Petty cash is a purchasing method used to manage nominal, out-of-pocket business expenditures in accordance with Administrative Guide Memo 5.4.4: Petty Cash Funds. This page provides a guide to the lifecycle of a petty cash fund including understanding the responsibilities of custodians and ensuring compliance with university policies.
Note: Stanford Financial Management Services encourages departments to consider using a Purchasing Card (PCard) as an alternative to handling cash transactions. PCards reduce risk and improve administrative efficiency, and departments are encouraged to transition away from reliance on petty cash where possible.
The university has two types of petty cash funds:
Cash Fund: Established for departmental use and emergency small-dollar purchases where the use of alternative means (e.g., PCard) is not feasible. The size of a petty cash fund will be determined by the business needs of the requesting department. A single fund will be limited to no more than $500 cash on hand, unless special approval is obtained to increase from the Office of the Treasurer (OOT).
Checking Account: Established in departments that make small check disbursements by mail (e.g., purchase of subscriptions or refunds) or must make immediate payment (e.g., cash-on-delivery [COD] payment for goods delivered by a courier). The size of a petty cash checking account is determined by the business needs of the requesting department. A single checking account, opened by the OOT with the bank, will be limited to no more than $2,500, unless special written approval is obtained from the OOT.
| Role | Responsibility |
|---|---|
| Custodian | The petty cash custodian is accountable for the petty cash fund until the fund is closed.
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| Department Head (authorized approver) |
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| School/unit management (Department and unit finance managers) |
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| Central administration | Financial Management Services (FMS) administers and oversees the Petty Cash program.
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The petty cash custodian establishes a system to organize and maintain the fund. Custodians keep all petty cash in a lockbox, and keep the lockbox in a locked desk or cabinet. Only certified custodians should have access to petty cash. In the event of a theft, it is the custodian’s duty to promptly report the incident according to the established guidelines to safeguard university resources and comply with policy.
Dispersing the funds
The custodian can then reimburse employees for eligible business expenses using the fund. Proper petty cash accounting requires custodians to obtain receipts, record expenditures, and make payments only for authorized expenditures. If a receipt is not available, petty cash cannot be used to reimburse the expense. Instead, the expense transaction must be entered in the Expense Requests by an authorized Expense Requests transaction preparer as an expense report and the reason for the missing receipt must be provided.
| Types of use | Examples |
|---|---|
| Eligible | Refer to Business and Travel Expenses and Other Reimbursable Expenses. Common uses of petty cash may include:
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| Prohibited use |
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Replenishing the fund
The petty cash funds are replenished as needed to maintain its authorized level, following university procedures. If there is a need to increase or decrease the petty cash fund, the department head initiates the request and obtains approval from OOT.
Recordkeeping and reconciliation
The original amount of the petty cash fund should equate to the total cash currently on hand, plus the total of receipts that have not yet been submitted for replenishment, all petty cash replenishment requests in process and any uncashed reimbursement checks.
The custodian should reconcile the fund monthly and annually.
- It is recommended that the petty cash custodian reconcile a petty cash fund at least once a month. They must retain the completed Petty Cash Reconciliation forms for their department records and be able to provide copies of these forms in the event of an audit by OOT.
- Annual reconciliations and validation of the fund’s current custodian/s are due to OOT by the end of August to. The custodian should complete the reconciliation sheet, have it signed by an authorized financial manager, and attach it to a support request.
Closing the account
When the petty cash fund is no longer needed, the certified custodian or department head can close it.