It is critical that you use all the resources of your organization as intended. In a childcare setting you want to ensure that all cash, food, supplies and other items are only used for childcare.

Your Board of Directors is ultimately responsible for ensuring that resources are used appropriately. The major issue is the control of cash as it can most easily be used inappropriately. Play supplies and food are generally not as much of a concern. For example, used building blocks have a limited use outside of a childcare setting. A monthly review of play supplies and food purchases will generally highlight significant changes in use patterns that can be followed up. Cash, on the other hand, can be used to buy anything and misuse is often difficult to detect.

Make Sure All Cash Received is Recorded

It is critical that at all times you know who has and who has not paid user fees. This applies equally to parent and government payments. Most fees are paid by cheque. Making sure all cheques are deposited and recorded generally is not difficult. We suggest the following:

·         Cheques received by staff from parents should immediately be given to the Supervisor. The Supervisor should also open the mail.

·         The Supervisor should enter cheque amounts in the deposit book noting the amount of the cheque, the parent/child’s name and the period the deposit relates to.

·         Details of non-parent related deposits should also be entered in the deposit book including the period a payment applies to and the funding/subsidy program (e.g. subsidy receipts, GST refunds).

·         Deposits should be made at least weekly.

Controlling cash payments received is trickier. To help make sure that all cash received is deposited and can be traced back to the person paying we recommend:

·         Parents should be directed to pay cash directly to one and only one person - generally the Supervisor. Cash payments should only be accepted by this person.

·         Parents should receive a receipt for all cash payments at the time of payment. Consider having the parent initial the receipt when issued to prevent misunderstandings as to actual amounts paid and accepted.

·         All cash received should be deposited directly into the bank account with the regular weekly deposit. A photocopy of parent receipts issued should be attached to the duplicate deposit book sheet. This will provide a trail from the payee to the deposit.

·         No cash received should ever be put directly in the petty cash box. Cash not deposited directly into the bank account is almost impossible to trace.

We are often asked whether organizations should photocopy cheques and cash received. Generally, keeping photocopies of cheques does not help ensure that all amounts received are deposited. If questions come up you can always ask the payee for a copy of the cancelled cheque to provide proof of deposit. Photocopying cash itself is considered counterfeiting and is illegal in Canada. It also does not help you determine who paid the money.

Make sure all cash spent is for approved purposes

It is important to make sure that only approved purchases are made and that amounts paid are reasonable. Discounts should be taken whenever available. Purchases are generally made by cheque, with petty cash or by credit card. To help make sure that only approved payments are made for appropriate amounts we suggest:

Payments by cheque

You should authorize purchases before ordering the goods. If you wait until the goods are delivered it is too late as the organization is already committed to the purchase. All non-routine expenditures in excess of a set amount (e.g. $1,000) should be authorized by the Board of Directors. A Board might consider giving the Supervisor permission to authorize purchases less than the threshold amount provided the purchases are within the organization’s budget.

We strongly urge not-for-profit organizations to have all cheques signed by at least two signing officers. At least one of the signatories should be a Board member. The person preparing the cheques for signature should include an invoice approved for payment by the Supervisor. Note the cheque number, the word "paid" and the date on the invoice.

Registered charities must have two signatures on each cheque as Revenue Canada deems the ability to sign cheques with only one signature as making resources available for personal use and is grounds for de-registration.

Do not make payments from supplier statements. If you always insist on invoices for support of payments then you will greatly reduce the chance of paying amounts twice.

As a general rule cheques should never be pre-signed by a signing officer. Pre-signing effectively eliminates the need for two people to review supporting documentation. If you permit pre-signing you might as well have only one signatory. It is worth the inconvenience of having to arrange for two signatures to prevent the potentially devastating effects of misuse of a pre-signed cheque.

If a cheque must be pre-signed, generally only in situations where the amount to be paid will not be known until it is time to pay (e.g. when paying for a food purchase at the store by cheque), then consider the following:

·         The cheque should be made out to a specified payee prior to it being pre-signed.

·         The inscription "Not to exceed $xxx" should be written below the space for the amount of the payment.

·         The cheque to be pre-signed should be accompanied by a supplier purchase order or a note from the Supervisor indicating precisely what the cheque is for and why it must be pre-signed.

·         The file of unpaid invoices should be reviewed at least monthly by the Treasurer. Invoices unpaid for more than a month should be followed up to determine whether there was a problem with either authorization of the expenditure or quality of the goods and/or services received.

Payments by cash

Cash payments (i.e. petty cash expenses) are often the most difficult to control. Thankfully petty cash expenses generally do not exceed $300 a month at most organizations. To help make sure petty cash payments are only for authorized expenditures we recommend the following:

·         A petty cash float should be maintained on an imprest basis. An imprest basis is one where the total of the cash on hand and receipts at any point in time equals a preset amount (e.g. $300).

·         The petty cash float should only be replenished by cheque on submission of an itemized expense report with all receipts attached.

·         Under no circumstances should cash received from other sources (e.g. parents paying fees with cash) be put directly in the petty cash box. If this is done then the sum of expenses and receipts will not equal the preset amount.

·         The Treasurer should review the petty cash box once or twice a year to ensure the sum of invoices and cash on hand equal the preset amount. Minor differences should be corrected in the next reimbursement cheque. Major differences should be followed up immediately.

·         Keep petty cash in a locked box tucked away in a safe drawer. Leaving cash in the open invites problems and inappropriate temptation.

·         Where security is a problem consider buying an inexpensive safe for the petty cash. A small safe from your local hardware store costs about $200.

·         Consider reimbursing unreceipted expenses only with approval from a Board member. A note should be included indicating what the purchase was for, why the receipt was lost or not obtained, and signed by the person being reimbursed.

Credit card purchases

Some organizations use credit cards for purchases. The primary problem with credit cards used by not-for-profit organizations is not payment of outstanding balances but authorization of transactions. It is important that authorization procedures remain well controlled. To help reduce unauthorized purchases we recommend:

·         Have very specific policies for what can be purchased with a credit card.

·         Require that all staff credit card purchases be pre-authorized by a Board member.

·         Have low credit limits on all cards to prevent problems in the event a card is lost or misused ($500 or less may be appropriate).

·         A copy of every credit card receipt together with the actual invoice and a note authorizing the purchase should accompany the monthly credit card statement when preparing the monthly payment.

·         Cancel credit cards that are not essential.

Review of cash transactions

The above procedures all deal with individual transactions. An overall review of receipts and payments for the month is also critical as it can help you identify unusual trends and irregularities. At a minimum the following monthly review procedure should be carried out:

·         All bank accounts should be reconciled monthly to the accounting records. The bank reconciliation should be reviewed periodically by someone other than the person doing the reconciliation (at least twice a year).

·         As a minimum the cash balance at the most recent month end together with a statement of cash received and disbursed since the previous report should be presented at each Board meeting.

If a statement of cash receipts and disbursements is presented to the Board and the cash balance at the end of the month is correctly reconciled then misclassification in the statements is the worst that can happen. Significant misclassifications will hopefully be spotted on review of the monthly statements.