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Cash Collection and Control. Why Are We Here ?. To ensure consistency of cash collection procedures To enhance our business practices To provide a safety net for individuals, departments, and the university To better control our cash.

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why are we here
Why Are We Here?
  • To ensure consistency of cash collection procedures
  • To enhance our business practices
  • To provide a safety net for individuals, departments, and the university
  • To better control our cash
what will we learn
The role of internal controls and designations of accountability

Best practices in cash collections

How to apply appropriate segregation of duties criteria

The steps involved in the cash collection process at USF

The roles, responsibilities, procedures, and constraints associated with each step

What Will We Learn?
why are you here
Why Are You Here?
  • You have been identified as cash handlers
  • Your department/unit/office has been identified as an official cash collection area
  • Certification is required in order to serve as a cash handler
to achieve certification
To Achieve Certification
  • Participate in training
  • Pass cash collection certification test
agenda
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
what is considered cash
What Is Considered Cash?
  • Currency and coin
  • Checks
  • Credit cards
  • Money orders
  • Travelers checks
  • Electronic funds
agenda8
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
accountability what is it
Accountability – What is it?
  • Delegation of authority to qualified persons to:
    • Initiate, approve, process and review business transactions
  • Holding these persons responsible for:
    • The validity, correctness and appropriateness of their actions
accountability
Accountability
  • Everyone is accountable for their actions
  • Cashiers are accountable for
    • Safety of your change fund
    • Making change correctly
    • Recording payments accurately
    • Balancing your collections at end of shift
    • Observing all of the USF internal controls
accountability11
Accountability
  • Supervisors are accountable for
    • Verification of cashier balancing
    • Assignment of duties that comply with separation of duties guidelines
  • Others are accountable for
    • Safety of the payments collected
    • Completeness and accuracy of the mail log
    • Endorsement of checks
    • Proper transfer of custody of payments
internal controls
Myth

Internal controls are essentially negative, a list of “thou shalt nots.”

Truth

Internal controls ensure the right things happen the first time, & every time.

Internal Controls

Tone at the Top, Issue 20 11/03

Institute of Internal Auditors

internal controls13
Internal Controls
  • Protect the staff
  • Protect the money
  • Help define what you do as a cash handler
examples of internal controls
Examples of Internal Controls
  • Generally, access to funds must be limited to a primary and a secondary custodian
  • Physical safety of the funds must be ensured at point of collection and when stored overnight
examples of internal controls15
Examples of Internal Controls
  • All adjustments must be documented and approved by a supervisor (authorizer)
  • Transfers of funds must be documented
    • When handed from one person to another
    • When delivered to the Cashier Office
examples of internal controls16
Examples of Internal Controls
  • Cashiers must balance the funds they collect to the system where the payments were recorded
  • Funds must be deposited in a timely manner
    • Deposit whenever funds are greater than $500 or within five business days, whichever comes first
  • Deposits must be reconciled to the general ledger
internal controls examples
Internal Controls - Examples
  • When funds are initially received, the event must be documented in one of the following ways:
    • Mail logs
    • Cash receipt slips
    • Cash registers
    • Credit card system
    • An enterprise business system (e.g. FAST or OASIS)
a real life example
A Real Life Example
  • You drive to a local store to purchase ten pieces of sod to repair a spot in you lawn
  • The following actions occur
  • How many internal controls can you identify?
a real life example19
A Real Life Example
  • You walk up to the cashier and ask to buy ten pieces of zoysia sod
  • The cashier scans a bar code in a company brochure
  • You pay for the sod
  • The cashier gives you a receipt and tells you the sod is out front on a pallet
  • You drive your car to the front of the store next to the pallet of sod
a real life example20
A Real Life Example
  • After you start loading the sod, an attendant comes over to help you
  • The attendant then looks at the receipt and tells you that you were charged the wrong amount
  • Back inside the store, a supervisor is called to void the receipt and ring up a new sale
  • The attendant initials your receipt and you go home
a real life example21
A Real Life Example
  • What internal controls did you encounter?
    • Bar codes are used for inventory control and pricing control
    • You had to pay at a cashier station- no one else could take your money
    • The cashier gave you a receipt
    • The attendant helped you load the sod (prevents theft and errors)
a real life example22
A Real Life Example
  • There were even more controls
    • The attendant confirmed that what you were loading into your vehicle is what you paid for
    • A supervisor was called to correct the transaction (this person acted as the authorizer)
    • The attendant initialed and dated the receipt to acknowledge that you received what you ordered (you can’t come back later and get ten more with the same receipt
slide23
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
segregation of duties
Segregation Of Duties

