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Project Cash on Hand for DIM Projects (PCH)
 
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1.0 Description
PCH is a perpetual cash advance to DIM project office/site that is in remote region with project disbursement needs that cannot be met by the CO’s main office through cheque or EFT, nor by PPCF or any supplementary banking arrangements.  A DIM project office that meets certain criteria (see section 3.1 below) and has monthly project disbursement requirement between $1,001 – $25,000, (or $2,501 – $25,000 for Fast Track), may elect PCH arrangement subject to Treasurer’s approval. 
The determination of the appropriate level for a PCH is based on the Annual Work Plan, the project expense forecast, staff capacity, number of FT staff working in the project office, internal control, and security risks.
The PCH follows the same procedures as PPCF except the following differences:
  1. The Head of Office must recommend the PCH arrangement for DIM project remote office/site with a specific PCH level and the Treasurer must approve the PCH arrangement.
  2. The Head of Office must appoint a staff holding Fixed Term Contract (FT) as the PCH Custodian.
  3. PCH does NOT exempt the CO or the project office from following all applicable procurement rules and processes.  This means that even if cash is used to pay for goods and services, the selection of the vendor must be subject to all applicable procurement rules and processes.
  4. The Project Manager (PM holding FT) in the remote project site, acting as the First Authority, can request the replenishment for PCH, subject to certain internal control conditions being met (see Internal Control for PCH).
Caution: For DIM project office with monthly liquidity requirement > $25,000, the CO must use the banking system or other alternatives instead of keeping large amount of cash in the project office.  This requires consultation with Treasury to open project bank accounts, or arrange the local service provider or cash courier to meet the cash needs.   


2.0 Relevant Policies
UNDP Financial Regulations and Rules (FRR) apply, in particular Rule 125.09 that states:
“Petty cash advances may be made available to officials designated by the Treasurer or his or her designate from petty cash accounts. The Treasurer may, where adequate safeguards are provided, authorize petty cash advances from petty cash accounts to non-staff personnel up to an amount determined by the Treasurer. These cash accounts shall be maintained on an imprest basis. The amount and purposes of each account shall be defined by the Treasurer. The amount held shall be the minimum compatible with working requirements.”


3.0 Flowchart
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4.0 Procedures
4.1 Authority to Establish the PCH and Level
The Treasurer has the sole authority for approving the establishment of the PCH based on the recommendation from the Head of Office of a CO.
The Head of Office must present the recommendation for the PCH arrangement for the remote DIM project office/site.  Such recommendation must provide details on:
  1. Efforts made in identifying alternate options and outcomes including the local banking environment assessment to demonstrate there are no other viable options
  2. Staff capacity and availability of Atlas at the project site in order to record the project disbursements on a monthly basis.
  3. Proposed internal control arrangements to ensure separation of duties.
  4. Monthly project liquidity requirement (expense forecast) to substantiate the selected PCH level.
  5. Security assessment of the project office/site and the travel route for the initial funding and subsequent replenishment to minimize the personal risk to the PCH Custodian and financial risk to UNDP.
  6. Procurement of the safe with strong security feature and availability of a locked room with security safeguards.
The Treasurer will evaluate such request based on the project’s needs, banking situation in the remote area, project staff capacity and site security, along with the CO’s compliance records with IFC and Guidelines for existing type of cash arrangements, if any, particularly in the areas of adherence of accounting, reconciliation, and year-end procedures, and make the decision whether to approve the recommendation.
Caution: Failure to timely and accurately record any type of cash arrangement and reconcile relevant GL accounts may lead to delay for the approval until the internal control issues are resolved. 
 
4.2 Qualifying Expenses for PCH
  1. DIM project related expenses that cannot be paid by the main office.
  2. No amount limit for each payment.
  3. Procurement rules and processes are to be followed for all project disbursements.
Caution: Salary and benefit payments including overtime, advances and allowances cannot be made from the PCH regardless of amount.  These payments must be entered in Global Payroll without exception.
 
