“The Municipality”
Draft Petty Cash Policy
VERSION CONTROL
VERSION NO. YEAR APPROVED BY COUNCIL
VER 3.1 2018/2019 27 March 2018
TABLE OF CONTEXT
1. Definitions... 3
2. Policy Objectives...3
3. Legal Compliance... 3
4. Legislative Framework...4
5. Methodology Of Operation...4
6. Imprest System...4
7. Internal Controls...4
8. Petty Cash Advance and Request Form...5
9. Replenishing of Petty Cash...6
10. Reconciliation of Petty Cash...6
11. Prohibited Practices and Expenses... 7
12. Complaince Enforcement...8
13. Policy Adoption... 8
Annexure XXXX (Petty Cash Voucher)
1. DEFINITIONS
The following words and phrases shall, when used in this policy, have the following meanings:
Accountant-SCM - shall mean the person appointed for the management of petty cash of Impendle Local Municipality as stipulated in section 7.1 below;
Chief Financial Officer - shall mean the Chief Financial Officer of Impendle Local Municipality;
Supply Chain Management - shall mean Supply Chain Management (SCM) of Impendle Municipality.
Accounting Officer - means the Municipal Manager of Impendle Local Municipality.
Municipality - means Impendle Local Municipality 2. POLICY OBJECTIVE
2.1. It is understood that from time to time there are transactions that are undertaken by the Impendle Local Municipality that are minor and urgent in nature. Such transactions require that the Municipality keeps limited cash resources in its premises referred to as Petty Cash in order to fulfill these transactions.
2.2. Since keeping cash present additional risks, this Policy serves to detail the parameters upon which petty cash should be maintained, disbursed and administered.
3. LEGAL COMPLIANCE
The Municipality shall at all times manage its cash and other assets in compliance with the provisions of and any further prescriptions made by the Minister of Finance in terms of the Municipal Finance Management Act No. 56 of 2003 especially the requirement of safeguarding the assets of the Municipality.
4. LEGISLATIVE FRAMEWORK
4.1. The legislation and regulations in terms of which cash and petty cash management decisions are governed are as follows: -
i. Local Government Municipal Finance Management Act No. 56 of 2003.
5. METHODOLOGY OF OPERATION
The Municipality will maintain a petty cash system with cash in its premises limited to R10 000.00 (Ten Thousand Rand) only, using Imprest System basis. Each department will be entitled to petty cash of R2 500.00 (Two Thousand Five Hundred Rands). This petty cash will be maintained centrally in Finance. Each Head of Department will be responsible for maintaining their petty cash and will not be reimbursed until they have supplied all the supporting documents. The petty cash will only be used for minor and urgent transactions only with a value of not more than R1000.
6. IMPREST SYSTEM
Petty Cash funds shall be administered by the SCM (Supply Chain Management) unit using an Imprest system. At any point in time, the amount of cash on hand plus the total receipts in the petty cash box plus the total outstanding requests for reimbursement should equal the amount of petty cash originally issued to the Accountant-SCM.
7. INTERNAL CONTROLS
7.1. The Supervisor Accountant-SCM & Treasury is responsible for the maintenance of petty cash for the Municipality. The Supervisor Accountant-SCM & Treasury delegates the duties of maintenance of Petty Cash to Accountant-SCM.
7.2. Petty Cash should be kept in a lockable cash box. The access to the office where petty cash is restricted only to authorised personnel and access to the keys should be strictly controlled. The petty cash box should be locked in a safe after office hours.
7.3. A “surprise” petty cash count should be conducted at least once a month by
conducted at the replenishment of the petty cash, to ensure that the petty cash register balances at every replenishment. A “formal” Petty Cash count should be conducted at year end.
7.4. Petty cash will only be issued upon receipt by the Accountant-SCM for petty cash of properly authorized petty cash voucher with supporting documents.
7.5. Petty cash reconciliation to the general ledger should be performed on a monthly basis, checked by the Supervisor Accountant-SCM & Treasury and reviewed by the CFO (Chief Financial Officer), who should sign or initial the reconciliation as proof of having reviewed it.
8. PETTY CASH ADVANCE AND REQUEST FORM
8.1. A Petty Cash requisition form must be used for all Petty Cash requisitions. Petty cash used shall be accounted for (e.g. slips) within three days (3) from the day when Petty Cash was issued. This period will exclude public holidays and weekends that fall within it. Failure to do so would result in the amount being deducted from the salary of the requester. An affidavit must be obtained where slips have been lost.
These forms shall be pre-numbered and recorded accordingly in the Petty Cash register.
8.2. The Petty Cash requisition form must include:
i. Reason for Petty Cash.
ii. Amount requested (not exceeding R1000.00).
iii. Vote number.
iv. Person requesting an item.
v. Supported by the Head Of Department.
vi. Person authorising (Head of Department or Supervisor).
