2017-02 Performance Audit Report: Cash Handling at County of Hawai'i's Department of Water Supply

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system, or PUBS (Public Utilities Billing System), as well as the general ledger (SB Client). Therefore, the Waterworks Controller: • has access and verifies cash receipts and performs the daily bank deposit (Custody of Assets and Authorization/approval); • is able to record and adjust transactions in PUBS and SB Client (i.e., the cash receipting system and the general ledger) (Recording Transactions); and • performs the monthly bank account reconciliation (Reconciliation/Control Activity). In addition to these incompatible duties, management has not established or performed any compensating controls, such as independent monitoring, to help mitigate this risk. Independent monitoring is insufficient When duties are not adequately segregated, it is even more vital that the cash receipting process be independently reviewed and monitored regularly. Because management performs part of the cash handling process, work should be reviewed for completeness and accuracy. Specifically, we observed the following: • Adjustments made in PUBS are not reviewed or reconciled. Adjustments to billing accounts may include such items as over/under charges (e.g., leak adjustment, meter misreads, etc.), late charges, and customer credits. The Customer Service Department Supervisor is required to complete a "debit/credit memo" due to billing errors or adjustments initiated by a customer complaint. Both an accountant and a supervisor in the Accounting Department approve the debit/credit memos immediately upon processing. However, there is no reconciliation of the adjustments recorded in the cash receipting system (PUBS) to the approved debit/credit memo to ensure that only authorized adjustments have been made. Cashiers may also process adjustments to PUBS; however, a debit/credit memo is not completed or approved. Therefore, management cannot determine that all adjustments to PUBS are appropriate and approved. Therefore, adjustments to cash receipt payments could be made and not detected. Without an approved debit/credit memo and without a reconciliation of the approved debit/credit memo to adjustments made in PUBS, management cannot determine if adjustments were made and revenue was misappropriated. During the course of our audit, DWS began to require that all adjustments be supported by a pre -authorized debit/credit memo. They also began running an adjustment report from PUBS and reconciling to the approved debit/credit memos. DWS Cash Receipts Audit Results 110