Larger governments struggle with segregating duties, too
It's easy to assume larger local governments have no problems fully implementing best practices for segregation of duties. While segregating duties can be easier for larger governments with more employees, they can struggle with the process, too. The State Auditor's Office has some suggestions for navigating challenges on your journey to segregating duties!
“That's the department's responsibility!”
Some departments might not know how to set up a financial operation with all of the right controls. If they don't receive expert guidance, then duties might not be properly segregated. Each internal control system is unique. We don't have a playbook for a one-size-fits-all solution; this makes designing a control system challenging.
Others are fortunate enough to have an internal audit department that can provide assistance. Some have even contracted out for help when necessary.
Our suggestion: Guide departments with a well-written policy, and help departments that need personalized assistance. Mitigate risks by suggesting duty assignments, establishing resources and offering training.
“But it's more practical this way!”
Governments like to combine a few conflicting duties, because it is more practical. For example, the ability to add or edit vendor information is sometimes combined with accounts payable processing. This increases risk substantially, because accounts payable clerks could process payments to anyone they choose. Combining these duties requires close monitoring of every vendor paid – a daunting task when you process thousands of transactions.
If you do combine conflicting duties, be sure to evaluate and quantify the risk you create before deciding.
Our suggestion: If you combine conflicting duties, make sure you establish adequate monitoring controls to cover the increased risks. When you process large volumes of transactions, segregating duties is likely the most efficient way to lower your risk.
“But that operation doesn't have enough staff!”
Larger governments have some financial processes with few staff. In these cases, just like in small governments, monitoring controls is an acceptable alternative to segregating duties.
For example, cities and counties have parts and tires inventory systems for maintaining vehicles and other equipment. A city might also have a court collecting payments with only one or two employees. These types of operations may only require few staff to operate.
Our suggestion: Build in oversight for financial processes with few staff to reduce the risk of limited segregation of duties. Our Segregation of Duties Guide offers oversight examples in each chapter, such as inventory or cash receipting, as well as additional possibilities in Appendix A.
“There's too much work, and we have to share the load!”
Sometimes departments are delegated work related to a financial process. However, this can create conflicting duties.
For example, what if finance asks departments to enter their own accounts payable invoices? Department staff would not be independent if they order and receive goods and approve payment for that same transaction. On the other hand, accounts payable staff in the finance department would be independent from the conflicting duties when processing these payments.
Our suggestion: Centralize certain duties of accounts payable or payroll when you can, and avoid letting departments process their own transactions from start to finish. If central finance needs help, perhaps departments can assist in other ways.
Where do I find resources?
If you want to learn more, we have information to help you!
If you have specific technical accounting questions, please submit them using our HelpDesk in the client portal.
We also have financial management specialists at the Center available to talk through your internal control systems. For assistance, reach out to the Center@sao.wa.gov.