We commend the Mass Transit Agency for their efforts to improve cash handling practices over share-ride, curb-to-curb, and non-fixed bus services for the County of Hawaiʻi. To further strengthen internal controls over the cash handling process, we’ve identified some opportunities. MTA should continue to remediate remaining recommendations and address the following:  

Partially Implemented

1.1  Continue to order new buses with updated electronic fare boxes.

2.1 Prioritize documentation and enforcement of their internal cash handling controls..

3.6 Continue to enhance and maintain their video systems.

4.1 Implement controls to further establish segregation of duties

5.2 Develop and implement ongoing management monitoring of processes

8.1 Continue to update procedures and ensure consistency

9.6 Continue to consistently track and reconcile ridership

Not Implemented

5.1 Develop and implement management reconciliation for cash handling processes

We also commend Mass Transit Agency (MTA) for fully implementing 14 recommendations in areas such as:  

• Ensuring valuables received are deposited timely
• Check endorsements are performed upon receipt
• Valuables are locked in secure locations
• MTA management develops and maintains analytical procedures and performs financial relationship analysis
• MTA conducts surprise cash counts and follows up on any issues
• All pre-numbered taxi coupons, licenses and receipts are tracked for consecutiveness and completeness
• Contracts are appropriately tracked
• MTA ensures staff are trained in all aspects of their primary and secondary assignments
• MTA also ensures bus drivers receive ongoing training as changes occur
• Management maintains public facing information, materials, and documentation, to ensure they are informed of any changes via their website, order forms and related documentation
• Management ensures there are trained backups for staff who are out of the office
• Account Clerks ensure that financial paperwork for the Treasury is appropriately completed and managed timely

Lastly, we would like to acknowledge the improvements MTA has made in developing and implementing the cash handling process.

Source: Data compiled by the Office of the County 

Mission

It is our mission to serve the Council and citizens of Hawai‘i County by promoting accountability, fiscal integrity, and openness in local government. Through performance and/or financial audits of County agencies and programs, the Office of the County Auditor examines the use of public funds, evaluates operations and activities, and provides findings and recommendations to elected officials and citizens in an objective manner. Our work is intended to assist County government in its management of public resources, delivery of public services, and stewardship of public trust.

Audit Authority

Hawai‘i County Charter §3-18 establishes an independent audit function within the Legislative Branch through the Office of the County Auditor.

Purpose

The purpose of this engagement is to follow-up and monitor the responses to audit recommendations by audited entities by evaluating if Mass Transit Agency’s internal controls are adequate to reduce the risk of fraud and mishandling of cash receipts and to identify potential areas of improvement. The follow-up also looked at cash receipt transactions to ensure that receipts were deposited timely and intact.

Performance Audit Definition

Performance audits provide objective analysis, findings, and conclusions to assist management and those charged with governance and oversight with, among other things, improving program performance and operations, reducing costs, facilitating decision making by parties responsible for overseeing or initiating corrective action, and contributing to public accountability.

Implemented: Department has fully completed the audit recommendation. We reviewed sufficient and appropriate evidence to support all aspects of the recommendation.

Partially Implemented:  Department has made significant progress. We reviewed sufficient and appropriate evidence to support key aspects of the recommendation.

Not Implemented:  Sufficient and appropriate evidence was unavailable to support key aspects of the recommendation or department has no plans to implement the recommendation.

Not Applicable:  The risk associated with the recommendation no longer exists or is no longer applicable.

Update the Bus Cash Handling System

Condition and Cause

MTA comingled monies from various fare boxes and did not reconcile fares and ridership counts to trip sheets to determine cash over/shorts.

Effect of the Condition

A break down in internal controls contributed to an ineffective cash handling system that did not properly track ridership.

Recommendation 1.1

“We recommend Mass Transit management equip each County bus and van with an updated electronic fare box to collect passenger fares and track ridership.”

