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Revolving and Change Funds

A. Introduction

Revolving funds and change funds are established to expedite the handling of University business by providing funds for authorized purchases and/or to make change. The terms revolving fund, cash fund, and change fund are often used interchangeably. The definitions of each are as follows:

  • Revolving Fund
    • Checking Account -- uses pre-numbered checks for handling disbursements. Normally, checks are written to vendors; no checks may to be written to cash, employees or independent contractors without specific pre-approval
    • Cash Fund -- for handling purchases on a cash basis. Normally, the amount of the fund is much smaller than those in checking accounts.
  • Change Fund -- used to make change in sales-type operations. The amount of the advance never changes and purchases are not permitted.

B. Establishment

A memorandum from the department head, director, or business manager is sent to the Comptroller requesting authorization to establish a revolving or change fund. This memo should include a justification as to why the fund is needed, the name f the fund custodian (the individual who will be responsible for the fund and the statements of condition associated with the fund), and the requested dollar amount.

For cash and change funds : A completed Invoice Voucher should be submitted with the memorandum requesting the revolving fund. Both the memorandum and the invoice voucher should be addressed to the Comptroller, but sent to the Banking and Investments Assistant in Accounting Services. The initial advance should be recorded on a fund on the General Ledger using GL Account 101450 “Change & Revolving Fund”. If you are unsure of which General Ledger Fund to use, please contact your Business Manager. The invoice voucher should be made payable to the name of the revolving fund and in care of the fund custodian. When the revolving fund is approved, the voucher will be processed to provide the money to create the fund. A check will be written in the name of the revolving fund and a Revolving Fund Receipt, will be sent to the fund custodian with the check.

Upon receiving the University check, the revolving fund custodian must sign a Revolving Fund Receipt and return it to the Banking and Investment Assistant. (All references to the Banking and Investment Assistant refer to the Banking and Investment Assistant position in Accounting Services in Freehafer Hall). This receipt will be kept in Accounting Services. Any time the custodian or the balance of the revolving fund changes, a new Revolving Fund Receipt will be issued.

For checking accounts: A complete Invoice Voucher should be submitted with the memorandum requesting the fund. The memorandum, together with the Invoice Voucher, should be addressed to the Comptroller, but sent to the Banking and Investments Assistant. The initial advance should be recorded on a fund on the General Ledger using GL Account 101450 “Change & Revolving Fund”. If you are unsure of which General Ledger Fund to use, please contact your Business Manager. The Invoice Voucher should be made payable to the revolving fund and in care of the revolving fund custodian. When the revolving fund is approved, the Office of Treasury Operations will work with the custodian to establish the new checking account and transfer funds into the account.

C. Increases and Decreases

Requests for increases or decreases to the revolving fund must be made in writing. The memo should be addressed to the Comptroller, but sent to the Banking and Investments Assistant in Accounting Services. The request should provide an explanation for the increase or decrease.

If an increase is requested for a cash or change fund, attach a completed invoice voucher, made payable to the name of the fund, in care of fund custodian, and indicating the amount of the increase. Once approved, a Revolving Fund Receipt reflecting the new balance will be sent to the revolving fund custodian. The receipt must be signed and returned to the Banking and Investments Assistant in Accounting Services.

If an increase is requested for a checking account, attach a completed Invoice Voucher made payable to the revolving fund name, in care of the fund custodian, and indicating the amount of the increase. Once approved, funds will be transferred into the existing checking account.

As a general rule, the revolving fund balance should accommodate a month's worth of expenditures. If reimbursements are only requested every 45 days or more, this should be an indication that there is more money available in the revolving fund than necessary. If the revolving fund balance is to be decreased, a Cash Receipts Voucher should be prepared to return a portion of the funds to the University. A new Revolving Fund Receipt reflecting the adjusted balance will be sent to the fund custodian. The receipt must be signed and returned to the Banking and Investments Assistant.

D. Creation of a Checking Account

Any checking account used for University business must be established with the authorization of the Trustees of Purdue University. The responsibilities for establishment, operation, and control of University bank accounts have been delegated to the Vice President for Business Services & Assistant Treasurer, the Director of the Office of Treasury Operations, and the Comptroller. If a checking account is to be established, the Director of the Office of Treasury Operations will issue a copy of the Bank Account Procedures to the Custodian and will work with the Custodian to establish the account.

Once a University checking account has been established, all activity on such funds must be handled by check and no funds, other than University funds, should be placed in the account. There should be no cash deposits or withdrawals by the fund custodian. The only deposits to such accounts should be the reimbursement of expenses made by Purdue via ACH from Purdue University.

Monthly, custodians of checking accounts must prepare a Statement of Condition (see example in Revolving Funds section below). The revolving fund must be reconciled on a monthly basis, in conjunction with the receipt of the bank statement, and a copy of the bank statement must be attached to the submitted Statement of Condition.

Revolving funds should not be used as a check cashing service unless it is specifically established for that purpose (i.e. Bursar's fund). If the fund custodian permits such activity, he/she will be held personally responsible for any bad checks cashed by the fund.

Any exceptions to this policy must be approved by the Comptroller.

E. Handling of Interest / Bank Charges

Every effort should be made to secure checking accounts free of service charges. Often, banks will approve accounts free of such charges for tax-exempt organizations.

