This page provides a general overview of revolving funds and imprest accounts for local governments in Washington State, including petty cash, change funds, advance travel funds, confidential drug buy/investigative funds, internal controls, and sample documents.
Overview
The Washington State Auditor’s BARS manual addresses petty cash and similar funds in Section 3.8.8 (see Cash and GAAP). The guidance applies to petty cash, imprest accounts, change funds, advance travel, stamp funds, or any other revolving funds set aside for making change, minor disbursem*nts, or similar uses.
What Are Revolving Funds?
A revolving fund account (sometimes referred to as an imprest fund) is established by the legislative body for specific amounts and uses. As funds are spent, they are replaced to their codified level by a check or warrant drawn and charged to the applicable fund. This is the “revolving” aspect of such accounts.
These types of funds allow the purchase of small items, such as office supplies, stamps, or shipping costs. They are also frequently used as change funds to accommodate payments by customers who pay with cash. Some revolving funds can be used for advance travel expenses or confidential law enforcement investigations.
Statutory Authority
Guidance on revolving funds comes from the State Auditor’s Office (SAO) Budgeting, Accounting, and Reporting System (BARS), Section 3.8.8 of both the Cash and GAAP manuals. The BARS manual is authorized by RCW 43.09.200.
There are no RCWs directly governing the establishment and use of revolving funds except in the case of advance travel funds. RCW 42.24.120 - .160 requires that monies from this fund are to be used solely for travel advances, per appropriate rules and regulations prescribed by the state auditor.
Types of Revolving Funds
There are several common types of revolving funds:
- Advance travel funds may be used only for cash advances for valid travel expenses of a person going on travel status that would otherwise be paid out of their personal finances and reimbursed. It may not be used for expenses already incurred, nor may it be used for direct payments to vendors, such as for airline tickets, car rentals, or hotel reservations. More information about travel expenses can be found on our Travel and Expense Reimbursem*nt Policies page.
- Change funds are most often used to make change for utility bill payments made onsite. Sometimes referred to as cash drawers or even as petty cash by some jurisdictions, it is typically a set amount of money in the cashier’s drawer at start of business. Not to be confused with a petty cash account that is used for small purchases (see below), the amount at the close of business should be the same as the opening amount.
- Confidential funds, sometimes known as drug buy money or investigative funds, are used for confidential law enforcement investigations, such as reasonable expenses for informants or undercover officers, undercover purchases (such as drug buys), or the purchase of specific information from informants.
- Petty cash is a set amount of currency kept onsite for small purchases such as postage, materials, or office supplies. All expenditures must be supported by proper receipting and the amount of cash plus receipts should equal the established petty cash amount at the close of business. A petty cash fund is sometimes used as both petty cash and a change fund (see Ellensburg Ordinance No. 4763, sections 2.16.2360 and 2.16.2440).
Establishing or Changing a Revolving Account
Each revolving fund must be authorized by the legislative body of the jurisdiction through the normal process used to pass legislation. The Cash and GAAP BARS manuals have minimum expected controls for revolving funds, including how to establish an imprest account or a revolving fund:
The governing body must authorize each revolving fund in the manner that local legislation is officially enacted, i.e., resolution or ordinance. This applies also to all subsequent increases or decreases in the imprest amount. [Cash and GAAP BARS manuals, Section 3.8.8.20]
The legislation may establish multiple revolving funds in the same ordinance.
Internal Controls
Section 3.8.8.20 of the BARS manual (see Cash and GAAP) lists minimum internal controls expected. Review the entire BARS section thoroughly when writing or amending your policies. SAO’s guidance on this includes instructions for entities with a small staff on how to maintain separation of duties without hiring additional staff. This is a partial list of controls covered in the manual:
- Each agency should appoint one custodian for each account who is independent of processing invoices, signing checks, or general accounting and cash receipting functions.
- The authorized balance should not exceed one month’s salary or the surety bond covering the custodian.
- The fund should be reconciled to the authorized balance and actual balance at least once per month.
- Independent, unscheduled (surprise) counts of petty cash funds should be performed at random with the custodian, but without their prior knowledge.
- Physical cash on hand must be secured in a locked drawer or box.
- Funds may never be used for personal cash advances, loans, or expenditures, or for check-cashing services for employees or others, excepting when authorized by an adopted policy to cash employees’ checks in accordance with RCW 35.21.087 or RCW 35A.40.110.