Agency Action

• Confirmed vendor began tracking ridership in November 2021 until May 2022
• Ordered four new buses equip with electronic farebox, anticipated arrival April 2022
• Plan to install electronic fareboxes for Americans with Disabilities Act (ADA) accessible buses upon arrival
• Plan to equip new fleet with electronic fareboxes by 2024
• Plan to decommission County buses and vans

Audit Activity

We reviewed ridership reports from January to May 2022, and one notice to proceed contract to purchase four ADA accessible buses equipped with electronic fareboxes. As of August 2022, no new buses were delivered.

To meet this recommendation MTA will equip electronic fareboxes to collect passenger fares and track ridership.

Status: Partially Implemented

Recommendation 1.2 – Not Applicable

“We further recommend Mass Transit pre-number bus tickets. As mentioned in recommendation 3.1 and 5.2 respectively, these tickets should be adequately secured and monitored for consecutiveness and completeness.”

Recommendation 1.3 – Not Applicable

“We further recommend Mass Transit remove or alter the perforated stub at the top of the bus ticket sheets to ensure passengers pay the full fare.”

Cash handling internal controls should be a priority

Condition and Cause

MTA did not prioritize cash handling internal controls. Internal control weaknesses included:

• Cash left unattended and safe door left ajar
• Security cameras contain blind spots
• Untimely deposits
• Cash not properly reconciled
• Policies and procedures were inadequate, not followed, or enforced

Effect of the Condition

The fare receipting system is not effective at safeguarding cash, ensuring full fares are collected, and deposits are accurate.

Recommendation 2.1

“We recommend Mass Transit management prioritize cash handling internal controls. Management should be responsible for an effective internal control system and internal controls increase the likelihood that the organization will achieve their objectives.”

 Agency Action

MTA performed the following:

• Developed and updated various policies and procedures to address cash handling controls
• Implemented dual control
• Reconciled cash counts
• Safeguarded assets
• Ensured physical security

Audit Activity

To verify status, we reviewed cash handling policies and procedures and found the control environment addressed:

• Verification of Policies and Procedures:
  • We confirmed that Mass Transit Agency has defined procedures for their internal controls, however, we discovered anomalies in a couple of areas, procedures for various payment methods are confusing in areas where there should be consistency
• Physical security:
  • Prenumbered and preprinted sales receipts are fully secured at the (Moʻoheau Bus Terminal)
• General appropriateness and completeness:
  • Despite the lapses in some of the procedures, the Account Clerks are processing payments for Taxi Coupons and Licenses appropriately and their physical security was largely intact  

To fully implement this recommendation MTA will update the cash handling policies and procedures to include all cash handling activities.

Status: Partially Implemented

Cause and Condition

Non-working cameras and blind spots were problematic.

Effect of the Condition

MTA could not ensure sufficient safeguarding practices.

Recommendation 3.6

“We further recommend Mass Transit management assess the security camera locations, regularly monitor, and limit access to the screen and recordings.”

Agency Action

• Inspected all twenty-six cameras
  • 13 out of 14 cameras at MTA were operable
  • One camera was inoperable
    • As of April 2022, the replacement part was on order
• All 12 cameras at the MBT were operable
• Plan to install six additional cameras to safeguard assets
• MTA said they reviewed video recordings after suspicious activity is reported

Audit Activity

To verify status, we:

• Observed camera system in a locked room with limited staff access to the screens and recordings during our site visits
• Validated camera footage is being retained
• During our camera review we noted one camera at the MTA is inoperable due to a problem with a device that acts as an interface for transmitting images. While MTA management has been working with the vendor for an extended period, the part needed to fix this issue has not been available To meet this recommendation MTA will ensure all cameras are operable and are regularly monitored.

Status:  Partially Implemented

Recommendation 3.7 – Not Applicable           

“We further recommend Mass Transit staff empty fare boxes frequently to ensure the automatic locking mechanism works.”

Segregate Incompatible Duties

Condition and Cause

One person collected, counted, and reconciled cash.

Effect of the Condition

MTA did not have adequate segregation of duties to ensure cash deposits were accurate.