“Segregation of duties provides the assurance that no one individual has the physical and system access to control all phases of a business process or transaction: from authorization to custody to record keeping.”

Diane McKiernan, Logical Apps (a certified Oracle partner)

four functions of segregation of duties
Four Functions of Segregation of Duties
  • The four functions are Record Keeping, Authorization, Custody and Reconciliation
  • The ideal is that any one person performs only one function; four people are needed for the four functions
  • If one person performs two functions
    • Risk exists that presents the opportunity for something to go wrong
    • A compensating control is needed to reduce the risk
    • The compensating control might be an extra layer of review
when segregation is not possible
When Segregation Is Not Possible
  • Provide mitigating or compensating controls
  • Design additional procedures to reduce risk
  • Design data system security roles to restrict access
example of a compensating control
Example of a Compensating Control
  • When a cashier receives a payment, they also record the payment
  • The cashier is acting as a custodian and a record keeper
  • This creates risk
  • As a compensating control, after the cashier balances at end-of-day, a supervisor reviews the balancing and signs off
slide28
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
record keeping definition
Record Keeping - Definition
  • Record keeping is the process of creating and maintaining departmental records
  • Record keeping may occur manually or through an automated data system
record keeping examples at usf
Record Keeping – Examples at USF
  • Mail log - paper or electronic
  • Customer cash receipts
    • Official USF pre-numbered cash receipts
    • System generated cash receipts
  • Deposit slips
  • Credit card receipts
record keeping examples at usf31
Record Keeping – Examples at USF
  • Cash register receipts/sales tapes
    • X tapes (Intermittent cash tapes)
    • Z tapes (End of day cash tapes)
  • Electronic sales logs
  • Electronic funds transfer (EFT) payment advice
  • Cashier balancing reports
record keeping retention
Record Keeping - Retention
  • Observe record retention requirements
  • Records serve multiple needs
    • Satisfy audit needs
    • Helpful in researching a question
slide33
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
authorization
Authorization
  • Authorization is the process of granting formal approval to perform a specific function
  • For example, someone must be authorized in order to perform one of the following functions:
    • Verify cash collections
    • Review daily balancing reports
    • Approve discounts, voids, or refunds
authorization35
Authorization
  • The person who originally created a transaction should not be the one who makes a correction, creates a void, or issues a refund
    • The best practice is to have a supervisor make the correction using an ID of their own
slide36
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
custody
Custody
  • Having access to or control over any physical asset
  • Examples of custodians:
    • Collector of funds
    • Deposit preparer
    • Anyone with access to safes, lock boxes, & file cabinets where funds are kept
    • Custodians of petty cash funds or change funds
custody guidelines procedures
Custody – Guidelines & Procedures

When funds are received by mail

  • Record payment on a mail log
    • Standard mail logs are recommended
    • The log should include at least:
      • The date received
      • Who the payment was received from
      • The amount
      • The check number
      • Who received the payment
  • Endorse all checks
    • Contact Controller’s Office (UCO) for endorsement stamps
custody guidelines procedures39
Custody – Guidelines & Procedures

