Cash Handling Procedure

Purpose statement

To provide direction for ensuring proper controls over all revenue sources and payment types by properly safeguarding, depositing, and recording funds in a timely manner.

Scope

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

Procedure

For the purposes of these procedures, “cash” will include coin, paper bills, cheques, money orders, Electronic Fund Transfers (EFT), Electronic Transfers (e-transfers), bank drafts and debit/credit card transactions.

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.

A departmental procedure must be in place, which will ensure that all payments received are processed timely and will enable Finance to trace any payment from initial receipt to the bank reconciliation. A department’s cash handling procedures should be based on the following controls:

General controls

  1. All payments are to be deposited and/or processed within 24 hours of receipt. If alternative arrangements are required, these must be approved by the Manager of Revenue Services and Taxation.
  2. Payments are only accepted through corporate systems approved by the Manager of Accounting.
  3. 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.
  4. Each cash drawer will have a starting cash amount (cash float) which requires daily verification by the cashier responsible.
  5. Collections for each individual cash drawer are to be reconciled daily, documented, and signed off by the cashier responsible for the cash drawer and their supervisor (or delegate) and deposits sent to the Finance daily or as approved by the Manager of Revenue Services and Taxation.
  6. Duties are to be segregated between collecting, recording, reconciling to payment system, and depositing.
  7. The daily reconciliation and counting of receipts will be completed away from public view and in a secure area.
  8. Overpayments will not be accepted when the intention is to give a cash refund to the customer as “cash back” for debit card purchases.
  9. Cashiers will report overages and shortages on the daily cash reports.Significant overages or shortages over $500 will be reported to the Manager of Accounting and Deputy Treasurer.
  10. Refunds must be authorized in accordance with the department’s procedures approved by the Manager of Accounting, or processed through cheque requisitions. Refunds should be reviewed by Departmental Management on a periodic basis.
  11. Revenue reports are prepared by department staff where deposits are decentralized or by Revenue Services staff when revenue is processed by the centralized tax counter.
  12. Revenue reports are to be prepared on a daily or weekly basis (if appropriate) and submitted to Revenue Services for entry and posting into the general ledger (GL).
  13. Cashiers must not carry out cash handling duties for at least one consecutive week per year.
  14. 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 designated supervisor.
  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. The combination lock should be changed on a periodic basis at least once every six months and when any of the staff with the knowledge of the combination ceases employment or changes positions.
  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 Revenue Services and Taxation whenever possible.

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. Opening the mail
  2. Depositing cash receipts
  3. Recording or approving entries within the accounts receivable module
  4. Issuing invoices or posting payments within the accounts receivable module
  5. Initiating, approving or recording accounts receivable write-offs or adjustments

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.

Counterfeit cash

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

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 Finance staff or the bank, staff will notify the department for them to investigate. Once an appropriate explanation is received, Finance staff will make the 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 Finance for further investigation.  The Manager of Accounting will determine the appropriate next steps 
  4. Cash losses greater than $500 need to be reported to the Manager of Accounting and the Deputy Treasurer as soon as they are identified. 

The same rules listed above apply to cash overages.

Foreign currency

Except for US coins taken at par, only Canadian currency will be accepted for town services.

Debit cards

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

Credit cards

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.

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 $10,000 including tax (HST), unless approved by the Manager of Accounting

No transactions, invoices or agreements over $10,000 shall be divided into one or more payments to avoid the requirements of this policy. The service charges associated with the use of payment card terminals and credit and debit card usage will be charged to the appropriate department where possible.

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 five working days in which case it can be held in a secure location until returned.

NSF cheques

The town is notified of non-sufficient funds when cheques are returned by the bank as unpaid.  Finance 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 fee as per the rates and fees schedule, which is deposited to the department account.

Responsibilities

Due to the decentralized nature of revenue collection within the town, procedures may vary from location to location. To ensure proper cash handling practices across the organization. The following positions are responsible for various cash handling activities:

Cash Handlers

The person receiving funds is responsible for:

  1. Adhering to this procedure and cash handling procedures developed for their respective service areas.
  2. Balancing cash activity with the point of sale system or cash register.
  3. Maintaining records for audit purposes.

Departmental Management

The Manager/Supervisor (or delegate) of the department receiving funds and preparing deposits is responsible for:

  1. Providing staff with the corporate policies and procedures on cash handling.
  2. Providing staff with the departmental operating procedures for cash handling.
  3. Requiring that staff handling cash be properly trained.
  4. Requiring that staff follow all cash handling and depositing procedures.
  5. Ensuring that funds are reconciled and deposited on a daily basis or as approved by Manager of Revenue Services and Taxation.
  6. Requesting bank deposit slips/bags as necessary.
  7. Maintaining proper segregation of duties.
  8. Monitoring cash systems “voids” and use of “no sale” key and investigate excessive use.
  9. Promptly following up on any bank discrepancies identified.
  10. Investigating unusual variations in revenue and report to the Manager of Accounting or Deputy Treasurer any instances of concern.

Finance Staff

  1. Coordinating with the town’s banking provider on fees, bank accounts, balances and other bank related items.
  2. Monitoring deposits to ensure cash is being deposited and ensuring that entering and posting of revenue to GL occurs daily unless otherwise approved by the Manager of Revenue Services and Taxation.
  3. Following up on all returned payments.
  4. Performing timely bank account reconciliations and investigating any discrepancies between internal records and the bank’s records.
  5. Following up on any reported cash-related concerns.
  6. In conjunction with Transit, ensure the town’s internal courier is bonded and that schedule for pick- up and delivery meets the deposit requirements.

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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