Policy and Procedures for Uncashed and Voiding of Checks



Policy and Procedures for Uncashed and Voiding of ChecksBACKGROUND INFORMATIONWhen checks are issued, there is the possibility that a check may need to be voided. This may occur if there was an error when printing the check, a check was lost in the mail, or if a vendor or tenant simply failed to cash the check. Processes should be put into place to ensure that the general ledger and bank reconciliation are updated, proper state laws are followed, and the threat of fraud is minimized. Most PHAs will review their books for uncashed checks once a year as part of the PHA’s fiscal year closing processing. Normally most uncashed checks are related to checks issued to program participants for utility allowances or refunds and are normally immaterial.This document provides two (2) samples for uncashed and voiding of checks policy and procedures.Sample 1 – PHA with a Fee Accountant. This sample provides an uncashed / voided check policy for a PHA who contracts with a fee accountant for monthly accounting services.Sample 2 – PHA without a Fee Accountant. This sample provides an uncashed / voided check policy for a PHA that performs all accounting functions in house.PHAs can simply cut and paste either or both samples into their policy and procedures documents and modify as needed.OTHER ITEMS FOR CONSIDERATIONThe following provides items that the PHA needs to consider when developing the policy and procedures for uncashed and voiding of checks and the major assumptions that were used to develop the sample policy and procedures.Assumption – There are no state requirements regarding the refunding of outstanding checks to the state as unclaimed property or that the state requires a minimum time limit by which a check must be honored (for example. two years after check issue date). The PHA must check their state statute to determine whether other processes are necessary for the voiding of checks Assumption – It is assumed that the program that issued the check will be credited for the voided check entry.Assumption – It is assumed that the associated bank will honor a check presented by the payee from the PHA in accordance with the bank’s check cashing policy.Reminder – Each PHA software system voids checks differently with regards to how accounts are credited and the time period in which the transaction is posted.SAMPLE 1 – PHA WITH FEE ACCOUNTANTUNCASHED AND VOIDING OF CHECKS POLICYChecks may need to be voided from time to time based on a variety of situations. The voiding of a check must be approved by the appropriate personnel and recorded in the general ledger in a timely manner to provide accurate financial statements. The proper program or project from which the funds were initially charged will be credited in the amount of the voided check.UNCASHED AND VOIDING OF CHECKS PROCEDURESThere are a variety of situations in which the PHA may need to void checks. The most common reasons include the following:Errors printing the checks (wrong amount, wrong vendor, check put in printer wrong)Checks lost in the mailOutstanding checks after bank reconciliation at end of PHA’s fiscal yearWhen it has been determined that a check needs to be voided, specific procedures should be followed based on the reason for voiding the check.ErrorsIf an error occurred while printing the check or an error was identified prior to mailing the check to the vendor, the Accounts Payable clerk should notify the Executive Director immediately. Once the Executive Director has reviewed the check and agrees that it needs to be voided, the check should be altered so that it cannot be cashed by any banking institution. The PHA will cut out the signature area on the bottom right corner of the check and the word “VOID” should be written across the check. The voided original check should be retained for audit verification.Lost in the MailIf a vendor has contacted the PHA to state they did not receive the check in the mail, the Executive Director will contact the bank to authorize a stop payment on the check. The PHA may choose not to place a stop payment if the amount listed on the check is less than the cost of the stop payment. The PHA will print and send the vendor another check. The PHA will notify the vendor that if the original check eventually arrives, that they should either destroy the check or return it to the PHA. In no instance shall the original check be cashed by the vendor.Outstanding Checks After Bank ReconciliationAt the end of the fiscal year, the bank reconciliation should be reviewed by the Executive Director and any outstanding checks that have been dormant and issued in the previous fiscal year will need to be researched to determine if they should be voided by the PHA. In addition, any outstanding check for a materially significant amount issued in the last six months, should also be researched to determine if they need to be voided by the PHA.Once the PHA has determined that the check needs to be voided, the PHA will send a copy of the void check or a memo to the fee accountant stating which check(s) need to be voided and the reason. The fee accountant will complete the appropriate journal entries and update the bank reconciliation accordingly.SAMPLE 2 – PHA WITHOUT FEE ACCOUNTANTUNCASHED AND VOIDING OF CHECKS POLICYChecks may need to be voided from time to time based on a variety of situations. The voiding of a check must be approved by the appropriate personnel and recorded in the general ledger in a timely manner to provide accurate financial statements. The proper program or project from which the funds were initially charged will be credited in the amount of the voided check.UNCASHED AND VOIDING OF CHECKS PROCEDURESThere are a variety of situations in which the PHA may need to void checks. The most common reasons include the following:Errors printing the checks (wrong amount, wrong vendor, check put in printer wrong)Checks lost in the mailOutstanding checks after bank reconciliation at end of PHA’s fiscal yearWhen it has been determined that a check needs to be voided, specific procedures should be followed based on the reason for voiding the check.ErrorsIf an error occurred while printing the check or an error was identified prior to mailing the check to the vendor, the Accounts Payable clerk should notify the Finance Director immediately. Once the Finance Director has reviewed the check and agrees that it needs to be voided, the check should be altered so that it cannot be cashed by any banking institution. The PHA will cut out the signature area on the bottom right corner of the check and the word “VOID” should be written across the check. The voided original check should be retained for audit verification.Lost in the MailIf a vendor has contacted the PHA to state they did not receive the check in the mail, the Finance Director will contact the bank to authorize a stop payment on the check. The PHA may choose not to place a stop payment if the amount listed on the check is less than the cost of the stop payment The PHA will print and send the vendor another check. The PHA will notify the vendor that if the original check eventually arrives, that they should either destroy the check or return it to the PHA. In no instance shall the original check be cashed by the vendor.Outstanding Checks After Bank ReconciliationAt the end of the fiscal year, the bank reconciliation should be reviewed by the Finance Director and any outstanding checks that have been dormant and issued in the previous fiscal year will need to be researched to determine if they should be voided by the PHA. In addition, any outstanding check for a materially significant amount issued in the last six months, should also be researched to determine if they need to be voided by the PHA.The Finance Director will review the documentation and provide a signed approval to void the checks. The accounting department will void the check in the PHA’s software system and update the bank reconciliation accordingly. ................
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