GHULAM MURTAZA, CIA, ACCA

SENIOR AUDITOR
ZULFIKARABAD DEVELOPMENT AUTHORITY

Definitions
The Policy Statement
Salient Features of Policy
Petty cash management process
Internal Controls for Fund
Roles and responsibilities for petty cash
Responses received summary

key terms used in petty cash

Petty Cash Fund: A limited amount fund established for purchase goods that
are low value and when use of the Authoritys normal procurement system is
impractical or cannot be used. The combination of cash and petty cash receipts
must equal the authorized amount of the fund at all times.
Petty Cash Custodian (Custodian): A full-time employee of the Authority who
is responsible for disbursing, safeguarding, administering and reconciling the
assigned petty cash fund.

Petty Cash Approver (Approver): Managing Director of the Zulifikarabad

Development Authority who has been designated as competent authority to
perform such duties while managing the operations of the Authority.
Petty Cash Authorizer (Authorizer): A full-time employee of the Zulifikarabad
Development Authority who has been given authority by the competent
Authority to authorize replenishment requisitions of a petty cash fund along
with reviewing reconciliations of the account.

Cash Advance: An advance of amount from a petty cash fund

account for the purpose to pay for approved business expenses.

Petty Cash Reimbursement request: A request to reimburse

amount from petty cash fund account used to pay for authorized
business expenses where cash for such expenses may not be
available at the time the expenses are incurred.
Petty Cash Reconciliation: Petty cash reconciliation is a
formal review of petty cash records, to see if there have been
any undocumented disbursements. It is an example of detective
control to verify that all disbursements are recorded and are for
business purpose.

THE CORE POLICY

A petty cash fund may be established only by making a request to, and
receiving approval from, Competent Authority. The Departments may establish
a petty cash fund to handle small, unanticipated purchases from vendors when
immediate payment is required, and the formal procurement systems are
impractical or cannot be used.

Petty cash must not be used to pay vendors when a purchase order, or
payment voucher can be used. The department using the petty cash fund must
ensure that all petty cash purchases and reimbursements adhere to the
Authority and government of Sind procurement policies and procedures.

The Managing Director is the competent authority and has purview over
establishing, setting limits for, and closing departmental petty cash funds and
over allowable expenditures and reimbursing petty cash funds.

The Authoritys approved petty cash funds provide cash advances in certain
situations. However, the petty cash funds cannot be used for payroll advances.

Limits, persons and time

frame

The Managing Director is the competent authority and has

purview over establishing, setting limits for, and closing
departmental petty cash funds and over allowable
expenditures and reimbursing petty cash funds.
The Managing Director being competent authority will be
the approver of all the reimbursement and advance
requests.

The Finance Director is assigned as the authorizer for both

funds to oversee administration of funds and authorize
reconciliations and replenishment requests.

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A departmental petty cash fund at accounts

department under custody of Accounts Officer is
limited to PKR 100,000.

Another petty cash fund in the administration

department under the custody of Assistant Director
Administration amounting PKR 20,000 is limited.

Individual petty cash expenditures may not exceed

PKR 7,000.

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The Petty Cash Custodian, the Petty Cash Authorizer

along with the Petty Cash approver are responsible for
limiting the use of the fund to legitimate and allowable
business related expenses.

The Authority related business petty cash allowable

expenditure is defined as one that meets following
conditions;
Expense is incidental.
Normal purchase and procurement process cannot be
followed.
Expense is of small amount worth PKR 7,000 or less.
i.

ii.
iii.

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Petty cash may not be used for;

Petty cash must not be used for recurring expenses requiring

fixed amount of money at a certain fixed time.

Reimbursements to cash checks.
To make salary advances or loans.
Payments to a single individual or entity exceeding PKR 7,000
per transaction.

Zufikarabad Development Authority ZDA management and

staff may seek up to PKR 7,000 in advance from the petty
cash fund to cover:
Expenses such as parking, tolls, taxes, etc., that may arise as part of a
day trip on official Authority business; and
The expense of an allowable certified business meal.
Any other expenditure for which the amount is approved from the
Competent Authority.
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In compliance with polices related to defalcation and loss event, any shortages
over PKR 0.1 rupees as the result of theft, fraud, defalcation, or other
irregularities should be reported to the competent authority and the top
management not later than the first business day following the discovery.

