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

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Report Highlights August 25, 2017 Cash Handling at the County of HawaiTs Department of Water Supply Background The County of Hawaii Department of Water Supply's mission is to provide safe and y dependable drinking water at a reasonable cost. Money is spent to maintain water quality and a dependable system. n fiscal year 2015-2016, water eceipts/sales totaled approximately $47 million for he Hilo, Waimea, Kona, and Ca'u offices. Nhat was the purpose of this audit? Fhis performance audit was undertaken to evaluate if the )rogram's internal controls vere adequate to reduce the 'isk of fraud and mishandling of eater receipt revenue and to dentify potential areas for mprovement. Fhe audit also looked at water eceipt transactions to ensure hat receipts were deposited imely and intact. Ne initiated the audit, as we )elieve cash receipts are an nherently high-risk process. Incomplete and inaccurate policies and procedures over the water receipts cash handling process resulted in significant internal controls weaknesses. These weaknesses include inadequate segregation of incompatible duties and insufficient independent review and monitoring. Due to these weaknesses, we could not determine if all cash received was deposited. We did not identify any instances of fraud or misappropriations during our testing. Management has generally agreed with the comments and recommendations in this report. Their complete response to this audit can be found on page 18: Management Comments. The recommendations identify improvements for management to increase internal controls for water receipts cash handling. Our audit report offers recommendations designed to address these issues through: Segregating incompatible duties among those who perform accounting procedures or control activities and those who have access to the cash. • Implementing adequate ongoing monitoring of the design and operating effectiveness of the internal control system over cash receipting activities to ensure that revenue is complete. Updating, strengthening, and enforcing cash handling policies and procedures according to best practices; and • Providing initial and on-going cash handling and internal controls training for all employees who handle cash receipts. These recommendations should be considered for all cash receipting locations. This audit was conducted in accordance with general accepted government auditing standards.