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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES

Volume
XI

Date
4/23/93
Section Name
Internal Controls - Cash Receipts
Section
3.0210

CASH RECEIPTS

          For purposes of this manual, cash receipts shall mean any and all cash received, such as revenues, patient or inmate trust receipts, and sales of securities and other assets. All checks should be stamped "For Deposit Only" as soon as practical after received.

INITIAL RECORD OF CASH RECEIPTS

          The system of control must ensure that all cash which should be received is actually received and is promptly recorded and deposited. It is imperative that initial accountability be established over cash receipts by listing or otherwise recording them as soon as received. Cash receipts stolen before a record of receipt is made are much more difficult to trace than cash received and recorded, followed by a theft and manipulation of the records. The initial recording of receipts should be by someone who will have no further control over cash handling or accounting. Then, there will be no opportunity to conceal any failure to list all cash received, through access to accounts receivable or other records.

           The receipt of cash should be centralized whenever possible. The initial record of cash receipts may be a press-numbered receipts form, a summary of press-numbered license tickets or permits issued, a cash register tape, a mailroom listing, or remittance advices. The choice depends on the type of agency and the nature of its revenues.

SERIALLY PRESS-NUMBERED RECEIPT FORMS

            Serially press-numbered receipt forms should be used for recording cash receipts, if other means of control over receipts are not otherwise provided. They should be used for all currency collections regardless of source.

          Where it is necessary to initially record cash receipts at different locations, the receipt form may be used as a subsidiary cashbook. In such cases, all cash receipts including currency, checks, money orders, etc., should be entered in the press-numbered receipt book.

          To maximize control over press-numbered receipt forms, the following procedures should be adhered to:

a.     The forms should be press-numbered and printed in triplicate. The original should be given to the payor, the duplicate used to establish accountability for the cash collected, and the triplicate retained in numerical sequence to establish accountability for the forms printed and used. The duplicate and triplicate copies should contain the printed statement "COPY - THIS IS NOT A VALID RECEIPT."

Where appropriate, signs should be displayed advising payors to request a receipt form. The sign should include a facsimile copy of the form.

b.      A Certification should be obtained from the printer as to the quantities of forms delivered and the corresponding numbers.

These certificates should be used as a basis for inventory control over the forms available for use and for reconciliation of issued forms.

The custody of perpetual inventory records and forms should be assigned to an employee who is independent of the cashiering function, and who does not have access to the bookkeeping records for cash. The inventory records should show:

(1) The quantity and serial press-numbers for each shipment of forms received.

(2) The quantity and serial press-numbers for each block of forms issued to an employee or collecting station. (The signature of the employee to whom they are delivered should be obtained.)

(3) The serial press-numbers and the quantity (balance) of the forms on hand.

(4) The book inventory of the forms on hand should be periodically verified by a physical count of the forms on hand. This verification should be performed by an employee other than the custodian of the forms and records.

c.      Provision should be made on the forms for indicating the purpose and type of money received. The latter might be accomplished by having descriptive terms printed on the forms, with an appropriate box to be checked for currency, check or money order.

d.      Moneys received at collection stations should be turned over to a designated cashier for deposit at prescribed intervals. If possible, this transmittal should be made at the close of each day. If daily transmittal is not feasible due to location of collection stations, or if amounts of collections are nominal, transmittals may be made less frequently, but in no case, less often than once a week. Each cash transmittal should be accompanied by the corresponding duplicate copies of the press-numbered receipt forms issued, and a covering document identifying the dollar amount and sequence of form numbers transmitted and the period of time covered by the transmittal. The cashier should "audit" each transmittal received to assure: (a) that the receipt forms have been transmitted promptly, (b) that all press-numbered forms issued and/or voided since the prior transmittal have been accounted for, and (c) that the monies were turned over in the form originally received. This can be done by inspecting the checked boxes on the receipt forms which show currency, check or money order.

The cashier should issue to the employee who transmitted the funds a receipt form for the total amount of moneys turned over.

e.      When it is necessary to void or cancel a receipt form, the original should be marked in such a manner that it cannot be reused.

This is important because no system of cash control, through the use of press-numbered receipt forms, is effective unless a strict accounting is made of all forms.

f.      In many cases, receipt forms are printed in bound pads to facilitate control of the forms issued. When all forms in a bound pad have been issued, the used pad should be returned to the employee responsible for keeping the book inventory of the press-numbered forms. This employee should examine the pad to see that all forms have been properly accounted for and that all copies of "void forms" are in the pad. He should make appropriate entry of his inventory control records indicating return of the used forms.

