Cash handling

A public sector agency may deal with cash transactions as part of their core functions such as providing public transport, parking or swimming pools.

Others may collect cash occasionally for the hire of equipment, running courses or fund-raising.

The ICAC has identified cash handling as a high-risk function, the most serious and obvious risk being that of misappropriation. 

The improper handling of cash in a public sector agency can constitute corrupt conduct as defined by the Independent Commission Against Corrupt Act 1988.


Corruption risks

A risk assessment of cash handling in a public sector agency may identify some or all of the following corruption risks:

  • An employee failing to record purchases properly in order to misappropriate cash.
  • An employee misappropriating cash from a machine or whilst cash is in transit.
  • An employee accepting or soliciting money or a benefit to provide cash to a third party.
  • An employee accepting or soliciting money or a benefit to provide a good or service to a third party without taking a cash payment from that party.
  • An employee being bullied or threatened to misappropriate cash or avoid proper payment for a good/service by a third party.
  • An employee artificially inflating the value of a good/service to misappropriate cash.

 

Managing corruption risks

As a minimum your agency should:

  • Introduce policy and procedures for handling cash that contain elements listed in the Policy Development Guide and Checklist (see Tips and tools below).
  • Include in the policy sanctions for any breach of the policy and procedures. 
  • Review the policy every two years.
  • Refer to cash handling in all relevant corporate documents such as codes of conduct.
  • Train all relevant employees in the policy and procedures to ensure they are aware of their responsibilities.
  • Include the handling of cash as a risk to be assessed in the agency's internal audit and corruption risk management processes.
  • Conduct a program of refresher training.

The following record-keeping requirements should be included in the policy:

  • Including procedures for tracking, receipting, securing, transferring and banking cash, including from fundraising.
  • Reporting missing deposits to aid reconciliation.
  • Detailing of the amount of cash provided for each good/service.
  • Identifying whether each transaction was for cash or other means of payment.
  • Issuing and recording receipts for all payments received, which include date/time of payment and amount.
  • Documenting delegations and changes in delegation levels.
  • Recording electronically cash collected by machines.
  • Registering the identity and position of employees with access to safes, cash registers or cash/card operated machines.

 

Risk management strategies

Following your corruption risk assessment of cash handling in your agency you should also consider:

  • Preparing and reconciling balances against corresponding bank deposits to account for all cash takings and identify anomalies.
  • Centralising collection points for cash.
  • Requiring cash to be deposited separately by each collector to ensure accountability.
  • Limiting the number of employees able to handle cash to minimise risk of misappropriation and enable the tracking of losses.
  • Changing individual passwords regularly for accountability.
  • Performing criminal history checks on staff applying for positions involved in cash handling to identify potential issues to do with untrustworthiness.
  • Using secure cash storage facilities and security for those transporting cash.
  • Monitoring and restricting access to computer systems involved in cash handling.

 

Case studies

Case study 1: Accepting payment in cash

In 1998 the ICAC investigated a matter at a depot owned and operated by a Sydney council, where bribes were accepted by depot workers in exchange for charging commercial waste businesses discounted cash fees (by altering the weight of waste deposited). 

The conduct occurred between 1994 and 1998. One of the council depot workers involved was the weighbridge foreman, who had been working at the council for more than 10 years. The other depot worker had been with council for approximately eight years. 

These individuals had made corrupt arrangements with two main commercial waste businesses that regularly paid bribes to the two council employees. The foreman was a friend of one of the company directors. Findings of corrupt conduct were made against these individuals.

ICAC recommendations included improving the extent and the form of records kept of these transactions so that they could be routinely reconciled and audited to enable the detection of abnormalities. Training and rotating staff were also recommended.

Case study 2: Theft of cash

In 1990 the ICAC received a report about the misappropriation of more than $130,000 in cash by clerical staff at two large public hospitals. One case concerned cash from coin-operated telephones and the other involved numerous service areas such as the cafeteria, child care and patient education. The issue was identified by NSW Health's internal audit function and the employees were dismissed and subsequently prosecuted. 

The Commission examined the system of collecting, receipting, securing and banking funds for non-primary cash service functions in 21 large public hospitals, and made 46 recommendations for improvements to cash handling procedures.

The main recommendations were for overarching NSW Health policies to be implemented that hospital managers could use in reviewing cash services and deciding which service to provide, and whether to do so directly or via contracts. 

It was recommended that finance managers should become informed of cash services to monitor and safeguard the movement of funds. Hospitals were advised to provide training, induction and supervision to limit the number of staff handling cash and the number of collection points, and to standardise procedures for receipting, securing and transferring funds, and for monitoring losses.

Frequently asked questions

It seems onerous to me that training and controls are needed for fundraising, particularly for a small organisation like mine that sells raffle tickets once a year and receives only very small amounts of cash. Are controls really necessary in this instance? 

Fund raising is often incidental to an agency's usual functions but this does not rule out the risk of corruption. In fact the Commission's research with public hospitals indicated that problems emerged where fund raising activities were not authorised and controlled by hospital administrators.

Opportunities for fraud were facilitated through procedural weaknesses such as not issuing receipts, issuing non-official receipts or selling unnumbered tickets, and using hospital resources without authorisation or payment. In these situations the security of the funds relied on the staff involved. The funds are placed at risk, and so were the reputations of the staff and the credibility of the fund raising ventures. 

If you have an occasional fund raising activity it might be prudent to give this task to staff that work in finance and are already familiar with the protocols for handling cash and keeping financial records. 

My agency rarely handles very much cash.  What minimum measures can we take to protect the agency from corruption risks?

Procedures do not have to be long, detailed or complex. The main issues that should be included in any procedure for handling cash are:

  • a centralised method for cash processing and storage
  • procedures for issuing receipts
  • regular cash reconciliation for control and audit purposes
  • mechanisms to control the access to cash and its transport.

Just as important as covering these issues is to make sure that everyone who handles the agency's cash knows the procedures.

Resources

 

Other publications

  • Report to the Nation on Occupational Fraud and Abuse – "How Occupational Fraud is Committed" and "Detecting Occupational Fraud" chapters, Association of Certified Fraud Examiners, USA, 2006.

 

Relevant websites

 

Related topics on the ICAC website