Cash payments need to be documented firmly by NGOs in their financial management policy. Since small sums of cash payments are common on a day-to-day basis, a certain procedure needs to be developed and mentioned in the policy manual. An example is given below:
Cash Account and Transactions
Cash transactions are to be resorted only for petty expenses and when /where banking facilities are not available. As per Income Tax Rules, no claim exceeding $______ should be settled through cash payments. These should invariably be by account payee checks only. As a matter of procedure and control, the attempt should be to minimize the number of cash transactions.
Daily Cash Balance
The denomination of the closing balance of the cash should be entered below this and signed by the Accountant. This register has to be maintained from the beginning of the financial year. A fresh register has to be started at the beginning of every financial year. Maximum and minimum cash limits have been fixed as: maximum $______ and minimum $______.
Withdrawal of Cash from Bank
- The Cash Withdrawal Form/Money Indent to be filled up and signed by the staff handling cash.
- The cash balance available and the estimated expenses would need to be computed.
- The authorized persons must verify the requirement before signing the check for withdrawal of cash.
- The signature of the person presenting the check and receiving the cash should be attested on the back side of the check by one of the authorized signatories.
- A Cash Receipt (Contra) voucher to be prepared and accounted for by the accountant on the same day.
- The Cash Account (Manual) to be updated for receipt of the Cash.
- Cash payments will be made only after preparing the Payment voucher.
- All vouchers should be pre-printed with machine made serial numbers
- The Voucher has to be approved by the competent authority before payment.(as per the requirement of individual projects )
- The Payee must sign the voucher for having received the payment.
- In case the competent person is not present, the voucher must be verified/approved by any other person standing-in for the person per before release of the payment.
- As per Income Tax Rules, no cash payment of more than $______ is permitted.
- All cash payments above $______should be receipted with a revenue stamp as per the provisions of the stamp act
- The number of cash payments has to be reduced by converting settlements through check payments.
- The competent authority should physically verify the cash balance occasionally and compulsorily at the end of the month.
- The Cash Account record should be signed by the person handling the cash and the person in charge of finance as and when the physical verification of cash is carried out.
- Any discrepancy noticed during the physical verification should be recorded and reported in writing to the person concerned immediately.
Controls to be exercised
- Third parties should not be allowed access to the accountant or the safe. Cash should be paid to them in the front office.
- Cash is handled by only one designated person who is responsible for it.
- A fixed period of time has to be fixed for cash disbursements. Only emergency payments can be released during other times.
- Maximum and minimum cash limits to be strictly observed.
- Accounting of cash receipts/payments is done on a daily basis.
- Petty cash shall be maintained on an imprest basis. At any given time, the cash and receipts in the cash box shall total the imprest level. The level shall be maintained at $______.
- Only the accountant will handle petty cash. Actual cash will be spot-checked and verified by the supervisor/finance manager at least once per week. The staff person in charge of the fund will reimburse for any discrepancies.
- All requests for petty cash must be signed by an authorized supervisor/finance manager on a pre-numbered voucher.
- A check to replenish the fund shall be issued when the fund is low, and at the end of every month.
- The cash and vouchers shall be kept in locked box or safe.