Segregation of duties is an important concept in financial management and internal controls, particularly in the context of sponsored awards and contracts, as well as grants. The purpose of segregation of duties is to prevent fraud, errors, and misuse of funds by dividing responsibilities among different individuals or entities. This helps ensure that no single person has too much control over a process or access to sensitive financial information.
In the context of sponsored awards, such as grants from government agencies and other sources, segregation of duties is critical to maintain transparency, accountability, and compliance with federal regulations. Organizations, like Ohio University that receive sponsored awards are typically required to adhere to specific segregation of duties requirements as outlined in the grant or award agreements. Here are some key principles and best practices to keep in mind related to segregation of duties for sponsored awards:
- Authorization and Approval: The responsibilities for authorizing and approving transactions related to awards should be separated. This means that the individuals who have the authority to commit funds (authorization) should not be the same as those who approve the expenditures.
- Recording and Reconciliation: Those responsible for recording financial transactions should be separate from those responsible for reconciling accounts and performing regular financial reviews. Reconciliation is essential to ensure that expenditures and financial statements are accurate.
- Custody and Handling of Funds: The individuals responsible for handling physical funds or assets related to federal awards should be distinct from those responsible for recording and reporting on these transactions. This separation helps prevent misappropriation of funds.
- Review and Oversight: Independent reviews and oversight mechanisms should be in place to monitor compliance with federal award requirements, including any subrecipient agreements you have in place on the federal award. This may include internal audits, external audits, or other forms of review by individuals or entities not directly involved in managing the award.
- Documentation and Reporting: The individuals responsible for preparing financial reports and documentation for federal awards should not be the same as those responsible for initiating or authorizing transactions. This separation helps ensure the accuracy and integrity of reporting. Similarly, technical or progress narratives should be reviewed/approved by a secondary party prior to submission to the grantee.
- Conflict of Interest (COI): It is important to identify and mitigate any conflicts of interest that may arise in the management of awards. Individuals with conflicts of interest should not be involved in decision-making processes related to the award. For more information on COI please visit https://www.ohio.edu/research/compliance/conflict-forms
- Training and Awareness: Personnel involved in managing sponsored awards should receive appropriate training and be aware of the segregation of duties policies and procedures in place.
- Clear Policies and Procedures: Organizations receiving awards should establish clear and well-documented policies and procedures that outline the segregation of duties requirements and expectations.
Segregation of duties is a fundamental principle of internal controls and is designed to safeguard the proper use of sponsored award funds. It helps reduce the risk of fraud, errors, and non-compliance, ultimately ensuring that federal funds are used for their intended purposes and in accordance with federal regulations and guidelines.