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HomeMy WebLinkAboutCOM 0448.000 2016-2018 Valerie T.Poindexter -.- Bonnie S.Nims,CGAP ='oacv.0F`l9h`'•., Legislative Auditor Chair&Presiding Officer ;.o. ;, .q,� g Council District 1 : ` - ' 444. • /�:� ,kms - ri _ Business Address •�'�,8r'T °;��`. 1266 Kamehameha Avenue 4 e°; A Suite A-8 Hilo,Hawaii 96720 Gurtff of �. afuxai`t OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street Hilo,Hawai`i 96720 * (808)961-8386 * Fax(808)961-8905 website:http://hari'aiicountv.gov e-mail:publiclaou,co.hmi'aii.hi.us August 25, 2017 f- , sem. • C, y The Honorable Valerie T. Poindexter, Council Chairperson and 1." Q-‹ Members of the Hawai`i County Council Hawai`i County Council >nl 25 Aupuni Street cv _> Hilo, Hawai`i 96720 v Dear Chair Poindexter and Council Members, In accordance with Hawai`i County Charter Section 3-18(d)(2), attached is the Office of the Legislative Auditor's report of our audit of cash handling at the Department of Water Supply. The purpose of the audit was to determine whether DWS implemented internal controls over water receipts to prevent, detect, and deter fraudulent transactions. We evaluated if these internal controls followed best practices. Department of Water Supply's water receipts cash handling process lacks significant internal controls including adequate segregation of incompatible duties and independent review and monitoring. Due to these internal control weaknesses, our audit could not determine if all cash received was deposited. We did not identify any instances of fraud or misappropriations during our testing. If you need any further information, please let me know. We would like to thank the Department of Water Supply staff for their assistance and cooperation during this audit. We greatly appreciate all of their valuable time and efforts spent on providing us information. Respectfully, . /1 -.- Bonnie S. Nims, CGAP r� Legislative Auditor m cc: Harry Kim, Mayor �• � . Ref. FC8-1017 Ref• To:®sate AFP 0 Stewart Maeda, County Clerk Wil Okabe, Managing Director Keith Okamoto, P.E., Manager-Chief Engineer Kawika Uyehara, P.E., Deputy Richard Sumada, CPA, Waterworks Controller Candace Gray, Waterworks Assistant Controller Water Board of Directors Cash Handling at County of HawaiTs Department of Water Supply Report Highlights August 25, 2017 Cash Handling at the County of Hawai`i's Department of Water Supply Background What did we find? The County of Hawaii Incomplete and inaccurate policies and procedures over the Department of Water Supply's water receipts cash handling process resulted in significant mission is to provide safe and internal controls weaknesses. These weaknesses include dependable drinking water at a inadequate segregation of incompatible duties and insufficient reasonable cost. Money is spent independent review and monitoring. to maintain water quality and a accounting procedures or control activities and those who dependable system. Due to these weaknesses, we could not determine if all cash identify potential areas for received was deposited. We did not identify any instances of In fiscal year 2015-2016, water fraud or misappropriations during our testing. receipts/sales totaled over cash receipting activities to ensure that revenue is approximately $47 million for Management has generally agreed with the comments and the Hilo, Waimea, Kona, and recommendations in this report. Their complete response to this Ka'u offices. audit can be found on page 18: Management Comments. What was the purpose of this audit? The recommendations identify improvements for management to increase internal controls for water receipts cash handling. Our This performance audit was audit report offers recommendations designed to address these undertaken to evaluate if the issues through: program's internal controls were adequate to reduce the • Segregating incompatible duties among those who perform risk of fraud and mishandling of accounting procedures or control activities and those who water receipt revenue and to have access to the cash. identify potential areas for • Implementing adequate ongoing monitoring of the design improvement. and operating effectiveness of the internal control system over cash receipting activities to ensure that revenue is The audit also looked at water complete. receipt transactions to ensure that receipts were deposited Updating, strengthening, and enforcing cash handling timely and intact. policies and procedures according to best practices; and • Providing initial and on-going cash handling and internal We initiated the audit, as we controls training for all employees who handle cash believe cash receipts are an receipts. inherently high-risk process. These recommendations should be considered for all cash receipting locations. This audit was conducted in accordance with general accepted government auditing standards. This page intentionally left blank. Table of Contents Introduction...............................................................................................................................1 AuditObjectives........................................................................................................................2 AuditScope and Methodology................................................................................................ 2 Commendations & Noteworthy Accomplishments................................................................ 3 Background.............................................................................................................................. 4 Who is the Department of Water Supply?..................................................................4 How do you pay for your water bill?...........................................................................4 How much money did the Department of Water Supply receive last fiscal year for waterreceipts?..........................................................................................................4 What internal controls should be expected over cash receipts?.................................5 Why are internal controls important?.........................................................................5 AuditResults............................................................................................................................ 8 Internal controls over water cash receipts are inadequate to prevent, detect, or deter, fraudulent transactions. As a result, we were unable to determine if cash receiptsis complete......................................................................................................8 Whatshould be?....................................................................................................... 9 Whatdid we find?..................................................................................................... 9 Whydid this happen?............................................................................................. 12 What are the consequences?................................................................................. 15 What do we recommend?....................................................................................... 