NOTIFICATION OF FRAUD OR ERROR - 20080

 

Legal Authority

Government Code section 13401 (b)(4)

Definitions

INCIDENT:
Examples of incidents include, but are not limited to the following: 

• Misuse/Theft – Intentional use of public resources for an improper purpose or taking public resources without consent.  

• Fraud – Intentional or criminal deception using public resources intended to result in financial or personal gain. 

• Damage – Intentional acts impairing the value, usefulness, or function of public resources.  

• Improper Contract/Procurement Activities – Inappropriate activities including, but not limited to, unfair competitive bidding practices, bid rigging, conflicts of interest, and double billing. 

• Employee Misconduct – Willful, improper, or unethical employee behavior that violates policies and laws affecting the state’s best interests.  

• Error – Unusual events causing impairment or inaccuracy.  

Policy

The Department of Finance (Finance) requires all state entities to track and monitor incidents of loss or error. For the purposes of this section and to align with Penal Code section 487, an incident, or a collection of incidents, exceeding $950 should be monitored and tracked by state entities. Although an incident, or a collection of incidents, totaling less than $950 does not need to be tracked, an entity should evaluate the cause for the loss or error and take appropriate measures to safeguard public resources.

 

IMPORTANCE OF MONITORING

Government Code Section 13401 (a)(1) states that active oversight processes, including regular and ongoing monitoring processes, for the prevention and early detection of fraud and errors in program administration are vital to public confidence and the appropriate and efficient use of public resources. Monitoring heightens awareness of the potential breakdown of control activities that serve to protect public resources, allows for the timely correction of identified weaknesses, and facilitates transparency and accountability of an organization’s operations.

MONITORING REQUIREMENTS

All state entities shall develop and maintain a system to track and monitor incidents of loss and error by December 31, 2025. The system should capture incident information including, but not limited to, the date and description of the incident, the monetary value of the loss or error, and the incident status. Finance may audit state entities’ compliance with this monitoring requirement.

REPORTING REQUIREMENTS

Beginning with the 2025 State Leadership Accountability Act reporting cycle, all state entities are required to report the total number of incidents and dollar impact in conjunction with the submittal of the State Leadership Accountability Act report.

SINGLE AUDIT MANAGEMENT REPRESENTATION LETTER REQUIREMENTS

State entities must report material incidents of loss or error, including fraud-related matters, in their annual Single Audit management representation letters in accordance with SAM 20020, Single Audit Coordination.

Responsibilities

 

State Entities

1. Monitor and track incidents of loss and errors exceeding $950.
2. Report loss and error information in conjunction with the submittal of the State Leadership Accountability Act report.
3. Report material incidents of loss and error in their annual Single Audit management representation letter.

Finance

1. Collect loss and error information through the State Leadership Accountability Act reporting process.
2. Provide guidance and oversight to promote state-wide compliance with SAM 20080.
3. Identify statewide trends and/or high-risk areas and share the data collected with respective policy makers.

Resources

 

• State Leadership Accountability Act (SLAA) | Department of Finance
• Single Audit Act | Department of Finance