How to segregate duties to help comply with federal grant rules

If you are familiar with segregation of duties, then you might envision separating duties for a cash receipting or a payroll process. But did you know you should segregate duties when designing internal controls to comply with federal award requirements?

We recently published a second edition of our Segregation of Duties Guide (PDF) and added a chapter for federal awards covering how to segregate duties for the common administrative requirements. In this article, we will define common administrative requirements and explain how to apply this information to your government’s internal control structure.

What is a common administrative requirement?

Granting agencies often impose similar requirements no matter the award type. For example, most require recipients to prepare and submit reports to them. These reports contain financial or performance information. Therefore, a common administrative requirement is “reporting.”

If you’d like to learn more about reporting or the other types of common administrative requirements, explore our Essentials of Managing Federal Awards – A Compliance Handbook (PDF). We provide an overview of the 12 common administrative requirements in Section 2 of this Handbook. We will continue to use “reporting” throughout our article, to explain how you might segregate duties and improve internal controls over a common administrative requirement.

What is an example of a segregated duty for federal awards?

To walk through an example, we will discuss the common administrative requirement “reporting.” To segregate duties for reporting, you should have one person prepare the required reports and a second person review and file those same reports. You want two sets of eyes on those reports to detect errors and to limit how much one person controls this process from start to finish. That way if any errors occur, the second person should detect it and the government can correct the report before it is submitted. In addition, if you have a larger issue such as frequently missing support, repeated mistakes or late filings, the second person in the process can alert others in your organization (or address the issue themselves, depending on their position).

To learn how to segregate duties over the other common administrative requirements, refer to the new federal awards chapter within our Segregation of Duties Guide (Section 2, Chapter 10).

What if we are too small to segregate duties?

If you cannot feasibly segregate duties, then someone must perform monitoring or oversight. In our reporting example, that might mean someone knowledgeable about the federal award reporting requirements periodically reviews some of the submitted reports for completeness and accuracy. They should trace key information to underlying support. This person would also monitor to ensure the employee submitted the reports on time.

For more on compensating controls for the other common administrative requirements, refer to the new federal awards chapter within our Segregation of Duties Guide (Section 2, Chapter 10).

How do I find help?

While your granting agency is the best source for information about federal awards, you can also submit your questions to our Help Desk in the client portal. To access your client portal, sign in first. Then, select “other action” among the menu options. 

If you have other questions, comments or suggestions, feel free to email us at Center@sao.wa.gov.