It is always recommended that sizable amounts of cash not be available in the church office but there are at times those occasions when small cash payments are appropriate. Each church office must determine an amount just sufficient to meet the occasional needs that the office experiences.

A petty cash fund is often maintained by many churches as a convenience to those individuals who are required to make small cash payments for goods and services. A petty cash fund will provide the necessary funds quickly and easily. It benefits those individuals who cannot wait for a normal check reimbursement (such as the postman with a postage due package.) It benefits the church employees in that they don’t have to expend personal funds for church business. And it benefits the church treasurer in that it can significantly reduce the amount of reimbursement checks that need to be issued.

Such a fund is nothing more than setting aside a specific amount of cash to be replenished periodically as it is used. Control of the petty cash fund must be the responsibility of one and only one designated individual who must at all times be prepared to account for the cash or its use. Having a number of individuals with access to the petty cash fund often results in mismanagement or misappropriation of the funds.

Setting up the petty cash fund might go something like this: a dollar amount is determined to be the petty cash beginning balance. That dollar amount is of course different for every congregation and depends on the needs and activities of the congregation. An individual is appointed as the petty cash treasurer. A lockbox or locking file cabinet or other such security measures are developed. The cash is transferred from the church’s checking account to the petty cash fund. The journal entry would be a credit to the church’s checking account and a debit to an asset account called "Petty Cash".

When requests for reimbursement come in, the petty cash treasurer verifies that the request is legitimate, collects any possible receipts and pays out the cash. He/She also needs to fill out a voucher of sorts and have it signed by the payee. Example below.

At any time, the total cash available in the petty cash fund when added to the total vouchers, must equal the beginning petty cash fund balance. For example, if the beginning petty cash fund was $75.00 at the beginning of the month and at the end of the month the cash is down to $24.00, then the vouchers must total the $51.00 which was used during the month. When the petty cash account falls to a predetermined level, the petty cash treasurer adds up the vouchers and fills out a check request for the total amount of the vouchers which will bring the petty cash account back up to the original balance. The church treasurer takes the check request and issues a check payable to petty cash, charging the appropriate expenses for which the petty cash was used.

Petty Cash Checking Account

A number of congregations in addition to or in place of a petty cash account have turned to using a petty cash checking account. A petty cash checking account operates in basically the same way as a petty cash account except that there is no cash-- only reimbursement by check. The advantage to using a petty cash checking account is that there is no actual cash that might be misplaced or mishandled. Usually larger amounts can be kept in a petty cash checking account as opposed to a petty cash account.

A predetermined amount is put into a separate checking account. A specific individual is given the responsibility and check signing authority. Security measures should be taken in that the check signing authority is limited to as few individuals as possible, the checkbook is kept in a safe place, and that the individual(s) granted check signing authority on the petty cash checking account does not have access to other church funds.

When requests for reimbursement come in, the petty cash treasurer verifies that the request is legitimate, collects any receipts and issues a check for reimbursement. He/She must also fill out a petty cash voucher. Example below.

At all times, the amount of the balance of the petty cash checking account along with the check checking vouchers must total the beginning petty cash balance. For example, if the petty cash checking account was opened with a $200.00 balance and the balance is down to $70.00, then the checking vouchers should total $130.00. When the petty cash checking account falls to a certain predetermined level, the petty cash treasurer totals up all to vouchers, makes up a check request which tells the congregational treasurer the breakdown of expenses, attaches all the vouchers and submits the request to the church treasurer. The church treasurer makes a check payable to the petty cash account (or just transfers the money if both accounts are in the same bank) charging the appropriate expense accounts. The congregational treasurer rather than the petty cash treasurer should be responsible for reconciling the bank statement of the petty cash checking account.