Petty cash

This relates to non cheque book schools.  Cheque book schools should see the section under Cheque book schools guidance.

Petty cash payments by cheque or cash should be recorded in the following way. 

It is recommended that cash items can be processed and posted in batches but cheque items are processed and posted individually to aid identification and bank reconciliation.

• Focus
• General Ledger
• Petty Cash
• View expenditure
• Click + button
• Choose Petty Cash Book
• Click right-hand + button
• Choose the cost centre to charge the expenditure - Use magnifier for selection
• Choose the ledger code to charge the expenditure - Use magnifier for selection
• Fund automatically appears for the combination selected
• Description for Cash Items "normal description of goods"
• Description for Cheque Items "cheque number, payee and description of goods"
• Post Petty Cash by clicking on the Red Letterbox icon
• Cheque payments posted individually and description cheque number and payee minimum
• Cash payments posted in batches with description as normal

As each transaction is processed, the balance of petty cash remaining appears in the Cash in Hand box which should represent total cash and bank balances available.

Confirm the current balance as follows:

• Reports
• General Ledger
• Balances and Reserves

The bank account should still be a nil balance, and the petty cash balance should be the same as the cash in hand.

Reconciling the petty cash bank account

Where a school uses a petty cash bank account, a manual reconciliation will be needed. This will identify the following:

• The balance of the last bank claim to use on the Petty Cash Claim, Section B
• The number of cheques drawn but not yet included on the bank statement sheets

Making a claim

Two reports from the FMS6 are required:

Report 1 - Petty Cash Ledger Code Expenditure

• Reports
• General ledger
• Petty cash
• Ledger code expenditure
• Select Account Petty Cash
• Select dates of this present claim
• Print

This print will show expenditure for the claim period by the Ledger Code and Fund.

Report 2 - Petty Cash Expenditure Listing

• Reports
• General ledger
• Petty cash
• Expenditure listing
• Select Account Petty Cash
• Select dates of this present claim
• Print

This print will show gross individual transactions made from petty cash.

From these prints, the petty cash claim is now compiled and submitted to North Somerset's Payment Section for reimbursement.

There are two parts to the claim, which can be completed manually or by using the automated version installed by the CAPITA Team (refer to the CAPITA Handbook).

Part 1 - Reimbursement claim form

Complete the following:

Header:

• Claim Dates - date the claim is from and to
• The year
• The claim number for that year
• Establishment - School name
• DCFS number of School
• Address of school

Section B - Bank reconciliation:

• Complete bank reconciliation as normal and complete the bank details
• Balance as per tin should be the amount of cash in hand
• Total will be the current balance of bank and cash

Section C - Petty Cash Imprest Reconciliation:

• Amount of the claim will be the total of the Petty Cash expenditure listing report
• Cash in Hand FMS6 should be the Petty Cash balance on FMS6 as viewed in balances and reserves, and should be equal to the total of Section B
• Add any claims not received
• The total should agree with the School's Petty Cash (Imprest) level

Section D - for Central Finance Use Only

Section E - Enter the separate amounts from the Petty Cash Ledger Code Expenditure Report

Section F - Enter the cost to Establishments amounts by Ledger code and Fund Number from the Petty Cash Ledger Code Expenditure Report. This should total to the Total Excluding VAT box in Section E.

Part 2 - Petty cash - Record of funds

This fund summary is required to assist with processing the reimbursement when it is received and is completed automatically by the system.

The claim must be signed by the Headteacher then sent to North Somerset's Payment Section with the Petty Cash Expenditure Listing attached. Please copy these documents before sending.

Retain the Record of Funds to assist with the reimbursement and await the reimbursement cheque.

Receiving the reimbursement

All schools on receipt of the reimbursement cheque/BACs notification must, whether or not they actually have a bank account, represent the cheque being cashed (for schools with just a petty cash "tin"), or the cheque being paid in (for schools with a petty cash bank account) in FMS6.

The VAT element must be paid in via a VAT Reimbursement.

• Focus
• Budget Management
• Fund to Bank Journal
• Click the + button
• Increase Bank
• Enter the correct period
• Choose Petty Cash Bank Account
• Choose the correct fund using part 2 of the claim, record of funds
• Type in net amount (less VAT)
• Narrative "Reimburse Petty cash Month (appropriate month)
• Click on blue tick to save
• Say yes

Repeat this process for each fund to be reimbursed.