4.3 PCH Custodian Appointment and PCH Custodian Responsibilities
The Head of Office appoints the PCH Custodian with the following Appointment criteria:
  1. Staff holds UNDP FT contract.
  2. Staff is competent to fulfill the responsibilities including safeguarding, proper use of, accounting for, and physical counting of, and maintaining the PCH Register.
  3. Staff agrees to the terms and conditions of Project Cash on Hand Custodian Appointment and Declaration Letter and signs the document (see Annex 1 – to be modified for PCH by the user) including any losses in the PCH are to be reimbursed to UNDP by the PCH Custodian or a deduction shall be taken from his/her salary.
The PCH Custodian is responsible for:
  1. Cash the cheque and place the cash for PCH initial funding and subsequent replenishment in the project office safe with the presence of a second officer. 
  2. Maintain the PCH Register to record all activities in the PCH (see Annex 2).
  3. Maintain PCH daily balance and average monthly balance on PCH Register for insurance purpose.
  4. Use pre-sequentially numbered PCH Voucher for each disbursement made from the PCH.
  5. Ensure such PCH Voucher is filled out for accounting/budget purposes and properly approved and has an invoice/receipt as the supporting document.
  6. Count PCH balance after each disbursement and after each of the replenishments to ensure the amount is always equal to the running balance on the PCF Register.
  7. Make every reasonable effort to prevent theft for example, including maintenance of PCF in secured location (i.e., office safe), requiring presence of two persons when safe is opened.
  8. Request the CO’s main office for replenishment when PCH balance reaches 20% of the initial opening balance (or a pre-approved % level, also see 4.5) Initial Funding and Subsequent Replenishment for PCH.

 

4.4 Security for PCH
The DRR(O) or Operations Manager is responsible for the physical security for PCF as follows:
1.      The project office must have a safe with strong security features.
2.      The safe is to be placed in a room with security safeguards and is limited access by authorized personnel only. 
3.      Cash must be kept in the safe at all times.
4.      Arrange and secure the travel route for the initial funding and the subsequent replenishments.
 
4.5 Initial Funding and Subsequent Replenishment for PCH
1.      Initial funding of PCH is done by an AP non-PO Voucher payable to the PCH Custodian as the “Vendor”.  The supporting document for the AP non-PO Voucher is the approval from the Head of Office or Treasurer, as applicable.
2.      Subsequent replenishment is done by an AP Non-PO Voucher payable to the PCH Custodian.  The amount of the subsequent replenishment should equal to the amount of the APJV (see Internal Control and PCH Accounting) that records the total disbursements made during the period prior to the replenishment request. The APJV and related invoices/receipts serve as the supporting document for the subsequent replenishment.
3.      After the subsequent replenishment, the PCH balance should equal to the initial opening balance.
For subsequent replenishment to the PCH, the DRR (O) or Operations Manager at the CO’s main office (other than the PCH Custodian) must review, certify and approve (as the case may be):
  1. APJV created by PCH Custodian for recording PCH disbursements and relevant supporting documents (see PCH Accounting).
  2. Physical count conducted by the project office to ensure the PCH balance in the safe equals to the balance on the PCH Register.
  3. PCH reconciliation to ensure that GL PCH Account 16107 balance is the same as the actual cash in the safe (after the APJV is posted) and on the PCH Register.
  4. AP non-PO Voucher to pay the PCH Custodian as the replenishment for the PCH.
Tips: Subsequent replenishment to the PCH must be requested when the PCH balance reaches 20% of the original level.  If the lead time required is longer due to specific local conditions, the Project Manager must agree with the Operations Manager to raise the % to the appropriate level so that the project activities are not adversely impacted.  The key is not to keep excess PCH balances on site to mitigate security risk and to ensure internal controls are strictly followed to reduce financial risk.
 
4.6 Internal Controls for PCH

1.      Separation of duties should be maintained at all times.

2.      Pre-sequentially numbered PCH Vouchers must be used to request the PCH disbursements; the proper approval obtained, and full Chart of Accounts (COA) indicated. 

3.      Invoice/receipt for any purchases should be attached to each PCH Voucher.

4.      APJV must be raised to record the PCH disbursements on a monthly basis or prior to each of the replenishment request, whichever comes first.

5.      PCH Register must be maintained on per transaction basis and issued on the close of business of the last day of the month or prior to each replenishment period with no further alteration.  A new PCH Register must be created for a new month or a new replenishment period.

6.      AAA report for GL Account 16107 must be generated for each month end or each replenishment period to compare the balance in the PCH Register and in GL.

7.      Operations Manager should perform a physical cash count at the month end or prior to each replenishment request, whichever comes first, and shall sign the PCH Count Form (see annex 3).  The signature on the PCH Count Form certifies that the balance in the safe equals to the balance in the PCH Register and the balance in the GL Account16107.  If the project office does not have an Operations Manager, the DRR(O) must designate an officer independent of the PCH to conduct the monthly physical count.

