Financial Policies

FN04 Long-Term and Short-Term Advances

Policy Status: 

Active

Subject Matter Expert: 

Controller, law254@psu.edu

Policy Steward: 

Associate Vice President for Budget and Finance

CONTENTS

PURPOSE

This policy governs The Pennsylvania State University (“University” or “Penn State”) policy on long-term and short-term advances.

SCOPE

The University’s financial policies are applicable throughout the University, including to all direct and indirect subsidiaries, and are required to be followed by all University employees who engage in financial, accounting, purchasing or other transactions, including University employees who in the course of their assigned duties engage in such transactions on behalf of third parties such as the Penn State Alumni Association or other related entities. The University’s financial policies are not applicable to Penn State Health or its subsidiaries, or to Penn College of Technology, each of which has its own financial policies.

DEFINITIONS

  • Change Fund - currency and coin used to make change for departmental cashiering functions.
  • Fund Custodian - the employee responsible for the safekeeping of the fund and for its proper usage.
  • Long-Term Advance - an advance issued for an indefinite period.
  • Petty Cash - a small amount of currency issued and held by departments to cover payments of day-to-day miscellaneous purchases.
  • Short-Term Advance - an advance issued for 90 days or less.
  • Short-Term Research Advance - an advance issued for 1 year used to pay research participants.

POLICY

The University offers three (3) types of cash advances: long-term advances, short-term advances, and short-term research. There are distinct categories within advance types:

  • Change Funds
  • Petty Cash Advances
  • Research Participants

Salary Advances and Travel Advances are outside the scope of this policy. See PR01 University Payroll or TR02 Penn State Travel for complete details on those business processes.

Cash is a liquid asset of the University and must be managed diligently by University employees. The potential for incidents of departmental loss, and misuse, of cash prompts the need for strong controls. Excess and unnecessary cash in departments has an impact on the University’s insurance deductibles and premiums. Cash in departments increases the risk of loss, fraud, and embezzlement.

Adherence to this policy will:

  • Reduce unnecessary cash in departments.
  • Increase cash available for daily investments.
  • Increase income earned by University investments.
  • Satisfy audit requirements regarding the accounting for, and verification of, cash on hand in departments; and
  • Satisfy financial reporting requirements of federal and state regulatory units.

Advances may only be issued to employees of the University and graduate assistants with assistantships.

Advances are not permitted to be issued to students. See Procedure CR2081 Short-Term Student Loans for details on loans to students.

LONG-TERM ADVANCES

Long-term advances are issued for an indefinite period. Long-term advances are open-managed accounts receivable in the name of the fund custodian who will be liable for the advance until settlement. If not settled in a timely manner, the amount of the advance will be deducted from the fund custodian’s paycheck.

Long-term advances are transferable. If the fund custodian transfers to another position or leaves employment with the University, the advance must be reconciled and transferred to a new fund custodian.

Central Accounts Receivable is responsible for reconciling the long-term advance GL account. Reconciliation of actual long-term advance funds should occur monthly within the business area and must be reconciled as part of the fiscal year-end closing process.

See Procedure FN2016 Long-Term and Short-Term Advances for complete details.

SHORT-TERM ADVANCES

Short-term advances are issued for a period of 90 days or less. Short-term advances are open-managed accounts receivable in the name of the fund custodian who will be liable for the advance until settlement. If not settled in a timely manner, the amount of the advance will be deducted from the fund custodian’s paycheck.

Short-term advances are non-transferable. If the fund custodian transfers to another position or leaves employment with the University, the funds must be reconciled and returned.

The Financial Officer is responsible for reconciling the short-term advance GL account for their business area. Reconciliation of short-term advances should occur monthly and must be reconciled as part of the fiscal year-end closing process.

See Procedure FN2016 Long-Term and Short-Term Advances for complete details.

SHORT-TERM RESEARCH ADVANCES

Short-term research advances are issued for one year. Short-term research advances are open-managed accounts receivable in the name of the fund custodian who will be liable for the advance until settlement. If not settled in a timely manner, the amount of the advance will be deducted from the fund custodian’s paycheck.

