Cash Difference Fund

SUBJECT:

CASH DIFFERENCE FUND
NUMBER:

C.2.

DEPARTMENTS & DISTRICTS AFFECTED:

ALL AGENCIES, DEPARTMENTS, AND DISTRICTS GOVERNED BY THE BOARD OF SUPERVISORS
EFFECTIVE: October 1, 1979
REVISED: 4/83, 2/2000
signed
_________________________________
David E. Sundstrom, Auditor-Controller
1. POLICY
The Board of Supervisors may establish a cash difference fund for an officer of the County pursuant to Government Code Sections 29370 through 29390.1. The accountability for the use of cash difference funds is to the Board of Supervisors.

Applications to establish, increase, reduce, discontinue, or replenish cash difference funds are made to the County Auditor-Controller, who is authorized to perform the functions of the Board under Government Code Section 29370.1 and Board Resolution Number 99-135 dated April 6, 1999.
1.1 Purpose
The purpose of this procedure is to assist officers of the County to establish, increase, reduce, replenish, and discontinue cash difference funds in conformance with requirements set forth in Government Code Sections 29370 through 29390.1.
1.2 Authority
Authority
Subject
California Government Code Sections 29370 through 29390.1
Establishment and replenishment of county cash difference funds.
Board of Supervisors' Resolution No. 83-354 dated March 8, 1983
Authorizes Auditor-Controller to perform the functions of the Board to replenish cash difference funds.
Board of Supervisors' Resolution No. 99-135 dated April 6, 1999
Authorizes Auditor-Controller to perform the functions of the Board to establish, increase, reduce and discontinue cash difference funds.
1.3 Definitions
1.3.1 Officer
"Officer of the County", includes any elective or appointed officer of the County, and any person in charge of any office, department, service, or institution of the County, or a division or branch thereof, and as enumerated in Section 24000 of the Government Code.
1.3.2 Cash Shortage
Deficits occurring from employee mishandling of cash receipts or disbursements. These deficits occur during daily operations such as accepting money and making change in over-the-counter transactions.
1.3.3 Cash Loss
Loss or deficit occurring due to a theft or mysterious disappearance.
2. PROCEDURE
2.1 Establishing or Increasing Fund
2.1.1 Written Request
An officer wishing to establish or increase a cash difference fund shall send a written request to the Auditor-Controller General Ledger Unit, stating the need for the fund or the reason for the increase, and the amount requested.
2.1.2 Auditor-Controller Review
The Auditor-Controller reviews the request for County procedural and operating rules compliance. If the request is approved, the Auditor-Controller authorizes the issuance of a check establishing or increasing the fund. The Auditor-Controller assesses the size of requests for increases based on prior activity for cash difference fund replenishments.
2.1.3 Internal Control Weaknesses
The Auditor-Controller may elect not to increase the fund of a department or agency with material cash difference fund internal control weaknesses until such weaknesses are corrected. Frequent replenishments for employees with chronic shortage problems may constitute evidence of internal control weaknesses.
2.2 Use of Fund
2.2.1 Increase Amount Tendered
The cash difference fund may be used to increase an amount tendered to any officer on an account when an underpayment of $10.00 or less exists.

NOTE: Each County officer should analyze each situation and determine if use of cash difference funds for this purpose is both cost-effective and beneficial to the County. A County officer has the prerogative of not using the fund for this purpose or for setting a limit less than the $10.00 maximum.
2.2.2 Reimburse Cash Shortage
The cash difference fund may be used to reimburse a cash shortage of County funds. The reimbursement shall not exceed the amount in the cash difference fund.

