XYZ Hotel Limited

Internal Control Framework

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 What is internal control ?
It is a process put in place by management to ensure:

1. Business objectives are Ensure significant return or profit on

achieved. the investment.
2. Safeguarding of Assets. Ensure the Hotel assets are protected.

3. Accounting information is Ensure all transactions are recorded

accurate and reliable. and accurately reported .

4. Regulatory compliance. Ensure compliance with Tax and

other regulatory authorities.

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 Why internal control ?
• Business owners have limited time to monitor their
investments, as such personnel are prone to perpetrate
occupational fraud harmful to the business.

• Hotels are most vulnerable to fraud due to its peculiar

nature and the absence of effective internal controls.

• By establishing controls the opportunity and motivation

for fraud and theft, is reduced, and the company is
better positioned to make a profit.

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Control focus

Revenue

Cost

Expense

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 Revenue Center
Front Desk - Rooms

Food and Beverages

Drinks and Bar

Pool, Laundry, Mini

Mart

Car Hire
and Others

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 Expense Center
Salary and Wages

Diesel and Fuel

Security

Electricity and PHCN

Maintenance

DSTV and Internet Subscription

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 Cost Center

Kitchen Bar Rooms

Food stuff Drinks Toiletries

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 Control framework 1
Process Risk
Accounting The Hotel transactions may
not be recorded, thus
revenue generated may be
omitted and not
recognized in the
Management Account.
Revenue Front desk may collude
with house keeping to sell
rooms, without recording
the sale, thus pocketing the
money. Other incomes may
be hidden.
Expenses Unauthorized expenses,
inflated pricing, excessive
operational cost.
Control
All transactions in the Hotel
should be recorded in the
relevant books, with
support documents.
Management Account
should be presented.
Room sales should be
recorded once a guest
books in. Daily monitoring
of the status of rooms, and
reconciling other income
with the cashier report.
Use of requisition and
payment vouchers.
Approval and Budgetary
control should be in place
for expenditures.
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 Control framework 2
Process Risk Control
Purchases Unauthorized, Registered vendors to be
substandard and inflated used, all purchases in the
prices on the goods Hotel should be approved
purchased. and supported.
Receiving and Illegal or private goods All goods coming into the
storage of goods may be smuggled in and Hotel should be jointly
sold in the Hotel, without inspected and witness by the
the attention of security office. Store should
management. Items may be secured, physical count of
be stolen from the store. all items should be regularly
conducted.
Cash and Bank Revenue may not be All cash sales should be
recorded or deposited in a registered in the daily cash
timely manner, money register and deposited intact.
may be personally used Bank reconciliation should be
before lodgment. done periodically.

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 Control framework 3
Process Risk Control
Security Dangerous individuals may Security gadgets such as
gain access into the hotel, for scanners and CCTV should be
a criminal intention. in place to monitor and deter
criminal intention. There
should be a periodic report on
security status.
Cash Cash may be withdrawn All cash expenses in the Hotel
disbursement from the front desk without should be centrally managed,
adequate control, resulting and appropriate levels of
in uncoordinated and approval should be in place
reckless expenditure. before disbursement.
Regulatory The Hotel may incur Register with the tax authority
compliance penalty, fines and possible and ensure regular
shut down by the revenue compliance with the statutory
authority for failure to pay laws and regulation.
tax.
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 Control framework 4
Process Risk
Recruitment and Personnel or service providers
service with questionable and
providers suspicious background may be
engaged in the Hotel,
constituting security risk to the
organization.
Repairs and Physical wear and tear and
maintenance destruction of the Hotel
infrastructure, makes it
inhabitable for guests.
Excessive cost of repair and
inflated job quotation.
Sales and Hotel rooms and services may
Marketing remain unsold, limiting the
ability to earn revenue.
Control
Interview process and
background screening
should be conducted
before engaging any
personnel. Referees and
confidentiality forms
should be signed.
Work order permit should
be used and approved
before any repair work.
Experienced contractors
should be engaged. All
related document
supporting the work done
should be filed.
Sales and marketing
strategy should be in place
to generate income.
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 Conclusion
• Millions of Naira are lost every day in all business environments
due to the absence of control which leads to the potential for
fraud. Fraud can be committed by a trusted individual, a
member of staff and/or external parties.

• But fraud doesn’t happen in a vacuum, fraud occurs because

of the opportunity created and the perception that it can not
be detected.

• Effective internal control should limit the opportunity for fraud,

prevent its occurrence and detect, if it does occur.

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 Way Forward

Management should work with a team of qualified and

independent firm of Chartered Accountants, to periodically
review the hotel operations, report on control lapses, exposure to
risk, as well as make a recommendation to reinforce, improve
and add value to the hotel operation.

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Thank you.

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 Contact:
eduumechukwu@gmail.com

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