2010-01-AU Limited Scope Performance Audit of Department of Water Supply's Internal Controls for Cash Handling and Financial IT Systems

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CHAPTER 4: CASH HANDLING SYSTEMS FIVE BASIC PRINCIPLES OF GOOD CASH HANDLING • SEGREGATION OF DUTIES • SECURITY • RECONCILIATION • MANAGEMENT REVIEW • DOCUMENTATION FINDING Segregation of duties between opening and posting of mail -in payments is inadequate. Water bill payments are processed by the Customer Service Branch of the Finance Division. Currently, only the Hilo office processes mail -in payments, with the Waimea and Kona District offices forwarding their mail -in payments through a bonded courier service to the Hilo office for processing. In the Hilo office, incoming water bill payments received from the post office or from the Waimea and Kona District offices through a bonded courier service are forwarded unopened from the Administrative Services Branch Receptionist to the Customer Service Branch Cashiers. Cashier I opens half of the mail payments, and Cashier II opens the other half. Any checks received are reviewed for accuracy and completeness, and the Cashiers independently process and post payments to customer accounts when not serving walk -in customers at the Customer Service payment window. According to the Assistant Controller, the Hilo office processes on average approximately 132 walk -in transactions per day and approximately 750 total walk -in and mail -in transactions per day. The Hilo office averages from $1,383 to $6,300 in cash deposits and $56,000 to $373,000 in check deposits per day, while the Waimea and Kona District offices average from $3,000 to $5,800 in combined cash and check deposits per day. DWS procedures dated October 20, 2009, DINS Checks and Cash Receipts Control — Recommendations for Change, included a proposed control for segregating cash handling duties related to mail -in payments in the Hilo office. The procedure proposed that the Receptionist assume responsibility for opening all mail -in payments and logging customer account numbers, forms of payment (cash, check, or credit card), and payment amounts before forwarding payments to the Cashiers for processing in the Department's Public Utility Billing System (PUBS) and inclusion in the daily deposit. However, DWS management stated that implementation of this control procedure has been indefinitely postponed due to demands on the Receptionist's current workload. While management has properly identified an existing risk to mail -in payments and proposed a preventive control, it has not implemented the necessary segregation of cash handling 25