All disbursements, except those from non-bank petty cash
funds, should be made by check. The following discussion
relates to checking accounts and to petty cash accounts
established under Section 6.17 of the State Comptroller's
Rules and Regulations.
Fraud involving cash receipts occurs more frequently than
in cash disbursement procedures, but in the aggregate,
the amount misappropriated through irregularities in cash
disbursements is much greater than the amount misappropriated
through cash receipts.
However, unless reasonable standards of internal control
are violated, fraud involving cash disbursements usually
is not possible. The following standards should be applied
in prescribing procedures for handling cash disbursements.
a. The authority and
responsibility for all expenditures should be set forth
in a general policy manual developed under the supervision
of the agency head. The policy developed should be implemented
by detailed procedures.
b. The function of approving
vouchers, preparing checks and recording disbursements
should be handled by different employees. Employees
handling disbursements should not have duties relating
to cash receipts or the reconciliation of bank accounts.
c. Vouchers payable should
be promptly recorded.
d. Payment should be
made only after the original voucher and all copies
of pertinent papers have been processed and approved.
e. Invoices should be
cancelled or stamped in a prescribed manner in order
to preclude reuse of the documents.
f. A periodic review
of vouchers should be made by an authorized person to
determine that all processing steps and approvals are
being followed properly.
CONTROL OF DISBURSEMENTS
All checks should be serially press-numbered and all numbers
accounted for. As a protection against misuse or alteration,
care should be exercised in preparing checks. Written
and figure amounts should be inserted far to the left
in the prescribed spaces to avoid the possibility of a
later insertion in front of the correct figure. Checks
should never be drawn to "Bearer" or "Cash".
Further steps to be taken to ensure that checks are properly
a. A limited number of
persons should be duly authorized to sign checks and
the signatures of these persons should be on file.
b. The supporting vouchers
and documents should accompany the checks and be examined
before the check is signed. The documents should have
the prescribed approvals showing compliance with purchasing,
receiving and payment routines. Signature cards, properly
approved, should be on file for those employees authorized
to approve documents, such as purchase orders and vouchers
and receiving reports.
c. Checks should not
be distributed or mailed by the same employee who prepares
the checks if he has access to records which pertain
d. When dual signatures
are required, the two employees authorized to sign checks
should be administratively independent of each other.
Rubber stamps should not be used for check signing purposes.
e. Check signing machines
should not be used except in cases where a large volume
of checks is processed. When they are used, the signature
plates should be kept in the custody of the officials
authorized to sign the checks or their authorized representatives.
Although the use of the check signing machine relieves
the officials of the manual signing operation, these officials
still should be held responsible for an examination of
the supporting documentation. If two signatures are required,
a separate signature plate should be used for each signature.
Check signing machines usually provide registers to control
the number of checks signed. These control totals should
be reconciled daily with the number of checks issued.
f. When it is necessary
to void a check, it should be marked "void"
and the signature space removed. All voided checks should
be filed numerically with the paid checks returned by
g. The number of press-numbered
checks purchased should be supported by a certification
from the printer as to the quantity shipped.
h. All checks issued
should be entered in numerical order in a cash disbursement
journal. Separate disbursement journals should be kept
for each bank account. Where necessary, disbursement
distribution columns can be provided.
There should be evidence that an agency has received proper
value before a voucher is authorized for payment. This
should consist of evidence that: (a) goods or services
have been received; (b) items delivered were as specified;
and (c) prices, terms and extensions shown on the vendor's
invoices are correct. To ensure that maximum discounts
are taken, vouchers should be paid within the due dates.
A report by the Institute of Internal Auditors states
that an optimum standard of control over the processing
of vouchers payable would be one where:
a. The purchasing department,
having ordered material on the basis of requisitions
from another department, sends a copy of the order to
an accounts payable unit not under the purchasing department's
b. A receiving department,
also not under the supervision of the purchasing department,
would send a report of quantity and quality of received
material to the accounts payable unit.
c. Incoming invoices
would be delivered directly to the accounts payable
d. The accounts payable
unit, having matched orders, receiving and inspection
reports, and invoices, would prepare a disbursement
voucher as authorization for payment to the vendor.
Where these standards cannot be met, the control requirement
is to provide as much separation as possible between the
responsibilities for: originating requisitions; placing
orders, reporting that goods and services have been received;
and approving invoices for payment.
Checks may be returned by the post office as undeliverable.
The volume of undeliverable checks is especially high
in those agencies where numerous fee refunds are made.
Strict control must be maintained over such checks. The
checks should be delivered by the mailroom to an employee
responsible for their control. This employee should not
have access to the undeposited receipts of the agency.
Prompt disposition of such checks should be made either
by subsequent delivery or cancellation and redeposit.
A permanent record of the checks returned and their disposition
should be kept.