Segregation of Duties

Segregation of Duties (SoD) is an internal control mechanism where critical tasks and financial responsibilities are divided among different individuals within an organization. This ensures that no single person has sole authority over all aspects of any critical transaction, reducing the risk of errors, fraud, or misuse of resources. In nonprofit accounting, SoD is a foundational best practice, often required by auditors and grantors, as it helps maintain the integrity of financial processes by establishing checks and balances. For example, the person who approves expenditures is not the same as the one who records them or reconciles bank accounts. Effective segregation of duties enhances transparency, accountability, and trust with stakeholders.