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 from initial setup to closure, including understanding the responsibilities of custodians, navigating the process for adding or removing 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 or a new custodian is officially designated and certified.
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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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To open a petty cash fund, the department head submits a support request for approval, providing information on the needs of the petty cash fund and custodian.
All petty cash custodians and temporary custodians are required to complete the FIN-PROG-0506: Petty Cash Administration Certification before assuming responsibility for the fund. Learn how to get certified as a petty cash custodian. Petty cash custodians must be recertified by completing the course annually.
The custodian is then granted access to the Petty Cash module within the Expense Requests System (ERS) to administer the fund.
After OOT approves the fund opening request and the custodian’s certification is verified, OOT funds the petty cash account.
- For cash funds, OOT initiates a request in the Expense Requests system to issue a check through Payment Services to the designated custodian. The petty cash custodian receives the check through ID Mail.
- For checking accounts, OOT opens the checking account with the bank and deposits the funds. The petty cash custodian receives the checkbook from the bank.
After the petty cash fund is created and funded, the certified 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.
Department heads can change or reassign a petty cash custodian when the current custodian leaves or is absent for an extended period.
Permanent custodian change
The department head provides the following information in a support request:
- Petty Cash Fund Number (82XXX)
- Name, phone number and SUNet ID of new custodian
- Name and SUNet ID of custodian being replaced
To responsibly administer funds, the new custodian must understand the petty cash fund policy, become certified as a petty cash custodian, and be familiar with the resources available on Fingate.
The outgoing custodian reconciles the petty cash fund before transferring it to the new custodian. Then the new custodian assumes responsibility for the petty cash fund.
Temporary custodian change
For absences for an extended period, the petty cash custodian, with the department head’s approval, may assign a temporary custodian to be responsible for the fund. If the custodian's absence will be less than two weeks, it is recommended that the fund be secured and no reimbursements be allowed during that time. The process is as follows:
- The department head and the regular custodian identify a temporary custodian and review the petty cash fund policy.
- The department head and the regular custodian must determine if there is a need to replenish the petty cash fund during the custodian’s absence. Without the notification, replenishment checks are made out to the regular custodian and cannot be cashed by the temporary custodian. The department head provides their approval and the following information in a support request:
- Petty Cash Fund Number (82XXX)
- Name, phone number and SUNet ID of temporary custodian
- Name and SUNet ID of regular custodian (to be replaced temporarily)
- To responsibly administer funds, the temporary custodian must understand the petty cash fund policy and become certified as a petty cash custodian.
- Before leaving, the regular custodian must reconcile the petty cash fund with the temporary custodian. Both custodians must sign a copy of the Petty Cash Reconciliation Form as a receipt. The receipt should be kept in the lockbox with the petty cash fund.
- Upon returning, the regular custodian must reconcile the petty cash fund with the temporary custodian.
- The department head should submit a support request upon the regular custodian’s return.