Irregularities and Clues are the things usually observed by auditors, unless there's a hidden camera for absolute proof.  There's usually some records associated with the cash.  For example, if paying for a membership to pools, there's the data for quantities of memberships sold.  Point of sales, register receipts are involved with balancing.  Too many variations to mention them all here. 

Yes there's always some possible slipping thru the cracks. Never 100%. For example cash tips are tough to assure accuracy.  Irregularities are all that OP's top notch auditors and the bank agreed upon, as occurring for that missing $27K.

Still, if you regularly follow the news, there are white collar thieves continually getting caught.  Audit checks and balances are assisting such discoveries.   Yet, less than 100%,  is little excuse for never bothering to check.  Otherwise, an organization can become a soft target. 

Also,  all those weaknesses OP's forensic auditors found in the PW payment practices are huge loopholes. Corrective action is definitely needed to assure OP is paying for materials and contractor services actually received. That's different from cash disappearing, but deserves just as much correction.

Wondering Randy -- what's your bottom line with your comments. 

Tom