Recommendation 4.1

We recommend that Mass Transit management separate incompatible duties. One individual should not be in charge of all of the cash handling elements: physical custody of cash, depositing cash, recording/adjusting transactions in the system, and reconciling the revenue accounts. If duties cannot be sufficiently segregated, mitigating controls, such as independent monitoring could be implemented.

Agency Action

MTA said they updated their cash handling procedures to address segregation of duties.

Audit Activity

To verify status, we:

Reviewed Written Procedures:

• A backup list for the cash handling staff exists if one or more cash processors is not available

Observation:

• Verified recording/adjusting transactions and reconciling revenue accounts is performed by a person independent of the cash processing
• Verified a noncash handling person reconciles revenue accounts and that the revenues are reconciled with the general ledger in the County’s accounting system

We noted the following exceptions:

• The cash handling process is not performed under dual control in all cases
• Reconciliation procedures are not fully developed
• Cash verification is performed by one account clerk and a security guard or the vendor employee. This is not appropriate since the security guard or vendor employees do not work for the County nor are they under contract to perform this work

To fully implement this recommendation MTA will implement dual control over their cash handling processes.

Status:  Partially Implemented

Implement Monitoring and Oversight

Condition and Cause

Independent monitoring was insufficient, it is important the cash handling process to be independently reviewed and monitored regularly, when duties are not adequately segregated.

Effect of the Condition

MTA is not able to detect irregularities in their normal course of business.

Recommendation 5.1

We recommend Mass Transit management perform ongoing monitoring of their internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, daily reconciliation of cash receipts, and other routine actions.

Agency Action

MTA developed and implemented monitoring and oversight over fiscal procedures.

Audit Activity

To verify status, we observed the following:

• Ongoing monitoring by regular management and supervisory activities related to reconciliation of cash receipts are not occurring regularly

• We noted that until an Administrative Services Assistant or equivalent is hired, supervisory activities (i.e. daily/weekly/monthly) related to cash handling will not be appropriately reconciled

Since reconciliation of the cash handling process is not being performed by MTA management regularly ((i.e. daily/weekly/monthly) we determined that the status for this recommendation is not implemented.

Status:  Not Implemented

Condition and Cause

There were numerous gaps in taxi coupon consecutive numbering; MTA did not issue written receipts or issued receipts in duplicate/triplicate.

Effect of the Condition

MTA was unable to determine if all transactions were receipted and revenue was complete.

Recommendation 5.2

We further recommend Mass Transit management specifically implement ongoing monitoring procedures of the cash handling process including both comparisons and reconciliations.  For example, someone independent of the cash handling process should review and/or reconcile:

Agency Action

MTA developed and implemented monitoring and oversight over fiscal procedures.

Audit Activity

To verify status, we reviewed the following processes:

While most items are being appropriately performed, we identified issues during cash handling and trip sheets reconciliation processes. To meet this recommendation, MTA will implement independent cash handling reconciliation processes and trip sheet reconciliation.  

Status:  Partially Implemented

Recommendation 5.3 – Not Applicable

“We further recommend Mass Transit management and staff monitor cash bags for patterns and inconsistencies (e.g., repeated over/shorts, inaccurate and incomplete trip sheets, cash bags with no trip sheets, cash bags with trip sheets and no cash, invalid ticket stubs).  If Mass Transit discovers unexpected patterns and/or inconsistencies, they should follow up with the respective bus driver or person responsible for the cash.”

Condition and Cause

MTA did not monitor the relationship between ridership and revenue (ridership x fare = revenue).

Effect of the Condition

Without reliable data, MTA does not know the actual cost of riders and losses of revenue.

Recommendation 5.4

“We further recommend Mass Transit management conduct analytical procedures and financial relationship analysis to monitor controls, revenue, and budget expectations. One example of an analytical procedure is comparing ridership counts to revenue (ridership x fare = revenue).”

Agency Action

MTA said they use analytical procedures to perform financial analysis to monitor controls/ridership, revenue, and budget monthly and annually.