There are a number of banks that now provide interest on checking accounts. This interest should be recorded on a request for reimbursement by listing the interest amount as a credit on the invoice voucher using GL Account 467010. This credit will reduce the amount of the reimbursement, thus maintaining the revolving fund balance in the bank at the amount of the original advance. Service charges, check charges, etc., should be recorded as a debit on the invoice voucher using GL Account 543025. Charges of this nature should be avoided if at all pber of banks that now provide interest on checking accounts. This interest should be recorded on a request for reimbursement by listing the interest amount as a credit on the invoice voucher using GL Account 467010. This credit will reduce the amount of the reimbursement, thus maintaining the revolving fund balance in the bank at the amount of the original advance. Service charges, check charges, etc., should be recorded as a debit on the invoice voucher using GL Account 543025. Charges of this nature should be avoided if at all possible.

F. Expenditures

Each revolving fund is established for a specific purpose as defined in the memorandum requesting the fund. Thus, the fund is restricted to expenditures listed on the original letter of approval. Personal advances, travel advances, and payments for items that can be readily procured though other purchasing options are not authorized.

The following guidelines should also be considered before making a purchase:

  • The amount of each check should not exceed $50.00. Exceptions to this amount are to be approved at the time the revolving fund is established.
  • Cash purchases should not be made to evade established purchasing procedures.
  • Items that are carried in University Stores should not be purchased with this fund.
  • Funds may not be used for reimbursing an individual for stolen or damaged personal items.
  • "Bad Checks" should not be reimbursed though a revolving fund. An Invoice Voucher should be prepared to cover overdraft charges from a departmental account. Overdrafts of the account should be reported immediately to the Office of Treasury Operations and the Assistant Comptroller – Accounting Services. Inadequate management of the account may lead to closure of the checking account. Joint recommendation for action on the account will be made to the Comptroller.
  • Travel advances or reimbursement of travel expenses should not be made through the revolving fund unless specifically identified as an approved expenditure item for that revolving fund.
  • Advance registration fees may not be paid through the revolving fund.

G. Reimbursement of Expenditures

Revolving Funds (Checking Accounts and Cash Funds) are established to make a number of small authorized disbursements. These funds may be established with the intent of maintaining a balance or they may be established with the expectation that the balance will be reduced by the authorized transactions.

  • If the balance is expected to be maintained:
    • The custodian of the fund will periodically submit a completed Invoice Voucher to the Banking and Investments Assistant in Accounting Services. Original signed and dated receipts, supporting the fund expenditures, should be attached to the invoice voucher
      [NOTE: Reimbursement of revolving fund expenditures should be made electronically (ACH or wire transfer); deviation from this must be authorized by the Comptroller.]
  • If the balance is expected to reduce with authorized purchases:
    • A Journal Voucher is submitted to the Banking and Investments Assistant.

H. Statement of Condition

The Statement of Condition is a reconciliation of the balance in the revolving or change fund to the approved amount as recorded in the General Ledger Fund.

Revolving Funds:

Monthly, the revolving fund custodians must complete, sign, and forward a Statement of Condition (or a reasonable facsimile) to the Banking and Investments Assistant by the 20th of the month following the month end for which the statement is being prepared. (i.e. January 31st report is due by February 20th) Each report must include the Revolving Fund Number for identification purposes, the Custodian's name, the month it's for, the preparer's signature, and a copy of the bank statement. No reimbursements or increases will be made if a current Statement of Condition is not on file.

The Statement of Condition should identify the acknowledged revolving fund balance, cash on hand, reimbursement request(s) in process, and receipts not yet processed. A list of all checks aged over 60 days should be attached to the Statement of Condition or included on the statement itself. If any outstanding checks are aged over two years, contact Accounting Services. (Statement of Condition)

If the custodian is unable to sign the statement of condition, it should be delegated in writing to someone else. The written delegation form should be on file with the Banking and Investments Assistant in Accounting Service. Only those who have been delegated by the fund custodian have authorization to sign in his/her absence.

Change Funds:

Quarterly, the Banking and Investments Assistant will issue to the fund custodian a Change Fund Balance of Record Statement, indicating the “amount of record” for the change fund. The custodian must verify the amount, sign the statement, and return it to the Banking and Investments Assistant.

I. Loss of Funds

If money from a revolving fund or change fund is lost or stolen, the University Police and Internal Audit should be notified immediately. An Invoice Voucher must be processed to replenish the fund to the amount of the original advance. The charge will be against a departmental fund and cost center using expense GL Account.

J. Audits

The revolving fund custodian is responsible for maintaining the fund in a business-like manner so that it may be audited at any time by Internal Audit or by the field examiners of the Indiana State Board of Accounts. Bank statements, canceled and voided checks, check books, and other pertinent information should be retained until audited and authorized to be destroyed as outlined in the record retention policy.

K. Closing Revolving Funds and Change Funds

The custodian is responsible for accounting for any advanced funds. The Banking and Investments Assistant may be contacted to obtain an expected balance of the revolving fund. When a revolving fund or a change fund is no longer needed the custodian should prepare a final Statement of Condition and complete the following procedures.

Cash Funds

Prepare a Journal Voucher to record any expenses not yet reimbursed and attach original receipts. Credit GL Account 101450 on the appropriate General Ledger Fund and debit the appropriate expense fund and cost center. The Journal Voucher should be routed to the Banking and Investments Assistant in Accounting Services. Any remaining cash should be deposited on a Cash Receipts Voucher using GL Account 101450 on the appropriate General Ledger Fund.

Checking Accounts

If you wish to close a bank account for a revolving fund, contact the Office Treasury Operations. They will instruct you on the proper procedures to close an existing bank account that has been created in the name of the University.