Small Business Office? No Worries! Tips for Effective Segregation of Duties
by Shauna R. Hetrick, CPA, MBA, Staff Associate II
Posted on May 17, 2018
Proper segregation of duties is an important internal control for any organization. By segregating duties between multiple employees, an organization can strengthen its processes and procedures to better detect errors, increase productivity, and mitigate the risk of fraud. The process sounds fairly simple, but it can be a real challenge for smaller organizations with budget constraints and business offices with few employees. Here are some helpful tips to consider when assigning duties.
Remember CAR (Custody, Authorize, Record): Do not lose sight of the main objective, which is to keep all positions from performing incompatible duties. One person should not have custody of an asset, power to authorize use of the asset, and the ability to update asset records and supporting documentation.
Get creative: Do not limit assigning duties to just the business office. Consider utilizing department heads, such as an IT director, or other administrative staff to take on a task or two.
Restrict physical access: Make sure staff only have access to items needed to perform their assigned duties. Items such as cash, check stock, and signature stamps should be locked up when not in use. Only personnel with duties requiring the use of these items should have access.
Utilize software controls: Many software applications contain features to restrict access to various functions. Organizations can establish login credentials and set up user roles that provide full access, partial access, or read-only access to functions within the software. Effectively restricting user access within a particular software application is a powerful control that can be achieved with minimal time invested.
Implement joint duties: Consider requiring two people to jointly perform a task. Joint duties can help reduce the risk of fraud or error for critical tasks where there does not appear to be personnel who can perform the task without conflict.
Review, review, review: If assigning personnel incompatible tasks is unavoidable, consider building in additional layers of review. Adding the responsibility of reviewing an existing task to the process and assigning it to a separate individual is an easy way to compensate for deficiencies in segregation of duties. If review cannot feasibly be performed each time the task is performed, consider implementing a detailed periodic review procedure. This can be a great alternative option for organizations trying to reduce risk without implementing time consuming procedures.
Cross-train employees: Whether it be sickness or vacation, inevitably one or more critical employees will be out. Cross-training employees to perform critical tasks allows organizations to maintain segregation of duties even when someone calls in sick. Try to cross-train employees only on tasks that are compatible with their existing tasks.
Having a small business staff creates unique challenges. A constant battle exists to establish effective internal controls while minimizing the resources needed to maintain those controls. However, using the tips above to effectively assign job duties and restrict access will create an environment that better mitigates the risk of fraud, detects errors, and increases productivity.
