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

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Segregation of duties. Existing procedures do not address separating any of the physical custody of the cash, depositing, or cash reconciliation functions. Policies and procedures should require that a different person be responsible for recording, collecting, authorization, and reconciling functions. • Timely reconciliation of cash receipts to applicable ledgers. Existing procedures do not address timely reconciliation of cash receipts to the general ledger. Policies and procedures should require that reconciliations are performed timely to ensure proper adjustments are made in the correct period. • Receipt numbers being consecutive and pre -numbered (including voids). Existing procedures do not address the manual (Moore) receipts. While the manual receipts used by DWS are pre -numbered and reviewed for consecutiveness, current policies do not describe the manual receipting process. Sequential receipts are necessary to ensure that all payments are documented and revenue collected is intact. By using pre -numbered receipts and reviewing sequentially, receipts cannot be easily duplicated or voided. • Checks endorsed immediately. Hilo office's policies do not address restrictive endorsement of checks. Policies and procedures should require check endorsement immediately upon receipt. • Fraud reporting procedures. Existing procedures do not address fraud reporting. Policies and procedures should require a fraud reporting process to aid in the detection and prevention of fraud. By providing fraud -reporting procedures, all County employees will be made aware of the types and signs of theft or fraud, the consequences associated with it, and how to report it. Those who are planning to commit fraud will know that management is watching and may be deterred by this. Honest employees who are not tempted to commit fraud will also be made aware of possible signs of fraud or theft and how to report any concerns. Policies were insufficient and not being followed We also identified policies and procedures that were not sufficiently detailed and not followed: • Independent review and monitoring. Actual procedures performed do not address an independent person outside of the cash receipting process performing any review of adjustments and reconciliations. • Segregation of duties. Actual procedures do not address separation of duties when a single employee (Waterworks Controller) has full control over all phases of cash transactions. • Timely reconciliation of cash receipts to applicable ledgers. During the risk assessment process, we found that the Accountant II only reconciles the known debit/credit memos to what they have in the system. Actual cash receipts, DWS Cash Receipts Audit Results 113