Administrative Practice Letter I-F

Subject: Cash Collection Procedures

Issue 4

Effective 9/11/06

Deposit of Cash Receipts

All cash receipts (including cash and checks) should be deposited daily. This may mean that funds are held overnight and deposited the following business day. Such funds must be kept secure. At a minimum, cash receipts must be deposited when receipts exceed $100 or once a week, whichever comes first. Timely and accurate deposits reduce the risk of lost or misplaced receipts and make account reconciliation easier. In addition, the sooner receipts are deposited, the sooner the funds may be invested in short-term money market instruments.

Recording of Cash Receipt

Income statements are prepared through the financial system. Statements of income are produced on a daily basis by each campus. The income statement must be retained along with all documentation (including bank deposit receipts) for future reference and auditing purposes. Each campus is responsible for providing all documentation pertaining to the income statements

Control of Cash Receipts

Management is responsible for establishing and maintaining an effective internal control structure to safeguard assets. Because of its nature, cash is particularly vulnerable to loss; therefore, management needs to be careful in evaluating each cash collection location and ensuring appropriate controls are present.

Management and other personnel responsible for cash must ensure that all cash receipts are recorded using pre-numbered receipts, cash registers, an appropriate ticketing system, or some other way that documents the completeness of collections and allows for the proper deposit, recording, and reconciliation of funds. Whenever possible, management should consider the reasonableness of deposits by comparing collections over a period of time or by performing other analytical tests.

Segregation of Duties

Adequate segregation of duties helps to prevent misappropriation of funds and aids in detecting errors. The responsibilities of one person should complement and check those of others. Management must ensure that more than one person is responsible for cash collections, deposits, and reconciliations. When segregation of duties is not practical, compensating control procedures must be established. For example, a cashier’s immediate supervisor could verify that the deposit receipt agrees with source documents (e.g., cash register tapes, receipts, ticket reports) and the related posting to the accounting system.

Summary of Typical Control Procedures

The following procedures are an example of a strong system of internal controls. Employees:

Use two-part sequentially numbered receipts, contained in a single bound book, with carbons retained in the book.
Retain all voided receipts within the book.
Use only one series of sequentially numbered receipts.
Add and verify all deposits at the time of receipt, immediately issuing a sequentially numbered receipt.
Issues a receipt for all collections.
Periodically audit the cash collections procedures to ensure the process is appropriate, the paperwork is complete, reconciliations are occurring correctly and all receipts and carbons are maintained. This audit is performed by a knowledgeable person who is independent of the process.
Provide training, and written instructions, on proper cash handling and reconciliation procedures to appropriate personnel.
Have view access to all accounts to which they deposit funds or ensure another appropriate way to verify these deposits.
Ensure Schedule of Collections forms contain all necessary information including proper chart field combinations; details of amounts collected by cash, checks, student billing, and credit card; and proper signatures and dates.
Sequentially number the Schedule of Collections forms to ensure completeness.
Retain all original collections backup, including the Schedule of Collections and any cash register tapes.
Retain the deposit receipt with the day’s backup.
Trace supporting deposit information to the University’s accounting system at least once a month.
Indicate the reconciliation of support to the accounting system, by checking off the respective amounts traced, noting any discrepancies and the resolution, and signing the day’s support along with the date the reconciliation process was completed.
Logically file all backup so that information can be retrieved as needed.
Ensure that job descriptions include responsibilities regarding appropriate cash handling procedure.

Management Responsibility

The importance of prompt deposit, adequate records, segregation of duties and reconciliation of accounts must be recognized by any individual working with cash. Management is responsible for ensuring that personnel who handle cash collections are properly trained.

Audit Requirement

In addition, campus management is responsible for ensuring that each cash collection location is audited at least once a year and the results reported to the UMS Department of Internal Audit. A Cash Collections Audit Program is provided as Exhibit A (PDF) and Accessible Text-Only Version of Exhibit A & B to assist with this requirement. Annually, the campus Chief Financial Officer or designee should send to the Internal Audit Department:

A summary of the areas audited (e.g., location, name of responsible person, authorized petty cash amount, name of auditor).
A note that there were either no concerns or a description of the issues found (e.g., shortages, segregation of duties issues, supporting documentation issues, reconciliation issues). In addition management should comment on any changes made to address concerns or a conclusion that no change would be made and why.

If the audits reveal areas of high risk or concern, the campus should immediately contact the Internal Audit Department.