16 Management's Comments......................................................................................................18 AppendixA — Audit Criteria....................................................................................................20 This page intentionally left blank. Introduction The Office of the Legislative Auditor conducted this performance audit of County of Hawai`i's Department of Water Supply's (DWS) cash handling process pursuant to Section 3-18 of the Hawaii County Charter, which outlines the Office of the Legislative Auditor's primary duties. Performance audits typically examine the effectiveness, economy, or efficiency of a government program. They can include analyzing the services of an entire department or activity, identifying possible cost savings, identifying the outcomes achieved by a program, or comparing actual department practices against the practices called for in law or policy. Our objective in performance auditing is to improve public services provided by county government. We do this by recommending specific actions that will address the issues we raise and by providing valuable information to the public, the administration, program leadership, the Hawai'i County Council, and the Mayor. A performance audit of the DWS cash handling process was included in the fiscal year 2016- 2017 annual audit plan based on the results of our countywide risk assessment. There are inherent risks associated with the implementation of the cash handling processes. If no internal controls exist, or if they exist but are not enforced, the risks related to the process increases, thereby increasing the risk exposure to the County. On a national level, employee misappropriation of cash is the most common type of fraud. According to the Association of Certified Fraud Examiners' (ACFE) 2014 Report to the Nations on Occupational Fraud and Abuse, organizations lose five percent of revenues to fraud each year.' "The most common employee occupational frauds of misappropriation of cash include: check tampering, revenue skimming, fraudulent disbursements by fake invoicing, payroll schemes, and billing scam S.112 The Office of the Legislative Auditor determined that a thorough examination of water receipts cash handling policies, procedures, and processes was warranted. 1 "The Cost of FRAUD". ACFE.com. https://www.acfe.com/rttn/images/cost-of-fraud-infographic.pdf (accessed June 30, 2016). z "Guarding Against Internal Frauds Committed by Employees". Bizfilings.com. http://www.bizfilings.com/toolkit/sbg/run-a-business/fraud/guarding-against-internal-frauds-by-employees.aspx (accessed June 30, 2016). DWS Cash Receipts Introduction 11 Audit Objectives The Office of the Legislative Auditor's fiscal year 2016-2017 annual audit plan included a performance audit of the County of Hawai`i's Department of Water Supply's (DWS) cash handling and receipting process. The objectives of the audit were to evaluate if internal controls over water receipts at the Hilo office are preventing, detecting, and deterring fraudulent transactions, whether these internal controls are following best practices, and if receipts are deposited timely and intact. Audit Scope and Methodology To accomplish our objectives, we: • Developed an understanding of the policies, procedures, processes, and document flows; • Compared DWS Hilo office's water receipts cash handling procedures, practices, and performance measures to recommended industry best practices; • Assessed compliance with DWS's cash handling policies and procedures, County of Hawai'i Code, County of Hawai'i Charter, and State of Hawai'i Revised Statues; • Analyzed water receipts by comparing revenue data and adjustments extracted from the County of Hawai`i's Public Utilities Billing System (PUBS) with the Hilo office's daily packet of water receipts and supporting documents; • Corroborated information through interviews with appropriate personnel, reviewed documentation and performed testing of documentation and controls; and • Reviewed additional documentation (i.e., daily packet contents, adjustment reports, debit/credit memos, cashiers copy of original deposit slip, Bank of Hawai'i deposit tag, Bank of Hawai'i statements, Account Clerk cash receipt reports, cash receipts general ledger, Bank of Hawai'i reconciliation and General Cash receipts reconciliation, etc.) as needed. During the course of our audit, we assessed internal controls relevant to the audit objective. This included a review of applicable policies and procedures, cash handling standards, and interviews with knowledgeable staff as well as water receipts for the Hilo office from November 2015 through December 2015 and May 2016 through June 2016. The Waimea, Kona, and Ka'u offices were not included in our audit scope because all work is reviewed and final cash receipting system reports are posted through the Hilo office. We also relied on computer generated data that is tested annually by the external auditors. We determined that the data used from these reports were sufficiently reliable for our intended purposes. DWS Cash Receipts Audit Objective, Scope & Methodology 12 We conducted this performance audit in accordance with general accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Our conclusions on the effectiveness of these controls are detailed within this report. We thank the Department of Water Supply's staff for their assistance and cooperation during this audit. Management generally agreed with the comments and recommendations in this report. Their complete response to this audit can be found on page 18: Management Comments. Commendations & Noteworthy Accomplishments We are pleased to report that the Department of Water Supply (DWS) has taken a proactive role in strengthening certain controls we identified as weaknesses during the course of the audit. Additionally, we appreciate the cooperation exhibited by DWS and their willingness to implement many of our recommendations. For instance, DWS has asserted they have: • established procedures to include a more proactive supervisory review process for any adjustments within the cash receipts process; • prepared adjustment reports through the cash receipting system (PUBS) to reconcile cash receipts and monitor adjustments; • conducted surprise cash counts at all established payment collection locations quarterly; and • started reviewing and revising current written procedures to be more comprehensive throughout the cash receipts process. We will follow up at the appropriate time to determine whether and to what extent all recommendations have been implemented. DWS Cash Receipts Audit Objective, Scope & Methodology 13 Background Who is the Department of Water Supply? The Department of Water Supply is a semi -autonomous agency of the County of Hawai"i, which operates by rules and regulations as adopted by the Water Board. As a semi -autonomous agency, the Department operates and maintains its water systems with revenues generated wholly through water sales. The primary function of the Department is to provide safe domestic water service through its 23 water systems and 74 sources scattered throughout the island. The individual water systems are not interconnected except in the more densely populated districts of South Hilo and Kona. As provided in the County Charter, the members of the Water Board are appointed by the Mayor and approved by the County Council for a five-year term. The Charter also provides that membership of the Water Board be representative of each of the nine County Council districts. The Manager -Chief Engineer of the Department of Water Supply, the Director of Public Works, and the Planning Director of the County of Hawai"i also serve on the Water board as ex -officio members without the power to vote. The Water Board is also responsible for the appointment of the Manager -Chief Engineer of the Department, who in turn appoints a Deputy with the confirmation of the Water Board. How do you pay for your water bill? There are several ways that your water bill can be paid: 1. Mail in your payment with a check 2. Pay in person by cash, check, or credit card at the Hilo office or at the district offices in Waimea, Kona, and Ka'u 3. Automatic bill payment from your checking account 4. On-line payment via ehawaii.gov How much money did the Department of Water Supply receive last fiscal year for water receipts? In fiscal year 2015-2016, total revenue for the Department of Water Supply was approximately $47 million.3 The Department of Water Supply services approximately 43,000 customers with about 9.6 billion gallons of water annually. 