MAIL RECEIPTS

     In many agencies, the majority of cash remittances (taxes, licenses, permits, fees, etc.) are received by mail. This mail should be opened at designated times (usually once or twice a day) by two or more designated personnel. To assure that remittances are all accounted for and properly deposited, the following procedures, or ones providing comparable control, should be used.

a.      If cash receipts are simultaneously received for different purposes, any accompanying documents should be sorted by revenue type.

b.      Each document should be assigned a cash line or serial number in strict numerical sequence which should be stamped on both the document and the remittance (check) accompanying it. If currency is received in the mail, a "dummy" document may be created on which the serial number is recorded. An accompanying letter or envelope may serve this purpose. A press-numbered receipt form should be issued to the payor acknowledging receipt of the currency.

c.      The documents for each operating bureau, if they are numerous, should be batched, usually in groups of 50 or less, to facilitate handling.

d.      Remittances should be listed on a cash report to be distributed as follows: the original, together with the remittances, should go to the cashier for deposit; one copy should go to the accounting office for posting to appropriate records; other copies should go to the appropriate operating bureau(s) along with the documents to be processed (tax return, license, permit, etc.).

 

MISCELLANEOUS MAIL RECEIPTS

          Agencies that receive the majority of their cash receipts over the counter, may also receive some remittances by mail. The following procedure is suggested to control these mail remittances.

a.      The mail should be opened by a designated employee in the mailroom. Press-numbered receipt forms should be issued for any currency received.

b.      The mailroom should prepare, in triplicate, a listing of all remittances received. This list should show the amount and form of each remittance; the name of the beneficiary, if any, for whom the money was received (in the case of moneys received for inmates or patients of State institutions); the name of the remitter; and the purpose for which the cash was received, as indicated in the accompanying correspondence. Remittances for which the mailroom cannot determine proper distribution should be listed on a separate transmittal. To aid in the identification of these items, the envelopes for these remittances should be retained.

c.      Remittances should be transmitted daily to the cashier, who in the presence of the employee delivering the transmittal should verify that the amount received agrees with the total of the items on the list, receipt the original list and return it for filing in the mailroom. The duplicate listing should be retained by the cashier while the third copy should be forwarded by the mailroom to the accounting office for posting to appropriate records.

d.      The correspondence accompanying the remittances should be stamped and the payment data recorded thereon. These documents should then be forwarded to the accounting office and/or the appropriate operating bureau(s) of the agency.

CASH REGISTERS

          Where cash receipts are controlled by the use of cash registers, assurance must be obtained that all receipts are recorded on the register, properly accounted for and appropriately deposited.

          Various techniques can be used to assure that all receipts are recorded on the cash registers. For example, cash register sales of certain commodities can be controlled by keeping a perpetual inventory at retail of the merchandise available for sale. Physical inventories should be taken periodically and the cashiers should account for the value of the book inventory under their control either in (1) physical stock on hand, or (2) cash collected. Another technique is to have "spotters", unknown to the cashiers, periodically observe the cashiering function. Also, cash registers should be located where customers can readily see the amounts rung up, and should prepare a customer's receipt for each transaction.

          Receipts recorded on cash registers are easy to account for if there are adequate controls. The following procedures should be used to account for receipts recorded on cash registers.

a.      Control must be maintained over all cash registers by manufacturer's number, or other suitable means, to preclude substitution or the use of cash registers not authorized.

b.      Cash registers should be equipped with a tape on which cash collected is listed and accumulated. All register tapes must be accounted for as discussed below:

(1) The best control method is to have the machine "locked" so that the cumulative total cannot be cleared and turned back. The register can readily be locked by a cash register serviceman.

(2) Another satisfactory method of determining that all tapes are accounted for is to use a register that prints a transaction number on the tape opposite each amount recorded. It is then possible to determine that all tapes are accounted for by comparing the first transaction number on each tape with the last number on the previous tape. The transaction numbers should not be able to be turned back.

(3) Another method is to use a register that has a "reset" counter. The accumulated total may be cleared by inserting the key into the register at which time the reset counter is increased by one. A record of each reset number and the corresponding tape must be kept. Of the three methods discussed this one is the least desirable because: errors in resetting the machine often result in "void" reset numbers; errors in recording reset numbers may occur; there is a risk that actual tapes may be replaced by spurious tapes of lesser amounts.

c.      Someone other than the register cashier should (in the cashier's presence) count the cash and extract the register tape. This function is normally performed by the business office of the agency. The amount collected should be balanced with the register total, as shown by the tape or the cumulative locked-in totals. All register tapes and reports of register readings should be collected by the business office and filed chronologically.

d.      A record should be maintained of all cash shortages or overages with explanations for all differences.

RECONCILIATION OF CASH RECEIPTS

          All cash receipts should be reconciled daily, by an employee charged with the cashiering function, to the cash reports prepared from press-numbered receipt forms, licenses, permits, cash register tapes, mailroom tabulations, etc. This cashier should furnish a receipt form for any monies transferred to his (her) custody for deposit.

           Serially numbered licenses, permits, etc., provide an accountability over the revenues collected. Periodically, at least annually, the number of licenses, etc., issued should be reconciled with the number available for issuance and the revenue collected.

          Other mechanisms such as treadles, turnstiles and other meters independently record the number of customers serviced. Readings from these control devices should be reconciled daily with cash collections.