See the BARS manual 3.8.2, Employee Travel (see Cash and GAAP) for additional guidance specific to advanced travel revolving funds. See the BARS manual 3.8.9, Confidential Funds (see Cash and GAAP) for additional guidance specific to revolving funds established for confidential investigative purposes.
For general guidance regarding internal controls, see the Washington State Auditor's Office Internal Controls Checklist for Local Governments.
Examples of Petty Cash Provisions
Below are selected examples of local ordinances, resolutions, code provisions, and policies/procedures related to petty cash and revolving funds.
Ordinances and Resolutions
- Buckley Ordinance No. 04-15 (2015) – Repeals and replaces revolving fund chapter of municipal code with a new chapter entitled Petty Cash. Updated to reflect actual practices of using the cash funds as change funds for various city operations and locations. Formally adopts police department drug buy funds and updates internal controls.
- Des Moines Ordinance No. 1732 (2020) – Increasing imprest cash funds, including the Police Investigative Fund.
- Ellensburg Ordinance No. 4763 (2017) – Establishes a utility change fund, animal shelter change fund, Adult Activity Center revolving petty cash fund, library change and petty cash fund, and several other funds. Repeals other funds and clarifies language.
- Sequim Resolution R2014-01 (2014) – Includes designation of custodian, location, amount, and type of fund (petty cash or change).
Code Provisions
- Aberdeen Municipal Code Ch. 3.24 – Creating petty cash funds, authorizing specific amounts for certain departments, and describing procedures. Brief and concise.
- Gold Bar Municipal Code Ch 3.36 – Names custodian and details responsibilities of internal controls.
- Kirkland Municipal Code Ch. 5.69 – Authorizing finance director to establish a petty cash fund for authorized disbursem*nts and to make change; and authorization and direction to establish regulations for operations and use in compliance with the BARS manual.
- Mason County Code Ch. 3.140 – Setting the number of cash drawers and their amounts, assigning authority and responsibility for internal controls to the Treasurer.
- Woodinville Municipal Code Ch. 3.24 – Petty cash fund and advance travel fund. Authorizes Director of finance to establish regulation, in accordance with SAO requirements. Does not enumerate permissions and prohibitions.
- Woodland Municipal Code Ch. 3.05 – Names custodian of funds, includes periodic reconciliation by non-custodian, documentation required for reimbursem*nt, replenishment schedule, and prohibitions on use of funds.
Policies and Procedures
Cities
- Chelan Petty Cash Funds Policies and Procedures (2009) – Permissions and prohibitions on use of funds; appointment of custodians by department, with department manager ultimately responsible. Procedures requiring original receipts except for per diem, including what constitutes a valid receipt. Notes that all petty cash funds are subject to random audit by Finance Department staff. Includes resolution.
- Edgewood Petty Cash Funds Policies and Procedures – One-page policy stating allowable expenses/uses, and prohibited uses. Includes procedures.
- Monroe Petty Cash Policy (2017) – Includes policy, sample petty cash record and request form, and adopting resolution.
- Spokane Cash Handler Policy and Procedures Manual (2006) – See Petty Cash Funds on page46.
- Sultan Petty Cash Policy and Procedures (2010) – Simple, four-section policy with amounts and procedures for receiving and processing petty cash.
Counties
- Cowlitz County Cash Handling Policies and Procedures (2018) – See Petty Cash on page9.
- King County Establish and Administer Petty Cash, Imprest and Change Funds Administrative Policy (2012) – Includes definitions of types of funds, who may establish funds and how; guidelines for using cash instead of P-card; process for approval of expenditure, receipt of funds, and proper documentation; course of action if funds are short/over; assignation of fund custodians; various responsibilities of certain staff positions.
Special Purpose Districts
FAQs
Petty cash funds include change funds, revolving funds and stamp funds, or any sum of money or other resources set aside for the specific purpose of minor disbursem*nts, making change or other similar uses. 1.
What is a revolving cash fund? ›
Definition. A revolving cash fund is a specific amount of money used to purchase inexpensive items. It is called revolving cash because as money is expended it is constantly being replaced.
What are the two types of imprest? ›
Classes of Imprest
Imprest is of two classes, namely: Standing Imprest, held throughout the financial year and replenished as and when necessary by the presentation of receipt and petty cash vouchers; and.
What account is revolving fund? ›
A revolving fund is a fund or account that remains available to finance an organization's continuing operations without any fiscal year limitation, because the organization replenishes the fund by repaying money used from the account. Revolving funds have been used to support both government and non-profit operations.
