N9G “TOOLBOX”
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!
Topics that will be filling your Tool Box
Monthly
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Cost of Goods Sold
Cash & Cash Handling
Managers Financial Review
NAF Personnel
Contracts
Reconciliation
Assets Inventory
November
December
January
February
March
April
May
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.
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
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.
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 transactions
2. Segregation of duties and responsibilities
3. Authorization of transactions
4. Timeliness of payment
5. Review and verification of documents
6. Security of physical conditions
7. Supervision, monitoring and traceability of fund movements
8. Planning and budgeting controls
9. Establishment of accountability
10. Limitations over accessibility and availability
11. Summarization and reports
12. 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
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.
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 letter
o Letter is to be retained at the accounting office or with person who issued the
funds.
o Copy of the letter with the custodian/cashier
Recording all overages and shortages
o Investigate all that exceed your established limit
o Investigate individual cashiers that are consistently over/short even though
they are below your established limit
o Ensure receipts are issued for manual operations on all sales
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:
o Allows for excess cash to be taken
o Allows for register reconciliation by the cashier if a shortage exists due to
conducting manual or off-book sales
Are 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 out
o Credit cards must be reconciled at the time of the cash count
o Run the “X” reading or sub-total to verify funds
o All funds must be rung into the register or a manual receipt is to be issued
o Investigate / explain ALL overages and shortages at the time of cash count
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 inhouse check cashing
o Refunds are to be made only if approved by management and enough cash sales
have been generated
o Discounts given should be reviewed to ensure they were legitimate
o Reversals have been approved by management or investigated
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 generated
The person receiving the cash payment should not perform dual functions related
to accounting or recording of business transactions. Examples include:
o Petty cash custodian does not issue him or herself cash to make purchases
o Catering individual should not be generating the catering contract, receiving
payment, and controlling the catering program
If checks are accepted they are only payable to the MWR or NGIS entity.
o Postdated checks are never accepted.
All documents to substantiate the days cash receipts are turned in
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 fund
 Petty 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 month
Ensure that all disbursements, including petty cash reimbursement
requests, are properly supported and contain the original signatures of the
petty cash custodian and receiving individual
Consider suspicious and investigate any cash receipt without a printed
store name shown on the document
Confirm unusual cash receipt documents with the vendors to determine
authenticity.
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
General Rules for
Cash and Cash handling controls
Separation of duties
One 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 cash
Record cash payments to receivable records
Reconcile cash receipts to deposits and the general ledger
Bill for goods and services
Note: 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 unchecked
Lost or stolen cash receipts
Inaccurate application of revenue to the respective cost centers and
general ledger accounts
General Rules for
Cash and Cash handling controls
Accountability, authorization, and approval
Cash 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 cash
Why they have access to cash
Where cash is at all times
What has occurred from the transaction's beginning to end
•Best 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
General Rules for
Cash and Cash handling controls
Accountability, authorization, and approval, continued
•Potential consequences if accountability does not exist
Lost or stolen cash receipts
Inaccurate application of revenue to the respective cost centers
and general ledger accounts
Improper use of MWR/NGIS assets
General Rules for
Cash and Cash handling controls
Security of Assets
Be 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 managers
Director 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.
General Rules for
Cash and Cash handling controls
Security of Assets, continued
Minimize the amount of cash used for daily operations to the minimum
needed – reevaluate annually or when patronage changes
Use a buddy system when taking funds from one location to another.
Count cash in a non-public area not easily visible to others
•Potential consequences if cash is not secured
Unsafe work environment
Lost or stolen cash receipts
General Rules for
Cash and Cash handling controls
Review and Reconciliation
Your reconciliation activities confirm that you've recorded transactions
correctly. Perform monthly reconciliations of cash receipts and bank
account statements to provide good checks and balances
•Best practices
Compare DAR to actual deposit and sales records
Record, count and balance cash receipts daily
Perform periodic surprise cash counts other than the required
quarterly counts
General Rules for
Cash and Cash handling controls
Review and Reconciliation, continued
•Potential consequences if review and reconciliation activities are not
performed
Errors, discrepancies, or irregularities not detected
Lost or stolen cash receipts
Inaccurate application of revenue to the respective cost centers and
general ledger accounts