THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL
Office of the Controller Telephone: 919-962-7007 Fax: 919-962-4140 Email: Dennis_Press@unc.edu		The University of North Carolina at Chapel Hill  CB# 1270, 440 West Franklin Street  Chapel Hill, NC 27599-1270

        A self-assessment survey on control and security of departmental receipts was distributed last fiscal year. The purpose of the survey was to assess compliance with internal controls over departmental receipts. The survey responses helped identify control weaknesses and inconsistencies 'in maintaining proper safeguards over cash items and indicated that improvements in internal control and security are needed in some departments. The responses also provided useful information as cash management policies related to cash receipting practices and petty cash funds are being revised.

        The revised policies and procedures related to these cash management issues will be *included in the next update of the Business Manual of Administrative Policies and Procedures. Also, the policies and procedures for cash receipting practices and petty cash funds will be available by October 3 1, 199 8 by accessing the Cash Management section of the Accounting Services web site at the following address: http://www.unc.edu/depts/finance/cashmgt/. The existing policies and procedures pertaining to various cash management issues are being combined for easier reference. The polices and procedures will be updated as additional cash management issues are addressed.

        Since the survey responses indicated that improvements in internal control and security are needed in some departments, it is important to address any control or security issues. The following control issues were noted as needing improvement. The comments after each item provide guidance to help ensure appropriate controls are maintained. The number of departments that indicated that the control weakness exists is included in parentheses. Survey responses were received from 176 departments. Departmental Receipts Issues Memorandum Dated 08/31/98 Page 2

Periodic surprise counts of collections, petty cash, and change funds (43 departments)

Someone other than the individual responsible for the funds should conduct a periodic surprise count of collections, petty cash, and change funds and compare the count to the recorded control total and documentation to determine if all funds are properly accounted for.

The individual responsible for preparing or making the deposits should not also have responsibility for recording collections or verifying the posting of deposits to departmental records or monthly FRS reports.

Restrictive endorsement of checks; timely & appropriate recording of collections (35 departments)

Checks received by the department should be restrictively endorsed as soon as received. A restrictive endorsement notes that the checks are "For Deposit Only, UNC - Chapel Hill". Timely endorsement helps ensure the checks will only be deposited to the proper University account.

 
Collections of cash, checks, and other items should be recorded upon receipt. Collections should be rung into a cash register, if available. Alternative methods to properly record collections include maintaining a log of checks received and issuing pre-numbered receipts for cash. Other alternative methods should be approved by the Cashiers Office.

Security for collections, petty cash, change funds, and safe combinations (13 departments)

Only the individual responsible for cash items should have access to them. Controlling access to cash items is necessary to provide accountability for the funds and prevent misuse.

Only individuals whose duties require access to the safe should be given the combination. The written combination should only be in a secure location. Safe combinations should be changed when an individual who knows the combination leaves the department. The combination to a safe that holds significant amounts should be changed at least annually.

Timely deposit of funds; security of deposits (38 departments)

Cash, checks, and other payments should be deposited within 1 business day or when $250 has been collected by transmittal to the Cashiers Office or by other approved deposit procedures. Collections totaling less than $250 should be deposited at least weekly. Credit card collections should be electronically transmitted daily with a copy of the summary report forwarded to the Cashiers Office, if applicable. The NC Office of State Auditor has cited the University with noncompliance with the Daily Deposit Act based on the lack of timely deposits by all departments. Timely deposits are essential to comply with prudent management practices and to prevent future audit findings.

Deposits containing cash should not be mailed. Cash deposits being delivered to the Cashiers Office or bank, if appropriate, should be placed in a locked bank bag and the University's armored car service should be used.

Daily balancing of funds; proper handling of overages and shortages (18 departments)

Each day the collected funds and other funds on hand should be counted. The total should be compared to the recorded and documented total of collected funds and other funds. Any differences between the funds counted and the funds recorded should be identified and resolved.

As funds are balanced each day, a cash overage or shortage may occasionally occur. The reason for any difference should be documented in writing and signed by the responsible individual and supervisor. Cash overages and shortages should be adjusted against that day's deposit and not netted against a petty cash or change fund.

 
Control of pre-numbered receipts & departments)

Individuals who collect payments should not have access to unused receipts books. Receipts should be used in sequential order. Voided receipts should be retained. Used receipt books should be stored in a secure area.

Periodic surprise counts of collections, petty cash, and change funds (41 departments)
Proper separation of duties (16 departments)
Restrictive endorsement of checks upon receipt (3 departments)
Timely and appropriate recording of collections (7 departments)
Security for collections, petty cash, and change funds (11 departments)
Timely deposit of funds (4 departments)
Security of deposits (31 departments)
Daily balancing of funds (48 departments)
Proper handling of overages and shortages (73 departments)
Control of pre-numbered receipts (36 departments)
 

The inconsistent responses indicate that additional control weaknesses may exist. It is important that cash assets, whether in the form of collected receipts, petty cash, impress bank accounts, or change funds, be properly accounted for and safeguarded against loss. Each of the elements of internal control is applicable
when cash assets are maintained. Cash assets, which are not properly controlled, have a high risk of loss. Departmental policies and procedures as well as the policies and procedures found in the Business ' Manual should be communicated within the department and monitored for compliance. Many University staff members are entrusted with handling cash assets. Establishment of an effective internal control environment that clearly defines and segregates duties significantly enhances the ability of staff members to carry out their responsibilities.

        The survey responses also indicated that in some instances the amount of petty cash reported on the survey was different than the amount recorded in FRS. The annual confirmation sent to custodians of petty cash funds is being used to resolve any reported differences.

        Although this memorandum is being sent directly to the survey respondents, please share it with others in your area that administer cash assets. Should your area need assistance with internal control or other cash management issues, you should contact Dennis Walden, Cash Management Accountant, in Accounting Services at 962-5370. Thank you for your assistance.
 
 

cc:	Angela Davis, Director of the Office of Student Accounts and University Receivables
	Carolyn Elfland, Associate Vice Chancellor for Auxiliary Services
	Kate McGaughey, Associate Vice Provost for Finance
	Roger Patterson, Associate Vice Chancellor for Finance
	Phyllis Petree, Director of Internal Audit
	James Ramsey, Vice Chancellor for Finance and Administration