5 Tips for Improving Segregation of Duties in Your Organization

I thoroughly enjoy cutting my grass on the weekend. It allows me to get exercise after sitting behind a desk most of the week. Once complete, I feel a sense of accomplishment because I can sit back and enjoy the green evenly cut grass. Sod is the foundation for most pretty yards with lush grass and is almost required to get a yard started off right. One day dirt and weeds, the next day pretty green grass, but it requires an investment of time and money. Sod must be installed properly or problems will quickly emerge. Additionally, it must be watered frequently or it will die — especially in the beginning. Once the sod is firmly rooted, it still must be maintained through fertilizing and weed prevention if you want to continue to enjoy your soft, green living carpet.

The same is true for segregation of duties (SOD). This term is mentioned often by business professionals when discussing internal controls, but often there is confusion surrounding it. If properly designed and implemented, SOD can be a strong internal control to prevent fraud and errors. The strength of SOD controls lies in the fact that there are at least three different individuals involved in every transaction.

However, like your newly installed lawn, if not properly tended and maintained, SOD can deteriorate. For example, without proper monitoring, two employees with segregated duties can still collude to commit fraud against the organization.

Access, authorization, and accounting are the three functions that should be segregated in any business process. For example, in the check writing process, these duties should be segregated:

1. Access: writing checks or preparing wire transfers or direct debit transactions;
2. Authorization: approving the transaction prior to payment that was created by an individual who has access; and
3. Accounting: reconciling the monthly bank balance to the general ledger account balance.

Applying these three functions to different business processes is complicated and requires proper planning, execution, and re-evaluation. We will dive deeper into each of these processes in a future series.

This series will offer five tips to improve SOD within your organization which will help you mitigate fraud and keep the grass in your organization green and full of life:

1. Missed the boat
2. Well planned, poorly executed
3. Doesn’t understand or doesn’t care
4. Collusion
5. My company is too small

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