8.      In addition, surprise physical cash counts must be carried out together by the DRR(O) or Operations Manager and  by the designated staff/officers from the CO’s main office. The PCH Count Form should always be used and the date of the surprise cash count should be noted. In addition, the Custodian should perform a daily cash count and reconciliation with a second officer.  This can be registered on the Cash Register.

9.      Any discrepancies identified in the steps 4.6.5 to 4.6.8 must be investigated and resolved within 7 days. 

10.   Steps from 4.6.5 to 4.6.9 constitute the monthly PCH reconciliation to be performed every month without exception.

11.   On or before 31 December of each year, the CO must deposit the PCH balance in the safe into the CO’s bank account. 

Caution: If the CO does not deposit the PCH balance in the safe into the bank account at the year-end, the office must notify Treasury and explain the reasons why action was not taken.  Treasury will issue guidance on the year-end certification procedures.
 
4.7 Accounting for PCH

1. AP non-PO Voucher for initial funding and subsequent replenishment for PCH:

Debit GL Account:
16107 – Project Cash on Hand_PCH
Credit GL Account
11005 – Cash
Operating Unit:
CO’s operating unit
Fund Code:
Relevant project fund code
Department:
Respective department
Project ID:
Relevant project ID
Impl. Agent:
As appropriate
Donor:
As appropriate
Open Item Key:
PCH Custodian Staff Index ID
 
 

2. APJV for PCH disbursements at each month end or prior to request PCH replenishment whichever comes first and for the year-end closure:

Debit GL Account:
7XXXX – relevant expense accounts
Credit GL Account:
16107 – Project Cash on Hand_PCH
Operating Unit:
CO’s operating unit
Fund Code:
Relevant project fund code
Department:
Respective department
Project ID:
Relevant project ID
Impl. Agent:
As appropriate
Donor:
As appropriate
Open Item Key:
PCH Custodian Staff Index ID
 
 
3. AR Direct Journal for year-end deposit of PCF cash balance into CO’s bank account:
Debit GL Account:
11005 - Cash
Credit GL Account:
16107 – Project Cash on Hand_PCH
Operating Unit:
CO’s operating unit
Fund Code:
Relevant project fund code
Department:
Respective department
Project ID:
Relevant project ID
Impl. Agent:
As appropriate
Donor:
As appropriate
Open Item Key:
PCH Custodian Staff Index ID
 
Caution: All transactions in PCH (AP non-PO Vouchers, AP Journal Vouchers, and AR Direct Journals) must be recorded in the currency code in Atlas that matches the actual currency in which the PCH is held.  Using incorrect currency code in Atlas will lead to inaccurate valuation of the PCH in the financial statements.
 
Caution: COs must never use any GLJEs to record PCH transactions and should never record any FX gain/loss.  HQ runs the revaluation process to recognize the FX gain/loss in conjunction with the preparation of the annual financial statements.
 
 
4.8 PCH Reconciliation and Year-End Closure
  1. Steps in Section 4.6.5 to 4.6.9 constitute the monthly PCH reconciliation to be performed every month without exception, including the year-end closure.
  2. If the CO’s main office and its project office follow the Guidelines and Procedures herein, the AAA report for GL 16107 at 31 December should show the balance to be zero in local currency.
  3. The DRR(O) must review the PCH reconciliation results, complete and sign the Year-end PCH Certificate and PCH Count Form.  These two documents must be uploaded to designated SharePoint on or before 31 January.
 
Caution: Pay attention to the currency in GL.  Reconciliation is to be done for the currency in which the PCH is held.  Typically, this means local currency. The CO should not reconcile the USD balance.
 
Caution: The DRR(O) is accountable for the accuracy and consistency of the balances in AAA report, in PCH Register, and in the safe.
 
 
4.9 PCH Monitoring
 
The Head of Office is responsible for ensuring routine monitoring, at least monthly, of GL Account 16107 for data quality and completeness.  CO compliance with the Guidelines and Procedures should ensure
 
  1. The PCH level not to exceed the authorized level by the Treasurer at any time.
  2. The expenses are recorded on a monthly basis or at each replenishment period.
  3. No GLJE is used.
  4. All transactions recorded are in the currency for which the initial PCH balance is established.
  5. At 31 December, balance in GL 16107 in local currency is zero.
Caution: Strictly following the procedures are critically important to ensure UNDP cash assets are accounted for timely and accurately.  .


5.0 Inputs
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6.0 Deliverables
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7.0 Roles and Responsibilities
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8.0 Templates and Forms


9.0 Additional Info. and Tools
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10.0 Lessons
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11.0 On the Drawing Board
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