CASH DISBURSEMENTS

          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.

STANDARDS

          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 drawn include:

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 thereto.

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 the bank.

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.

PAYMENT DOCUMENTATION

          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 supervision.

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 unit.

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.

UNDELIVERED CHECKS

          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.