3 N&K CPAs, Inc. "County of Hawaii, Department of Water Supply Financial Statements and Supplementary Information With Independent Auditor's Report", Fiscal Year ended June 30, 2016, pg. 13. DWS Cash Receipts Background 14 What internal controls should be expected over cash receipts? Internal controls are broadly defined as a process effected by management. They are designed to provide reasonable assurance on the effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. Internal controls can help achieve performance targets and prevent loss of resources. An organization's internal control structure over cash handling operations should include the following elements: • Segregation of Incompatible Duties. Duties should be segregated amongst employees so that errors and irregularities made by one employee are difficult to conceal. • Independent Review and Monitoring. Management should document their review and approval of critical tasks performed by employees. Employees should not review and approve their own work. • Written Policies and Procedures. Policies and procedures should be approved by management, cover all aspects of operations, be sufficiently detailed, and be distributed to staff. In addition, ongoing monitoring is necessary to ensure policies, procedures, and internal controls, remain effective and efficient as operations change. • Physical Safeguarding of Assets. Assets should be physically protected from loss and unauthorized use. Why are internal controls important? Effective internal controls reduce the risk of theft or misappropriation of assets and helps provide reasonable assurance that the County's objectives will be achieved. Internal controls are affected by the actions of individuals within the County, as well as policies and procedures. Segregation of Incompatible Duties. Segregation of duties helps prevent fraud, waste, and abuse and can address the risk of management circumventing existing control procedures. Essentially, no one individual has control over all key aspects of a transaction or an event. "Responsibilities and duties involving transactions and events are separated among different employees with respect to authorization, approval, processing and recording, making payments or receiving funds, review and auditing, and the custodial functions and handling of related assets. Duties are assigned systematically to a number of individuals to ensure that effective checks and balances exist."4 Independent Review and Monitoring. When independent monitoring is designed and implemented appropriately, organizations are more likely to identify and correct problems on a timely basis. The Government Accountability Office (GAO) provides an overview of monitoring: 4 Steinhoff, Jeffrey C. "GAO Internal Control Standards, Internal Control Management, and Evaluation Tool".GAO.gov. https://www.gao.gov/assets/80/76615.pdf (accessed June 30, 2016), pg: 40. DWS Cash Receipts Background 15 ... since internal control is a dynamic process that has to be adapted continually to the risks and changes an entity faces, monitoring of the internal control system is essential in helping internal control remain aligned with changing objectives, environment, laws, resources, and risks. Internal control monitoring assesses the quality of performance over time and promptly resolves the findings of audits and other reviews. Corrective actions are a necessary complement to control activities in order to achieve objectives... 16.05 Management performs ongoing monitoring of the design and operating effectiveness of the internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, comparisons, reconciliations, and other routine actions. Ongoing monitoring may include automated tools, which can increase objectivity and efficiency by electronically compiling evaluations of controls and transactions.' Written Policies and Procedures. The Government Finance Officers Association (GFOA) establishes best practices including written policies and procedures that are reviewed on an annual basis. The GAO also recommends establishing written policies to document internal controls and responsibilities. The development of written departmental policies and procedures are an effective way to maintain a strong system of internal controls. Policies and procedures should clearly delineate the control activities performed throughout various business processes. These procedures should be detailed steps of departmental processes and should map out the course of action, so that persons not familiar with the process can follow them to perform the duties when necessary. This will aid in the orientation of new employees, help ensure business continuity in the event of turnover, and help ensure compliance with applicable laws and regulations. Unclear, outdated, or a lack of written policies and procedures could potentially result in: • misunderstanding or guiding employees in the wrong direction; • policies and procedures are inconsistently applied; • employees are unable to get a clear answer as to how or why something is done, leading to inefficiencies and frustrations among staff and management; • duplicated work; and/or • process and procedures are never improved. ' Dodaro, Gene L., "United States Government Accountability Office, Standards for Internal Control in the Federal Government".GAO.gov. https://www.gao.gov/assets/670/665712.pdf (accessed June 30, 2016), pg: 64-65. DWS Cash Receipts Background 16 By identifying gaps in policies and procedures, management can identify where effective controls need to be placed, where to provide sufficient detail for new and existing procedures and to clarify unclear procedures so that they are easier to follow. DWS Cash Receipts Background 17 Audit Results Internal controls over water cash receipts are inadequate to prevent, detect, or deter fraudulent transactions. As a result, we are unable to determine if cash receipts was complete. The Department of Water Supply's (DWS) revised Cashier Procedures establishes internal controls to ensure cash is safeguarded, accounted for, and properly recorded. Our audit evaluated these internal controls of DWS's water cash receipts. We found that these internal controls are generally inadequate and not operating according to best practice to prevent, detect, or deter fraudulent transactions. (Figure 1) As a result, errors and irregularities may go undetected by employees performing their normal assigned duties. Audit testing of internal control procedures included the following risk area where we found no exceptions: Summary of Internal Controls Best Practice Was it Performed? Segregation of duties No Independent Monitoring No Written Policies and Procedures No Safeguarding of Assets Figure 1 • Adequate Safeguarding of Cash Receipts - Department of Water Supply's management and staff have limited access to cash and only one employee has access and uses one cash drawer. While we found that cash receipts were adequately safeguarded, we did identify other areas where DWS could enhance its controls to further strengthen compliance with best practices and discourage theft or misappropriation. DWS Cash Receipts Audit Results 18 Segregation of duties is a key internal control and its primary objective is to minimize the risk or occurrence of errors or fraud by ensuring that no one employee has the ability to both commit and/or conceal errors or fraud in the normal course of their duties. Generally, the primary incompatible duties that need to be segregated are: • Authorization or approval • Custody of assets • Recording transactions • Reconciliation/Control Activity To achieve the highest level of internal control over the cash handling process, a different person should be involved in billing/recording, collecting, authorization or approval, and reconciling functions. No single individual should have complete control over all phases of a transaction. Some examples of incompatible duties are: • An employee who opens the mail and endorses checks should not handle cash receipts. • An employee who prepares a document should not approve the same document. • An employee who handles cash receipts should not maintain the change fund and receive deposit slips or corrections from the bank. • An employee who reconciles the bank statements should have no responsibility for cash receipts, disbursements, or custody. When duties cannot be segregated due to the small size of the department or division, compensating controls should be considered. These compensating controls should include monitoring activities such as a detailed independent review. Monitoring activities are an integral component of internal controls; unmonitored controls tend to deteriorate over time. When monitoring is designed and implemented appropriately, organizations are more likely to identify and correct problems on a timely basis. Ongoing monitoring can occur in the course of daily operations including regular management and supervisory activities including comparisons, reconciliations, and other routine actions. Incompatible duties are not adequately segregated We examined the cash receipt handling processes at the Hilo Main office and found that proper segregation of duties for