Cashing Personal or Third-Party Checks

Some government entities cash personal or third-party checks from employees or the public. We recommend that government entities prohibit this practice. Government entities should not function as banks for their employees or for third parties. Cashing personal or third-party checks increases the entity’s risk of losses due to insufficient funds.

In addition, it increases an entity’s exposure to fraud. All funds collected by the entity should be deposited exactly as collected. The composition of the funds to be deposited, in terms of the amount of cash and checks, should reflect the actual receipts.

Reviewing the deposit’s composition is one way to prevent and detect thefts involving “lapping” -- an employee taking cash before it is deposited and replacing it with a check that should be in a different deposit. Allowing an employee to cash a personal or third-party check with funds that should be deposited defeats that safeguard.

Date this Avoiding Pitfall was most recently published: 04/01/2022