2018-01 Performance Audit Report: Cash Handling at County of Hawai'i's Mass Transit Agency

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drawer. In addition, it is best practice to maintain cash records in a separate location from the cash itself. If fraud or theft does occur, the records cannot easily be taken, destroyed, or modified. Separation of cash records and cash is a simple cash security practice that can discourage theft, or at least allow the timely discovery of theft. Incompatible duties are not adequately segregated Segregation of duties' primary objective is to minimize the risk or occurrence of errors or fraud by ensuring that no one employee has the ability to both commit and/or conceal errors or fraud in the normal course of their duties. Generally, the primary incompatible duties that need to be segregated are: • Authorization or approval • Custody of assets • Recording transactions • Reconciliation/Control Activity To achieve the highest level of internal control over the cash handling process, a different person should be involved in billing/recording, collecting, authorization or approval, and reconciling functions. No single individual should have complete control over all phases of a transaction. Some examples of incompatible duties are: • An employee who opens the mail and endorses checks should not handle cash receipts. • An employee who prepares a document should not approve the same document. • An employee who handles cash receipts should not maintain a change fund and receive deposit slips or corrections from the bank. • An employee who reconciles the bank statements should have no responsibility for cash receipts, disbursements, or custody. We examined the cash handling processes at the Mass Transit Administrative Office and found that proper segregation of duties for cash handling was not in place. Currently, the County Transportation Specialist: • maintains the master Word document for some in-house receipts (custody of assets), • performs over-the-counter sales (custody of assets), • maintains the key to where the change funds are secured at night (custody of assets), • performs and approves voids (authorization/approval), • reviews end -of -day cash receipts and reconciles to the treasury receipt (reconciliation/control activity), and • sometimes deposits daily revenue with the Treasury Division (custody of assets). Mass Transit Cash Handling Audit Results 111