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 However, based on observation of cashiering activities at District offices, a designated "Cashier' with an assigned Cash Can is not always available, and Cash Cans continue to be shared by and accessible to multiple personnel. In interviews with Customer Service Branch personnel, the auditors were told that there are only two Cash Cans available at each customer payment collection site, but there are times when a third employee needs to step in as alternate Cashier using one of the Cash Cans. During a follow -up interview on March 5, 2010, supervisory personnel in the Customer Service Branch also reported that the Cashier's Exchange Log is no longer used when transferring a Cash Can from one employee to the other. One goal of cash handling controls is to ensure accountability by providing an audit trail that permits reconciliation of transactions processed by each Cashier to the physical cash. However, based on personnel interviews and observation of cashiering activities by the auditors, it appears that policies and procedures and control activities (such as the Cashier's Exchange Log) are not consistently adhered to by Customer Service Branch personnel or enforced by Finance Division managers. This absence of audit trails for cashiering activities reduces the Finance Division's ability to hold individual employees accountable for discrepancies and increases the risks for mishandling or misappropriation of customer monies. As stated above, the Hilo office averages from $1,383 to $6,300 in cash deposits and $56,000 to $373,000 in check deposits per day, and the Waimea and Kona District offices average from $3,000 to $5,800 in combined cash and check deposits per day. Without consistent policies and procedures in place for controlling access to and exchanging of Cash Cans by Cashiers, not only are the accountability and protection of Cashiers compromised, DWS management appears to communicate that safeguarding of customer payments is not a priority. One District office indicated that its procedure when exchanging Cash Cans is to print out a Cashier's Summary Report that displays cash and check totals, which are then reconciled to the contents of the Cash Can. The Cashier then signs or initials and dates this print -out that is kept in the Cash Can, and the next Cashier signs or initials and dates the print -out to verify its contents. RECOMMENDATION Finance Division managers need to implement policies and procedures that provide an adequate audit trail of transactions for each Cashier. Finance Division managers should also assess the aforementioned District Office control procedure for Cash Cans and determine if it could be adopted by all offices in the Customer Service Branch. Adherence to this control procedure would provide an audit trail of transactions for each Cashier that would permit reconciliation to the contents of each Cash Can. Another possible control procedure would be to establish a third "Cash 31