Generally, petty cash funds are established for the payment of relatively small expenditures such as postage, deliveries or urgently needed supplies. Payment by check is not always possible or practical, so petty cash funds are established on an imprest basis to handle these small purchases. The Governmental Accounting, Auditing and Financial Reporting, (GAAFR) definition of “imprest account” states in part that this is “an account into which a fixed amount of money is placed for minor disbursements¼.”
As a public agency, the library’s internal control over the petty cash fund is important and should be conducted openly. The petty cash should be placed in the custody of a specific employee who is authorized to disburse the fund in accordance with stipulated restrictions as to maximum amount and purpose. The following recommendations should be considered regarding petty cash funds:
- The petty cash fund should be established by Board action. The Board should approve a policy to authorize the maximum amount of the petty cash fund, the types of allowable disbursements, the method and frequency of replenishment and the authorized custodian.
- On a periodic/monthly basis, the petty cash fund should be balanced and replenished by check to the original established amount.
- All cash received or collected by the library should be recorded as a receipt and deposited in the bank. It is not acceptable to replenish petty cash with miscellaneous library receipts such as fines or copy fees.
- Petty cash funds should not be used to cash personal checks.
- Payment receipts should support petty cash payments. For example, these could include postage receipts, cash register receipts or other documentation to explain the petty cash item that was purchased or paid for.