Separation of duties is the means by which no one person has sole control over the lifespan of a transaction. Ideally, no one person should:
There should be at least two sets of eyes on each transaction.
Separation of duties is critical to effective internal control because it reduces the risk of both erroneous and inappropriate actions.
All units should attempt to separate functional responsibilities to ensure that errors, intentional or unintentional, cannot be made without being discovered by another person. In addition, separation of duties is a deterrent to fraud because it requires collusion – working with another person – to perpetrate a fraudulent act.
When separation of duties is not possible due to a small department size, compensating controls must be put in place. Detailed Tier 2 and/or Tier 3 review of activities is required to compensate for the lack of separation of duties.
In general, no one employee should have job functions in more than one of the following three categories of duties:
Consider the following in assigning duties to people involved in handling a financial transaction process:
Note: An employee serving in a “back-up” role must be competent and have the same authority as the person normally performing the duty.
Responsibility | Duty Category | Ideal: 4 Person | Good: 3 Person | Minimal: 2 Person |
Cash receiving (cashiering) and counting cash as part of the cash drawer closing process | Asset handling | Employee 1 | Employee 1 | Joint – Employees 1 and 2* |
Deposit preparation and the recording of cash receipt on deposit records/logs | Booking | Employee 2 | Employee 2 | Joint – Employees 1 and 2* |
Recording the deposit in myUFL | Booking | Employee 3 | Employee 3 | Initiation: Employee 1
Approval: Employee 2 |
Making the cash deposit at the University Cashier’s Office | Asset Handling | Employee 1 | Employee 1 | Employee 1 |
Comparing cash deposits recorded in the general ledger to deposit amounts appearing on copies of departmental records/logs | Comparison/Review | Employee 4 | Employee 3 | Employee 2** |
*Closing of cash drawer is performed jointly with both coworkers witnessing the count and certifying the deposit amount appearing on the department records/logs. Employee 2 retains and secures the copy of the record/log for ledger review purposes.
**Ideally, someone other than employee 1 or 2 should review and certify the monthly reconciliation
Responsibility | Duty Category | Ideal: 4 Person | Good: 3 Person | Minimal: 2 Person |
Order initiation | Asset handling | Employee 1 | Employee 1 | Employee 1 |
Order approval | Booking | Employee 2 | Employee 2 | Employee 2 |
Confirmation of receipt of good | Asset Handling | Employee 3 | Employee 1 | Employee 1 |
Payment of invoice | Booking | Employee 2 | Employee 2 | Employee 1 |
Ledger review and certification | Comparison/Review | Employee 4 | Employee 3 | Employee 2** |
**Ideally, someone other than employee 1 or 2 should review and certify the monthly reconciliation
Responsibility | Duty Category | Ideal: 4 Person | Good: 3 Person | Minimal: 2 Person |
Review and approval of billing data included on bills | Booking | Employee 1 | Employee 1 | Employee 1 |
Billing adjustment issuance, including account credit issuance and bad debt balance write-off authorization | Asset Handling | Employee 2 | Employee 2 | Employee 2 |
Billing adjustment transaction ledger or billing system recording payment | Booking | Employee 3 | Employee 1 | Employee 1 |
Comparison of AR balance recorded in the general ledger to the total billings reflected in the billing system or records | Comparison/Review | Employee 4 | Employee 3 | Employee 2 |
PRO303 – Internal Controls at UF
PST130 – Reconciliation for Tier 1
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Last reviewed on 03/20/2024