What is segregation of duties?

The segregation of duties is the assignment of various steps in a process to different people. The intent behind doing so is to eliminate instances in which someone could engage in theft or other fraudulent activities by having an excessive amount of control over a process. In essence, the following three general functions in a process should be split among different people:

• Custody – Possession of the funds whether from money coming in or going out.
• Authorization – Approval of transactions.
• Recordkeeping – Actual entering of transactions into the data or financial management systems and generating the resulting reports.

It is not required that these functions be performed by three separate individuals or that the individuals must be paid staff members. If at least two people divide these responsibilities,
the likelihood of fraud is significantly decreased. If there is limited staffing, volunteers can be a solution, providing additional resources at no additional cost to protect both the ministry and the staff from wrongdoing or perceived wrongdoing.

The segregation of duties is more difficult to accomplish in a smaller organization, where there are too few people to effectively shift tasks to different people. Another issue with segregation is that shifting tasks among too many people makes the process flow less efficient. When a higher level of efficiency is desired, the usual trade-off is weaker control because the segregation of duties has been reduced.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
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