LEC in another fraud and procurement scandal

… as internal audit uncovers more financial mismanagement and corruption in electricity sales and procurement

Mohloai Mpesi

THE Lesotho Electricity Company (LEC) is once again mired in fraud and procurement scandals.

This time after the parastatals own internal audit department uncovered fraud in electricity sales and corruption and mismanagement in the procurement department. In all these instances, the department suspected collusion between LEC staffers and suppliers.

Suppliers to the LEC were paid above their contract prices without any justification or documentary proof explaining why. The report did not quantify the potential losses.

But suspected fraud in electricity sales could have cost the LEC about M2 million.

According to an internal audit report released in March 2025 by the Head of Internal Audit, Thato Matsoso, LEC lost M1,886,664.69 due to collusion between its sales staff and clients.

The losses stem from unauthorised electricity credit loadings and weak internal controls that allowed funds to vanish undetected.

The audit, initially unplanned, was launched to investigate whether sales agents were complying with internal financial protocols when loading electricity onto customer accounts.

Mr Matsoso’s report reveals that agents’ accounts were credited with amounts that were never deposited into LEC’s bank accounts. In some cases, a single deposit was used multiple times to credit agent accounts. This due to systemic failures in LEC’s oversight, internal controls, and bank reconciliation processes.

According to Mr Matsoso, sales agents were working hand-in-hand with LEC employees to defraud the company of millions. The report revealed that agents’ accounts were credited with amounts that were never deposited into LEC’s bank accounts. In other cases, a single deposit was used more than once to justify multiple credits to agents’ accounts.

“The prepaid contract between LEC and its sales agents stipulates that agents must deposit cash into LEC’s account. Upon confirmation of the deposit, the agents are to be credited with the equivalent value plus the agreed commission,” the report stated.

“Internal Audit noted that agents’ accounts were credited with amounts that were never deposited in the LEC bank accounts, and some were credited multiple times with a single deposit.

“This anomaly has been caused by potential collusion between employees and agents to defraud LEC, weaknesses in the internal financial control system that fail to detect and prevent unauthorized transactions. This was exacerbated by inadequate supervisory oversight and review of agent accounts crediting against corresponding bank deposits and delays in preparation of bank reconciliation statements.”

The report said unauthorized loadings without corresponding deposits posed significant risks, including direct financial losses and reputational damage due to potential stakeholder loss of trust.

However, LEC appears to have taken action based on the audit report. On 10 March 2025, the Head of Customer Experience, Lebohang Mohasoa, wrote a show cause letter to one employee, Tlotliso Bereng, accusing him of being involved in the fraudulent crediting of electricity worth M1.3 million.

“The internal audit office has discovered that sales agents were, for a period spanning three years, credited with amounts before money was paid into LEC’s bank account, in violation of the prepaid agreements that LEC has with the sales agents.

“The auditor also has reasonable grounds to believe that the relevant advance credits were processed by yourself, either working alone or in concert with the agents with the intention of defrauding LEC.

“These irregularities occurred without you keeping any records for future reference. Thus, suggesting an intention to hide them,” the letter read.

According to the same letter, Mr Bereng’s actions could have a damaging effect on the company’s financial standing.

“These are serious allegations and since it was your job as the person who processed them to keep records of all the documents used to substantiate the transactions, in your role, you could have detected these irregularities, prevented them, and should have reported them as and when they occurred.

“Your actions have raised concerns that have the potential to negatively affect the financial position and reputation of Lesotho Electricity Company. According to our HR policies and other policies, such behaviour is considered unacceptable and may lead to disciplinary action or termination, depending on severity.

“It is against this background that you are required to provide a written explanation within three days of receiving this letter why disciplinary action cannot be taken against you on the account of actions which potentially expose LEC to significant loss of approximately M1.3 million,” the letter stated.

The Lesotho Times could not establish what transpired to Mr Bereng after Mr Mahasoa’s ultimatum.  Mr Mahasoa is part of the entire executive management of the LEC suspended on 12 March 2025 pending a probe corruption and mismanagement at the parastatal.

In addition to the irregularities in the sales agents’ operations, the audit report also uncovered fraudulent activity in LEC’s procurement processes. One of the issues raised is that payments to suppliers were increased without providing any explanation or justification for the increments.

The procurement department failed to maintain proper documentation and was unable to produce supporting evidence for the changes. This despite clear contractual obligations that bind LEC and its suppliers.

“The contract between LEC and its approved suppliers states that ‘prices charged by the suppliers for goods and related services shall not vary from the prices quoted in their bids unless sound reasons are provided and accepted by both parties.’

“Additionally, on 25 July 2023, the Board of Directors approved the award of contracts for lots exceeding M15 million with clear instructions that framework agreements be drafted. These agreements were to include provisions for price adjustments linked to inflation indices from the Central Bank of Lesotho (CBL) and the South African Reserve Bank (SARB) every 6 months.

“A review of selected purchase transactions revealed discrepancies between the prices quoted in supplier bids and the actual prices charged, with price increases ranging between 10 and 69 percent. Despite multiple audit requests, procurement officers could not provide any supporting documentation or correspondence to justify these variations.”

According to the report, this failure opened the door for collusion between LEC procurement personnel and suppliers. It said some suppliers could be deliberately submitting low bid prices initially, only to raise them later without resistance or scrutiny from within LEC.

“Furthermore, while the Procurement Manager cited delays in the procurement process as the reason for price adjustments, since bids were submitted on 26 August 2022, and only approved by the Board on 25 July 2023, there was no evidence to confirm that these adjustments were reviewed and approved by the appropriate authority.

“A lack of proactive contract management and oversight has created opportunities for collusion between suppliers and procurement personnel, where suppliers may submit artificially low bids to gain preference, knowing that prices will be inflated later.

“LEC faces potential financial losses due to unsubstantiated price variations, increasing the risk of procurement fraud and unethical practices that could undermine the fairness and transparency of the procurement process.”

The audit also reveals that the company had not formalised contractual agreements with several suppliers, despite engaging in material procurement with them.

“During the audit, the team requested framework contracts signed for the listed suppliers, as approved by the LEC Board of Directors on 25 July 2023, to verify compliance with contract management terms, policies, and procedures. However, the requested contracts were not provided, despite ongoing material purchases from these suppliers.

“The Procurement Manager indicated that the contracts were drafted and submitted to the Legal Department for finalisation, but delays occurred. However, there was no evidence to confirm that the contracts were sent to legal, nor any documented follow-ups or escalations to the Managing Director to address the delays.”

The supplier contracts in question involved the delivery of key equipment including transformers and mini substations to the LEC by suppliers.  Among the contracts in question is one granted to Lesehe for transformers and mini substations at a cost of M44,745,347.47, to MM Building for meters at M59,822,341.56. Also questioned are contracts awarded for the supply of bandits, saddles, and screws to Lesehe at M15,295,764.47, cables to TJ Group at M52,001,826.91, and poles, boxes, and circuits to TJ Group at M28,583,546.67.

According to the audit, the failure to formalise contracts with these suppliers exposed LEC to a range of legal and regulatory risks.

“Inadequate contract administration and oversight have resulted in the failure to finalize and maintain supplier framework contracts before procurement transactions commenced.

“The absence of formal supplier contracts exposes LEC to legal and regulatory risks, financial inefficiencies, and potential disputes due to unclear supplier obligations, pricing, and service levels.”