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

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Why did this happen? Since the Department of Water Supply (DWS) is semi -autonomous, they are responsible for creating and maintaining their own policies and procedures for establishing an adequate system of internal controls. The Department of Water Supply created cash receipting policies and procedures on June 29, 1999 and then updated them on January 14, 2010. However, DWS management does not conduct on-going and continuous monitoring of their policies and procedures in order to remain effective and efficient as operations change. We compared DWS's cash receipting policies and procedures, as well as current practices, to expected control procedures and found several deficiencies. (Figure 2) Comparison of industry best practices to the Department of Water Supply's policies and procedures Expected Practice Were Policies & Procedure Complete? Actual Practice Performed? Independent review and monitoring No Insufficient Segregation of duties Insufficient Nc Timely deposit of receipts Yes Yes Timely reconciliation of cash receipts to applicable ledgers Insufficient No Physical security procedures Yes Yes Receipt numbers being consecutive and re-numbered(including voids No Yes Checks endorsed immediately No Yes Reconciliation of total checks and cash Yes Yes Fraud reporting No No Figure 2 Policies were incomplete We compared the DWS written policies and procedures to industry best practices and identified several deficiencies: • Independent review and monitoring. Existing procedures do not address any independent review of the incompatible duties that the Waterworks Controller is performing during the cash handling process. Policies and procedures should require a thorough review performed by an independent person to ensure accuracy, completeness, and timeliness of payments. DWS Cash Receipts Audit Results 112