Summary of Report 02-070

August 2002

Report Number 02-070

The five state agencies we audited spent and accurately reported their travel advance and petty cash funds in accordance with state laws and regulations. However, through our analysis, we determined that state agencies and institutions of higher education (state entities) do not appear to need all the travel advance and petty cash funds they have set aside. If not spent, these funds remain unused in bank accounts outside of the State Treasury. We also identified control weaknesses related to travel advance and petty cash accounts at the agencies we audited.

According to the fiscal year 2001 Annual Cash Report from the Comptroller of Public Accounts, state entities' travel advance fund balances at the end of fiscal year 2001 totaled $2,270,802. However, based on fiscal year 2000 and 2001 actual travel advance fund expenditures, state entities needed to hold approximately only $1,337,000 in travel advance funds. If excess funds were transferred out of travel advance funds, approximately $934,000 could be returned to the State Treasury, a portion of which could potentially go to unappropriated General Revenue. As a result of our analysis, 29 state entities have notified us that they have returned or intend to return $540,701 in unspent travel advance funds to the State Treasury. To maximize the use of state funds, we encourage all state entities to examine their use of travel advance funds annually and to align travel advance fund balances with their needs.
Unlike travel advance expenditures, petty cash expenditures are not easily identifiable in the Uniform Statewide Accounting System (USAS). Therefore, we could not analyze petty cash funds at a statewide level. However, of the five agencies we audited, three maintained petty cash fund balances that they did not use or that appeared to be excessive. As with travel advance funds, we encourage all state entities to examine their use of petty cash funds annually and to align petty cash fund balances with their needs. At the end of fiscal year 2001, state entities held $1,359,736 in petty cash funds.

• State entities should annually examine and adjust their travel advance and petty cash fund balances to align with their needs and ensure that they manage these funds properly.

  Despite the availability of state credit cards and improvements in state payment system technology, state entities continue to maintain large travel advance fund balances. Reducing the amount of funds held for the purpose of providing employees with travel advances could result in entities' returning approximately $934,000 to the State Treasury (based on fiscal year 2000 and 2001 actual travel advance fund expenditures). As of July 22, 2002, a total of 29 state entities have notified us that they have returned or intend to return $540,701 in unspent travel advance funds to the State Treasury. (The $540,701 figure is part of the $934,000 mentioned previously.)

  Unlike travel advance expenditures, petty cash expenditures are not easily identifiable in USAS. As a result, we could not analyze them at a statewide level. However, three of the agencies we audited appear to have petty cash fund balances that they did not use or that were larger than necessary. Specifically, we found that:

  • The Department of Mental Health and Mental Retardation's Austin State School maintained a $5,800 petty cash fund balance, but it spent an average of only $1,356 of these funds each month during an eight-month period in fiscal year 2002.
  • The Texas Rehabilitation Commission's Austin Regional Office maintained a $4,000 petty cash fund that it did not use, and its Houston District Office maintained a $4,000 petty cash fund from which its total monthly activity averaged $25 during an eight-month period in fiscal year 2002. Additionally, both offices paid bank service charges to maintain these petty cash fund accounts in local banks outside the State Treasury. Texas Rehabilitation Commission's overall petty cash fund balance was $24,000, but its petty cash fund expenditures per month for fiscal years 2000 and 2001 averaged $500.
  • The Texas Department of Transportation's Fort Worth District Office maintained a $1,500 petty cash fund, but its total monthly activity from this fund during an eight-month period in fiscal year 2002 averaged $224.



• Each of the five agencies audited needs to strengthen controls over travel advance and petty cash funds to protect them from loss.

  The Texas Lottery Commission (Lottery), School for the Blind and Visually Impaired (School), Department of Mental Health and Mental Retardation (MHMR), Texas Rehabilitation Commission (TRC), and Texas Department of Transportation (TxDOT) need to strengthen controls over travel advance and petty cash funds. Examples of the weaknesses we identified include the following:

  • The Lottery provided travel advances to employees who had not submitted travel vouchers for prior travel advances. It also did not always ensure that it processed employee travel vouchers associated with travel advances. As a result, the Lottery has $8,315 in outstanding travel advances issued during the years 1995 through 1998. The Lottery is working to clear these outstanding advances. In addition, the Lottery coded 38 petty cash reimbursement transactions totaling $3,747 with incorrect USAS accounting transaction code combinations.
  • The School did not ensure that employees promptly reimbursed the travel advance fund for any differences between the travel advances they received and their actual travel expenses. The School also did not promptly reconcile petty cash funds with bank statements and lacked policies and procedures regarding the proper administration of petty cash funds.
  • MHMR's Austin State School did not ensure that it always used the appropriate USAS transaction codes for petty cash transactions. MHMR also did not have documented travel advance and petty cash policies and procedures specific to the Austin State School.
  • TRC's Austin Regional Office did not reconcile petty cash funds with bank statements and did not ensure that employees reviewed and approved reconciliations.
  • TxDOT's Fort Worth District Office's petty cash fund exceeded TxDOT's $1,500 limit by $120. TxDOT's Fort Worth and Bryan District Offices did not reconcile, review, or approve petty cash funds with bank statements. These offices also lacked documented policies and procedures specific to their individual offices.
    

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