Cash Collection and Control

1. Cash Collection and Control

2. 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

3. 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?

4. 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

5. To Achieve Certification • Participate in training • Pass cash collection certification test

6. Agenda • Accountability & Internal Controls • Segregation of Duties • Record Keeping • Authorization • Custody • Reconciliation • Good Business Practices

7. What Is Considered Cash? • Currency and coin • Checks • Credit cards • Money orders • Travelers checks • Electronic funds

8. Agenda • Accountability & Internal Controls • Segregation of Duties • Record Keeping • Authorization • Custody • Reconciliation • Good Business Practices

9. 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

10. 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

11. 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

12. 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

13. Internal Controls • Protect the staff • Protect the money • Help define what you do as a cash handler

14. 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

15. 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

16. 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

17. 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)

18. 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?

19. 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

20. 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

21. 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)

22. 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

23. Agenda • Accountability & Internal Controls • Segregation of Duties • Record Keeping • Authorization • Custody • Reconciliation • Good Business Practices

24. 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)

25. 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

26. When Segregation Is Not Possible • Provide mitigating or compensating controls • Design additional procedures to reduce risk • Design data system security roles to restrict access

27. 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

28. Agenda • Accountability & Internal Controls • Segregation of Duties • Record Keeping • Authorization • Custody • Reconciliation • Good Business Practices

29. 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

30. 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

31. 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

32. Record Keeping - Retention • Observe record retention requirements • Records serve multiple needs • Satisfy audit needs • Helpful in researching a question

33. Agenda • Accountability & Internal Controls • Segregation of Duties • Record Keeping • Authorization • Custody • Reconciliation • Good Business Practices

34. 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

35. 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

36. Agenda • Accountability & Internal Controls • Segregation of Duties • Record Keeping • Authorization • Custody • Reconciliation • Good Business Practices

37. 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

38. 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

39. 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)

40. 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

41. 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

42. 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

43. 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

44. 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

45. 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

46. Custody – System Passwords Your cash register or point-of-sale system should be password protected to assign accountability and fix responsibility

47. 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

48. Custody – System Passwords • Passwords should be changed periodically • Passwords should be inactivated whenever a custodian vacates the position

49. 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

50. 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