Audit Activity

We observed MTA used analytical procedures to perform financial analysis to monitor controls/ridership, revenue, and budget monthly and annually.

Status:  Implemented

Condition and Cause

Surprise cash counts were not performed.

Effect of the Condition

Surprise cash counts is not addressed in MTA cash handling policies and procedures which increases their risk exposure. Surprise cash counts is an important part of the internal control system, it encourages honesty and discourages misappropriation.

Recommendation 5.5

“We further recommend that the Mass Transit conduct surprise cash counts at all cash handling locations.”

Agency Action

MTA updated their cash handling procedures to include surprise cash counts.

Audit Activity

To verify status, we reviewed results of managements surprise cash counts and found MTA was conducting surprise cash counts regularly.

Status:  Implemented

Improve Purchase Order Sales Process

Condition and Cause

MTA sold taxi coupons, bus tickets, and bus passes to 23 vendors using purchase orders in lieu of a required contract.

Effect of the Condition

Non-compliance with provisions of contracted services resulted in several vendors having outstanding past due balances.

Recommendation 7.1

“We recommend Mass Transit management comply with Hawai‘i County Charter Section 13-13, which requires all contracts with private parties to perform any function or activity with the County to be authorized and approved by the mayor, corporation counsel, and the finance director.”

Agency Action

MTA developed a Fare Free Implementation Plan and issued it to the vendor to ensure their bus drivers are aware of the rules changes when greeting and driving passengers.

Audit Activity

Verified that the contract impacting this audit is appropriately approved and is current.  Review also noted that while no supplementals or change orders were required, an MTA Fare Free Implementation Plan was developed and distributed to the vendor.

Status: Implemented

Recommendation 7.2 – Not Applicable

“We further recommend Mass Transit management require payment at the time of sale unless an official contract has been established and approved.  If and when a contract is executed, terms should be complied with and enforced (e.g., discounts, interest rates, timely payment, reassignment of non-transferable coupons).”

Recommendation 7.3  - Not Applicable

“We further recommend Mass Transit management implement a process to ensure collection of all outstanding accounts receivable balances.”

Update and Enforce Policies and Procedures

Condition and Cause

Written policies and procedures were incomplete, insufficiently detailed, and not consistently followed or enforced.

Effect of the Condition

A weak control framework leads to fraud, loss or theft.

Recommendation 8.1

“We recommend Mass Transit management establish, clarify, and enforce internal controls in County policy and procedures to ensure consistency throughout the department and with industry best practices including but not limited to:

• Timely independent review and monitoring procedures
• Guidance and clarification on individual job duties to ensure adequate segregation of duties exists
• Physical security procedures
• Timely deposit of receipts
• Endorsing checks immediately upon receipt
• Consecutiveness of pre-numbered receipts, paratransit coupons, taxi coupons, bus passes, and bus tickets (once pre-numbered)
• Timely recognition of revenue
• Cash and check composition reconciliation
• Recording and reconciliation of cash over/shorts
• Fraud reporting guidance
• These policies should provide enough detail to describe how the procedures are intended to be performed, delineate authority and responsibility, and indicate which employees are to perform which procedures”

Agency Action

• Developed Mail-In, Walk-In, Treasury Receipt, Credit Card Sales procedures to address:
  • Endorse the check by stamping the bank information on the back
• Used after-hours security guard/services from 5:30 pm to 6:00 am 7-days a week. The Leilani Street gate into the transfer station is locked between 5-5:30pm and reopens at 6am. Security guard patrols from Leilani Street to base yard

Audit Activity

Verified that all items listed below are included in MTA cash handling policies and procedures. We determined that while multiple items in this recommendation are covered by the various cash handling procedures, there are some areas not fully addressed:

Exceptions

• Timely independent review and monitoring procedures are not fully developed 
• Guidance and clarification on individual job duties to ensure adequate segregation of duties exists - MTA has procedures and processes partly meet this recommendation, however, there is only one Account Clerk assisted by various security guards/vendor staff to act as a second set of eyes for the cash count; this is not appropriate since neither of the persons is working for the County or is contractually covered to do this type of work
• Cash and check reconciliation - Reconciliation of taxi coupons and licensing sales are not being reconciled daily
• Recording and reconciliation of cash over/shorts - cash overs/shorts are not covered in any of the cash handling procedures

To fully implement this recommendation MTA will ensure that policies and procedures are updated to reflect current cash handling processes.

