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

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Introduction The Office of the Legislative Auditor conducted this performance audit of County of Hawai`i's Department of Parks and Recreation's (P&R) 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 P&R's cash handling process was included in the fiscal year 2015- 2016 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 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 scams."' The Office of the Legislative Auditor determined that a thorough examination of facility use permits cash handling policies, procedures, and processes was warranted. 1 The Cost of FRAUD (Association of Certified Fraud Examiners, Inc., 2014) https://www.acfe.com/rttn/images/cost-of-fraud-infographic.pdf Z Guarding Against Internal Frauds Committed by Employees (BizFilings, Business Owner's Toolkit, Deterring Fraud) http://www.bizfilings.com/toolkit/sbg/run-a-business/fraud/guarding-against-internal-frauds-by-employees.aspx Cash Handling for Facility Use Permits: Introduction I 1