Segregation of Duties
Managing donor funding requires best practice systems and processes to ensure compliance and achieve long and short term goals. Developing a strong organizational approach will help you meet any donor’s requirements.
The segregation of duties is the assignment of various steps in a process to different people. The intent behind it – is to eliminate instances in which someone could engage in theft or other fraudulent activities by having an excessive amount of control over a process. In essence, the physical custody of an asset, the record-keeping for it, and the authorization to acquire or dispose of the asset should be split among different people.
The segregation of duties is an essential element of a control system. Auditors will look for duty segregation as part of their analysis of an entity’s system of internal controls and may determine the strength by also considering various aspects of this control element or else will lower their judgment of the system if there are any segregation failures. When there are segregation failures, it is sufficient to assume that there is an expanded risk of fraud and error.
The segregation of duties is more difficult to achieve in a smaller organization, especially a community-based organization that may rely on volunteers who do not report for duty daily, and where there are too few people to effectively assign tasks to different people. Another issue with segregation is that assigning tasks among too many people makes the process flow less efficient and bureaucratic. When a higher level of efficiency is desired, the usual system will have weaker internal control because the segregation of duties has been reduced.
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