Status: Partially Implemented

Condition and Cause

MTA did not provide ongoing training to bus drivers.

Effect of the Condition

Without reliable ridership counts, management may not be able to adequately budget, monitor revenue, and make informed decisions.

Recommendation 9.2

“We further recommend Mass Transit provide ongoing training to bus drivers on ridership count and cash collection procedures.”

Agency Action

• Hosted weekly meetings with bus drivers
• Confirmed the vendor began tracking ridership in November 2021
• Received daily and monthly summary ridership reports from vendor

Audit Activity

To verify status, we reviewed Hele-On Daily Ridership reports from January to May 2022 and Monthly Summary Reports from January to May 2022 and found the vendor was tracking ridership in November 2021.

Although cash collection procedures are no longer applicable until bus fares are reinstated, we reviewed written cash handling procedures for drivers and found no exceptions.

Status:  Implemented

Condition and Cause

MTA was not tracking or reconciling ridership timely.  

Effect of the Condition

If ridership is not tracked and reconciled timely, ridership reporting to County, State, and Federal agencies will be inaccurate and can impact MTA’s ability to obtain grant funding.

Recommendation 10.6

“We further recommend Mass Transit reconcile and record trip sheets timely.”

Agency Action

• Vendor collects and provides monthly reports per terms of contract as November 2021
• MTA tracks ridership daily, monthly, and annually 

Audit Activity

Review of trip sheets and trip sheet report provided by the vendor determined the following:

• Mass Transit receives trip sheets from the vendor timely, and stores the trip sheets in the secured storage room area
• Vendor employees enter trip sheet data and forward the data report to MTA
• MTA reviews the ridership reports monthly
• Of the eighty-three reviewed only one trip sheet had a slight problem where the passenger count was miscalculated by one passenger

Compared the vendor’s Hele On Daily Ridership 2022 report to MTA’s Monthly Summary Report for the months of January 2022 to April 2022 and found discrepancies in total ridership between the two reports. See below:  

Based on our review of the discrepancies noted above, the reconciliation component of this recommendation requires additional work, therefore, this recommendation is considered partially implemented.

Status:  Partially Implemented

We commend Mass Transit Agency (MTA) for implementing 14 of the 22 recommendations reviewed during this audit. We would also like to commend MTA for making significant progress in partially implementing seven recommendations. We encourage MTA to strive toward fully implementing all recommendations including the one not implemented at this time.

The Office of the County Auditor maintains a remediation tracker to inform stakeholders of the status of audit recommendations.

The tracker is located on our audit website at:

https://www.hawaiicounty.gov/our-county/legislative/office-of-the-county-auditor.

We encourage departments to contact us for independent verification when they believe they have fully implemented a recommendation.

In closing, we welcome County employees and members of the public to address concerns over the misuse of County resources or position through our fraud and whistleblower hotlines.

Often, the improper use of government resources or positions is discovered thanks to employees and the public. Submit confidential tips to deter improper conduct by:

Fraud and waste hotline: (808) 480-8213

Whistleblower hotline: (808) 480-8279

Email: concern@hawaiicounty.gov

Fax: (808) 961-8905

Mail: Office of the County Auditor, 120 Pauahi St., 309 Hilo, HI 96720

To access complaints directory, visit:

https://www.hawaiicounty.gov/departments/office-of-the-county-auditor/whistleblower

Submit a claim: https://www.hawaiicounty.gov/our-county/legislative/office-of-the-county-auditor/inquiry-and-complaint/intake-form

Audit standards require that we remain mindful and document all instances of waste, fraud, and abuse.

We did not note any instances of waste, fraud, or abuse during our audit.