Segregating Duties for Federal Grant Compliance

The Importance of Segregation of Duties in Federal Grant Management

Internal audit and assurance professionals understand that segregation of duties (SoD) is a foundational internal control, typically applied to financial processes like cash receipting or payroll. However, this article from the Washington State Auditor's Office highlights its equally vital role in ensuring compliance with federal grant requirements. The core principle remains the same: distributing tasks among multiple individuals to prevent any single person from controlling an entire process, thereby reducing the risk of error, fraud, and non-compliance.

Applying SoD to Common Administrative Requirements

The article introduces the concept of "common administrative requirements" in federal awards, which are recurring obligations across various grant types, such as reporting. To illustrate, it provides a clear example for reporting: one person prepares the required reports, and a second person reviews and files them. This two-person approach provides a critical check-and-balance, ensuring that errors are detected before submission and that any systemic issues, like missing support or late filings, are identified and addressed promptly. The Washington State Auditor's Office has expanded its Segregation of Duties Guide to include a specific chapter on federal awards, offering detailed guidance on applying SoD to all 12 common administrative requirements.

Addressing Challenges in Smaller Organizations

Recognizing that smaller entities may face challenges in fully segregating duties due to limited staff, the article also addresses the importance of compensating controls. When full segregation is not feasible, robust monitoring and oversight become paramount. For instance, in the reporting example, a knowledgeable individual should periodically review submitted reports for completeness and accuracy, tracing key information to underlying support and ensuring timely submission. This proactive oversight acts as a crucial safeguard, mitigating the risks associated with a lack of complete SoD. For further assistance, the article directs readers to their granting agencies and the State Auditor's Office Help Desk.

Download Segregation-of-Duties-Guide (3).pdf