cash handling was not in place. Currently, the Waterworks Controller makes the daily bank deposit as well as performs a final review of the daily cash receipt's reconciliation. In addition, the Waterworks Controller has full access to the cash receipting DWS Cash Receipts Audit Results 19 system, or PUBS (Public Utilities Billing System), as well as the general ledger (SB Client). Therefore, the Waterworks Controller: • has access and verifies cash receipts and performs the daily bank deposit (Custody of Assets and Authorization/approval); • is able to record and adjust transactions in PUBS and SB Client (i.e., the cash receipting system and the general ledger) (Recording Transactions); and • performs the monthly bank account reconciliation (Reconciliation/Control Activity). In addition to these incompatible duties, management has not established or performed any compensating controls, such as independent monitoring, to help mitigate this risk. Independent monitoring is insufficient When duties are not adequately segregated, it is even more vital that the cash receipting process be independently reviewed and monitored regularly. Because management performs part of the cash handling process, work should be reviewed for completeness and accuracy. Specifically, we observed the following: • Adjustments made in PUBS are not reviewed or reconciled. Adjustments to billing accounts may include such items as over/under charges (e.g., leak adjustment, meter misreads, etc.), late charges, and customer credits. The Customer Service Department Supervisor is required to complete a "debit/credit memo" due to billing errors or adjustments initiated by a customer complaint. Both an accountant and a supervisor in the Accounting Department approve the debit/credit memos immediately upon processing. However, there is no reconciliation of the adjustments recorded in the cash receipting system (PUBS) to the approved debit/credit memo to ensure that only authorized adjustments have been made. Cashiers may also process adjustments to PUBS; however, a debit/credit memo is not completed or approved. Therefore, management cannot determine that all adjustments to PUBS are appropriate and approved. Therefore, adjustments to cash receipt payments could be made and not detected. Without an approved debit/credit memo and without a reconciliation of the approved debit/credit memo to adjustments made in PUBS, management cannot determine if adjustments were made and revenue was misappropriated. During the course of our audit, DWS began to require that all adjustments be supported by a pre -authorized debit/credit memo. They also began running an adjustment report from PUBS and reconciling to the approved debit/credit memos. DWS Cash Receipts Audit Results 110 • Cash receipts in the billing system (PUBS) are not reconciled to the general ledger. Daily cash receipts are posted to PUBS while month-end cash receipt entries are manually posted to the general ledger system. Currently, a reconciliation is performed between the two systems, but does not include adjustments to PUBS. A revenue report is produced prior to the end of the business day. This report is used to post to the general ledger and to perform the current reconciliation. As mentioned above, there is no reconciliation of the adjustments recorded in the cash receipting system (PUBS) to the approved debit/credit memo. This results in a revenue report that may not include adjustments. Because the reconciliation is performed from a potentially incomplete revenue report, we could not ensure that all cash collected was deposited and posted. Since duties are not adequately segregated as discussed above, this reconciliation is crucial to ensure all revenue is collected and deposited in a timely manner. Manual receipts posted to PUBS are not reviewed for accuracy and the correct posting period. Manual receipts are used for non -water cash receipts (i.e., credit deposits, installation charges, facilities charge, rent, and reimbursements). While the cash for these receipts is deposited daily, the cashiers only enter the manual receipts into PUBS weekly. In addition, the manual receipts postings are not reviewed against the physical manual receipts or daily deposit for accuracy. • The bank reconciliation is not independently reviewed. Since the Waterworks Controller has access to the deposits, full computer access to cash receipting and the general ledger systems, as well as performs the bank reconciliation, someone independent of the cash receipting process should review the bank reconciliation for errors or inconsistencies. • Surprise cash counts are not performed at all offices. In Hilo, only "unofficial" cash counts are conducted by the supervisor, which only includes counting the daily beginning balance of the cash drawer. During our audit period, no cash counts are performed at any locations. Only beginning in July of 2016, did the Water Service Program Supervisor begin performing surprise quarterly cash counts in both Kona and Waimea. This cash count reconciles cash on hand to a PUBS check balance report. DWS Cash Receipts Audit Results Ill Since the Department of Water Supply (DWS) is semi -autonomous, they are responsible for creating and maintaining their own policies and procedures for establishing an adequate system of internal controls. The Department of Water Supply created cash receipting policies and procedures on June 29, 1999 and then updated them on January 14, 2010. However, DWS management does not conduct on-going and continuous monitoring of their policies and procedures in order to remain effective and efficient as operations change. We compared DWS's cash receipting policies and procedures, as well as current practices, to expected control procedures and found several deficiencies. (Figure 2) Comparison of industry best practices to the Department of Water Supply's policies and procedures Expected Practice Were Policies & Procedure Complete? Actual Practice Performed? Independent review and monitoring 114 Insufficient Segregation of duties Insufficient No Timely deposit of receipts Yes Yes Timely reconciliation of cash receipts to applicable ledgers Insufficient No Physical security procedures Yes Yes Receipt numbers being consecutive and pre -numbered (including voids) No Yes Checks endorsed immediately No Yes Reconciliation of total checks and cash Yes Yes Fraud reporting No No Figure 2 Policies were incomplete We compared the DWS written policies and procedures to industry best practices and identified several deficiencies: Independent review and monitoring. Existing procedures do not address any independent review of the incompatible duties that the Waterworks Controller is performing during the cash handling process. Policies and procedures should require a thorough review performed by an independent person to ensure accuracy, completeness, and timeliness of payments. DWS Cash Receipts Audit Results 112 • Segregation of duties. Existing procedures do not address separating any of the physical custody of the cash, depositing, or cash reconciliation functions. Policies and procedures should require that a different person be responsible for recording, collecting, authorization, and reconciling functions. • Timely reconciliation of cash receipts to applicable ledgers. Existing procedures do not address timely reconciliation of cash receipts to the general ledger. Policies and procedures should require that reconciliations are performed timely to ensure proper adjustments are made in the correct period. Receipt numbers being consecutive and pre -numbered (including voids). Existing procedures do not address the manual (Moore) receipts. While the manual receipts used by DWS are pre -numbered and reviewed for consecutiveness, current policies do not describe the manual receipting process. Sequential receipts are necessary to ensure that all payments are documented and revenue collected is intact. By using pre -numbered receipts and reviewing sequentially, receipts cannot be easily duplicated or voided. Checks endorsed immediately. Hilo office's policies do not address restrictive endorsement of checks. Policies and procedures should require check endorsement immediately upon receipt. • Fraud reporting procedures. Existing procedures do not address fraud reporting. Policies and procedures should