Cash Handling Procedure

Purpose statement

To provide direction for ensuring proper controls over all revenue sources and payment types to safeguard cash and record it in a timely manner.

Scope

This procedure applies to all staff whose duties involve receipting, handling and/or processing of payments of any type inclusive of cash transactions.

Procedure

For the purposes of these procedures “cash” will include:

  1. Canadian currency of legal tender under the Currency Act
  2. Cheques
  3. Money orders and bank drafts
  4. US currency
  5. Debit card transactions
  6. Credit card transactions

Note: Rolled coin is considered to be cash, and can be deposited as such without rerolling; however large quantities of loose coin is not considered legal tender under the Currency Act and payments in that form can be refused.

General controls:

  1. All payments are to be deposited and/or processed within 24 hours of receipt.
  2. Documentation for each transaction may be generated manually (receipt form) or through the use of an automated program/system.  However, where possible, the use of an automated program/system is recommended to increase cash processing efficiency, provide more detailed support for reconciliations, and provide a better audit trail.
  3. Each cash drawer will have a starting cash amount (cash float) which requires daily verification by the cashier responsible.
  4. Collections for each individual cash drawer are to be reconciled daily, documented, and acknowledged (signed off) by the cashier responsible for the cash drawer and deposited to the Financial Operations department on a daily basis.
  5. Duties are to be segregated between collecting, recording, reconciling and depositing.
  6. The daily reconciliation and counting of receipts will be completed away from public view and in a secure area.
  7. Overpayments will not be accepted when the intention is to give a cash refund to the customer as “cash back” for debit card purchases.
  8. Cashiers will report overages and shortages on the daily cash reports.  Significant overages or shortages will be reported to the appropriate Financial Operations staff member.
  9. Revenue reports are prepared by department staff where deposits are decentralized or by Revenue and Taxation staff when revenue is processed by the centralized tax counter.
  10. Revenue reports are to be prepared on a daily or weekly basis and submitted to Accounting Operations for entry and posting into the general ledger.
  11. During the monthly bank reconciliation, the revenue deposited will be reconciled with the revenue recorded in the G/L and any discrepancy will be reported to the respective department.

Security controls - cash drawers, safes and lock boxes:

  1. Access to cash drawers are limited to the cashier collecting the cash and/or the manager.
  2. The cashier is responsible for ensuring the security of the cash drawer under his/her custody.
  3. Where possible cash drawers should not be visible to the public.
  4. Management should use draw-downs when necessary to ensure large amounts of cash in the cash drawer do not exceed the limit set by the department.  Drop safes should be utilized where appropriate.
  5. Where possible cashiers should have access to a security alarm or buzzer to alert management or security personnel of theft, robbery or any other threatening activities.
  6. Cash drawers must be locked and secured in a safe at end of each day.
  7. Any un-deposited cheques or cash must be stored in a secure facility at the end of each day
  8. Any “paid” or “received” stamps must be stored and locked at the end of each day.
  9. Safes and lock boxes must be kept in a secure area and must be locked at all times when unattended.
  10. The number of staff utilizing safe combinations and/or keys to lock boxes or vaults must be kept to a minimum.
  11. Safe combinations must be changed when an employee who previously had the combination is no longer employed in the same role.
  12. Keys to lock boxes must be kept in a secure area.
  13. The town’s bonded courier will be utilized to deliver revenue delivered to Financial Operations (Revenue and Taxation) whenever possible.

Processing cheques, money orders, and bank drafts:

Town staff may accept cheques made payable directly to the “Town of Oakville" or to the organization for which the town has a financial services agreement (ex. Oakville Public Library).  When staff accept cheques, money orders or bank drafts the receiver must:

  1. Ensure the date, amount and payee are correct and that the cheque is signed by the payer.
  2. Stamp the back of the cheque with the department endorsement showing the department/section name and indicate the general ledger (GL) account number to which the cheque is to be deposited.