Travelers have 15 days from the completion of travel (the due date) to submit
the appropriate documentation to Petty Cash Fund Custodian and settle the
cash advance.

Thirty (30) days after the due date, Petty Cash Fund Custodian will charge the
individual for the unpaid balance as bad debt and the Competent Authority will
be notified of outstanding cash advance balances.

The other cash advance holders should settle their advance within 7 days by
submitting expense receipts and/or returning balance to the fund custodian.

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The petty cash reconciliation should be made

on every replenishment date.

Need to sign acknowledgment on petty cash

receiving form while submitting receipts.

In order to record transaction with details and to

maintain a complete log of petty cash
transaction, Receiver cash signs the demand
book with date.
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Establishing, managing,
changing and Closing a
fund

Establishing or Closing Petty Cash Fund

The competent authority must nominate a person to act as authorizer
for the petty cash fund.
The competent authority with consultation of concerned departmental

head (in which fund is created) must designate an individual to act as

the petty cash custodian.
The department head (in which fund is created) mentioning the petty
cash custodian and petty cash authorizer must sign and submit
the petty cash fund request. This request must be submitted to
Managing Director Competent Authority, which has the final authority
to establish a fund.

In order to increase or decrease the amounts or close a petty cash

fund, the request in writing must be submitted to competent
authority for approval.
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Administration
Department

Finance
Department MD / The Competent
and/or Fund Custodian Authority

The custodian screens

and
makes
the
Demand Book is kept
disbursements
and All disbursements and
Expenses
or
after the approval.
advances
are
disbursements
are
Receiving
forms, approved
recorded for approval
Reconciliations
and
vouchers are prepared.

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Information Flow Diagram

The Information flow
depicts the petty cash
management process for
ZDA

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The Petty Cash Custodian is responsible for managing his

departmental petty cash fund and is the only person in the
department who may disburse cash. The custodian is
responsible for balancing and reconciling the departmental petty
cash fund on replenishment date.

The Petty Cash Authorizer is responsible for verifying the

appropriateness of expenditures, if solicited for, and authorizing
the petty cash fund reconciliation.

The Petty Cash Custodian, the Petty Cash Authorizer along with
the Petty Cash approver are responsible for limiting the use of
the fund to legitimate and allowable business related expenses.

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Petty cash may be used for allowable Authority

purchases only after it is determined that
payment cannot be made by purchase order or
payment voucher. The Authority related
business petty cash allowable expenditure is
defined as one that meets following conditions;
a) Expense is incidental.
b) Normal purchase and procurement process cannot be
followed.
c) Expense is of small amount worth PKR 7,000 or less.

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 In

addition, Petty cash may not be

used for;
Petty cash must not be used for recurring
expenses requiring fixed amount of
money at a certain fixed time.
Reimbursements to cash checks.
To make salary advances or loans.
Payments to a single individual or entity
exceeding PKR 7,000 per transaction.
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The fund is to be reconciled at least monthly

and on replenishment date. Count the cash
on hand and add up the receipts, the total
should equal the authorized amount of the
fund. If there is an overage or shortage was
caused by carelessness on the part of the
custodian, the competent authority will make
a determination as to whether to replace the
custodian.
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At any point in
time the total of
the cash count
plus vouchers in
the petty cash
drawer should
equal the
total in the Petty
Cash Fund.

Petty Cash Drawer

Petty Cash
Vouchers

Rs

Total of the established Petty Cash

Fund
(Assumes no decrease or increase in cash due to
error or theft.)
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It is the responsibility of the custodian to report

to the petty cash authorizer that the petty cash
fund is larger than needed. A rule of thumb to
follow is that the fund should turn over every
four weeks, i.e. every four weeks the total
amount of the fund should be replenished. A
balance in excess of four weeks could indicate
extra funds that should be deposited with the
DDO Account and documentation processed to
decrease the fund.
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Safe guarding the fund

The petty cash fund must be in the control of the

custodian. Only the custodian should be allowed access
to the fund. The cash must be kept in the custodians
locked safe.

