Page 66 - New Employee Onboarding

Internal Control Plan

operating style, organizational structure, assignment of authority and responsibility, and
human resource policies and practices.

2. Risk Assessment: This component identifies, analyzes, and manages the potential risks
(i.e. what could go wrong) that could prevent management from achieving its objectives.
Change is one factor that can be used to identify risks. Another is inherent risk usually
associated with assets that can be readily converted to personal use.

3. Control Activities: These are the policies and procedures needed to address the risks
identified that could prevent management from achieving its objectives. Control activities
generally relate to proper authorization of transactions, security of assets and records, and
segregation of incompatible duties. Control activities can be further categorized into
programmatic control and administrative and fiscal control.

4. Monitoring: It is the responsibility of management to continually monitor control
activities to ensure that they function properly and take the necessary corrective action to
resolve potential problems or weaknesses in a timely manner. This component also involves
evaluating the effectiveness of control, i.e., (1) control is properly designed so they will
accomplish their intended purpose and (2) control actually functions as designed.

5. Information and Communication: Information provided to staff should be appropriate
in content, timely, current, accurate, and accessible. Communication takes such forms as
policy manuals, accounting and financial reporting manuals, policy memoranda, and
regularly scheduled staff meetings.

Control Environment

The control environment is first of five interrelated components of internal control. It sets
the tone of an organization including overall attitude towards adherence to sound business
practices, integrity and ethics; influences the attitude and actions of the Boards of Directors
and management regarding the significance of control; how risk and opportunities are
viewed; and affect control consciousness of its people based on how authority is delegated
and accountability is enforced. It is the foundation for all other components of internal
control by providing discipline and structure.

CSCS’s Boards of Directors for the Apple and Pancake Co-ops have significant risk oversight
responsibilities. Board members understand the risks for all business units and integrate
risk management into their decision making processes. Specific issues are presented and
discussed at regularly scheduled Board meetings which occur three times per year. The
Audit & Finance Committee of each Board is responsible for reviewing the financial results
reported by the Coop and supervising all activities taken by the Coop within the area of cost
management. A separate committee is responsible for the annual review and updating of the
Commodity Risk Management Program guidelines. The joint Compensation Committee
provides governance around compensation philosophy, policies and annual compensation
objectives.

Centralized Supply Chain Services, LLC. Page 6