Receipting:

Manual receipting:

  1. Departments without access to automated systems (a cash register or computer) should use a pre-numbered official Town of Oakville triplicate receipt, with the following completed:
    1. Staff name taking payment, department and extension
    2. The payer’s name and full address
    3. Description of the item purchased
    4. Quantity and unit price if applicable
    5. GL account number
    6. Taxes, if applicable
    7. Type of cash received (ex. cheque, cash)
    8. Total amount of cash received
    9. Date of receipt of revenue
    10. The signature of the person receiving the cash.
  2. The second (yellow) copy of the receipt is provided to the customer and the first (white) and third (pink) copy of the receipt, along with the payment, should be forwarded on a daily basis to the Revenue and Taxation for deposit.
  3. The third copy will be returned by Revenue and Taxation to the originating department (for reconciliation purposes) and the first copy of the receipt will be retained by Revenue and Taxation.
  4. Departments shall file all receipts in numeric order for audit purposes.
  5. If an error is made in on a receipt or if the receipt must be cancelled, write “VOID” across the receipt ensuring that the word “VOID” is seen on the receipt and all copies. The voided receipt must be retained and filed numerically.
  6. Revenue and Taxation will cross reference the receipt number in the POS system when posting payments.

Automated System Receipting:

  1. If departments have an automated system or cash register, receipting will occur through those means and the daily revenue reports and payments are sent on a daily basis to Revenue and Taxation.

Counterfeit cash:

Staff should take precautions to avoid accepting counterfeit or suspicious currency.  In such situations staff are to contact the Manager, Revenue and Taxation or other appropriate staff for a determination of any action to follow.

Foreign currency:

  1. Acceptance of foreign currency is limited to US funds which can be accepted in lieu of Canadian dollars. Contact the Financial Operations Department if more information is required.
  2. US coin shall be accepted at par.
  3. US currency must be noted on the revenue sheet and forwarded to Revenue and Taxation and deposited into the town’s US bank account. A maximum of $3,000 US cash may be received at any one time.

Cash loss:

Staff are expected to take reasonable precautions to secure funds and avoid accepting counterfeit funds.  However, when shortages are identified, the following steps should be taken:

  1. Staff and management of the department experiencing the cash shortage will make every effort to determine the reason for the shortage and report the explanation on the revenue sheet.
  2. If the cash shortage is identified by Financial Operations staff or the bank, staff will notify the department and make the appropriate journal entry to record the shortage to the responsible department.
  3. If the shortage is a result of missing funds or theft staff are obligated to report this directly to Financial Operations for further investigation. The Manager, Accounting Operations will determine the appropriate next steps.
  4. Cash losses greater than $5,000 should be reported to the Internal Auditor.

The rules listed above for cash shortages also apply in situations for cash overages.

Large cash transactions:

When someone attends the Taxation and Revenue counter with large cash remittances (greater than $10,000) the following steps shall be utilized:

  1. In a secured area, the client will be requested to count and sort the cash by denomination and give staff a total of the deposit.
  2. Two staff members will then recount and reconcile the cash total given by the client.
  3. Only once this procedure has been completed will a receipt be given.

Departmental cash procedures:

Cash receipts, where possible, shall be deposited on the day the cash/payment is received or at the earliest possible time:

  1. Deposits from remote operations should be forwarded to Revenue and Taxation on a daily basis through the town’s internal courier.  If alternative arrangements are required these must be approved by the Manager, Revenue and Taxation.
  2. Departments preparing their own bank deposits must ensure that cash receipts are deposited intact and the total receipts equal the total bank deposits.
  3. All coin should be rolled.
  4. Cash receipts should be easily reconciled and traceable to the bank statements and the general ledger entries by date of deposit.
  5. Un-deposited funds should be adequately safeguarded and stored in a secure device and location, such as a safe or lock box.

Segregation of duties:

Persons collecting cash should not have any other responsibilities related to cash handling.  Cash receipting functions should also be segregated from cash disbursement functions.

A different person should be involved in each step of the process:

  1. Cash collecting/receipting
  2. Cash depositing
  3. Reconciliation
  4. Billing

If there are not enough staff to segregate the collecting, depositing and reconciling functions (a minimum of two staff are required) then mitigating controls should be developed.