Short-term research advances are non-transferable. If the fund custodian transfers to another position or leaves employment with the University, the funds must be reconciled and returned.

The Financial Officer is responsible for reconciling the short-term advance GL account for their business area. Reconciliation of short-term advances should occur monthly and must be reconciled as part of the fiscal year-end closing process.

See Procedure FN2016 Long-Term and Short-Term Advances for complete details.

LONG-TERM AND SHORT-TERM PETTY CASH FUNDS

To minimize the handling of cash, approval of new petty cash funds will only be considered when a department demonstrates that standard payment methods established by the University will not meet the unit’s business needs. If approved, the fund custodian must manage these funds in accordance with this and other established University policies and procedures.

Recent changes and improvements in purchasing and payment methods, banking regulations, international payments, and electronic technology reduce the need for petty cash in departments, and non-travel cash advances to employees.

There is no requirement that a Business Area establish and/or maintain petty cash funds.

The University Purchasing Card is to be used for minor purchases rather than petty cash if available (refer to Policy BS14 Penn State Purchasing Card.

Petty cash funds are used for minor local purchases and other expenditures which individually do not cost more than $50.00. Purchases of this nature are made only if it is not practical to obtain the items through established University procurement procedures. A purchase (or purchases) from a sole source that exceeds the $50.00 limit may not be broken up on separate receipts to avoid this limit.

Purchases made from petty cash funds are subject to the same guidelines and regulations as purchases made through normal channels using purchase orders, Shop OnLion, Non-PO Invoice, and purchasing cards.

Petty cash funds are never to be intermingled with change funds or any other cash-on-hand.

Refunds from petty cash are prohibited. All refund requests must be processed through SAP Concur or SIMBA.

Petty Cash funds may not be replenished for amounts greater than the original amount of the fund.

Petty cash funds having no activity during the fiscal year are to be closed.

See Procedure FN2016 Long-Term and Short-Term Advances for the business processes associated with petty cash funds.

LONG-TERM AND SHORT-TERM CHANGE FUNDS

Change funds are used in cash register operations or other areas where cash collections take place and the need for having change-on-hand exists. By their very nature, change funds become intermingled with cash transactions over the course of a business day; however, at the end of the business day the original amount of change fund is removed from the daily cash count prior to preparing a deposit.

See Procedure FN2016 Long-Term and Short-Term Advances for the business processes associated with petty cash funds.

PETTY CASH AND CHANGE FUND RESTRICTIONS

Petty cash and/or change funds are not to be used for cashing employee paychecks or personal checks. Petty cash and/or change funds are not to be used for making any cash advances.

Petty cash and change funds are never to be intermingled and must be kept in separate bags or lock boxes.

SAFEGUARDING CASH ADVANCES

The fund custodian is fully responsible for the safekeeping of the funds and for their proper usage. The custodian must exercise caution in the administration and protection of the fund in their possession. Access to the fund should be limited to the fund custodian. It is the responsibility of the custodian to follow current University policies and procedures in maintaining the fund.

Any amount of cash on hand that exceeds $1,000 must be maintained in a vault or an approved safe (fireproof, bolted to floor or otherwise immovable). Amounts of $1,000 and under must be maintained in a file safe or reinforced file cabinet with a pad lock and bar that secures all drawers. Cash should not be retained in desk drawers or standard file cabinets since they are easily accessed with nominal forcing or readily available keys.

THEFT OR LOSS OF FUNDS

In instances of stolen cash, the fund custodian must file a police report with the University Police and report the incident to the Business Area Financial Officer and Central Accounts Receivable.

In addition, a completed incident report along with a copy of the police report should be submitted to the Office of Risk Management, which will review the incident for potential insurance recovery. Any insurance recovery could be subject to a per occurrence deductible, charged back to the department. The Office of Risk Management may require additional documentation to support the loss.

