Cash-handling is a high-risk function, the most serious and obvious risk being theft of money. It remains essential for some agency activities, even though total volumes of cash may be small. A public sector agency may deal with cash as part of its core functions, such as providing public transport, parking or swimming pools. Other agencies may collect cash occasionally for the hire of equipment, running courses or fundraising.
Some activities, such as fundraising, pose specific risks. Fundraising typically involves selling tickets for cash, but, as it is also usually incidental to an agency's usual functions, it gets little scrutiny – even though it can be a high-profile activity and carries risks for theft and other corruption that are disproportionate to the monetary importance of the activity.
|Systemic theft of cash by hospital staff
The ICAC investigated allegations that clerical staff at two public hospitals stole cash totalling more than $130,000 on multiple occasions. Cash was stolen from coin-operated telephones, as well as service areas such as the cafeteria, childcare and patient education. Theft of cash was identified by internal audit, and the employees were dismissed and subsequently prosecuted.
The ICAC examined the system of collecting, receipting, securing, and banking funds for cash-service functions across 21 public hospitals, and made 46 recommendations to improve cash-handling procedures.
A key recommendation was for the organisation to adopt a single overarching policy that all hospital managers could use to review and plan services involving cash payments, including reviewing what services to provide and whether those services should be provided by Health NSW staff, or be contracted out.
The ICAC recommended that hospital finance managers familiarise themselves with cash services, in order to monitor and safeguard the movement of cash. Hospitals were also advised to:
- limit the number of staff handling cash and the number of collection points
- provide training, induction and supervision to staff involved in cash-handling
- standardise procedures for receipting, securing and transferring cash.
Source: Complaint provided to the ICAC.
The ICAC's research into public hospitals highlighted how corruption problems emerged when fundraising activities were not authorised or controlled by 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. One option for managing risks around fundraising is to give responsibility for this task to accounts payable or finance department staff who are familiar with the protocols for handling cash and keeping financial records.
Common corruption risks around cash-handling include a public official:
- failing to record purchases properly in order to steal cash
- stealing cash from a cash machine or while it is being transferred to the agency or a bank
- accepting or soliciting money or a benefit to corruptly give the agency’s cash to a third-party
- accepting or soliciting money or a benefit to provide a good or service to a third-party, without taking the required cash payment from that party
- artificially inflating the value of a good/service to misappropriate the additional cash.
Developing a strategy
Cash-handling procedures do not have to be long, detailed or complex. The main measures that should be included in a cash-handling procedure are:
- a centralised method for cash processing and storage
- secure mechanisms to control access to cash and its transport
- procedures for issuing receipts
- regular cash reconciliation for control and audit purposes.
A written policy and procedures for handling cash helps ensure consistency in applying these measures, but only if staff understand the policy, are able to comply and are motivated to comply. If cash-handling is significant – either in monetary terms or because it involves high-profile activities such as fundraising events – it should be included in your risk assessment programs.
Being able to reconcile cash collected with cash holdings is critical, as reconciliation is the basic test of whether cash is being misappropriated. Recordkeeping around cash-handling is important for this reason. Following a risk assessment of cash-handling, consider:
- detailing the cash holdings allocated for each good/service
- identifying whether each transaction was for cash or another means of payment
- recording the date/time for all receipting, securing, transferring and banking that occurs, including cash collection and dispensing by machine
- centralising collection points for cash
- using secure cash storage facilities and security for those transporting cash
- requiring cash to be deposited separately by each collector to ensure accountability and to protect the person collecting and depositing the cash
- registering the identity and position of personnel with access to safes, cash registers or cash/card operated machines
- reconciling balances against corresponding bank deposits to account for all cash takings and to identify anomalies
- limiting the number of employees able to handle cash to minimise risk of theft to facilitate the tracking of losses
- performing criminal background checks on staff applying for positions that involve handling cash
- monitoring and restricting access to computer systems involved in cash-handling
- including delegations in the cash-handling procedures, and informing relevant personnel of any changes in delegations.
Updated December 2018