Which internal control practices help prevent misclassification of funds?

• A. Segregation of duties
• B. All of the above
• C. Independent reconciliations
• D. Review of funding sources

Answer: (B)

Preventing misclassification of funds relies on building checks and balances into how transactions are recorded. Segregation of duties ensures no single person controls the entire process—from initiating to recording to approving transactions—so errors or improper misposting are less likely to go undetected. Independent reconciliations provide an objective, periodic check by comparing internal records with external or separate ledgers, catching mismatches that could indicate misclassification. Review of funding sources involves confirming donor restrictions and the intended use of funds, ensuring that receipts and allocations match the approved purposes and correct accounting categories. When these controls work together, they create multiple layers of verification that make misclassification much harder, so using all of these practices together offers the strongest protection.