What is a revolving fund in business? ›
revolving fund. noun [ C ] FINANCE. an amount of money that exists in order to finance something, but from which any loans must be replaced in order that the full amount is available again: The Land Trust has a state revolving fund to pay for security and maintenance of abandoned properties.
What is the difference between imprest and petty cash? ›
Imprest is a cash account on which a business relies for paying off small or minor expenditures and the amount is replenished by the cashier who ensures that a fixed balance is maintained. Petty cash is the cash that is used for the purchase of office supplies, refreshments etc.
What are the two methods in accounting for petty cash fund? ›
Forms used for Operating Petty Cash Fund
The petty cash fund can be operated in the two ways: ordinary and imprest system of petty cash fund.
Is revolving fund an asset? ›
Revolving funds are accounts in which the assets of the fund are used for loans or other purposes, with the understanding that the expenditures are periodically replenished to allow future expenditures to take place.
What is mean by revolving? ›
Definition of revolving
1a : tending to revolve or recur especially : recurrently available. b : of, relating to, or being credit that may be used repeatedly up to the specified limit and is usually repaid in regular proportional installments. 2 : turning around on or as if on an axis a revolving platform.
What is another name for imprest? ›
In this page you can discover 3 synonyms, antonyms, idiomatic expressions, and related words for imprest, like: petty-cash, receipts and income-account.
Definition of imprest
: a loan or advance of money.
What are the columns in petty cash book? ›
This Petty Cash Book has two sides – the debit side and the credit side. The particulars of cash receipts and expenses are written together in a single column which is known as the particulars column and the other column is used for writing the dates of both debit and credit.
Is revolving fund a cash equivalent? ›
Cash, cash in transit, university money market funds, securities lending cash collateral, change and revolving funds, and repurchase agreements are included with Cash and Cash Equivalents.
How do you manage revolving funds? ›
Increase/Decrease Your Revolving Fund
- Increasing a Revolving Fund. The ideal balance for a revolving fund should be twice the average monthly expenditures. ...
- Decreasing a Revolving Fund via Spend Down. ...
- Decreasing a Revolving Fund via Check.
Replenishment of a petty cash fund can be either in cash or by check. For replenishment in cash, the custodian must complete an Ad Hoc Bank Transaction. For replenishment by check, the custodian must complete an Ad Hoc Payment.
How do you create a revolving fund? ›
Starting a Revolving Loan Fund
- Research existing RLF's and compile samples of application forms, program guidelines, and other materials.
- Invite lenders and potential borrowers to participate in the design process.
- Establish the purpose of the RLF. ...
- Set the eligibility requirements for borrowers.
Key Takeaways. A revolving line of credit is a dynamic financial product, as you pay the credit down, you may be offered more credit to spend, especially if you make regular, consistent payments on a revolving credit account. A line of credit is a one-time financial arrangement or a static product.
What are contingency funds? ›
Meaning of contingency fund in English. an amount of money that is kept to pay for something that might possibly happen or cause problems in the future: The projected cost increase will come out of a $900 million contingency fund included in the bridge's $6.3 billion construction budget.
What are the types of petty cash? ›
What are some typical petty cash expenses?
- Office supplies.
- Coffee and snacks.
- Postage.
- Fuel and parking for work trips.
- Reimbursem*nts to employees for small expenses.
- Any other unpredictable expenses that are too small to write a check for.
Accounting for Petty Cash
There are two primary types of entries in the petty cash book, which are a debit to record cash received by the petty cash clerk (usually in a single block of cash at infrequent intervals), and a large number of credits to reflect cash withdrawals from the petty cash fund.
What is another word for petty cash?
| cash | money |
|---|
| shoestring | small change |
| spending money | pocket money |
| pin money | capital |
| wealth | reserves |
111 more rowsPetty cash appears within the current assets section of the balance sheet.
What is the journal entry for petty cash? ›
The petty cash journal entry is a debit to the petty cash account and a credit to the cash account. The petty cash custodian refills the petty cash drawer or box, which should now contain the original amount of cash that was designated for the fund. The cashier creates a journal entry to record the petty cash receipts.
How do you report petty cash? ›
The four steps to do petty cash accounting and recording are:
- Establish Petty Cash Policy & Procedures. The first thing you need to do is document your petty cash procedures and communicate them to all employees. ...
- Set Up a Petty Cash Log. ...
- Create Journal Entries to Record Petty Cash. ...
- Reconcile the Petty Cash Account.
