one person at a time?

25. Are cash drawers locked during a cashier’s absence, preventing anyone other than the cashier from entering and/or using the drawer?

26. Are employees required to get a supervisor’s approval before voiding transactions?

27. Is the cashing of checks made payable to the City prohibited?

Are checks restrictively endorsed

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immediately upon receipt and does your area have a “For Deposit Only”

28. Do all cash registers work properly and are they capable of generating (a) cash register receipts and (b) register summary reports?

29. Does your area summarize the number of voids, no sales, refunds, and other miscellaneous transactions?

30. Are cash register receipts numbered sequentially and dated?

31. Do cash register receipts identify the register that was used to process the transaction?

32. Are cash receipts refunds primarily made by check to the individual making the deposit and are a record of the refund retained?

33. Are cash receipt refunds approved by a manager or supervisor?

Cash Depositing

35. Are receipts recorded promptly and deposited intact daily at different times of the day?

36. Do you prepare deposit slips indicating the funds deposited? If yes, is the person preparing the deposit different from the one who initially received the funds?

37. Do deposit slips or an attached tape show the amount of each payment deposited?

38. Do you use tamper proof (i.e., sealed) deposit bags for deposit?

39. Are deposit bags sealed immediately upon preparation of a deposit slip?

40. Does a person other than the cashier and with no access to cash, verify the deposit against the cash receipt?

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41. Are unused sealing deposit devices (e.g., deposit bags) and logs (used to record deposit bag number) secured and retained by someone other than the cashier?

Monitoring

44. Are cash receipts accounted for and balanced to receipt records (register tapes, receipt books, amount due records, etc.) on a daily basis? If yes, is the person performing this reconciliation different from the one who initially received the funds?

45. Are all cash overages and shortages reported to a supervisor? Are these amounts used for performance evaluations/training?

46. 46. Does management examine revenue

amounts from applicable cash reports and investigate any unusual fluctuations in monies received?

47. Does management investigate all substantial variations from norms such as cash register voids, no sales, refunds, errors, etc.?

48. Are all original voided or canceled receipts retained?

49. Are all voided, pre-numbered documents retained and accounted for?

50. Are cash funds periodically counted on a surprise basis by someone who has no responsibility for the area’s cash? If yes, who performs the cash count? Please provide the two most recent dates of the cash counts.

Does the cash handling area have written Departmental cash handling policies and procedures?

51. Do cashiers take annual vacations?

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DE V E LOP I NG AN A C TI ON P LAN

As the end product of the workshop, you must determine a course of action. Based on your assessment of the objectives, risks, and controls present in your current business environment, you have several alternatives. Your department can:

ACTION EXAMPLE

Adopt New Procedures

Transferring the duty of opening the mail from a cashier to an Admin who does not otherwise have access to cash or cash receipt records is an instance where a new control was adopted to address a perceived risk in the cash receipts cycle.

Improve Existing

Procedures

Increasing the frequency of your bank deposits from twice weekly to every day is an example of enhancing a control already in place. This might be done in response to increased risk due to an increase in cash receipts.

Discard An

Existing Control.

Discontinuing the use of armored car service for your bank deposits in favor of deposits made by an employee is an example of removing an existing control when the risk no longer warrants it. This might be done because a decrease in cash receipts makes the cost of the armored car service exceed its benefit.

Accept Risk

Some risks to the organization are just accepted with the knowledge of the consequences. Acceptance of some risk is necessary for an organization to be able to respond to day to day changes and events and remain flexible.

Make No

Changes

In the event your assessment shows the controls you currently have in place effectively address the risks in your area, you need not make any changes to your cash handling procedures. You must, however, clearly document your thought process and reasons for your conclusions.

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PU TTI NG TOG E TH E R AN AC TI ON P LAN

Action plans can come in many different formats, but in putting together your action plan there

is one rule you should observe: BE SPECIFIC.

