2016-01 Performance Audit Report: Cash Handling at County of Hawai'i's Department of Parks and Recreation

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Audit Results Internal controls over facility use cash receipts are inadequate to prevent, detect, or deter fraudulent transactions. 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. They should not review and approve their own work. • Written Policies and Procedures. Policies & 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 and procedures, and internal control, remain effective and efficient as operations change. • Physical Safeguarding of Assets. Assets should be physically protected from loss and unauthorized use. The Department of Finance's Accounting Manual requires each County department to establish internal controls to ensure cash is safeguarded, accounted for, and properly recorded. Our audit evaluated these internal controls of Department of Parks and Recreation's (P&R) facilities 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. Summary of Internal Controls by Location Best Practice Kona Hilo Segregation of Duties No No Independent Monitoring No No Written Policies and Procedures No No Safeguarding Assets: Physical security of cash receipts Yes Timely deposits/reporting No Figure 1 Cash Handling for Facility Use Permits : Audit Results 16