Terms of reference
Review of the petty cash system
Terms of reference
The report is being written is to satisfy the requirements of the ICAS unit for the final level of the AAT qualification.
The report looks at the need to make improvements to the management of the petty cash system for Kaplan Financial.
In order to gain sufficient evidence for the report questionnaires were prepared for completion by the operational staff (see appendix 1).
Interviews were conducted with the Financial Accountant, Account Payables Team Leader and the Assistant Accountant (AA).
The accounts department was observed for a period of three weeks.
Following a thorough review of the accounts department and, in particular, the petty cash system, a number of weaknesses were identified. The major weakness with the current system is that the petty cash is loose in the drawer of the receptionist who is often away from her desk dealing with clients. Other weaknesses are identified within the report.
By not having a set procedure for the safeguarding of petty cash, or the reconciliation thereof, fraud could easily be committed which may result in cashflow problems for the business and the misstatement of the expenses in the Income Statement.
There are several recommendations which are discussed later in the report, the most significant of which is to hold all petty cash, under an Imprest system preferably, in a secure tin which is to be kept in a locked drawer within the accounts department, away from non-staff members. It is also recommended that the responsibility for maintaining the petty cash is given to the Assistant Accountant and the reconciliation to the Financial Accountant.
Subject to all the recommendations being implemented, the initial cost savings are estimated to be in the region of £39,000. This will be an ongoing benefit.
Kaplan Financial is one of the largest accountancy tuition providers in the UK and is owned by the Washington Post. The Washington Post has several businesses within its portfolio, each operating as a separate autonomous business unit.
In terms of Kaplan Financial, the main stakeholders are the customers who send their students to the company for training, and the government agencies who manage the funding for the Association of Accounting Technician (AAT) qualification. Other qualifications provided include the Chartered Institute of Management Accountants (CIMA); the Institute of Chartered Accountants of England and Wales (ICAEW) and the Association of Chartered Certified Accountants (ACCA). The tutors are also important stakeholders as they are responsible for the delivery of the product. Other stakeholders are the shareholders, suppliers and the accountancy bodies themselves.
The accounts department oversees all the financial functions of the business and is responsible for accurate record keeping of the day to day transactions. The department is divided into several key areas (see appendix 2) with each section being responsible for a different section of the accounts; Accounts Payable (AP), Accounts Receivable (AR), Financial Accounting and Management Accounting. The reception staff are also direct reports of the Financial Accountant (FA).
Whilst it is the responsibility of the Cost Centre managers, heads of each Kaplan centre, to generate their own sales and procure their own study materials, consumables and utilities, the accounting function is there as a centralised point of access to...