DEPOSIT OF CASH RECEIPTS

          All cash receipts should be deposited promptly. Deposits should be made daily, but under no circumstances should they be made less than once a week. Each deposit should include all monies collected since the previous deposit and in the same form as originally received. Personal checks are not to be "cashed" out of receipts. Deposit slips should be prepared in triplicate: one copy to be retained by the bank, one copy to be retained by the cashier and a bank validated third copy transmitted to the employee responsible for comparing deposits with recorded receipts.

UNDEPOSITED RECEIPTS

          Notwithstanding the fact that deposits are made daily, large amounts of cash often accumulate. Adequate protection of the cash must be provided. An adequate safe must be utilized and, pending deposit, the cash should not be accessible to anyone except properly authorized employees. Cashiers should be relieved of cash collections several times during the day, providing the cashiers with an appropriate receipt each time. When warranted, agencies should use night depositories of banks.

BANK ACCOUNTS

         Cash receipts should be deposited in one or more authorized bank accounts. Authorization for establishing bank accounts, bank collateral requirements, agency reporting requirements for the accounts and other matters relating to agency bank accounts are set forth in Section 106 of the State Finance Law, Parts 14.3 through 14.6 and 16.9 of the State Comptroller's Rules and Regulations and Section 4.0000 of this manual. Strict control over the establishment of bank accounts should be exercised to prevent the diversion of agency funds to unauthorized bank accounts. Banks should be instructed not to cash checks payable to the agency, but to accept them only for deposit to official accounts.

RETURNED CHECKS

          On occasion, checks are returned by the bank as uncollectible after they have been deposited. When this occurs, the reason why the check is not collectible should be noted and the maker contacted to effect its collection. The returned checks should come to an employee other than the one making the deposits, preferably the employee responsible for the bank reconciliation.

          An adjusting entry decreasing cash receipts by the amount of the check should be made in the cash receipts journal and the amount should be posted to an accounts receivable record to control the collection and deposit of such items. Adjustments for such items should not be made to the cash disbursements journal, since this procedure results in overstating both receipts and disbursements. When the amount of a returned check is collected from the maker, the collection should be recorded in the cash receipts journal and this entry cross referenced to the corresponding adjustment entry made when the check was returned by the bank. The re-deposit of a returned check should not be made as part of a deposit of current receipts. A separate deposit ticket should be used when such items are made good and redeposited. This will cause the check to appear on the bank statement as a separate item which will facilitate tracing return deposit items when the bank reconciliation is conducted.

MONITORING CASH RECEIPTS JOURNAL

           Both cash receipts and disbursements journals should be maintained as permanent records, prepared in ink or type form. Erasures should not be permitted.

          Accurate cash receipts journals are necessary to assure that all cash receipts are properly recorded and accounted for. Some fundamental controls and procedures associated with the maintenance of cash receipts journals are discussed below.

a.     An employee independent of those responsible for receiving and depositing cash should maintain the cash receipts journal. In some instances this may not be possible because of the small size of the agency, staffing limitations, etc. When this happens an employee independent of both the cashiering and bookkeeping functions should be designated to periodically check the detailed receipt record documents against corresponding bank deposits. This should be done daily if volume warrants, but in any case, at least once a week.

b.      As accountability is established for cash received, a statement of the amount thereof should be furnished to the employee who maintains the cash receipts journal. This statement should be signed by the employee responsible for the collection of the cash receipts. Where collections are made at more than one location, the statement should be a duplicate of the one forwarded to the central cashier when the cash receipts are forwarded for deposit. This statement of accountability may consist of a record of press-numbered receipts or documents (licenses or permits) issued, a reconciliation of a cash register reading or a mailroom tabulation. In all instances, these statements should be numbered and all numbers accounted for. A separate series of numbers should be used to control the statements submitted by each collection location.

c.      The total of each statement should be entered in the applicable cash receipts journal. Columns should be provided for each major type of revenue. Each entry should be referenced by date, type of revenue or receipt, and number of the statement of accountability. The statements should be numerically filed by collection station.

d.      As the monies are deposited, a validated deposit ticket for each deposit should be furnished to and retained by the employee maintaining the cash receipts journal. The amount of each deposit should be entered in a deposit column in the applicable cash receipts journal in such manner as to indicate the specific receipt entries covered by the deposit.

e.      A monthly reconciliation should be made between the total bank deposits and the total receipts recorded in the cash receipts journals. This reconciliation may be made in connection with the monthly reconciliation of the bank balances.

f.      In some agencies, deposits are required for various purposes, such as for rental of equipment, dormitory room deposits, pre-registration deposits, contractors' bid deposits, etc. Records should be established to record the receipt and disposition of such deposits. In most cases, subsidiary records are required to show the name of payors to whom individual deposits will be refunded or credited. Periodically, the total of the balances of the subsidiary records should be reconciled with the cash in the deposit account