Certified cheques

Where a certified cheque is required, as is the case for security for tenders and purchasing contracts, a money order or bank draft is equivalent to a certified cheque.  Certified cheques will be deposited, unless there is a deposit requirement to return the funds within 5 working days.

Debit cards

Debit cards are acceptable payment options, provided the staff/department has access to a payment card machine for processing.  Staff must do the following:

  1. Process transaction through the payment card machine as a debit transaction
  2. Confirm that the transaction was approved and provide the customer with a copy of the receipt generated through the payment card machine
  3. Enter payment in corresponding program as debit payment
  4. “Cash back” services are prohibited

Credit card

Credit cards are acceptable payment options when the service is an option for payment, provided the staff/department has access to a payment card machine for processing, and provided the town’s card machine can accept that type of credit card.  Staff must do the following:

  1. Check the expiry date the credit card
  2. Process through the payment card machine, using the appropriate payment key (i.e. VISA/MC/AMEX).
  3. Confirm that the transaction was approved
  4. If the card is not a chip card where a PIN is required, have the customer sign the credit card receipt.  Ensure the signature matches the card holder signature on the back of the card
  5. Give customer the duplicate copy of the credit card receipt
  6. Place original receipt in a safe place for daily reconciliation of revenue
  7. Enter payment in corresponding program as credit payment

Credit cards shall not be accepted as payments for the following revenue sources:

  1. Property taxes(except through independent third party provider)
  2. Development charges
  3. Any fees or charges collected by the Town on behalf of other third party (i.e. Region, hydro, etc.)
  4. Refundable deposits
  5. Security deposits
  6. Transactions over $5,000 including tax (HST), unless approved by the Manager, Accounting Operations

The service charges associated with the use of payment card terminals and credit and debit card usage will be charged to the appropriate department.

New requests for acceptance of credit cards must be approved by the Manager, Accounting Operations, who will review the request and determine if the volume, charges and service requirements are sufficient to warrant the acceptance.

Staff must follow the Payment Card Industry Data Security Standard (PCI) and all internal Town procedures in order to protect the card holder and the Town.

NSF cheques

The Town is notified of non-sufficient funds when cheques are returned by the bank as unpaid.  Financial Operations staff will contact the applicable department, journal the amount from the revenue account which was credited, and return the cancelled cheque to them.  It is the responsibility of the department to contact the payer and seek a replacement cheque. All NSF cheques are subject to a $45 fee, which is deposited to the department account.

Responsibilities

The following are responsible for:

Staff:

Receiving funds on behalf of the Town must adhere to this procedure, and must maintain records for audit.

Management:

Establishing an effective internal control system to include:

  1. Delegating responsibility for cash handling duties.
  2. Maintaining proper segregation of duties.
  3. Requiring that staff handling cash be properly trained.
  4. Requiring that staff follow all cash handling and depositing procedures.
  5. Reviewing receipts and reconciliations on a regular basis.
  6. Specifying the actions to be taken by management based on the dollar amount and/or frequency of overages and shortages.
  7. Investigating unusual variations in revenue.

Financial Operations:

  1. Monitoring deposits to ensure cash is actually being deposited, and ensuring that entering and posting of revenue to GL occurs at minimum weekly.
  2. Performing timely bank account reconciliations and investigate any discrepancies between internal records and the bank’s records.
  3. Conducting surprise cash counts to ensure the accuracy of collections.
  4. Periodic review of decentralized receipt tracking.
  5. Performing trend analysis of cash deposits and activity levels, which may identify anomalies or potential fraud.
  6. Monitoring cash systems “voids” and use of “no sale” key and investigate excessive use.
  7. In conjunction with Clerks, ensuring town’s internal courier is bonded and that schedule for pick- up and delivery meets the deposit requirements.
  8. Managing the armoured car services to ensure safe, daily delivery of funds to the bank

Internal and External Auditors

Reviewing the town’s cash management controls as needed.

References

GAAP and PSAB regulations
Payment Card Industry Data Security Standard (PCI DSS)
Official Town Receipt
Retention By-law
Currency Act

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