Research and Sponsored Projects Manual (RSP)
| Effective: 11/1/1996 |
Revised: 7/1/2007 |
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RSP 503–02: Sponsored Project Cash Advances |
Purpose
To provide sponsored principal investigators (PIs) with the necessary guidelines to establish and use a cash advance, which may be in the form of a departmental petty cash fund, travel advance, or expense advance; permit the efficient use of these funds; safeguard the funds and related documents; and maintain satisfactory accounting controls
Sources
Financial Services
Office for Research and Sponsored Projects Administration
University policy
Background
The efficient operation of a sponsored project sometimes makes it necessary to have funds readily available. Generally, three types of cash advance mechanisms may be used: petty cash funds, travel advances, and sponsored project expense advance funds.
Policy
Petty cash funds generally are not authorized for sponsored agency/orgs. If sponsored project staff wish to purchase incidental project-related items and cannot use a Departmental Limited Value Purchase Order and do not wish to use his or her own money and submit a claim for reimbursement, then the use of a departmental petty cash fund is recommended. Similarly, if the project needs a change fund for a project-related function, a departmental petty cash fund established specifically to provide funds for making change at university functions is recommended. A single departmental petty cash fund may be used to reimburse expenditures from any agency/org under the jurisdiction of the custodian.
A sponsored projects accountant may permit the establishment of a petty cash or change fund if:
- a sponsored project is located off-campus
or
- the necessity for a petty cash fund for the operation of the project can be justified and a departmental petty cash fund cannot be used.
The amount of a petty cash fund should be limited to a level that permits efficient use of the cash fund (normally $50 to $100).
Travel advances for project-related individual travel of ASU staff and students are authorized through Travel Reimbursements. Travel advances are occasionally issued for the travel and supply costs required for fieldwork, such as archaeological digs and campsite expenses.
Expense advance funds for sponsored projects are authorized by sponsored projects accountants and then issued by the Business Services division of Financial Services. These advances may be issued to a principal investigator or staff member for relatively small amounts of money when it would not be feasible to obtain a check through the university’s financial system for each discrete expense.
The amount of an expense advance should be limited to a level that permits efficient use of the cash fund. Expense advances should be kept to a minimum, as excessive balances lead to unnecessary risks of loss. Normally the expense advance fund should not exceed two months of anticipated expense advance needs. Examples of when expense advances might be used are:
- subject fee payments
and
- operating expenses of a project office, archaeological excavation, or fieldwork located at a remote site.
The cash advance policy subjects all sponsored petty cash and expense advance funds to the following restrictions:
- the purchase cost of a particular item shall not exceed $500
and
- the funds cannot be used for:
- payments to ASU employees for services or to independent contractors for services rendered in excess of $100
- subject fees (object code 7310.40) in excess of $100 or multiple payments to a single subject expected to receive in excess of $100 in a calendar year
- capital equipment
- travel
- fines
- interdepartmental purchases
- personal loans
- cashing checks
- unallowable project costs
and
- any other prohibited transactions, outlined in the Financial Services Policies and Procedures Manual—FIN 401–03, “Prohibited Transactions.”
Responsibility for issuing, monitoring, expending, documenting, clearing, auditing, and securing sponsored project cash advance funds is a shared effort. Typically the fund custodian, principal investigator, sponsored projects accountants, Business Services, Cashiering Services, and Payables and Reimbursements handle these responsibilities. Additionally, responsibilities for travel advances are shared with the individual traveler, the traveler’s department, and the Travel Reimbursements office.
Using Cash Advances for Payment of Services
Current policy permits nominal payments (up to $100) to be made for services without the completion of documentation and forms normally required for such payments. As an extension of this policy, sponsored expense advances may be used to pay subject fees up to $100 per recipient. Documentation of subject fee payments made from sponsored expense advances may include logs signed by the recipients, canceled checks, or similar documentation as permitted by the Human Subject Institutional Review Board.
If a subject is to be paid more than $100, or is expected to receive multiple payments that cumulatively exceed $100, the subject fee payment cannot be made from the sponsored expense advance.
Using Cash Advances while Traveling
While traveling abroad, the sponsored expense advance custodian needs to obtain receipts for all expenses paid from the advance. Generally, it is a good idea for the traveler to take along a blank receipt book in case vendors do not have their own receipts. The description of the payment and the date should be entered on the blank receipt and the vendor should sign the receipt.
Independent contractor payments to individuals for services in excess of $100 may not be made from sponsored expense advances. However, payments can be made to individuals while traveling abroad if it is not feasible to make the payments through Purchasing and/or Payables and Reimbursements. Circumstances justifying such payments while abroad might include interpreters or guides hired after arrival in a foreign country.
Payments to individuals for services require additional record keeping to comply with Internal Revenue Service regulations. This includes payments made for services and for the travel and living expenses of these individuals (excluding nominal tips paid to service providers). The Payments to Individuals Abroad form must be completed for all such payments and can serve as the receipt for these payments. This form is available from Grant and Contract Accounting (GCA). ASU will issue a 1099 form to U.S. citizens for the total of service payments and undocumented expense reimbursements. To exclude expense reimbursement amounts from the 1099 form total, the payee must provide receipts from third-party vendors for living and travel expenses incurred.
| Note: | Only unusual circumstances would warrant payment for services to a U.S. citizen while abroad. Generally, payments in excess of $100 to a U.S. citizen should be made through Payables and Reimbursements. |
Payments cannot be made to ASU employees (including the traveler) from a sponsored expense advance. Payments to ASU employees for services must be paid through ASU payroll as additional compensation (see the Staff Personnel Policies and Procedures Manual—SPP 404-02, “Supplemental Pay”). For travel expenses, ASU employees should each file their own Travel Authorization and document their travel expenses after the trip through the claim process.
