Petty Cash Funds: Discretion Run Wild

Government petty cash funds are a perfect example of uncontrolled discretion. Not in the fact that they exist, but in they way they are managed. By definition, "petty cash" is a small amount of money intended for minor, unexpected expenses. The office printer suddenly runs out of ink, and there is no more in the supply cabinet. Sometimes these things happen, no matter how carefully a budget is planned. So the office manager issues a few hundred pesos from petty cash, properly logged of course, and someone runs to the store. After making the purchase he turns in the receipt, and that money is now accounted for. This is how petty cash works in most private businesses, and even in many governments. And no matter how big the company, the amount of money in any petty cash fund would never be more than a few thousand pesos at one time. There should not be many unexpected expenses, and those that do arise should be small. More expensive needs, even for emergencies, must still go through the formal purchase request process. The idea is that managers should plan for their needs with a carefully thought out budget.

In the Philippines however, many government offices maintain very large petty cash accounts, sometimes on the scale of several hundred thousand pesos. Expenditures from the fund are often documented by a certification signed by the official, rather than with receipts. There is no proof, other than the official's word, as to how the money was spent. Once again we see the "shield of honor" being invoked to ward off any accusations of corruption. But while we really do wish we could accept the word of those "honorable" officials, let's not forget the 1/5 of the national budget that "evaporates" every year. Misuse of petty cash funds is one of the cracks through which that money disappears.

This situation is simply not acceptable. To say that an office needs to keep 200,000 pesos available for emergency purchases is nothing but an excuse for poor fiscal planning. And not requiring a receipt for every expenditure is an almost overwhelming invitation for corruption. I suspect that millions of pesos, at the very least, are lost and stolen every year through the combined petty cash funds of the Philippine Government, high and low. This is one of the incredibly simple steps that government can take to immediately gain control over its money. Again, strictly regulating the size and use of petty cash funds, and requiring official receipts for every purchase, should not be seen as a sign of mistrust. Every private company does it. It's just good accounting.