2 What is the N9G Tool Box?The N9G tool box provides the field with helpful information on wide range of subjects.The tool box provides information to CNIC Regions & Installations; keeping them “audit-ready” at all times.We have provided each of you with a tool box, just make sure as we provide you a tool monthly, you keep it in your tool box!
3 Topics that will be filling your Tool Box Monthly Cost of Goods Sold NovemberCash & Cash Handling DecemberManagers Financial Review JanuaryNAF Personnel FebruaryContracts MarchReconciliation AprilAssets Inventory May
4 Cash Handling &Cash Controls within your operation Are you confident that your cash is effectively protected?You may think that your present controls are adequate enough to cover your cash against theft or embezzlement; yet, even you must take into account the actual effectiveness of internal controls actually instituted to protect your own interests.A report by the Association of Certified Fraud Examiners (ACFE) states that a fraud suspect is not easy to pick out from a crowd. More than 80% of the frauds in the ACFE study were committed by individuals in accounting, operations, retail sales, management, customer service and purchasing.More than half of all cases in the study were committed by individuals between the ages of 31 and 45, and the median losses tended to rise with the age of the perpetrator.All fraudsters exhibit behavioral warning signs of their misdeeds such as living beyond ones means or exhibiting control issues.Unfortunately only 2% - 5% of all thefts are actually caught through an audit placing a higher responsibility on management and supervisory staff being vigilant to recognize any possible red flags.
5 Guiding Principles for Setting Up Policies & Procedures First we all must understand that a reference to cash covers more than just the actual currency that physically exists and is actually on hand within your operation or facility.Conversely since we are speaking of cash and its controls we should always remember that one of the controls for keeping money secured is to make sure that only a minimum amount is physically available within each establishment, facility, and or individual cashier. This requirement should be reevaluated at least semi-annually or more often as the business environment changes i.e. decrease in patronage increase in charge cards thus decreasing cash requirements etc.Cash and cash equivalents denotes that the monies subject to internal controls not only include those that are kept with the central cashiers’ safe, in the local managers safe or by the individual cashiers. Cash and cash equivalents also includes the funds in the bank controlled not only by the central cashier, but also the accounts payable clerks, HR for payroll, purchasing agents, card holders etc. to which these funds are withdrawn as a means to meet the MWR/NGIS operational and financial requirements
6 Guiding Principles for Setting Up Policies & Procedures Secondly we must always remember that not only is there a CNIC requirement but best practices recommend depositing cash received during the day to a local depository bank.In some instances, and as required a “Two-Person” team is used as a control or an armored vehicle is contracted and used to pick-up the deposit to ensure security of transport.Most importantly the best place for your cash is in the bank and not in your safe or the cashiers safe.Finally, the most important aspect of cash management is to institute efficient and effective security measures for cash handling.Internal control policies and procedures are therefore implemented to safeguard funds and monies against theft, waste and embezzlement.
7 Guiding Principles for Setting Up Policies & Procedures There are twelve operational principles that must be observed and used as guidelines for setting-up your policies and procedures for managing cash and tacking its movement.1. Recording and documentation of transactions2. Segregation of duties and responsibilities3. Authorization of transactions4. Timeliness of payment5. Review and verification of documents6. Security of physical conditions7. Supervision, monitoring and traceability of fund movements8. Planning and budgeting controls9. Establishment of accountability10. Limitations over accessibility and availability11. Summarization and reports12. Element of surprise in relation to periodic audits and related initiatives.Policies and procedures can be formulated by integrating the 12 basic principles above as your built-in preventive and corrective measures in managing your facility or operation
8 Securing the Monies Collected from Business Operations and Other Sources Your daily cash receipts are the most vulnerable and theft sensitive transactions related to cash handling.Internal control requires that balancing and reconciliation procedures are performed daily to ensure that all monies received are handled and recorded accurately.Keep it in mind that cash receipts include customers’ checks and credit card payments as well.
