THE Lesotho Electricity Company (LEC) has appointed an international forensic audit consultancy to further examine the affairs of the company after an internal audit report pointed to rampant fraud and corruption which has cost taxpayers tens of millions of maloti.
This was revealed by the LEC board chair, Refiloe Matekane in an exclusive interview with the Lesotho Times this week.
Mr Matekane said the current board inherited a serious mess from its predecessor when it got into office “four months ago in terms of staff ethical conduct and performance and service delivery”.
“What we as the new board have done is to look into the previous internal audit reports in order to familiarise ourselves with what has been going on within the company. The most important issue that we picked was that the previous LEC board overlooked issues of concern in the internal audit report of 2016/2017. The issues of illegal electrification by LEC staff, waste management issues and employment of staff without approval of the management were never addressed.
“The USAID has given LEC financial support to engaging an international forensic audit consultant to dig more into the fraud uncovered in the internal audit and assist the board to come up with a five year strategic plan on how LEC can provide customers with affordable electricity,” Mr Matekane said.
He said the international forensic audit consultant recently started work and once the audit was completed the LEC would report errant employees to the police.
“There are issues of serious misconduct where employees of LEC offered services to customers through their own companies and of individuals received payments for using the company’s resources. We will report them to the police. We are not threatening people but it is the procedure that when you are believed to have committed fraud, justice must be served.”
The confidential LEC internal audit report for 2017, seen by the Lesotho Times , paints a picture of a dysfunctional organisation where poor corporate governance practices have allowed employees to increasingly engage in fraudulent activities that range from small misdemeanours to huge fraud and corruption of as much as M170 million.
The embezzlement of M170 million is suspected to be the cause of the assassination of the LEC’s head of internal audit, Thibello Nteso, who was shot and killed early last year after he raised the alarm bells over the corruption at the parastatal.
The indiscipline and corruption of LEC staff has resulted in them connecting electricity illegally to consumers in exchange of bribes. Bribes are also demanded for various reasons.
Some LEC employees have been paid huge gratuities in excess of M500 000 despite that they do not qualify for such benefits while illegal payments of as much as M400 000 have been made to lawyers.
The thick report outlines a plethora of poor corporate governance practices including the signing of employment contracts by the human resources manager without the approval of the managing director as required.
Revenues are routinely pilfered from LEC coffers, because of lack of controls, putting its viability at risk.
“Revenue is the most crucial asset to ensure the survival of the LEC in the long term,” part of the IDA report states, adding, “However, the current controls over revenue protection become a real cause for concern and calls for a strong message from the board to management to ensure business stability”.
“In our opinion, the LEC is exposed in the way in which it handles its revenue until such time that appropriate and effective controls are put in place.
“The IAD has identified that there is significant misalignment between the strategic plan, corporate risk register and corporate plan and this hinders the effective delivery of the overall company strategy.
“The LEC has been in the spotlight for quite a while over rampant fraud which seems to be escalating. It is the management’s responsibility to prevent and detect fraud while the IAD is expected to evaluate the risks arising from the fraud.”
The IAD also called for the appointment of external auditors to examine the affairs of LEC.
“The journey that the LEC has travelled since 2011/2012 has indicated that the entire organisation is engulfed in fraudulent activities, with the magnitude escalating.
“It has been observed through audits conducted in the period 2011/2012 to date that the internal control environment continues to weaken. This can be attributed to a very poor culture, no sense of responsibility and accountability resulting in non-observance of and overriding of controls. Based on this, the IAD is of the opinion that that the current state of affairs within the LEC cannot be dealt with through normal audits.
“The situation therefore warrants the engagement of external forensic experts who would do a thorough analysis and provide a holistic view of the root causes that resulted in this situation as it is evident that IAD initiatives only treat the symptoms,” the report states.