When funds are received at a cashier counter

  • Endorse all checks
    • Contact the Controller’s Office (UCO) to request endorsement stamps (Cheryl Clark)
  • Issue a receipt to the customer (required)
    • Your register or cash receipt system may produce a receipt
    • You may also give the customer an official USF cash receipt
    • Contact Controller’s Office (UCO) for receipt books (Brian Stanley)
custody guidelines procedures40
Custody – Guidelines & Procedures
  • Never commingle USF funds with personal funds
    • Never actually combine USF funds with any other funds
    • Cashiers should place personal possessions in a safe environment away from the cashier station
custody guidelines procedures41
Custody – Guidelines & Procedures
  • Each cashier should have their own cash drawer
    • Cashiers use only their own cash drawer for receiving payments
    • Individual cashier drawers are placed in the safe over night separating their funds
custody guidelines procedures42
Custody – Guidelines & Procedures
  • Change funds are for making change only
    • Never use for purchases
    • Never use to cash personal checks
    • Never use to make loans
custody checks
Custody – Checks
  • Checks should be made payable to either
    • USF
    • University of South Florida
  • If checks are made payable to an individual
    • Best practice is to return the check to the payer and ask for a replacement check
custody foundation checks
Custody – Foundation Checks
  • Immediate actions
    • Stamp with restrictive endorsement stamp
    • Deliver to USF Foundation within 24 hours
    • After business hours use the drop box
  • Delivery of foundation deposits
    • Hand carry to the foundation
    • Never use campus mail
    • Contact the USF Foundation for questions, endorsement stamps, or locking bank bags
custody storage of funds
Custody – Storage of Funds

During business hours, funds should be stored in a safe or secure area with limited access:

  • A locked cash register
  • A lock box
  • A locked filing cabinet
slide46
Custody – System Passwords

Your cash register or point-of-sale system should be password protected to assign accountability and fix responsibility

slide47
Custody – System Passwords
  • Every person must have their own password
  • Passwords must never be shared
  • Don’t write your passwords down
  • If you need to leave the work area, sign off your password; log back on when you return
slide48
Custody – System Passwords
  • Passwords should be changed periodically
  • Passwords should be inactivated whenever a custodian vacates the position
custody register keys
Custody – Register Keys

If your cash register or point-of-sale system uses key access:

  • Only essential staff should possess the keys
  • An inventory of the keys should be kept
  • Keys should never be shared
  • Keys must be collected whenever a custodian vacates the position
slide50
Custody – Storage of Funds

The safe or lock box combination should be changed:

  • Any time an employee with knowledge of the combination or access to the key terminates or is reassigned
  • Periodically
custody storage of funds51
Custody – Storage of Funds
  • Access to stored cash should be limited to two individuals: one primary, one secondary
  • Funds should never be stored in a desk, even if it is locked
custody transfer of funds
Custody – Transfer of Funds

A transfer is the “hand-off” of funds from one custodian to another

Documenting a transfer:

  • Receiving custodian
    • Recounts the funds
    • Initials and dates the mail log, balancing sheet or deposit back-up
  • Both custodians keep a copy of the document
custody transfer of funds53
Custody – Transfer of Funds

What transfers need to be documented:

