The ground wire inside the metal conduit is not a requirement in the National Code.

The installers evidently forgot that although they were doing more than required, they must still comply with all the rules, in this case, the equipment ground must be #12.( presuming that the #12 wire is connected to a 20 amp breaker, if it is connected to a 15 amp breaker, all is well).

There is some danger to this installation, but I can think of a lot of other things that are more hazardous. However, it is always best to be in complete compliance with the NEC, so I'd advise having this problem corrected.

Tom

This is not, by itself, a hazard. In years past, code allowed a smaller ground wire; sheathed electrical cable was manufactured that way.
This practice is no longer allowed. New work is required to follow new rules, so you only need to replace it when it is otherwise necessary in the course of remodeling, maintenance, etc.

Does it make a difference if the 14G wire was used for bonding instead of grounding? If the wire is in EMT, then isn't the EMT the primary mechanical ground?

I've been rewiring my old house for about 6 months now (off and on), and I run 12G wire on 15A circuits and add a 14G bonding wire if I have any concern about the mechanical connection. Is this the same issue?

The conduit can still be used as a grounding conductor, but if you choose to put in a Grounding wire it must be sized to the Overcurrent protection.

20 amp circuits need #12 minimum (no #14)

15 amp circuits need #14 minimum