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 1: AUDIT PLAN CHAPTER 1 AUDIT PLAN Background 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. The Office of the Legislative Auditor acknowledges and appreciates the cooperation and assistance of the Manager and staff of the Department of Water Supply during the course of this performance audit. Audit Scope This limited scope performance audit of the County of Hawaii Department of Water Supply examines the adequacy of current internal controls relating to its cash handling and financial information technology (IT) systems. The audit period covers July 1, 2008 through February 28, 2010. During the audit entrance conference between the Department of Water Supply and the Legislative Auditor's Office, DWS management informed the auditors that it had discovered a theft of money in the Customer Service Branch of its Finance Division, and that the employee responsible had been terminated. DWS management also advised that it was conducting an internal investigation to gather information for the Hawaii County Police Department. The complaint filed by the Hawaii County 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 in the amount of $78,868.40, which County officials confirm has been reimbursed to the Department of Water Supply. The employee was convicted of Theft in the First Degree. On the request of DWS management, the Legislative Auditor's Office agreed to focus performance auditing efforts on the DWS Finance Division and, more specifically, internal controls related to its cash handling and financial IT systems.