Is Petty Cash a Cash Equivalent? No. Petty cash is actual cash money: bills and coins. Cash equivalents are highly liquid securities and other assets that can be easily converted into cash: money market funds, commercial paper, or short-term debt, like Treasury bills.
What is meant by revolving capital? ›
revolving capital means a fund, a revolving fund, capital money, revolving capital money, a capital or a revolving capital, which is established for a business of which incomes are permitted to be expended without being required to be remitted to the Treasury; Sample 1Sample 2. revolving capital .
What is classified as cash and cash equivalents? ›
Cash and cash equivalents refers to the line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately. Cash equivalents include bank accounts and marketable securities such as commercial paper and short-term government bonds.
What is an example of revolve? ›
Revolve is defined as to think about something, or cause to move in a circle. An example of revolve is thinking about work while trying to go to sleep. An example of revolve is spinning a toy top.
What is the other term for revolving? ›
In this page you can discover 53 synonyms, antonyms, idiomatic expressions, and related words for revolving, like: vorticose, circumvolutory, circumgyratory, circumrotatory, gyral, gyrating, gyratory, rotary, vertiginous, whirling and rotatory.
What is revolving account balance? ›
What Is a Revolving Balance? If you don't pay the balance on your revolving credit account in full every month, the unpaid portion carries over to the next month. That's called a revolving balance. You might apply for credit assuming you'll always pay your balance in full every month. But real life can get in the way.
You can set up your petty cash float – the maximum, fixed amount of on-hand cash – by cashing a check, usually ranging from $100 to $500 depending on the size of your business. Larger companies often have a petty cash fund for each department.
How do you use imprest in a sentence? ›
Use “imprest” in a sentence | “imprest” sentence examples
- This petty cash is kept on the imprest system, whereby the petty cashier is entrusted with a fixed sum of money.
- The imprest would also be ￡3.77, so that the petty cash box contains ￡20 for the next day.
The 'imprest' medication is an emergency/ out of hours supply of medications only, where a few doses of a medication may be given whilst awaiting supply from pharmacy. The 'imprest' cupboard is not a pharmacy or dispensing cupboard.
What is a float accounting? ›
Definition of Float
In accounting and bookkeeping, float is the time between the writing of a check and the time that the check clears the bank account on which it is drawn.
What is a float in finance? ›
In financial terms, the float is money within the banking system that is briefly counted twice due to time gaps in registering a deposit or withdrawal. These time gaps are usually due to the delay in processing paper checks. A bank credits a customer's account as soon as a check is deposited.
What is fluctuating fund system? ›
- Under the fluctuating fund system, the fund balance may still be increased despite an increased effect in the fund balance during the replenishment.
What are the 3 types of cash book? ›
There are three common types of cash books: single column, double column, and triple column.
What are the two types of petty cash book? ›
There are two types of petty cash books that are most commonly used:
- Imprest petty cash book.
- Columnar or Analytical petty cash book.
A ledger is a book containing accounts in which the classified and summarized information from the journals is posted as debits and credits. It is also called the second book of entry. The ledger contains the information that is required to prepare financial statements.
How do I post petty cash in general ledger? ›
To show this, debit your Petty Cash account and credit your Cash account. When the petty cash fund gets too low, you must refill it to its set amount. Then, create another journal entry debiting the Petty Cash account and crediting the Cash account.
A cash equivalent is an investment with a short-term maturity that can be quickly converted to cash, such as stocks, bonds, and mutual funds.
Which of the following items is considered as cash equivalents? ›
Examples of cash equivalents are as follows:
- Commercial paper.
- Marketable securities.
- Money market funds.
- Short-term government bonds.
- Treasury bills.
Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organisations or by law. It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments.
What do you mean by sinking fund? ›
A sinking fund is a fund containing money set aside or saved to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue.
What is fund replenishment? ›
Definition: Replenish refers to the action of refilling petty cash funds. In other words, it means reimbursing expenses made with petty cash.
What is the difference between establishing and replenishing the petty cash fund? ›
A petty cash fund is simply a box with a supply of cash and a sheet of paper or notebook for tracking the amounts that are added to or subtracted from the fund. To establish a petty cash fund, you must have a balance of starting cash. When that starting amount runs out, you must replenish the fund with additional cash.
What is petty cash example? ›
Example. Small payments are often needed for postage, delivery charges, office supplies, or entertainment expenses. A petty cash fund provides an efficient way of handling these payments.
