APPENDIX A:
WHO IS RESPONSIBLE FOR IMPLEMENTING INTERNAL CONTROLS?

The Governor
The overall responsibility for internal control in the executive branch rests with the Governor. The Governor establishes the tone for a positive control environment and sets the implementation example for the rest of the State. The Governor adopts the internal control policies for achieving the objectives in his or her own office, as well as for State government as a whole.

The State Comptroller
In Connecticut, consistent with Constitutional and statutory obligations, the State Comptroller establishes the statewide internal control policies for all State agencies and authorities.

Agency Heads
Agency heads (including the constitutional officers) are responsible for adhering to the statewide internal control policies and adapting them to their agencies' objectives. This helps to ensure a positive control environment and convey high ethical standards to agency division managers. Among other responsibilities, the agency head should do the following:

• Set objectives for the agency.
• Establish the agency's strategic plan.
• Establish broad-based agency policies.
• Establish the organizational structure.
• Define the content of operations.
• Communicate key policies to staff members.
• Define the type of planning and reporting systems the agency will implement.
• Analyze risk.
• Decide how changes will be managed.
• Monitor the agency's performance.

Bureau and Division Heads
Bureau and division heads are responsible for aligning division objectives with agency policy. Division objectives guide the development and implementation of internal control policies and procedures and ensure consistency with overall agency objectives and the strategic plan. In addition, managers provide direction on the following:

• Division structure.
• Personnel hiring and training.
• Financial and budget information systems.
• Assessing risk.
• Deciding how change will be managed.
• Monitoring the division's performance.
• Investigating and responding to questions from legislators.

Bureau and division heads assign specific responsibility for internal control to program administrators who have a hands-on role in devising and executing internal control policies.

Fiscal Officers
Fiscal officers play a particularly significant role in the implementation of financial internal controls. They track and analyze agency performance from a financial perspective. Fiscal officers are important in preventing and detecting fraudulent reporting. According to the 1992 Treadway Commission, fiscal officers have the following responsibilities:

• To help set the tone of ethical conduct.
• To design, implement, and monitor the financial reporting system.
• To identify unusual situations caused by fraudulent financial reporting.
• To help establish agency financial objectives.
• To help analyze financial risk.

Staff
Internal control activities are explicit or implicit in the duties of every staff member including the following:

• Delivering services to the public.
• Producing information for the internal control system.
• Maintaining financial information.
• Inspecting and maintaining physical assets.

In addition, each staff member has the responsibility of communicating to higher levels within the agency, regarding the following matters:

• Problems in operations.
• Non-compliance with codes of conduct.
• Violations of policy.
• Illegal or unethical actions.

Each staff member has the responsibility to resist pressure to participate in improper activities. The internal control system needs to include channels outside normal reporting lines, permitting each staff member to report concerns without fear of reprisal.

The State Legislature
In the public sector, management is accountable to the General Assembly (State Legislature). For example, through the rules review, budgeting, and auditing processes, the Governor, agency heads, and governing boards are accountable to legislators. Because the State Legislature can reserve its authority in regard to key decisions, such as Senate confirmation of appointees, legislators have their own unique role in setting high-level objectives. In this manner, the State Legislature's oversight plays a pervasive role in internal control. In addition, the legislature's appointed Auditors of Public Accounts evaluate the internal control structure as a part of their audits of the various State agencies.

Oversight and Governance
For Executive Branch departments, oversight and governance groups include the Office of the State Comptroller, the Office of Policy and Management, the Department of Administrative Services, the Office of the State Treasurer, and the Legislative Program Review and Investigations Committee. These groups set standards and specify procedures for the operation of State programs.

For higher education organizations, the oversight entity is usually a Board of Trustees and may include an audit committee.

Internal Auditors
Within an agency or division, internal auditors have a direct role in examining the adequacy and effectiveness of internal controls. They also have a responsibility to recommend improvements. Internal auditors have the difficult challenge of remaining objective; they must maintain independence if they are to do their jobs effectively. The standards of Professional Practice established by the Institute of Internal Auditors describe that important role. Internal auditors must be concerned with the following:

• The reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
   
• The established systems to ensure compliance with policies, plans, procedures, laws, and regulations with potential for significant impact on operations and reports; determining whether the organization is in compliance.
   
• The means of safeguarding assets and verifying, as appropriate, the existence of such assets.
   
• The operations and programs to ascertain whether results are consistent with established objectives and goals and whether the operations and programs are being carried out as planned.

The dual nature of an internal auditor's role and the scrupulous maintenance of his or her independence require that potential conflicts of interest be carefully monitored. At the same time, internal auditors need to recognize their limitation-they do not have primary responsibility for establishing policy or maintaining internal control.

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