What is a key principle of financial controls in a licensed agency?

• A. Diversified investments
• B. Segregation of duties
• C. Personal budgeting by director
• D. Outsourced marketing

Answer: (B)

Separating duties in financial tasks is a fundamental principle of financial controls. When different people handle approving transactions, recording them, and safeguarding cash or assets, it becomes much harder for fraud or errors to go unnoticed. Each step acts as a check on the others: one person authorizes expenses, another records them, and a third verifies reconciliations against bank statements. This creates accountability and makes irregularities easier to detect, which is crucial in a licensed child-placing agency where funds must be managed carefully and transparently.

Diversified investments focus on how funds are allocated rather than how day-to-day financial activities are controlled. Personal budgeting by the director concentrates power and can undermine independent checks. Outsourced marketing relates to operations, not the controls over financial processes. The separation of duties best addresses the need to prevent misuse and errors by distributing responsibilities among multiple individuals.