Research and Sponsored Projects Manual (RSP)

Effective: 11/1/1996

Revised: 3/1/2011

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RSP 503–02: Sponsored Project Cash Advances

Purpose

To provide sponsored principal investigators (PIs) and their departments with the necessary guidelines to establish and use a cash advance for sponsored projects activities to maintain satisfactory accounting controls and to allow for out-of-pocket expenses related to these sponsored projects

Sources

Financial Services
Office for Research and Sponsored Projects Administration (ORSPA)
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

Petty cash funds generally are not authorized for sponsored agency/orgs. If the sponsored project staff find a need 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.

An ORSPA grant and contract officer may permit the establishment of a petty cash or change fund if:

  1. a sponsored project is located off-campus

    or

  2. 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). See the Financial Services Policies and Procedures Manual—FIN 403, “Petty Cash Funds” to initiate a petty cash advance.

Out of Pocket Expenses

Out-of-pocket expenses to be charged to a sponsored project must be supported by itemized receipts when submitted for reimbursement. The only acceptable documentation is a cash register tape or sales receipt from an outside vendor indicating the date, vendor, items purchased, and amounts. Unitemized charge card sales slips (such as MasterCard, VISA) are not acceptable documentation; expenditures based on or supported with unitemized charge card slips cannot be reimbursed.

Reimbursement of out-of-pocket expenses while in travel status are to be requested pursuant to FIN 505–02, “Out-of-State Travel Reimbursement,” or FIN 504, “In-State Travel” and submitted to Travel Reimbursement.

Travel Advances

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.

Travel advances involving three or more university-related personnel working on a sponsored project may receive advances/be authorized as group travel—one employee must be responsible for all expenses. See the Financial Services Policies and Procedures Manual—FIN 507, “Non-Athletic Team/Group Travel.”

Using Cash Advances while Traveling

While traveling, the sponsored expense advance custodian must 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.

Many faculty conduct research in rural or remote locations often times in foreign countries where local custom may dictate the way negotiations related to commerce take place. For example, the faculty may need to procure an item such as a shed for material storage while in the field and the negotiation may involve bartering rather than payment in cash. These situations are governed by the customs of the local community. In extenuating circumstances when acquiring hand written receipts is not possible, the PI shall maintain a log of incidental expenses. Use of the “Sponsored Cash Advance Remote Operations Purchase Log” template is strongly encouraged. The log should provide the date, approximate time, amount paid, description, and a brief justification of the purchase and will serve as a substitute for receipts in these instances.

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 ORSPA. 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.

Expense advance funds for sponsored projects are authorized by sponsored projects accountants and then issued by the Business Services division of Financial Services. Once Business Services has approved the cash advance application the custodian will be notified when a check has been issued by Cashiering Services.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:

  1. subject fee payments

    and

  2. 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:

  1. the purchase cost of a particular item shall not exceed $500

    and

  2. the funds cannot be used for:
    1. payments to ASU employees for services
    2. payments to independent contractors for services rendered if $600 or more
    3. subject fees (object code 7310.40) in excess of $600 or multiple payments to a single subject expected to receive in excess of $600 in a calendar year
    4. capital equipment
    5. travel
    6. fines
    7. interdepartmental purchases
    8. personal loans
    9. cashing checks
    10. unallowable project costs

      and

    11. any other prohibited transactions, outlined in the Financial Services Policies and Procedures Manual—FIN 401–03, “Prohibited Transactions.”

Exceptions to the above restrictions for extenuating circumstances are to be reviewed and approved by an ORSPA grant and contract officer.

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, ORSPA grant and contract officer, 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. It is recommended all personnel expected to handle the cash advance fund review related university policy and have cash handling training.

Using Cash Advances for Payment of Services

Current policy permits nominal payments (in certain cases up to $600) to be made for services without the completion of documentation and forms normally required for such payments. Additionally, payments can be made to non-U.S. citizen working outside the U.S. in excess of $600 if it is not feasible to make the payments through Purchasing and/or Payables and Reimbursements.

As an extension of this policy, sponsored expense advances may be used to pay subject fees up to $600 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. See the Financial Services Policies and Procedures Manual—FIN 421–05: “Human Subject Payments” for detailed information.

If a subject is to be paid more than $600, or is expected to receive multiple payments that cumulatively exceed $600, the subject fee payment cannot be made from the sponsored expense advance.

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 21 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. In extenuating circumstances that involve remote locations and/or fieldwork when acquiring hand written receipts is not possible, the PI shall maintain a log of incidental expenses. A log template can be found at the ORSPA forms Web site. The log should provide the date, approximate time, amount paid, description, and a brief justification of the purchase and will serve as a substitute for receipts in these instances. 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. Cash advance expenditures must have adequate supporting documentation in adherence with RSP and FIN policies and procedures.

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 the appropriate ORSPA grant and contract officer. 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 pursuant to this RSP policy, which can result in the issuance of a deficiency notice if funds are not appropriately safeguarded and accounted for.

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.

Domestic Bank Accounts

Expense advances deposited in domestic bank accounts:

  • 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 noninterest bearing 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 Business Services for processing.

Foreign Bank 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 traveler’s checks is recommended for security of the advanced funds. Please consult with your personal tax advisor for possible foreign account reporting responsibilities to the IRS.

Maintaining Cash Safely

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 in a remote location and a locking device is unavailable the fund custodian shall secure the funds in a safe area within the limited resources that may be available.

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 ASU PD, 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 Office is satisfied that the fund custodian has implemented procedures to prevent further thefts. If the theft or loss does not qualify for insurance recovery, the amount of the theft or loss is charged to the fund custodian directly or to the employee’s departmental account, as decided on a case-by-case basis.

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:

  1. RSP 504, “Travel”

    and

  2. the Financial Services Policies and Procedures Manual:
    1. FIN 508, “Travel Advances.”
    2. FIN 504, “In-State Travel”
    3. FIN 505–02, “Out-of-State Travel Reimbursement”

      and

    4. FIN 511, “Receipts and Itemization.”

For information on prohibited transactions, see the Financial Services Policies and Procedures Manual—FIN 401–03, “Prohibited Transactions.”

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