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Petty Cash and Other Revolving Funds

This page provides a general overview of revolving funds and imprest accounts for local governments in Washington State, including petty cash, change funds, advance travel funds, confidential drug buy/investigative funds, internal controls, and sample documents.


Overview

The Washington State Auditor’s BARS manual addresses petty cash and similar funds in Section 3.8.8 (see Cash and GAAP). The guidance applies to petty cash, imprest accounts, change funds, advance travel, stamp funds, or any other revolving funds set aside for making change, minor disbursements, or similar uses.


What Are Revolving Funds?

A revolving fund account (sometimes referred to as an imprest fund) is established by the legislative body for specific amounts and uses. As funds are spent, they are replaced to their codified level by a check or warrant drawn and charged to the applicable fund. This is the “revolving” aspect of such accounts.

These types of funds allow the purchase of small items, such as office supplies, stamps, or shipping costs. They are also frequently used as change funds to accommodate payments by customers who pay with cash. Some revolving funds can be used for advance travel expenses or confidential law enforcement investigations.


Statutory Authority

Guidance on revolving funds comes from the State Auditor’s Office (SAO) Budgeting, Accounting, and Reporting System (BARS), Section 3.8.8 of both the Cash and GAAP manuals. The BARS manual is authorized by RCW 43.09.200.

There are no RCWs directly governing the establishment and use of revolving funds except in the case of advance travel funds. RCW 42.24.120 - .160 requires that monies from this fund are to be used solely for travel advances, per appropriate rules and regulations prescribed by the state auditor.


Types of Revolving Funds

There are several common types of revolving funds:

  • Advance travel funds may be used only for cash advances for valid travel expenses of a person going on travel status that would otherwise be paid out of their personal finances and reimbursed. It may not be used for expenses already incurred, nor may it be used for direct payments to vendors, such as for airline tickets, car rentals, or hotel reservations. More information about travel expenses can be found on our Travel and Expense Reimbursement Policies page.
  • Change funds are most often used to make change for utility bill payments made onsite. Sometimes referred to as cash drawers or even as petty cash by some jurisdictions, it is typically a set amount of money in the cashier’s drawer at start of business. Not to be confused with a petty cash account that is used for small purchases (see below), the amount at the close of business should be the same as the opening amount.
  • Confidential funds, sometimes known as drug buy money or investigative funds, are used for confidential law enforcement investigations, such as reasonable expenses for informants or undercover officers, undercover purchases (such as drug buys), or the purchase of specific information from informants.
  • Petty cash is a set amount of currency kept onsite for small purchases such as postage, materials, or office supplies. All expenditures must be supported by proper receipting and the amount of cash plus receipts should equal the established petty cash amount at the close of business. A petty cash fund is sometimes used as both petty cash and a change fund (see Ellensburg Ordinance No. 4763, sections 2.16.2360 and 2.16.2440).

Establishing or Changing a Revolving Account

Each revolving fund must be authorized by the legislative body of the jurisdiction through the normal process used to pass legislation. The Cash and GAAP BARS manuals have minimum expected controls for revolving funds, including how to establish an imprest account or a revolving fund:

The governing body must authorize each revolving fund in the manner that local legislation is officially enacted, i.e., resolution or ordinance. This applies also to all subsequent increases or decreases in the imprest amount. [Cash and GAAP BARS manuals, Section 3.8.8.20]

The legislation may establish multiple revolving funds in the same ordinance.


Internal Controls

Section 3.8.8.20 of the BARS manual (see Cash and GAAP) lists minimum internal controls expected. Review the entire BARS section thoroughly when writing or amending your policies. SAO’s guidance on this includes instructions for entities with a small staff on how to maintain separation of duties without hiring additional staff. This is a partial list of controls covered in the manual:

  • Each agency should appoint one custodian for each account who is independent of processing invoices, signing checks, or general accounting and cash receipting functions.
  • The authorized balance should not exceed one month’s salary or the surety bond covering the custodian.
  • The fund should be reconciled to the authorized balance and actual balance at least once per month.
  • Independent, unscheduled (surprise) counts of petty cash funds should be performed at random with the custodian, but without their prior knowledge.
  • Physical cash on hand must be secured in a locked drawer or box.
  • Funds may never be used for personal cash advances, loans, or expenditures, or for check-cashing services for employees or others, excepting when authorized by an adopted policy to cash employees’ checks in accordance with RCW 35.21.087 or RCW 35A.40.110.

See the BARS manual 3.8.2, Employee Travel (see Cash and GAAP) for additional guidance specific to advanced travel revolving funds. See the BARS manual 3.8.9, Confidential Funds (see Cash and GAAP) for additional guidance specific to revolving funds established for confidential investigative purposes.

For general guidance regarding internal controls, see the Washington State Auditor's Office Internal Controls Checklist for Local Governments.


Examples of Petty Cash Provisions

Below are selected examples of local ordinances, resolutions, code provisions, and policies/procedures related to petty cash and revolving funds.

Ordinances and Resolutions

  • Buckley Ordinance No. 04-15 (2015) – Repeals and replaces revolving fund chapter of municipal code with a new chapter entitled Petty Cash. Updated to reflect actual practices of using the cash funds as change funds for various city operations and locations. Formally adopts police department drug buy funds and updates internal controls.
  • Des Moines Ordinance No. 1732 (2020) – Increasing imprest cash funds, including the Police Investigative Fund.
  • Ellensburg Ordinance No. 4763 (2017) – Establishes a utility change fund, animal shelter change fund, Adult Activity Center revolving petty cash fund, library change and petty cash fund, and several other funds. Repeals other funds and clarifies language.
  • Sequim Resolution R2014-01 (2014) – Includes designation of custodian, location, amount, and type of fund (petty cash or change).

Code Provisions

  • Aberdeen Municipal Code Ch. 3.24 – Creating petty cash funds, authorizing specific amounts for certain departments, and describing procedures. Brief and concise.
  • Gold Bar Municipal Code Ch 3.36 – Names custodian and details responsibilities of internal controls.
  • Kirkland Municipal Code Ch. 5.69 – Authorizing finance director to establish a petty cash fund for authorized disbursements and to make change; and authorization and direction to establish regulations for operations and use in compliance with the BARS manual.
  • Mason County Code Ch. 3.140 – Setting the number of cash drawers and their amounts, assigning authority and responsibility for internal controls to the Treasurer.
  • Woodinville Municipal Code Ch. 3.24 – Petty cash fund and advance travel fund. Authorizes Director of finance to establish regulation, in accordance with SAO requirements. Does not enumerate permissions and prohibitions.
  • Woodland Municipal Code Ch. 3.05 – Names custodian of funds, includes periodic reconciliation by non-custodian, documentation required for reimbursement, replenishment schedule, and prohibitions on use of funds.

Policies and Procedures

Cities

Counties

Special Purpose Districts


Last Modified: September 29, 2020