require a fraud reporting process to aid in the detection and prevention of fraud. By providing fraud -reporting procedures, all County employees will be made aware of the types and signs of theft or fraud, the consequences associated with it, and how to report it. Those who are planning to commit fraud will know that management is watching and may be deterred by this. Honest employees who are not tempted to commit fraud will also be made aware of possible signs of fraud or theft and how to report any concerns. Policies were insufficient and not being followed We also identified policies and procedures that were not sufficiently detailed and not followed: • Independent review and monitoring. Actual procedures performed do not address an independent person outside of the cash receipting process performing any review of adjustments and reconciliations. Segregation of duties. Actual procedures do not address separation of duties when a single employee (Waterworks Controller) has full control over all phases of cash transactions. • Timely reconciliation of cash receipts to applicable ledgers. During the risk assessment process, we found that the Accountant II only reconciles the known debit/credit memos to what they have in the system. Actual cash receipts, DWS Cash Receipts Audit Results 113 adjustments to cash receipts are not monitored and reconciled to the SB Client general ledger. Fraud reporting. There are no written policies and procedures to address the risk of fraud to help in the detection and prevention of fraud, waste, and abuse. DWS Cash Receipts Audit Results 114 Inadequate segregation of duties could make fraud detection difficult and management may not timely detect and correct errors and irregularities during the normal course of business. Furthermore, since adjustments to cash receipt payments could be made and not detected, management could not determine if payments were adjusted and cash was misappropriated. Because of these internal control weaknesses, we tested cash receipts to determine if payments were deposited timely and intact. In fiscal year 2015-2016, water receipts/sales totaled approximately $47 million for the Hilo, Waimea, Kona, and Ka'u offices.' Since billing is evenly staggered over different monthly and bi-monthly billing cycles, we selected twenty days during four months (November 2015, December 2015, May 2016, and June 2016) for testing. This consisted of an estimated 13,000 transactions, totaling $2.9 million from the Hilo office. Total revenue was $19 million, with an estimate of 79,000 transactions for these four months. Of these transactions, most were complete and accurate and we only found minor exceptions: • two instances where cash receipt adjustments to PUBS were not approved and did not have an approved debit/credit memo as supporting documentation. • one instance where the daily cash receipts, an estimated 600+ transactions did not match PUBS and the daily deposit slip, but was later reconciled. Additionally, upon auditor request, DWS prepared an adjustment report to reconcile the authorized debit/credit memos. All adjustments were accounted for except the adjustments made to cash receipts noted above. We did not identify any instances of fraud or misappropriations during our testing. 6 N&K CPAs, Inc. "County of Hawaii, Department of Water Supply Financial Statements and Supplementary Information With Independent Auditor's Report, Fiscal Year ended June 30, 2016", pg. 13. DWS Cash Receipts Audit Results 115 Segregation of Duties We recommend that Department of Water Supply management separate incompatible duties. One individual should not be in charge of all of these cash handling elements: physical custody of cash, depositing cash, recording/adjusting transactions in the system, and reconciling the bank statements. If duties cannot be sufficiently segregated, mitigating controls, such as removing administrator computer access rights to the cash receipting system and/or a lower level of detailed supervisory review could be implemented. Implementing Monitoring and Oversight We recommend the Department of Water Supply management perform ongoing monitoring of their internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, daily reconciliation of adjustments and cash receipts, and other routine actions. We further recommend that the Department of Water Supply Finance and Customer Service Branch implement an independent verification process by an employee outside the cash handling process to review: ■ the daily cash receipts reconciliation and bank reconciliation; ■ cash receipts in the Public Utility Billing System (PUBS) that are reconciled to the general ledger; and ■ manual receipts posted in PUBS for accuracy. We further recommend that the Department of Water Supply Finance and Customer Service Branch reconcile all adjustments in PUBS to an approved debit/credit memo. We further recommend that the Department of Water Supply Customer Service Branch conduct surprise cash counts at all cash receipting locations. Update and Enforce Policies and Procedures We recommend the Department of Water Supply management clarify and enforce internal controls in County policy and procedures to ensure consistency throughout the department and with industry best practices including but not limited to: • Provide clear guidance on independent review and monitoring procedures. These procedures may include: ✓ reconciling adjustments in PUBS with approved debit/credit memos; DWS Cash Receipts Audit Recommendations 116 ✓ reconciling cash receipts in PUBS to the general ledger system; ✓ reviewing manual receipts posted in PUBS for accuracy and completeness; ✓ independently reviewing the bank reconciliation; and ✓ performing surprise cash counts at all locations. • Provide guidance and clarification on individual job duties to ensure adequate segregation of duties exists. • Clarify or add policies regarding any updated procedures to reflect current processes. Updated policies should also include: ✓ endorsing checks immediately upon receipt; ✓ require all adjustments are supported with an approved debit/credit memo; and ✓ fraud reporting guidance. Provide Training We recommend the Department of Water Supply management provide on-going cash handling and internal controls training for all DWS employees who handle revenue. DWS Cash Receipts Audit Recommendations 117 Management's Comments DEPARTMENT OF WATER SUPPLY 345 KEKUANA0'A STREET. SUITE 20 • HILO. HAWAII 96720 FAX (808) 961-8657 COUNTY OF HAWAVI TELEPHONE (808) 961-8050 August 17, 2017 Ms. Bonnie S. Nims, CGAP Legislative Auditor Office of the Legislative Auditor County of Hawaii 1266 Kamehameha Avenue, Suite A-8 Hilo, HI 96720 Dear Ms. Nims: Subject: Comments on Legislative Auditor Report, "Cash Handling at County of Hawai°i Department of Water Supply," Dated August xx, 2017 The Department of Water Supply (DWS) agrees that internal controls can be improved and changes are being made according to the Legislative Auditor's recommendations. The following are changes that the DWS has made or will make to address the Legislative Auditor's findings: 1. In duties are not adequately segregated. To segregate incompatible duties, DWS has shifted these responsibilities, effective July 2017: • Monthly Bank reconciliations have been assigned to the Assistant Waterworks Controller. • Daily delivery of deposits to the bank has been assigned to an Accountant outside of the cash receipting process. 