9 Securing the Monies Collected from Business Operations and Other Sources Some key elements to ensure positive internal controls from daily cash receipts include but not limited to:Each person entrusted with cash has signed a sub-custody letterLetter is to be retained at the accounting office or with person who issued the funds.Copy of the letter with the custodian/cashierRecording all overages and shortagesInvestigate all that exceed your established limitInvestigate individual cashiers that are consistently over/short even though they are below your established limitEnsure receipts are issued for manual operations on all sales
10 Securing the Monies Collected from Business Operations and Other Sources Cashiers do not have access to the subtotal or “Z” readings. If cashiers have access to their own register readings it:Allows for excess cash to be takenAllows for register reconciliation by the cashier if a shortage exists due to conducting manual or off-book salesAre the receipt books controlled and verified by someone other than the cashier?Surprise cash counts must be conducted during the shift not prior to or after close outCredit cards must be reconciled at the time of the cash countRun the “X” reading or sub-total to verify fundsAll funds must be rung into the register or a manual receipt is to be issuedInvestigate / explain ALL overages and shortages at the time of cash count
11 Securing the Monies Collected from Business Operations and Other Sources A Daily Activity Report (DAR) is prepared by each cash register operator at the end of his/her shift.Copies of the reports retained and submitted to facility management and original placed into the cash drop bag for accounting.The cash register is utilized purely for sales transactions and should not be used for in-house check cashingRefunds are to be made only if approved by management and enough cash sales have been generatedDiscounts given should be reviewed to ensure they were legitimateReversals have been approved by management or investigated
12 Physical Handling of Cash and Daily Cash Receipts All monies received over-the counter are to be counted and verified in front of the patron before processing the official receipt that acknowledges receipt of payment. The following basic controls should be in place:Official receipts are pre-numbered regardless if it is manually or electronically prepared or generatedThe person receiving the cash payment should not perform dual functions related to accounting or recording of business transactions. Examples include:Petty cash custodian does not issue him or herself cash to make purchasesCatering individual should not be generating the catering contract, receiving payment, and controlling the catering programIf checks are accepted they are only payable to the MWR or NGIS entity.Postdated checks are never accepted.All documents to substantiate the days cash receipts are turned in
13 Petty Cash Transactions The amount of temporary outstanding petty cash fund advances and all funds on hand should always agree with the authorized amount of the petty cash fundPetty cash fund reimbursements should never exceed the total authorized amount of the fund and are required to be completed on the last day of every monthEnsure that all disbursements, including petty cash reimbursement requests, are properly supported and contain the original signatures of the petty cash custodian and receiving individualConsider suspicious and investigate any cash receipt without a printed store name shown on the documentConfirm unusual cash receipt documents with the vendors to determine authenticity.
14 Petty Cash Transactions Review similar invoices and receipt stubs to determine if the documents are being reused or copied If the receipts for petty cash expenses don't contain current dates (such as dates prior to the last reimbursement request), review the supporting documents for previous petty cash reimbursement requests to determine if the expense was paid again in a prior period. Mark all petty cash expense documents "paid" to preclude their re-use on subsequent reimbursements
15 General Rules for Cash and Cash handling controls Separation of dutiesOne of the most important steps you can take to protect cash — and your operation — is to separate cash handling duties among different people. With proper separation of duties, no single person has control over the entire cash process.Best practice is to have different people:Receive and deposit cashRecord cash payments to receivable recordsReconcile cash receipts to deposits and the general ledgerBill for goods and servicesNote: The key to effective cash control while separating duties is to minimize the number of people who actually handle cash before it's deposited.Potential consequences if duties are not separated:Concealed errors or irregularities going uncheckedLost or stolen cash receiptsInaccurate application of revenue to the respective cost centers and general ledger accounts
16 General Rules for Cash and Cash handling controls Accountability, authorization, and approvalCash accountability ensures that cash is accounted for, properly documented and secured, as well as being traceable to specific cashiers.When proper cash accountability exists, you can answer the four W's during a process:Who has access to cashWhy they have access to cashWhere cash is at all timesWhat has occurred from the transaction's beginning to endBest practices:Record cash receipts when received.Keep funds secured in individual cash safes.Document transfer of all funds on a cash receipts or sub-custody letter.Give a receipt to each customer; if register is inoperative provide a pre-serialized manual receipt.Never share your POS passwords, Swipe Key, or cash drawer keys.Issue each cashier a separate cash drawer.Supervisors or manager on duty will approve all voids, refunds, and over rings
17 General Rules for Cash and Cash handling controls Accountability, authorization, and approval, continuedPotential consequences if accountability does not existLost or stolen cash receiptsInaccurate application of revenue to the respective cost centers and general ledger accountsImproper use of MWR/NGIS assets
18 General Rules for Cash and Cash handling controls Security of AssetsBe sure to keep all of your resources physically protected, including your cash handlers. To promote a safe work environment when working with cash the following recommendations are provided.Best practices:Restrict access of cash to as few people as possible.Lock cash in a secure location: individual safes for cashiers and managersDirector or Central Cashiers to maintain emergency combinations and or keys to all safes; assign passwords only to authorized personnel.Change combinations to all safes annually or when the custodian of funds is changed or when the custodian leaves.Minimize the amount of funds held overnight.
19 General Rules for Cash and Cash handling controls Security of Assets, continuedMinimize the amount of cash used for daily operations to the minimum needed – reevaluate annually or when patronage changesUse a buddy system when taking funds from one location to another.Count cash in a non-public area not easily visible to othersPotential consequences if cash is not securedUnsafe work environmentLost or stolen cash receipts
20 General Rules for Cash and Cash handling controls Review and ReconciliationYour reconciliation activities confirm that you've recorded transactions correctly. Perform monthly reconciliations of cash receipts and bank account statements to provide good checks and balancesBest practicesCompare DAR to actual deposit and sales recordsRecord, count and balance cash receipts dailyPerform periodic surprise cash counts other than the required quarterly counts
21 General Rules for Cash and Cash handling controls Review and Reconciliation, continuedPotential consequences if review and reconciliation activities are not performedErrors, discrepancies, or irregularities not detectedLost or stolen cash receiptsInaccurate application of revenue to the respective cost centers and general ledger accounts