  • From customer to cashier
    • Customer should receive a receipt
  • From cashier to supervisor
    • Supervisor initials balancing form
  • From collection area to cashier office
    • Cashier staff should sign off on transmittal form
  • From cashier office to courier
    • Courier signs off at time of pickup
custody deposits
Custody – Deposits
  • Funds totaling more than $500 are deposited daily
  • Funds are always deposited within 5 working days
slide55
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
reconciliation balancing
Reconciliation & Balancing
  • Cashier Balancing
  • Check Log Balancing
what do we reconcile
What Do We Reconcile?
  • Point of sale transactions ( POS )
  • Check logs
  • Transaction reconciliation
  • Budget review and reconciliation
  • Credit cards
point of sale transactions
Point Of Sale Transactions
  • The POS system should
    • Record sales and cash collections
    • Produce a daily detailed sales report
    • Produce a pre-numbered customer receipt
  • Reconciliations to perform
    • Balance the cash drawer
    • Balance the day’s sales to actual collections
    • Reconcile daily balancing sheet to deposit
point of sale cashier balancing
Point Of Sale – Cashier Balancing
  • A standard cashier balancing form should be used by all cashiers
    • Departments may design a form
    • Cashiers must balance cash receipts per the system/cash register to actual cash receipts
    • Cashiers should be required to complete a balancing sheet before leaving for the day
    • The balancing form should be reviewed and initialed by a supervisor
point of sale cashier balancing60
Point Of Sale – Cashier Balancing
  • Elements of cashier balancing
    • Periodic X tapes should be run during the day
    • Z tapes should be run at the close of business when cashiers balance
    • Supervisors balance the total of all Z tapes to the total bank deposit for the day
point of sale cashier balancing61
Point Of Sale – Cashier Balancing
  • What are X tapes
    • X tapes are a sub-total function that report cash collections up to a point in time
    • X tapes should be run periodically to determine financial activity at a given point in time
    • This is especially important during shift changes
point of sale cashier balancing62
Point Of Sale – Cashier Balancing
  • What are Z tapes?
    • Z tapes report all cash receipts recorded for the entire day
    • Z tapes should be run by all cashiers
    • The combined total of all Z tapes should reconcile to the total of all funds deposited to the bank
check log reconciliation
Check Log Reconciliation
  • Reconciliations to perform
    • Compare check log to the actual deposit
    • Reconciler should not be the person who creates the deposit
    • May also need to reconcile pre-numbered cash receipts to the deposit
transaction reconciliation
Transaction Reconciliation
  • Reconcile
    • Deposits to accounts receivable postings
    • Deposits to general ledger postings
    • Inventory to sales
non inventory reconciliation
Non-inventory Reconciliation
  • Some sales may not involve tangible inventory
  • To ensure that all billings have been completed, review
    • Room usage logs
    • Equipment or lab usage logs
    • Participant lists or class rolls
    • Order forms or contracts for services
credit card reconciliation
Credit Card Reconciliation
  • When credit cards are used with a POS
    • POS system should produce a report of credit card transactions
    • Compare the POS report to the daily settlement report
    • Supervisor reviews this
reconciliation guidelines
Reconciliation - Guidelines
  • Reconciliation must be performed by a person with no cash handling responsibilities
  • The reconciliation form must be dated and signed or initialed
  • The prescribed procedure should be followed
slide68
Agenda
  • Accountability & Internal Controls
  • Segregation of Duties
    • Record Keeping
    • Authorization
    • Custody
    • Reconciliation
  • Good Business Practices
oversight monitoring of cashiers
Oversight & Monitoring of Cashiers
  • Cashiers balance drawers after each shift; at least daily
  • Supervisor conducts surprise cash counts at least semi-annually
oversight monitoring of cashiers70
Oversight & Monitoring of Cashiers
  • Supervisor reviews the following:
    • No-sale transactions
    • Voids and errors
    • Overages and shortages
    • Timeliness of deposits
    • X tapes and Z tapes
oversight monitoring of accounts receivable ar
Oversight & Monitoring of Accounts Receivable (AR)
  • Outstanding AR is reviewed at least monthly
  • Someone other than the person who maintains AR conducts the review
are you ready for the test
Are You Ready For The Test?
  • Accountability
    • Cashiers are accountable for
      • Safety of the change fund
      • Making correct change
      • Recording payments correctly
      • Balancing collections
      • Observing USF internal controls
  • Internal controls exist
    • To protect the staff
    • To protect the cash
are you ready for the test73
Are You Ready For The Test?
  • Custody
    • Cashiers should have their own change drawer
    • Never commingle personal and USF funds
    • Remember to always endorse checks immediately upon receipt
  • Record Keeping
    • Since a cashier serves as both a custodian and a record keeper, a compensating control is needed
    • A supervisor should always review your balancing report; then initial and date the form
are you ready for the test74
Are You Ready For The Test?
  • Authorization
    • The person who receives a payment should never make a correction, issue a refund, or void a transaction
    • The authorizer performs these actions
  • Balancing
    • Always balance your funds at the end of your shift
    • Your department should have a standard balancing report
time to take the test
Time to take the test
  • Navigate to the UCO web site
  • The address is www.usf.edu/ucotraining
  • Click cash collections training
  • Click cash collections quiz
resources
Resources
  • Office of University Audit & Compliance
    • http://usfweb2.usf.edu/uac
  • COMPASS (for USF procedures)
    • http://www.usf.edu/compass
  • University Controller web site
    • http://www.usf.edu/controller
contacts
Contacts
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