Well-defined action plans have a much greater chance of success than a general statement with

vague directions. In putting together your plan think specifically about:

The specific need, identified in your assessment, that you are addressing

The detailed actions to be taken

The persons responsible for accomplishing these actions

A definite timeline or due date for each action to be completed

Interim status reporting dates for tasks of longer duration

Documenting the successful implementation of your plan

An example of an action plan format is included in the workbook as Appendix #3. This

sample sheet has a format more applicable to reporting the status of your action plan to

management.

The working document you use to implement you plan may be much more detailed.

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POS T AS S E S S M E NT M ONI TOR I NG

There are several reasons to monitor your cash handling area. For instance, change resulting from the

hiring of new personnel, training and supervision effectiveness, and time and resource constraints can

all impact the manner in which your cash procedures are carried out. You will want to monitor your

area to determine if circumstances or events are adversely impacting your ability to achieve your cash

handling objectives.

Monitoring is a process through which you assess the quality of your area’s performance over time and

ensure that your internal controls continue to operate effectively. Monitoring can be accomplished

through ongoing monitoring activities, separate evaluations, or a combination of the two. The

more ongoing monitoring you do, the less need for separate evaluations. The following discusses the

types of monitoring that can be performed within your area.

Ongoing Monitoring Activities

Ongoing monitoring activities include regular management and supervisory activities like comparisons, reconciliations, and other routine actions (e.g., ongoing communication with staff). Other examples include regular supervisory oversight, training seminars, planning sessions, and meetings. These all provide important feedback to management on whether your cash handling area’s procedures are effective.

Periodic Evaluations

Periodic evaluations usually take the form of external reviews, but often take the form of self-assessments. As you are already familiar, self-assessments involve persons responsible for a particular area (e.g., cash handling) determining the effectiveness of their area. Under the self-assessment education program that we have created, we will be asking departments to conduct periodic self-assessments of their cash handling policies and procedures so that we may keep apprised of changes within each department’s area. These assessments will assist us in determining when and where additional training or audit services are needed.

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APPENDIX 1

Departments often find it difficult to adequately assign cash handling duties when personnel resources are limited. To assist in this area, we are presenting the following table that suggests a method for assigning cash receipting activities for areas having only two employees to perform this function. Appendix 2 suggests an alternative method for departments that have three employees. Departments should work to ensure that duties are adequately segregated to the fullest extent possible.

SEPARATION OF DUTIES For Areas with Only Two People to Perform Cash Receipt Procedures

FUNCTION #1 FUNCTION #2 1. Receives cash from payers. 1. Receives cash receipt forms, daily cash receipts summary,

mail receipts register, and deposit slip from Person #1.

2. Prepares a pre-numbered cash receipt form, cash register receipt of computer receipt.

2. Reviews daily cash receipts summary and mail receipts register for accuracy, completeness, and reasonableness, and compares amounts to deposit slip.

3. Opens mail. 3. Signs daily cash receipts summary and mail receipts register to document review.

4. Prepares mail receipts register. 4. Retains a copy of the deposit slip.

5. Stamps all checks, etc., received “For Deposit Only.” 5. Returns cash receipt forms, daily cash receipts summary, mail receipts register, and original deposit slip to Person #1.

6. Retains cash received in a cash register or a locked cash box. 6. Receives the validated deposit slip from Person #1.

7. Prepares a daily cash receipts summary, reconciling cash receipts to collections.

7. Verifies that amount on validated deposit slip agrees with copy of original deposit slip.

8. Investigates and documents cash overages and shortages. 8. Returns validated deposit slip to Person #1.

9. Signs daily cash receipts summary and mail receipts register. 9. Obtains accounting records and reviews for accuracy and completeness and performs bank reconciliation on a monthly basis.

10. Prepares deposit slips in duplicate.

11. Submits cash receipt forms, daily cash receipts summary, mail receipts register and deposit slip, in duplicate, to Person #2.

12. Receives cash receipt forms, daily cash receipts summary, mail receipts register, and original deposit slip from Person #2.

13. Deposits cash with bank and receives a validated deposit slip.

14. Sends validated deposit slip to Person #2.

15. Records information from daily cash receipts summary.

16. Receives validated deposit slip from #2.

17. Files cash receipt forms, mail receipts register, validated deposit slip, and daily cash receipts summary by date.

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APPENDIX 2

Departments often find it difficult to adequately assign cash handling duties when personnel

resources are limited. To assist in this area, we are presenting the following table that suggests a

method for assigning cash receipting activities for areas having three employees to perform this

function. Appendix 1 suggests an alternative method for departments that have two employees.