NOTE: If the shortage exceeds the cash on hand in the cash difference fund, a written application to the Auditor-Controller can be made to have the fund replenished. (See Section 2.3 following.)
2.2.3 Not Used to Replenish Cash Losses
Cash difference funds cannot be used to replenish cash losses. Any evidence of burglary, theft or mysterious disappearance of County funds should be immediately reported to the Sheriff-Coroner or appropriate police agency. For additional requirements, refer to County Accounting Procedure (CAP) No. C.3., "Cash Losses."
2.2.4 Report to Officer
In accordance with Government Code Section 29373 in a department or agency with a cash difference fund, the director or department head shall be provided with a written report setting forth the exact sum of any cash deficit or overage by the close of each business day. The report shall be prepared by the person who receives and disburses money placed in his or her custody as directed by law or by official authority.
2.3 Replenishment of Fund
2.3.1 Application for Replenishment
Application for replenishment shall be in writing to the Auditor-Controller. Each application must include the following:
  1. Itemization of each cash shortage and/or underpayment.
  2. Dates of occurrences.
  3. Names of employees whose accounts were reimbursed from the fund.
2.3.2 Statements Included in Replenishment Application
Individual cash shortages of $10.00 or more must reference the following applicable statements:
  1. Circumstances of the deficit have been reviewed by management and there is no evidence of fraud or gross negligence.
  2. Where necessary, specific steps have been taken to modify procedures and increase control to preclude similar instances from occurring. (Briefly describe new or revised procedures.)
  3. Individuals accountable for cash shortages have not had a history of cash shortages, or if they have had a history, they have received additional counseling and training.
2.3.3 Authorized Signature
Application for replenishment must be signed by the department/agency head, or, in case of his/her absence, by the Chief Deputy or an Assistant Director.
2.3.4 Auditor-Controller Review
The Auditor-Controller reviews the application for replenishment for compliance with procedures and determines the amount of replenishment. If the Auditor-Controller does not concur with the application, it is returned to the department/agency for correction or completion.
2.3.5 Issuance of Check
After concurrence, the Auditor-Controller issues a check to the officer who requested replenishment. The replenishment is charged to expenditure Object Code 1701, "Cash Difference," in the fund/agency of the department/agency in which the shortages were incurred.
2.3.6 Amount of Replenishment
An application for replenishment should not exceed the total amount of the cash difference fund. Applications should be prepared considering the time required for review and check preparation.
2.3.7 Recovery of Shortage
If a shortage for which the cash difference fund has already been replenished is recovered, the department or agency shall restore this amount into the cash difference fund and reduce the subsequent request for replenishment. Each such recovery should be noted as a separate item on the request for replenishment.
2.4 Discontinuance of Fund
2.4.1 Written Request
The officer may send a written request to the Auditor-Controller General Ledger Unit to discontinue the cash difference fund. Upon receipt of the request, the Auditor-Controller directs the officer or designee to deposit any unused balance of the cash difference fund into the County treasury and to submit an accounting for the portion of the fund that was used, in accordance with Government Code Section 29379.
2.4.2 Deposit of Unused Balance
The deposit of the unused balance of the cash difference fund is recorded in Balance Sheet Account Code 8030, "Cash Difference Funds," on a deposit order. The deposit order shall be prepared in accordance with CAP No. C.4., "Deposits."
2.4.3 Final Accounting
The officer submits a final accounting report with the information required for replenishments as described in Sections 2.3.1 through 2.3.3 of this Procedure. The report must account for any remaining balance of the cash difference fund that is not deposited according to Section 2.4.2 of this procedure.

Upon receipt of the final accounting from the officer, the Auditor-Controller prepares a journal voucher to record the used portion of the fund as expenditures in Object Code 1701, "Cash Difference," with an offsetting entry reducing Balance Sheet Account Code 8030, "Cash Difference Funds."
2.5 Transfer of Fund
The cash difference fund will be transferred whenever a change in County officers occurs and the outgoing and incoming officers are both available and willing to sign the transfer request.

2.5.1 Statement of Assets Transferred
The outgoing and incoming officers submit a Statement of Assets Transferred to the Auditor-Controller General Ledger Unit to transfer the cash difference fund and other assets from the outgoing to the incoming officer. Both officers must sign the Statement. See CAP No. M.4., "Requirements of Elected Officials Assuming or Leaving Office."
2.5.2 Auditor-Controller Approval of Transfer
Upon receipt of the Statement of Assets Transferred, the Auditor-Controller notes the transfer in the cash difference fund records. A written confirmation of the transfer is sent to each of the affected officers.
2.6 Termination of Officer
The cash difference fund must be discontinued whenever an outgoing officer's employment is terminated or the outgoing officer is unavailable or unwilling to sign a Statement of Assets Transferred Form as described in CAP No. M.4.. In such circumstances, the final deposit and the final accounting are submitted by the incoming or interim officer.
2.7 Safeguarding the Fund
Funds granted to an officer must be retained in safekeeping equipment within the department/agency or in a bank checking account, or both. The County Treasurer will normally assist in establishing a checking account to avoid bank charges.
2.8 Annual Report
The Auditor-Controller shall render a written report and give an account to the Board of Supervisors of cash difference funds used at the end of each fiscal year and at such other times as the Board directs or the Auditor-Controller determines is necessary. The Annual Report will contain a summary of cash difference fund establishments, replenishments, increases, reductions, transfers, and discontinuances requested and received by each department/agency.
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