Prompt Clearing and Documentation of Cash Advance Expenditures
The fund custodian is responsible for prompt and regular clearing of advance amounts. Additional cash advances cannot be issued to the custodian without processing requests for reimbursements to the current cash fund. All sponsored petty cash funds must be cleared by project termination. Travel advances must be cleared no later than seven working days after returning from the trip. Expense advances must be cleared immediately following the completion of the stated purpose of the advance or at least monthly to clear expenditures that have been made to date from advanced funds.
Clearing any type of cash advance fund requires proper documentation and/or repayment of unused funds. The fund custodian is responsible for providing documentation of the expenditures made from petty cash or expense advance funds. Such documentation includes original receipts for expenditures, bank statements if applicable, and account reconciliation for outstanding cash advance funds. The custodian must submit all documentation in a completed Reimbursement Recap envelope to the Business Services division of Financial Services. Business Services will sign off and forward the documentation to Payables and Reimbursements for review and processing.
Any project costs that may be advanced but later are disallowed by a sponsor or audit remain the responsibility of the principal investigator. Any deficiency in documentation or violation of the petty cash/cash advance policy relative to the appropriate use of cash advances will result in the issuance of a deficiency notice by Payables and Reimbursements to the fund custodian in accordance with the Financial Services Policies and Procedures Manual—FIN 403, “Petty Cash Funds.”
Review and Audit of Outstanding Cash Balances
The necessity, size, and use of outstanding sponsored project petty cash or expense advance funds are periodically reviewed by GCA. Recommended changes are communicated to the custodian and implemented as necessary. Additionally, outstanding sponsored petty cash and expense advance funds are subject to periodic cash count audits by Cashiering Services.
Security of Sponsored Cash Advance Funds
For security and documentation purposes, sponsored project expense advances greater than $500 should be deposited in a separate bank account or converted to traveler’s checks. If the expense advance is less than $10,000, the bank account must be in the name of the fund custodian.
If the expense advance is $10,000 or greater (whether the initial advance or the cumulative outstanding advance for a single project account equals $10,000 or more), a separate bank account in Arizona State University’s name must be established. A Sponsored Cash Advance Bank Account Information form must be completed and returned to Financial Services for processing.
Bank statements on advances of $10,000 or more, which require the university as an ownership party, must be mailed by the bank to GCA for review and subsequent forwarding to the cash advance fund custodian. Initial review of these bank statements by GCA includes monitoring for unusual activities such as extraordinarily large expenditures or the unexpected closing of accounts.
Expense advances for any amount deposited in foreign bank accounts can be established only in the name of the cash advance fund custodian. If the establishment of a foreign bank account is not practical, conversion of the advanced funds to travelers checks is recommended for security of the advanced funds.
The fund custodian must keep all undeposited petty cash or expense advance funds and related documents in a secure, lockable cash box placed in a locking desk or cabinet. If a safe is available, the cash box should be placed in the safe whenever it is not being accessed. Keys and lock combinations should be restricted to the fund custodian.
If the petty cash or expense advance fund is lost or stolen, the fund custodian is responsible for filing a report with ASU’s Police Department (ASU PD). Insurance Services and Safety Services reviews all reports of lost or stolen cash to determine whether an insurance claim can be filed. Although Insurance Services and Safety Services receives copies of all cash loss reports from DPS, the fund custodian must also contact Insurance Services and Safety Services to determine the status of the theft claim or loss.
A new petty cash fund or expense advance fund may be established after the Business Services Assistant Comptroller is satisfied that the fund custodian has implemented procedures to prevent further thefts. If the theft loss does not qualify for insurance recovery, the amount of the theft loss is charged to the fund custodian directly or to the employee’s departmental account, as decided on a case-by-case basis.
Procedure
All sponsored expense advance fund applications require the inclusion of a justification for establishing an expense advance and the approval of a project authorized agency/org signer. An alternate state or local account, authorized by the agency/org signer, must be available to guarantee coverage of the advance in the event expenditures from the advance cannot be charged to the project. Sponsored expense advance fund applications also require the final approval of Grant and Contract Accounting. D
| Responsibility
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Action
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| Principal investigator |
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| Fund custodian |
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| Sponsored projects accountant (SPA) |
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| If the cash advance is warranted: | |||
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| Fund custodian |
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| Business Services |
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| Fund custodian |
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| Cashiering Services |
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| Fund custodian |
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| Business Services |
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| Payables and Reimbursements |
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| If any discrepancies exist: | |||
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| If no discrepancies exist: | |||
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| If SPA approval or assistance is necessary: | |||
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| SPA |
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| If SPA approval or assistance is not necessary: | |||
| Payables and Reimbursements |
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| Cashiering Services |
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| Business Services |
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| SPA |
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Cross-References
For more information on human subjects in research, see RSP 201, “Human Subjects in Research.”
For more information on petty cash funds, see the Financial Services Policies and Procedures Manual—FIN 403, “Petty Cash Funds.”
For more information about travel on sponsored projects, see:
- RSP 504, “Travel”
and
- the Financial Services Policies and Procedures Manual—FIN 508, “Travel Advances.”
For information on prohibited transactions, see the Financial Services Policies and Procedures Manual—FIN 401–03, “Prohibited Transactions.”
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