Departments should work to ensure that duties are adequately segregated to the fullest extent

possible.

SEPARATION OF DUTIES

For Areas with At Least Three People to Perform Cash Receipt Procedures

FUNCTION #1 FUNCTION #2 FUNCTION #3

1. Receives cash from payers. 1. Opens mail received with Person

#1.

1. Receives daily cash receipts summary

and validated bank deposit slip from

Person #2.

2. Prepares a pre-numbered cash

receipt form, cash register or

computer receipt.

2. Receives cash receipt forms, daily

cash receipts summary and mail

receipts register from Person #1.

2. Verifies that amounts and dates agree

on the documents submitted.

3. Opens mail received with Person

#2.

3. Reviews daily cash receipts

summary and mail receipts for

accuracy, completeness, &

reasonableness.

3. Submits daily cash receipts summary

and validated deposit slip to Person #1.

4. Prepares a mail receipts register

of all cash received through the

mail.

4. Signs daily cash receipts summary

and mail receipts register to

document review.

4. Obtains accounting records from

Person #2 and performs bank

reconciliation on a monthly basis.

5. Stamps all checks, etc. received

“For Deposit Only.”

5. Prepares deposit slip and retains

copy.

6. Retains cash received in a cash

register or a locked cash box.

6. Records information, including

cash overages and shortages, from

the daily cash receipts summary in

the accounting records.

7. Prepares a daily cash receipts

summary, reconciling cash

receipt forms to cash collections.

7. Returns cash receipt forms, daily

cash receipts summary, mail

receipts register and original

deposit slip to Person #1.

8. Documents cash overages and

shortages on the daily cash

receipts summary and investigate

reasons therefore.

8. Receives daily cash receipts

summary and validated deposit slip

from Person #1.

9. Signs daily cash receipts

summary and mail receipts

register.

9. Verifies that amount on validated

deposit slip agrees with copy of

original deposit slip.

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APPENDIX 2 (Concl’d) Separation of Duties

For Areas With at Least Three People To Perform Cash Receipt Procedures

FUNCTION #1 FUNCTION #2 FUNCTION #3

10. Submits cash receipt

forms, daily cash receipts

summary and mail receipts

register to Person #2.

10. Submits the daily cash

receipts summary and

validated deposit slip to

Person #3.

11. Receives cash receipt

forms, daily cash receipts

summary, mail receipts

register, and original

deposit slip from Person

#2.

12. Deposits cash with bank

and receives a validated

deposit slip.

13. Attaches validated deposit

slip to the daily cash

receipts summary and

submit to Person #2.

14. Obtains daily cash receipts

summary and validated

deposit slip from Person

#3 and files them along

with the cash receipt forms

and mail receipts register

by date.

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Appendix 3

ACTION PLAN Cash Handling Policies and Procedures

Description of Area or

Procedure to Be Modified

Description of

Action to Be Taken Target date

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Guidelines in the Event of a Robbery

The following guidelines are provided to help ensure staff safety and minimize loss to the City. Unnecessary risks should never be taken.

• Cooperate with robber. Avoid any confrontation and facilitate a rapid departure.

• Stay as calm as possible. Take no risks. Try not to panic or show any signs of anger or confusion.

• Make a mental note of any descriptive features or distinguishing marks on the robber, such as his/her clothing, hair color, eye color, scars, tattoos, etc. Touch nothing in areas where robbers were and note specific objects touched by robbers.

• If it is safe to observe, the direction the robber took should be determined. If possible, observe color and make of vehicle leaving the scene.

• Departments having security alarms should trip the alarm as soon as it is safe.

• City Police should be called as soon as it is safe.

• Do not discuss the robbery with anyone until the police arrive.

• Cooperation with City Police is important.

• The victim should, above all else, remain calm and try to remember the details. Write them down.

At your department's request City Police will assist in devising specific procedures for your operation.