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11 <br />2023-2024 San Mateo County Civil Grand Jury <br />Assessing Internal Controls <br />Entities must assess its internal controls. State guidelines require established mechanisms to hold <br />management responsible for internal control responsibilities and to align incentives with the <br />fulfillment of internal control responsibilities. <br />When an entity does not periodically assess its internal controls, the entity cannot demonstrate <br />that they are monitoring its internal controls, and the likelihood of a failure in internal controls <br />that results in fraud or waste increases. <br />Reporting Results of Assessments <br />Each governing board must oversee its entity’s internal controls. State guidelines require <br />established mechanisms to hold management responsible for internal control responsibilities and <br />to align incentives with goals and objectives. <br />Management should both internally and externally communicate the results of its assessments of <br />internal controls. If management does not communicate the results of its assessments of internal <br />controls, others may see this as an opportunity to commit fraud or waste government assets. <br />Management should communicate the results of its assessments of internal controls in writing to <br />its governing board. <br />When management does not report the results of its assessments of internal controls to its <br />governing board and the entity has not communicated externally, the likelihood that others may <br />see this as an opportunity to commit fraud or avoid waste increases. <br />FINDINGS <br />F1. When an entity does not have a process to identify organizational risks, and the entity does <br />not demonstrate how its internal controls address identified risks, the likelihood of a failure <br />in internal controls that results in fraud or waste increases. <br />F2. When an entity does not periodically assess its internal controls and the entity cannot <br />demonstrate that it is monitoring its internal controls, the likelihood of a failure in internal <br />controls that results in fraud or waste increases. <br />F3. When management does not report the results of its assessments of internal controls to its <br />governing board and the entity has not communicated externally, the likelihood that others <br />see this as an opportunity to commit fraud or waste increases. <br /> <br />6.C. - Page 15 of 22 <br />94