All petty cash funds shall be subject to periodic review by

the Authoritys Internal Audit Department. The petty cash
authorizer and the petty cash custodian are both
responsible for ensuring that the funds are properly
safeguarded. Cash must not be stored in desk drawers or
filing cabinets since they are easily accessed. Petty cash
funds may not be commingled with other types of Authority
funds or personal funds.

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The Managing Director, as competent authority has the purview

to require the use of any forms and procedures considered
necessary for proper internal control of petty cash funds.

The Zulfikarabad Development Authority, with respect to petty

cash must adhere to the following internal controls at a
minimum.
There shall be at least three people handling petty cash and
demand book:

A petty cash custodian who is primarily responsible for the petty cash
funds, signs receiving forms, and disburses the actual cash;
An authorized official or employee nominated as authorizer for reviewing
reconciliations and approving replenishment request; and
An authorized official or employee nominated as approver who reviews
and approves payments and disbursement vouchers, but does not have
the authority to sign checks or disburse actual cash.

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The reconciliation of the petty cash fund on monthly

basis and on replenishment date should be prepared
and kept on record for audit purpose.

All the petty cash disbursement should be listed on

Demand book and are approved by the competent
authority.
The bills or invoices for reimbursement or for cash
advance should be endorsed by the person
requesting petty cash.
The internal audit should perform periodic review of
petty cash record and reconciliation along with
surprise cash counts.

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The Roles &

responsibilities

The cash advance or reimbursement recipient is responsible for:

requesting a cash advance or reimbursement from Petty Cash Fund Custodian;

using the cash advance for qualifying Authority business purposes;
returning unused cash advance funds as soon as possible; and
Settling the cash advance within the prescribed time frame.
Ensuring petty cash payments requests are within the prescribed rupee amounts.
Getting approval from departmental head for cash advance request prior to
submitting it to Competent Authority, where department send a request for cash;
guaranteeing repayment of the cash advance,

The Petty Cash Fund Custodian is responsible for:

reviewing petty cash receiving request forms;

initiating collection of any unsettled petty cash advances; and
Sending reports of unsettled cash advances to the Competent Authority;
Preparing reconciliations, replenishment request and updating and/or informing
accounts department for updating of record.
Safety and security of the safe.

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Responses to the policy

document

Responses received

replies

Reference to SPPRA procurement systems

are not in use so petty cash is used. (Dir.
Ops).
Who will prepare the voucher in the
process. (Dir. Ops).
Legitimate and allowable business
expenses should be classified or listed.
(Dir. Ops).
Every procurement is covered by SPPRA and these
kind of purchases are termed as petty purchases
by SPPRA.
The person demanding cash will fill the receiving
voucher but the custodian has main role as with
out proper filling and signing cash will be not
disbursed.
A frame work based approach is taken for
classifying expenses as business related allowable
by giving definition of that instead of giving list of
possible expenses type.
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Responses received

Why the receiver of cash also required to

sign on the demand book. (Dir. Ops).
The investigation of losses due to fraud
and irregularities found is too much for
small amounts. (Dir. Ops).

The receiver of cash and for whom cash is

approved can be two different person also
the date of approval may also be different
than the cash receiving date, therefore, in
order to completely record the transition
activity we require signature of receiver.
The presence of fraud and / or irregularity is
enough ground to start investigation if
competent authority would like.

replies

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Responses received

replies

The word department is used instead

Authority. (Ac Off).
The allowable expenditure need to be
clarified. (Ac Off).
Name of officers has been used instead
of designation. (Ac Off).
Section 4, statements not cleared. (Ac
Off).
It is department or wing of Authority like
finance or Admin that is mention. Now
elaborated appropriately in report.
The report contains definition of allowable
business expenditure.
Accepted and amended.
More elaborated now.
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Responses received

Reconciliations monthly or on
replenishment. (Ac Off).
Finance wing is ready for surprise cash
count provided it is approved by
competent authority. (Ac Off).
There should be additional column for pre
audit in demand book.(Ac Off)

replies

Only on replenishment date.

Approval is requested.
There should be proper cost-benefit
analysis before deciding on issue.
Furthermore, the petty cash and demand
book is under periodic review of audit.
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Responses received

There is contradiction in the content of

Para 6-2 and Para 10-1.(Ac Off).

Now removed.

replies

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End of Presentation

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