COM 0860.000 2008-2010 - Laserfiche WebLink

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h 7 Limited Scope Performance Audit of the Department of Water Supply's Internal Controls for Cash Handling and Financial Informational Technology (IT) Systems EXECUTIVE SUMMARY This limited scope performance audit was performed in accordance with Hawaii County Charter, section 3 -18 and Generally Accepted Government Auditing Standards (GAGAS). - The Department of Water Supply was designated for review based on a County -wide risk assessment conducted by the Office of the Legislative Auditor in FY 2007 -2008. DEPARTMENT OF WATER SUPPLY Hawaii County Charter article VIII provides for a semi - autonomous Department of Water Supply (DWS) consisting of a nine - member Water Board, a Manager, and necessary staff, and establishes a separate Water Fund to be utilized solely for water purposes that includes revenues from the operation of the County's water system and State and Federal water grants or appropriations. AUDIT SCOPE During the audit entrance conference, DWS management stated that it had discovered a theft of money in the Customer Service Branch of its Finance Division; the employee responsible had been terminated; and the illegality had been reported to appropriate County of Hawaii officials for investigation. The complaint filed by the Prosecutor's Office charged that a theft had occurred "on or between July 1, 1997 through August 15, 2009 ", in a continuing course of conduct. In a no contest plea, the employee agreed to pay restitution of $78,868.40, which County officials confirm has been reimbursed to DWS. The employee was convicted of Theft in the First Degree. On the request of DWS management, the Legislative Auditor's Office agreed to focus our examination on the adequacy of current internal controls relating to cash handling and financial information (IT) systems within the DWS Finance Division and Information Systems Branch. The audit period covers July 1, 2008 through February 28, 2010. AUDIT OBJECTIVES • Assess the control environment, including management's policies and procedures for establishment and maintenance of an effective internal control system. • Assess the adequacy of internal controls relating to cash handling activities. • Assess the adequacy of internal controls of systems and application activities relating to financial IT systems. AUDIT METHODOLOGY • Review of DWS documentation and practices; County and State laws and records; and government best practices relating to cash handling and financial IT technology. • Interview and observation of Hawaii County personnel, and interview of Honolulu City and County personnel and financial IT systems experts. AUDIT CRITERIA • Government Auditing Standards (July 2007 Revision), also known as Yellow Book, published by the U.S. Government Accountability Office. • Internal Control Criteria: o Committee of Sponsoring Organization Internal Control (COSO) Integrated Framework. o Government Finance Officers Association (GFOA) Recommended Practice: Revenue Policy — Cash Receipts Policy (January 2007).