Cash Collection Standards

These standards are issued to assist departments with the design of collection systems to minimize control risk and to meet the requirements of GS § 159-25- Duties of the Finance Officer: The finance officer shall…(4) receive and deposit all moneys accruing to the local government or public authority, or supervise the receipt and deposit of money by other duly authorized officers or employees.

Collection Standard #1: Control should be established at the earliest point practical in the collection process.

This standard is intended to minimize the potential for funds to be lost or misapplied between the time of being collected and deposited to Wake County’s accounts. The term “control”, as used in this context, defines the process or procedure that establishes an accounting for the funds collected. Making a record of the transaction and providing the customer with a receipt usually establishes control. To meet this standard, a variety of process’ or procedures are available. These include:

Entering the collection amount into a computerized system that establishes an electronic record of the transaction, provides the customer with a receipt, and generates a daily report of collections. The receipt may be in the form of paper summarizing the transaction or a document with an established value (license, permit, etc.);

Collecting funds through a cash register that makes a record (i.e. audit tape) of each individual transaction, provides the customer with a receipt and provides for a daily summary of transactions;

Listing the individual amounts collected through the mail;

Use of a lock box agent to process collections (Note: a lock box is usually only practical in those circumstances in which collections are billed and controlled through an accounts receivable system), and

Using an official Wake County receipt book to manually prepare the customer a receipt.

Collection Standard #2: Safeguard assets in a secure location to the extent practical.

This standard is intended to ensure that County assets are protected by collecting and maintaining them in a secure environment. As used in this context, the term assets not only includes cash, checks or money orders; but also documents that represent assets such as licenses, permits and accounts receivable records. Also, collection records such as receipt books and cash registers should be secured when not being used. This standard may be achieved by locating collection points away from doors, locating collection points where they are visible by other staff, varying the time and assignment of staff who make deposits, placing assets in a safe or locked filing cabinet in which access is centralized within a few responsible staff members, and periodically moving collections that accumulate in large amounts to a safe location during the day.

Collection Standard #3: Assign collection functions to specific individuals who are bonded.

This standard is intended to ensure that staff that handle assets are identified and can be trusted with that responsibility. To meet this standard, the collection function should be assigned to a specific employee. In those instances where the collection function needs to be performed by several persons, each should operate with a separate cash drawer and collections should be specifically tracked to that individual. That individual(s) should meet reasonable expectations of trustworthiness. This can be accomplished by performing background checks during the hiring process and only assigning collection functions to permanent full-time staff.

Collection Standard #4: Assign supervisory responsibility for the collection process.

This standard is intended to ensure that staff performing the collection function are properly supervised, that the collection function is consistently staffed, and that daily work is appropriately reviewed. To achieve this standard, organizational units that collect funds should not only assign the responsibility to supervise the collection process, but also require specific supervisory tasks be performed such as scheduling, observing staff, balancing cash collections, ensuring that daily wire transfers and miscellaneous credits are recorded in an accounting entry, making an accounting record of daily collection totals, and assuming responsibility for collections being recorded in the accounting system.

Collection Standard #5: Perform and make a record of an independent reconciliation of the amount documented as collected (as established in Control Standard #1) with the amount to be deposited.

This standard is intended to ensure that an accounting is performed each day to ensure that all funds recorded as being collected are being deposited. To achieve this standard computer systems, cash registers, receipt books and other evidence of control over funds collection should be closed and reconciled by someone not involved directly in the collection of those funds. This function may be performed by the person assigned supervisory responsibility (see Collection Standard #4 above).

Collection Standard #6: Establish written procedures that ensure that funds are deposited and recorded in the accounting system timely.

This standard is intended to minimize the risk of funds being lost or misplaced awaiting deposit and that accounting entries are timely. To meet this standard, written procedures should be established to ensure that a deposit is made each day that the collections exceed $250 and always by the last day of the month with the associated accounting entry made at the time of deposit.

Collection Standard #7: Establish written procedures that ensure that accounting entries along with cash reconciliations flow routinely to the Finance Department.

This standard is intended to ensure that errors and irregularities are identified and corrected timely. To achieve this standard, each department collections receipts should develop written procedures and assign responsibility to process daily cash reconciliations and deposit slips so they flow to the Finance Department routinely.

Collection Standard #8: Assign collection responsibilities in such a way as to not have the same employee performing incompatible functions and to create a system of checks and balances.

This standard is intended to separate the access to assets from the record keeping over those assets and to provide for an independent review of work. To achieve this standard employees responsible for collecting accounts receivable should not have access to accounts receivable records. Often this standard is achieved by employees involved in the collection function electronically posting the collection to accounts receivable, but limiting their access to make adjustments to accounts receivable or to be involved in the billing functions. Employees involved with collections should not also close their accounting system or cash registers. Employees involved in collections should not also prepare and make the deposit.