8.3. Petty cash requisition form must be signed by a person requiring the monies and signed by Head of Department or Supervisor.
9. REPLENISHING OF PETTY CASH
1.1 When the petty cash float reaches the minimum amount as determined from time to time by the Chief Financial Officer, the Accountant-SCM shall prepare a replenishment voucher and submit it together with the petty cash register to the Supervisor Accountant-SCM & Treasury which will be verified by the Chief Financial Officer.
1.2 If the Chief Financial Officer is satisfied with the voucher, the voucher shall be referred to the Supervisor Accountant-SCM & Treasury who shall make out a cheque to the Accountant-SCM who shall in turn cash it and immediately place the cash in the petty cash box.
1.3 The Accountant-SCM shall balance the petty cash at every replenishment 10. RECONCILLIATION OF PETTY CASH
10.1 When the cash in the Petty Cash is almost exhausted, the Petty Cash register must be balanced and reconciled by the Accountant-SCM as follows:
i. Counts the Petty Cash money at hand and confirm the monthly closing balance of cash at hand as reflected in the Petty Cash register.
ii. Adds up all the receipts submitted as proof of payment and agrees the total to the total reflected in the Petty Cash register.
iii. Verifies that the total Petty Cash as at the beginning of the month plus receipts less payments for the month equals the Petty Cash on hand at the end of month.
iv. Reconciles the Petty Cash total on hand with the requisition forms, vouchers and other supporting documentation.
10.2 Such reconciliation procedure as stated above should be performed at the end of the month and it should be ensured that the Petty Cash balances to the closing ledger balance.
10.3 The Supervisor Accountant-SCM & Treasury responsible for the review of the Petty Cash funds and petty cash register, signs as proof of the review.
10.5 The Chief Financial Officer may make surprise inspections of the Petty Cash at least once per quarter and perform the following procedures:
i. Inspect the Petty Cash vouchers to ensure that all items on the voucher are items usually used by the Municipality in the performance of duties and that no purchase was made for personal use.
ii. Performs a cash count, in the presence of the Supervisor Accountant-SCM &
Treasury and Accountant-SCM for Petty Cash.
10.6 Any shortages or surplus funds concerning Petty Cash must immediately be paid in at the cashier and the reason for the shortage/ surplus must be investigated by the senior official appointed by Municipal Manager or Chief Financial Officer for rectification.
10.7 At year-end a cash count should be performed on all advances to ensure that the cash on hand agrees with the general ledger account. A cash count working paper should be prepared as evidence of the cash count (preferably an Internal Auditor or the Chief Financial Officer), the Accountant-SCM and Supervisor Accountant-SCM
& Treasury should sign the working paper as evidence of the cash count.
11. PROHIBITED PRACTICES AND EXPENSES
1.1. Petty Cash shall not pay for installment invoices such as for rental of equipment or open orders even if the amount falls within the limit specified.
1.2. Petty Cash shall not be used to offer credit due to a Vendor/Supplier where the Vendor is registered with the Municipality.
1.3. It is forbidden to pay out Cellular Claims or all other claims through Petty Cash, however the discretion of the Chief Financial Officer shall prevail
1.4. It shall also be forbidden to purchase an asset through Petty Cash, however the following shall be considered:
a) Only the CFO shall approve/decline any purchases of assets out of petty cash.
Such purchases shall not be in excess of R500 whether aggregated or not.
Such need for a purchase must be resulting from unforeseen/unplanned
circumstance. The CFO must be satisfied by reasons necessitating the need for such purchase. Only one item shall be purchase and not in bulks.
b) Prior purchase with a view to claim from petty shall be in line with the above and subject to approval/ decline of the CFO.
1.5. Petty Cash Advances shall be readily available for Auditors/checkers without any postponement or deviation.
1.6. It shall be deemed an offence to use the Petty Cash for private matters despite even the good intentions to repay at the appropriate time.
1.7. Deviation from the accepted accounting practices in the use of Petty Cash shall constitute a serious offence under the Disciplinary Code.
1.8. Petty Cash float or advances shall be for immediate withdrawal the total lump sum amount from the individual’s next salary if not accounted for within the stipulated period.
12. COMPLIANCE ENFORCEMENT
12.1 Violation of or non-compliance with this Policy may give a just cause of disciplinary steps to be taken as per the Municipality’s disciplinary code of conduct.
12.2 It will be the responsibility of Chief Financial Officer to enforce compliance with this Policy.
13. POLICY ADOPTION
This revised Policy replaces the current Policy, it has been considered and approved by the COUNCIL OF IMPENDLE LOCAL MUNICIPALITY as follows:
Resolution No: ___________________
Approval Date: 31 March 2017
It shall be effective and binding upon adoption by Council.
