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

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What are the consequences? Ag Inadequate segregation of duties could make fraud detection difficult and management may not timely detect and correct errors and irregularities during the normal course of business. Furthermore, since adjustments to cash receipt payments could be made and not detected, management could not determine if payments were adjusted and cash was misappropriated. Because of these internal control weaknesses, we tested cash receipts to determine if payments were deposited timely and intact. In fiscal year 2015-2016, water receipts/sales totaled approximately $47 million for the Hilo, Waimea, Kona, and Ka'u offices.6 Since billing is evenly staggered over different monthly and bi-monthly billing cycles, we selected twenty days during four months (November 2015, December 2015, May 2016, and June 2016) for testing. This consisted of an estimated 13,000 transactions, totaling $2.9 million from the Hilo office. Total revenue was $19 million, with an estimate of 79,000 transactions for these four months. Of these transactions, most were complete and accurate and we only found minor exceptions: two instances where cash receipt adjustments to PUBS were not approved and did not have an approved debit/credit memo as supporting documentation. one instance where the daily cash receipts, an estimated 600+ transactions did not match PUBS and the daily deposit slip, but was later reconciled. Additionally, upon auditor request, DWS prepared an adjustment report to reconcile the authorized debit/credit memos. All adjustments were accounted for except the adjustments made to cash receipts noted above. We did not identify any instances of fraud or misappropriations during our testing. 6 N&K CPAs, Inc. "County of Hawai"i, Department of Water Supply Financial Statements and Supplementary Information With Independent Auditor's Report, Fiscal Year ended June 30, 201611, pg. 13. DWS Cash Receipts Audit Results 115