2. Independent monitoring is insufficient. To implement monitoring and oversight, DWS: • Has implemented monthly reconciliations of adjustments in PUBS to authorized debiticredit memos effective January 2017 by an Accountant outside of the cash receipting process. DWS created a report to capture all adjustments processed by the billing system for the month. Transactions on the report are matched against approval documentation to make sure there are no unauthorized adjustments. All adjustments are required to be supported by an approved memo. • Has implemented monthly reconciliations of PUBS cash receipts Journals to bank deposits by an Accountant outside of the cash receipting process. DWS is utilizing a report from PUBS to capture all the cash receipts Journals processed for the month. Cash receipts Journals in the PUBS report are matched against the bank deposits to ensure all payment collections were deposited and posted. Water, Our Wost Precious (4source , .. K4 WaiA Kane ... The Department of Water Supply is an Equal Opportunity provider and employer. DWS Cash Receipts Management's Response 118 Ms. Bonnie S. Nims, CGRP Page 2 August 17, 2017 • Is currently exploring the PUBS G/L interface for additional reports to utilize in the monthly reconciliation between bank, PUBS and the GL by the Assistant Waterworks Controller. • Will implement regular monitoring of DWS' internal control system in accordance with policies and procedures and industry best practices and update as necessary. Cash recei is in the billing system PUBS are not reconciled to the general ledger. DWS currently reconciles daily cash receipts Journals to daily bank deposits. A monthly report of cash receipts is used to post the cash receipts to the GL which is reconciled to the monthly bank statement. DWS has also implemented monthly reconciliations of PUBS cash receipts Journals to bank deposits by an Accountant outside of the cash receipting process. DWS will be utilizing a report from PUBS to capture all the cash receipts Journals processed for the month. Cash receipts journals in the PUBS report will be matched against the bank deposits to ensure all payment collections were deposited and recorded. The PUBS G/L interface is being explored for additional reports to utilize in the monthly reconciliation between bank, PUBS and the GL by the Assistant Waterworks Controller. 4. Manual receipts posted to PUBS are not reviewed for accuracy and the correct posting period. DWS will be revising our procedures to address this finding. 5. The bank reconciliation is not independently reviewed. The Assistant Waterworks Controller has completed reviews of the bank reconciliations prepared by the Waterworks Controller dating back to July 2016. Effective July 1, 2017, the responsibility for bank reconciliations has been shifted to the Assistant Waterworks Controller. 6. Surprise cash counts are not performed at all offices. Beginning June 2017, surprise cash counts were scheduled for all offices for the current fiscal year which will be performed unannounced at each district office. A schedule will be prepared annually going forward. 7. Written policies and procedures. Current policies and procedures are being reviewed and revisions will be made to incorporate recommendations and include more details throughout the cash receipts process. In summary, DWS will be implementing all of the recommendations made by the Legislative Auditor. Sincerely yours+P. k" V Keith K. Okam, Manager -Chief Engineer CG:dmj DWS Cash Receipts Management's Response 119 Appendix A: Audit Criteria United States Government Accountability Office (GAO), Standards for Internal Control in the Federal Government ("Green Book") describes the monitoring internal control and remediation of internal control deficiencies component: Overview Finally, since internal control is a dynamic process that has to be adapted continually to the risks and changes an entity faces, monitoring of the internal control system is essential in helping internal control remain aligned with changing objectives, environment, laws, resources, and risks. Internal control monitoring assesses the quality of performance over time and promptly resolves the findings of audits and other reviews. Corrective actions are a necessary complement to control activities in order to achieve objectives... Principle 16 — Perform Monitoring Activities 16.01 Management should establish and operate monitoring activities to monitor the internal control system and evaluate the results... Internal Control System Monitoring 16.04 Management monitors the internal control system through ongoing monitoring and separate evaluations. Ongoing monitoring is built into the entity's operations, performed continually, and responsive to change. Separate evaluations are used periodically and may provide feedback on the effectiveness of ongoing monitoring. 16.05 Management performs ongoing monitoring of the design and operating effectiveness of the internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, comparisons, reconciliations, and other routine actions. Ongoing monitoring may include automated tools, which can increase objectivity and efficiency by electronically compiling evaluations of controls and transactions. 16.08 Management retains responsibility for monitoring the effectiveness of internal control over the assigned processes performed by service organizations. Management uses ongoing monitoring, separate evaluations, or a combination of the two to obtain reasonable assurance of the operating effectiveness of the service organization's internal controls over the assigned process. Monitoring activities related to service organizations may include the use of work performed by external parties, such as service auditors, and reviewed by management... DWS Cash Receipts Audit Criteria 120 Principle 17 — Evaluate Issues and Remediate Deficiencies 17.01 Management should remediate identified internal control deficiencies on a timely basis... Evaluation of Issues 17.05 Management evaluates and documents internal control issues and determines appropriate corrective actions for internal control deficiencies on a timely basis. Management evaluates issues identified through monitoring activities or reported by personnel to determine whether any of the issues rise to the level of an internal control deficiency. Internal control deficiencies require further evaluation and remediation by management. An internal control deficiency can be in the design, implementation, or operating effectiveness of the internal control and its related process. Management determines from the type of internal control deficiency the appropriate corrective actions to remediate the internal control deficiency on a timely basis. Management assigns responsibility and delegates authority to remediate the internal control deficiency. Corrective Actions 17.06 Management completes and documents corrective actions to remediate internal control deficiencies on a timely basis. These corrective actions include resolution of audit findings. Depending on the nature of the deficiency, either the oversight body or management oversees the prompt remediation of deficiencies by communicating the corrective actions to the appropriate level of the organizational structure and delegating authority for completing corrective actions to appropriate personnel. The audit resolution process begins when audit or other review results are reported to management, and is completed only after action has been taken that (1) corrects identified deficiencies, (2) produces improvements, or (3) demonstrates that the findings and recommendations do not warrant management action. Management, with oversight from the oversight body, monitors the status of remediation efforts so that they are completed on a timely basis. Government Finance Officers Association (GFOA) provides best practices for documenting accounting policies and procedures: Communication is an essential component of a comprehensive framework of internal controls. One method of communication that is particularly effective for controls over accounting and financial reporting is the formal documentation of accounting policies and procedures. A well-designed and properly maintained system of documenting accounting policies and procedures enhances both accountability and consistency. The resulting documentation can also serve as a useful training tool for staff. Recommendation: Every government should document its accounting policies and procedures. Traditionally, such documentation has taken the form of an accounting policies and DWS Cash Receipts Audit Criteria 12 1 procedures manual. Thanks to advances in technology, even more effective methods are now also available for this purpose. An appropriate level of management to emphasize their importance and authority should promulgate accounting policies and procedures. The documentation of accounting policies and procedures should be evaluated annually and updated periodically, no less than once every three years, according to a predetermined schedule. Changes in policies and procedures that occur between these periodic reviews should be updated in the documentation promptly as they occur. A specific employee