Broken locks on cash tills, ready access to where “liquid assets” are stored and a lack of CCTV monitoring in sensitive areas have been flagged in several government agencies that were subject to cash audits in the past year, according to records obtained by the Cayman Compass.
Government’s Internal Audit Unit noted difficulties with potential “increased risk of loss of funds” and “increased risk of theft/misappropriation of assets” arose out of the cash handling procedures in some agencies that included customs, prisons and the Legislative Assembly administrative office, among others.
In most cases, the amount of cash or other assets being handled are not considered material to the operations of the relevant agency, but the problems were significant enough for auditors to note them in four reports detailing the operations of about a dozen public sector entities.
The redacted sections of the reports do not always identify the government agency in which the asset handling problems were discovered, typically for security reasons, but some do. Corrective steps are outlined, and in every case are accepted by the government agency involved in the audit.
Locks and keys
During an unannounced audit at the customs department in government’s previous budget year (2014/15), auditors discovered a simple problem at the department’s office: the cash pan used to hold customer payments had no lock.
“Discussions with the cashier revealed that the lock broke recently, however, they were cognizant of the importance of having a lock for the till,” the audit report noted. “Having a till with no locking mechanism or one which is defective exposes the department to an increased risk of loss of funds.”
Customs officials responded that the lock on the drawer had since been replaced.
The same problem was noted during a 2014/15 audit – again unannounced – of three central government agencies. The specific agency where the problem was located was not named in this instance, but auditors noted cash collections were being kept in an unlocked drawer in an area that was accessible by staff.
“In response to our query on the matter, we were informed that the lock on the drawer had recently broken and needed to be repaired or replaced,” auditors noted.
The agency responded that it had provided employees with a lockable cash drawer to safeguard revenues collected. The implementation date for this was not verified by the Internal Audit Unit.
In another unannounced review, both the Prisons Service and the Legislative Assembly offices were identified as having “inadequate safeguarding of funds.”
At the prisons office, cash collections were being placed in an envelope and stored in a drawer that was only locked at the end of the day in an area where a number of employees walked through. In the Legislative Assembly, cash collections and petty cash were “loosely kept in an unlocked drawer” that was accessible by staff members.
“Best business practice … requires that accessibility to liquid assets be restricted,” auditors noted. “Ideal restrictions can include the use of tills and drawers with locking mechanisms and the use of dual access combination safes.”
The prisons staff told auditors that the cash collections were placed in a safe at the end of each working day.
“In response to a … query, staff at the Legislative Assembly informed us that there had been a key for the [cash] drawer originally,” the audit report noted.
“However, as at the date of the audit, the location of the key was unknown.
“Although the collections on hand at both entities at the time of our cash count were immaterial, the current practices in place greatly increase the risk of theft/misappropriation of assets.”
Both the prisons service and the Legislative Assembly staff agreed to implement audit recommendations and purhcase lockable cash tills for their respective offices.
Safes and CCTV
Some deficiencies with the use of safes in various government departments were also noted by internal auditors.
For instance, one review last year at the Planning Department noted that the agency’s safe was accessible to multiple employees who had the combination, and that the combination was never changed after planning’s financial administrator left the department.
“The lack of established policies dictating reasonable intervals and circumstances in which the combination should be changed tender the department susceptible to the risk of loss of funds,” the report stated.
In a separate review, another unannounced cash audit, the Department of Environmental Health management was found to have “inadvertently overlooked” the risks associated with inadequate cash hand over procedures.
For instance, transfers of items kept in the department’s safe vault were not documented.
“Based on this finding, we are concerned that, in the event of a discrepancy, particularly a shortage or where items go missing, it will prove difficult to assign responsibility for the error,” the report stated.
The department’s management stated it had complied with the audit recommendations and had implemented a system where items removed from the vault would have to be documented.
Another section of the cash handling audit noted the absence of closed-circuit television cameras in one government entity and recommended that those be installed “at a minimum” in the customer service area.
“Based on these observations, we are concerned that – should the investigation of a serious matter (e.g. robbery or internal disparities) be warranted, security footage would not be available,” the auditors noted. The name of the agency was redacted for security reasons.
The agency involved told auditors it had begun the process of security camera procurement 18-24 months ago, but that the project “remains incomplete.”