Petty Cash and Change Funds

Department Responsibilities

  • Be aware whether your department has a petty cash and/or change fund and that is it properly recorded on the Oracle/PeopleSoft general ledger
  • Request establishment of new funds through the Accounting Office
  • Designate a custodian of the fund
  • Make sure the fund is properly safeguarded
  • Ensure disbursements are allowable and supported by invoices/receipts
  • Make sure reimbursement of expenses are done periodically (and assigned the proper expense coding), especially at fiscal year-end so expenses are applied to the proper fiscal year
  • Allow access to the funds to internal and external auditors for periodic surprise counts.


If the petty cash custodian makes a petty cash disbursement the original receipt or invoice (which contains the date, amount, and nature of the transaction) should be immediately placed in the petty cash box. If the petty cash custodian disburses cash to another employee for a subsequent purchase, the custodian must have the employee sign a petty cash voucher indicating cash was withdrawn from the fund for a later purchase.

It is recommended that a petty cash disbursement log be maintained to provide good accountability of the expenses.

Allowable Purchases

Allowable petty cash expenses include the following:

  • Expenses (e.g., freight and postage due) that must be immediately paid due to the nature of the item
  • Emergency expenses (e.g., for machine repairs) incurred to support continued daily business operations
  • Expenses incurred where checks and business credit are not available or permitted
Non-Allowable Purchases

Petty cash shall not be used for the following:

  • Salaries or overtime
  • Travel and entertainment
  • Charitable contributions
  • Purchases not allowed under NDSU policies or guidelines, OMB policy or State law.

Establishing a Fund

An Accounts Payable Voucher must be prepared and submitted to the Accounting Office to setup a new petty cash or change fund. The department's local fund should be used, along with account code 101001 (petty cash) or account code 102001 (cash on hand), when coding the Accounts Payable Voucher. (This coding will make the petty cash or change fund show up as an asset in the local fund.) The Voucher should include a written justification.

According to state law, the state auditor must approve a new petty cash or change fund, regardless of the size of the fund.

The department should notify the Accounting Office to receive instructions on how to close the fund, if it becomes apparent that a petty cash or change fund is no longer needed.

Designation of Custodian

The department head should designate a custodian of the petty cash or change fund.

Internal Control

Once established, the petty cash fund should be maintained at the authorized level at all times (i.e., the cash plus receipts in the fund should always equal the authorized amount). Periodically, there will be unannounced counts by internal or external auditors to make sure the fund is maintained at the authorized level.


Use the vendor number that was used to set-up the fund when reimbursing expenditures of the petty cash fund. When reimbursing expenditures, the invoices/receipts should be attached to Accounts Payable Voucher.  In addition, the fund, department, expenditure account, program and project (if applicable) numbers should also be shown on the Voucher.

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