should be assigned the duty of overseeing this process. Management is responsible for ensuring that this duty is performed consistently. The documentation of accounting policies and procedures should be readily available to all employees who need it. It should delineate the authority and responsibility of all employees, especially the authority to authorize transactions and the responsibility for the safekeeping of assets and records. Likewise, the documentation of accounting policies and procedures should indicate which employees are to perform which procedures. Procedures should be described as they are actually intended to be performed rather than in some idealized form. Also, the documentation of accounting policies and procedures should explain the design and purpose of control related procedures to increase employee understanding of and support for controls. Government Finance Officers Association (GFOA) recommends governments establish a revenue control and management policy and review it on an annual basis. This policy should be customized for the size and resources of the government: The following factors should be considered in developing a general revenue control and management policy: ■ Internal controls - Management should establish controls, and ensure they are documented and followed. All aspects of cash receipting and accounts receivables should be subject to proper internal controls including: • Segregation of duties such as initiation and authorization of transactions, execution of transactions (receipting and disbursement), recording transactions, reconcilement, and maintaining custody. • Daily processing and timely deposit of receipts. Ideally, all funds should be deposited within 24 hours of receipt. • Timely reconciliation to applicable ledgers. • Physical security procedures. This is especially important for funds not deposited day of receipt. • Fraud reporting procedures. DWS Cash Receipts Audit Criteria 122 • Use of integrated receipt and accounting systems wherever practical and cost-effective. Accounting practices — All receipts and receivables should be recorded in accordance with generally accepted accounting principles (GAAP). ■ Billing and collection practices - Accounts receivable should be established for services provided in advance of payment and terms for collection should be established. In accordance with established procedures, bills should be initiated, recorded in an accounts receivable system, and generated within an established timely manner after initial service delivery. Effort should be made to ensure that receivables are collected in a timely fashion. ■ Methods of payment — A policy outlining the acceptable methods of payment for the governments should be established. This policy should include the method of access (as well as method of payment) while promoting electronic methods of access and payment when feasible and cost-effective to reduce overall risk and increase cash flow. ■ Depositing of received funds - Treasury management should serve as the primary recipient for all revenue collection sites. There should be timely recognition and depositing of revenue collected. Smaller governments that do not have a formal treasury function are encouraged to establish a formal single point of receipt or cashier function to control access to received funds. ■ Due to the special nature of funds received from grants, developers, partners and other entities, governments should consider whether separate procedures should be established for recording and depositing these funds. ■ Returned checks — Procedures for processing and collection of returned checks should be established, including the assessment of fees to offset the costs associated with the returned items. ■ Accounts receivable management — All accounts receivable should be recorded in a manner that allows for aging analysis. After reviewing available collection options, governments should establish procedures that maximize collections. Collection agencies that are familiar with federal, state, and local notice requirements and regulations should be considered when their use proves cost- effective. • Bad Debts — An allowance for doubtful accounts and a write-off policy should be established. Bad debt expense should be estimated based upon a documented method of calculation. An allowance for doubtful accounts should be recorded. Write-offs should be performed periodically to ensure that accounts receivable and allowance balances are not overstated. Efforts should be made to pursue the timely collection of delinquent accounts. DWS Cash Receipts Audit Criteria 123 Budgetary review responsibilities — Revenue collections and accounts receivable should be monitored in a timely manner. Both actual and budgeted or forecast revenues should be monitored. Any significant variance of actual from the forecast or budgeted revenues should be investigated thoroughly. ■ Compliance - Governments should ensure their revenue control and management policy and procedures are in full compliance with any federal, state, local or other applicable laws, or requirements. The Committee of Sponsoring Organizations (COSO) provides an integrated internal control framework and guidance that consists of five interrelated components, which are control environment, risk assessment, control activities, information and communication, and monitoring. Component No. 3 Control Activities Control activities are the policies and procedures that help ensure managements directives are carried out. They help ensure that necessary actions are taken to address risks to the achievement of organizational objectives. Control activities occur throughout the organization at all levels and in all functions. They include a range of activities as diverse as approvals; authorizations; verifications; reconciliations; reviews of operating performance; security of assets; and segregation of duties. Component No. 5 Monitoring Internal control systems need to be monitored - a process that assesses the quality of system performance overtime. This is accomplished through ongoing monitoring activities, separate evaluations, or a combination of the two. Ongoing monitoring occurs during the course of operations, and includes regular management and supervisory activities as well as other employee activities. The scope and frequency of separate evaluations will depend primarily on an assessment of risks and the effectiveness of ongoing procedures. Internal controls deficiencies should be reported upstream, with serious matters reported to top management and governmental leaders. Hawai"i Revised Statutes (HRS) Title 6. County Organization and Administration, 54. Water Systems, Part III. Hawai"i County Board of Water Supply establishes the requirements of accounts, revenues, and expenditures: X54-58 Accounts, revenues, and expenditures. The board of water supply shall maintain proper accounts in such manner as to show the true and complete financial status and the results of management and operation. The accounts shall be kept so as to show all costs of maintenance, extension and improvement, all operating expenses, all expenses of the board and the amounts paid or set aside for depreciation, insurance, pensions, interest, sinking funds, and reserves. DWS Cash Receipts Audit Criteria 124 All revenues or moneys derived from the waterworks or otherwise appropriated for the board, other than funds derived from the sale of bonds and excepting moneys appropriated by Act 5 of the Special Session Laws of 1950 for the construction of a water system for the districts of North and South Kona, shall be paid into the treasury of the county and maintained by the treasurer in a waterworks fund. The funds shall be expended for the following purposes: (1) For payment of interest and sinking fund on all bonds issued for the acquisition or construction of waterworks and extensions thereto: (2) For the payment of the operating and maintenance expenses of the waterworks, repairs, replacements, additions and extensions; (3) For accident reserve, pension charges and compensation and insurance; (4) For purchase or development of new sources of water; and (5) For a reserve fund. §54-30 Deposit of money in banks. All moneys deposited in the office of the county treasurer belonging to the board of water supply shall be deposited