Shortages in the fund must be reimbursed. Business Areas have the authority to use University funds to replace lost funds or to assess the charge to the fund custodian.

Overages in the fund are the property of the University and must be deposited in a University designated bank account.

EXCEPTIONS

Any exceptions to this policy must be obtained, in writing, from the Associate Vice President for Budget and Finance.

SANCTIONS

Mishandling of funds may result in dismissal and/or prosecution of involved employees and/or relinquishment of the funds by the department.

VIOLATIONS

Violation of a financial policy should be reported to your supervisor, your Human Resources representative, your unit manager, and/or office responsible for the policy. Where those resources are inadequate, you may choose to make an anonymous report through the Penn State University hotline by calling 1-800-560-1637.

FURTHER INFORMATION

For questions or additional details, please contact the Business Area Financial Office.

To request changes to this policy, please contact the Office of Systems & Procedures, by submitting a GURU Technical Support Request Form.

CROSS REFERENCES

POLICY STATUS

MOST RECENT CHANGES

  • July 1, 2024 -
    • Policy retitled from FN04 Petty Cash and Change Funds to FN04 Long-Term and Short-Term Advances
    • Policy was completely rewritten to indicate the policy pertaining to long-term, short-term, and short-term research advances. The policy was expanded to include all types of advances and information from decommissioned Policy FN05 Operating Cash Funds incorporated into this policy.

REVISION HISTORY

  • January 5, 2023 - Editorial changes. Changed all references to the Office of the Corporate Controller to the Office of Budget and Finance, per the directive of the Associate Vice President for Finance
  • September 2, 2022 - Editorial change to change Policy Steward from Associate Vice President for Finance and Corporate Controller to Associate Vice President for Finance
  • November 8, 2018 - Subject Matter Expert added.September 20, 2018 - Editorial changes to update GURU hyperlinks from html formatting to cfm format.
  • September 10, 2018 - Editorial changes to correct hyperlinks and to remove redundant Date Approved, Date Published, and Effective Date information.
  • January 18, 2016 - Editorial change to the RESTRICTIONS section clarifying that petty cash and change funds must be kept in separate bags or lock boxes, to bring the policy in sync with Procedure CR2013 (Operating Cash Fund) verbiage.
  • August 12, 2014 - Major revisions throughout the entire policy to reflect current handling of petty cash and change funds.
  • September 25, 2013 - Editorial changes. Addition of policy steward information, in the event that there are questions or requests for changes to the policy.
  • February 18, 2005 - Editorial change to eliminate "General Forms Usage Guide" and correct bad links.
  • September 27, 2002
    • Account 0208 has been replaced by 0206.
    • Petty Cash section updated to reflect current purchasing methods
  • September 7, 2001 - Changed requirements for safeguarding cash to be consistent with controls published in Policy FN01.
  • February 7, 1995 -
    • Allow non-University Park locations to purchase postage stamps through petty cash and operating cash funds.
    • Allow group meals to be reimbursed from the Financial Officer's operating cash fund.
    • A Request for Cash Advance form now used in place of Special Request For Check form to establish funds.
  • March 30, 1994 -
    • Increased petty cash fund limit from $20 to $50.
    • Can use petty cash funds to reimburse group meals and travel expenses up to $50.
    • Prohibits cashing of employee checks.
    • Added Travel Expense Accounts and Request for Reimbursement for a Group Meal forms to list of required forms.
  • October 2, 1992 - Revised entire TERM OF A FUND section.
  • March 25, 1992 - Substantial changes for editorial and form titles.
  • July 24, 1986 - Increased petty cash fund limit from $15 to $20.
  • March 26, 1985 - Prohibited purchase from a single source from being broken into smaller amounts to meet the $15 petty cash limit.
  • July 27, 1983 - Location title change under ESTABLISHMENT OF FUND section.
  • June 1,1982 - Consolidation of Policies CS-4 (September 29, 1978) and CS-5 (October 22, 1980).

Date Approved: 

June 28, 2024

Date Published: 

June 28, 2024

Effective Date: 

July 1, 2024