To process a VAT reimbursement

• Focus
• General Ledger
• Manual Journal Processing
• Click + to add
• VAT Reimbursement
• Next
• Enter the correct period
• Narrative "Reimburse Petty cash Month (appropriate month)
• Next
• Ledger Code : Petty Cash Bank Account
• Enter appropriate Ref
• Next
• Finish
• Click + at side of 'Journal Lines'
• Choose IN17-Input VAT Standard Rate
• Enter Amount as a credit
• Enter suitable Narrative
• Update & Close
• Click on blue tick to save
• Post

All Petty cash transactions, regardless of whether they are cash or Cheques, will be recorded against the petty cash (tin) account. Therefore the reimbursement needs to be transferred to the petty cash account (tin).

• Focus
• General Ledger
• Petty cash
• Click on view
• Choose reimbursement only
• Click on +
• Period "appropriate month"
• Amount both Net & VAT i.e. total of cheque
• Cheque number "number of the reimbursement cheque"
• Narrative "Petty cash reimbursement month (appropriate month)"
• Click on the blue tick to save
• Say yes to post petty cash transaction

Now check that the petty cash account shows the correct balance as follows:

• Reports
• General Ledger
• Balances and Reserves
• The bank account should now show a nil balance and the Petty cash the current balance in the Listing

Continue the process of paying and reimbursing for the rest of the financial year.

VAT coding

Where VAT is being claimed on Petty Cash expenditure, a VAT receipt is needed.

VAT codes on FMS6 are as follows:

• Z - Zero-rated VAT for items where no VAT is applicable, for example, books
• S - Standard rated VAT where a receipt is held proving that VAT has been charged at the basic rate
• O - Outside scope for items where VAT may have been charged but you have no VAT receipt to prove this

Procedures and trouble-shooting

North Somerset (non local payment) Schools petty cash system, also known as the Imprest Account, is detailed below.

North Somerset Council advances the school a sum of money, also known as the "float", to enable the School to process small cash payments, which are posted into the accounts on a periodical basis.

At the end of each period, the school ascertains the amount spent, which is posted to the General Ledger in FMS6 on the relevant Ledger Codes, and claims from North Somerset an amount equal to that spent.

The petty cash in hand should then be equal to the original amount with which the period was started.

An example would be as follows:

Petty cash float

Period	Action	£
Period 1	North Somerset advances school	100
	The school pays out in the period	75
	Petty cash now in hand	25
	North Somerset now reimburses the school the amount spent	75
	Petty cash in hand end of Period 1	100
Period 2	The school pays out in the period	70
	Petty cash now in hand	30
	North Somerset now reimburses the school the amount spent	70
	Petty cash in hand end of Period 2	100

This system gives the school good control as it can be checked at any time, as the cash in hand plus the amount spent in the period according to the vouchers should always equal the cash "float".

Schools can be reimbursed by cheque, which is cashed, and the money held to make petty cash payments. This has become known as the "tin".

There may be times when it is more convenient to pay for petty cash items by cheque.  In this instance, a petty cash bank account can be requested.

The reimbursement is in the form of a BACs payment and is paid into this account and if cash is still required, a cheque is written on the account and cashed to provide money for the "tin".

Payment should be made to individuals on production of a receipt.

A VAT receipt should be presented in order for the school to pay only the cost of the goods.

Payroll related items such as travel expenses should not be paid from petty cash but submitted on the appropriate forms to payroll.

Income should not be paid into the petty cash bank account.

Further information can be found in paragraph 12 of Annex B of the North Somerset Scheme for Financing Schools.

Viewing your petty cash balance

You can view the current petty cash balances through FMS6 in the following way:

• Reports
• General Ledger
• Balances and Reserves

Move the cursor down through the various funds and you will see the Petty Cash bank account and Petty Cash Tin totalled on the line that reads Petty Cash.

The total of the petty cash "tin", plus the bank account, together with any outstanding vouchers, should equal the imprest level.

Physical security

Petty cash should be held in a lockable cash box.

Schools should ensure that their insurance cover is compatible with the amounts of cash held in the school on a regular basis and secure the cash in a safe where required under the policy.

Access to cash, cash records and forms should be restricted to authorised personnel.

Secure safes and containers should be provided for cash, records and valuables.

Where, for example, school meal income is secured on behalf of a catering company, the liability for loss should be agreed in writing. Cash passed between people must be signed for.

There should be independent checks on petty cash holdings and records.

This should be carried out by surprise counts and reviews of reconciliations by an independent person who is not involved in recording petty cash transactions.

Schools may wish to open a bank account to support their petty cash imprest.

The following controls should be applied:

• The maximum limit of the account must be kept low - The most appropriate limit will vary according to the size of the school and must be determined by the governing body. It should not exceed £1000 at any school, except in special circumstances agreed by the governors
• The use of cash for any transactions should be kept to an absolute minimum
• The imprest system should be enforced rigidly
• The account must not be allowed to be overdrawn and the school's bank should be informed of this

For further information visit our Petty cash FAQs page.