in such manner and upon such provisions and requirements, as provided by chapter 38. The county treasurer and the chairperson of the board shall have the same rights, powers and duties as devolve upon the state, its director of finance and the governor, respectively, with respect to state funds so deposited. All interest received by the county treasurer upon moneys belonging to the board shall be credited to the board. §54-20 Accounts, revenues and expenditures. The board of water supply shall maintain proper accounts in such manner as to show the true and complete financial status and the results of management and operation. The accounts and financial status of the board shall be examined annually by the county auditor who shall report thereon to the board. The board may, whenever necessary in connection with the issuance of any bonds, employ a certified public accountant to make an audit of the accounts and financial status of the board. County of Hawai"i, County Charter, Article VIII Department of Water Supply, Section 8-2 Water Board describes the powers of the water board: The water board shall consist of nine members who shall be appointed by the mayor with the approval of the council in the manner prescribed in Section 13-4. One member shall be a resident of each council district. The manager -chief engineer of the department of water supply, the planning director, and the director of public works or their designated representatives shall serve as ex -officio members of the water board without power to vote. The water board shall: DWS Cash Receipts Audit Criteria 125 (a) Manage controls and operate the waterworks of the county and all property thereof. (b) Adopt rules and regulations, which shall have the force and effect of law relating to the management, control, operation, preservation, and protection of the waterworks of the county... County of Hawai"i Department of Water Supply, Revised Cashier Procedures Accounting & Internal Control Basic Procedures (January 2010) states: CASH RECEIPTS — Cashier Procedures I. Equipment Assignment, Security, & Access: 1. Each cashier will be held responsible for an assigned and lockable "cash can," unique date paid stamp, and change fund. Each cashier will be the only person authorized to access the contents of their cash can. Sharing of cash cans between two or more cashier at the same time is prohibited. For example, during break times when there is only one designated Cashier available, a Clerk Meter Reader assisting customers should direct payment collection to the Cashier. Cash cans are to be locked at all, times when the responsible cashier is unable to monitor access to the cash can (e.g. breaks, errands, etc.). Substitute Cashiers shall access or obtain key for cash can through the District Supervisor (Waimea & Kona) or Controller (Hilo). 2. Each cashier will be assigned their own unique date paid stamp, to be used to date stamp stubs brought in or receipts prepared for over the counter collections. Cashiers should not share date paid stamps under any circumstances and will be held responsible for transactions bearing their date paid stamp. II. Security Protocols: 1. Cashiers shall ensure cash & checks on employees desks are secured if it is necessary to step away from their workstations during close out, payment posting and or preparation of deposit. 2. Access to combination safes in the District offices shall be limited to the District Supervisor, Assistant District Supervisor, and Cashiers. Safes shall be kept locked at all times. Cash cans shall be kept in the locked safe while not in use for the day. Cash cans in use during the day shall be kept in locked counter drawers while not in use. 3. Access to cashiering area should be limited only to Cashiers and Supervisor. Only Cashiers should be handling payments from customers. DWS Cash Receipts Audit Criteria 126 III. Cash Shortages/Overages: All cash overages/shortages shall be reported on the Cash Receipts Journal report and will be monitored by the Customer Service Supervisor. Use of the petty cash or per diem funds or any other means to balance cash due to overages/shortages is prohibited. Excessive occurrences of overages/shortages will be investigated to determine the causes and corrective actions to be taken. IV. Balancing, Closing & Reporting: 1. Each cashier is responsible for reconciling and closing their respective cash can and running the Cash Receipts Journal report, which summarizes collections by the cashier for each day they are assigned cashiering duties. Waimea and Kona district offices shall also record issued receipts separately on the Cash Receipts Journal report before faxing the reports to the Hilo office. Related stubs, receipts, deposit slips, and calculator tapes are attached to the Cash Receipts Journal reports when submitted to the Hilo office through interdept. mail via Courier Service. 2. When closing cash registers, cash and checks should be balanced separately. a. (Harris System) Balance check screen: cash total + change total + total receipts for cash (td, cd, fac. Chg., etc.) = total cash deposit/cash register; b. Balance check screen: check total + total receipts for checks (td, cd, fac. Chg., etc.) = total check deposit/cash register. c. Calculator tapes proving balance for each cash register should be labeled with batch or CR Journal number and identifying check and cash amounts separately. 3. Since closings of cash registers are performed during Customer Service hours, cashier(s) should not perform daily close and balance of each cash register at the same time. Separate close outs will allow each Cashier to focus on balancing and closing while the other Cashier assists the customers. Closeout sequence and schedule may be adjusted as necessary during high traffic times to accommodate customer's needs. Cashier shall ensure cash and checks on employees desks are secured if it is necessary to step away from their workstations during closeout, payment posting, and or preparation of deposit. V. Bank Deposits: 1. Cashiers shall prepare bank deposits coinciding with the total collections for the day. Deposit slips and related cash checks are routed to the District Supervisor (Waimea & Kona) or Controller (Hilo) for review and deposit. Deposit slips cash, DWS Cash Receipts Audit Criteria 127 check and grand totals must agree to the totals shown on the cashier's calculator tape. 2. District Supervisor (Waimea (Kona), Controller (Hilo) or designated substitutes shall review deposit before proceeding to bank: (see Attachment 1) Unlocked deposit bag with deposit ticket and calculator tape showing clearly visible totals wrapped around each tender. A separate calculator tape signed at the top by responsible Cashier needs to be submitted to District Supervisor or Controller with deposit bag. The calculator tape should contain each tender added separately and identified by batch or CR Journal and receipt numbers, then totals for each tender are added together to sum total collections, then credit card receipts total is subtracted to sum the total deposit for the day. Responsible Cashier remains present while District supervisor or Controller then compares amounts on deposit ticket and the separate calculator tape showing the collection totals for each batch by tender. 3. District Supervisor (Waimea & Kona) or Controller (Hilo) initials or signs and dates separate calculator tape and returns signed calculator tape to responsible Cashier then signed calculator tape with related stubs, receipts and deposit slips attached to the Cash Receipts Journal reports when submitted to the Hilo office through inter -departmental mail via Courier Service for inclusion in the daily cash packet. 4. Deposits at the bank should be made daily to reduce the risk of loss overnight. Controller, district Supervisors and/or designated substitutes are responsible for transporting daily deposits in tact to the bank. VI. Audits: 1. Unannounced cash counts will be made by the District Supervisor or management personnel to verify contents of cash cans. 2. Periodic audits may occur to ensure procedures are being followed. VII. Other: 1. Advise customers that all mailed payments shall be mailed to Hilo address shown on return envelope: Department of Water Supply 345 Kekuanaoa St., Ste 20 Hilo, HI 96720 DWS Cash Receipts Audit Criteria 128