…as leaked audit report reflects missing equipment, fuzzy finances, and mysterious debts
Mohloai Mpesi
THE Lesotho National Development Corporation (LNDC) is facing serious allegations of asset mismanagement, with numerous items reportedly missing and several others still in use despite being fully depreciated.
This worrying situation is revealed in a leaked audit report for the financial year ending March 2024, compiled by CGT and Associates Chartered Accountants and released on 2 February 2025.
The audit painted a troubling picture of poor asset management, questionable accounting practices, and potentially significant financial misstatements at LNDC. It called for urgent reforms in internal controls, asset tracking, debtor management, and overall financial reporting to restore accountability and transparency at the national corporation.
According to the report, LNDC continued to use assets that should have been written off entirely, a practice that distorted its financial statements. These outdated yet functional assets were still generating income, but since their costs were no longer recorded, they inflated the corporation’s apparent profitability and possibly misled the government about LNDC’s actual financial health.
CGT’s audit covered a wide scope of areas, including financial findings, internal control weaknesses, compliance failures, inconsistencies in rental deposits, and misclassification of both capital and intangible assets.
“The LNDC Fixed Asset Register is incomplete. We selected a sample of assets from the register and attempted to trace them to physical locations. However, the items listed could not be physically verified – management does not know where they are,” the audit report stated.
The audit firm also stated that even attempts to verify LNDC’s investment properties were met with obstacles. Some buildings lacked proper labelling and identification, making it impossible to confirm their existence. The auditors had to rely on the branding of operators, and in cases where those operators had changed branding, they were unable to determine if the buildings under review were the correct ones.
CGT listed missing assets such as; furniture from LNDC’s House 90 being the official residence of Acting Chief Executive Officer Molise Ramaili, seven Lenovo computers, a Dell computer, a camera, a filing cabinet and internet servers among others.
The report also raised alarm over the continued use of fully depreciated assets, warning that the LNDC was violating basic accounting principles.
“We observed that certain items of property, plant, and equipment have been fully depreciated yet continue to be actively utilized by the LNDC. This raises concern over matching concepts as the benefits accruing to the LNDC are currently not matched with the associated costs of running these assets. This distorts the true presentation of the financial health of the corporation as income and expenses are not aligned.
“There is a risk that financial statements do not reflect the true financial health of the corporation.
“We recommend changes in accounting policies, errors and estimates, management revisit the expected useful lives of the assets to ensure these assets’ costs continue being matched to the benefits being earned and that asset values and depreciation methods are appropriate and reflect actual usage.”
These depreciated assets included a Toyota Fortuner bearing registration RB 625, Toyota Hilux under registration number R 5644, another Toyota Hilus registered RH 121, desks and computers among others.
In response, LNDC management acknowledged the gaps and promised to investigate the entire fixed asset register, with appropriate corrections to follow.
M1.5m discrepancy in rental deposits
Another red flag raised in the audit was a discrepancy of M1,502,707.85 in rental deposits. According to the Annual Financial Statements (AFS), rental deposits amounted to M14,530,289.46. However, a separate schedule lists the amount as M13,027,581.61 – a significant mismatch.
Auditors advised that the financial statements were misstated and called for the variance to be investigated and corrected.
LNDC management explained that the figures were carried over from past real estate managers and that no formal records were handed over.
“This amount is adopted from the previous real estate management entities engaged by LNDC. Upon the handover, no records were provided, but only the list. A proposal to align the schedule and AFS was submitted to the board subcommittee last year, but approval was deferred pending further confirmation from management that no mitigating records exist,” the management said.
M1m in bad debt
The auditors also uncovered discrepancies in rental debtors’ records, pointing to a potential bad debt of over M1 million. They reported being unable to verify individual balances due to a lack of responses from several sampled debtors.
Among the non-responsive debtors were Advanced Property (Pty) Ltd, Bright Light (Pty) Ltd, Bull Clothing (Pty) Ltd, KDC Lesotho, Ministry of Home Affairs, VDC Suppliers, Alto Trading, MG Commodities, Nanabolela (Pty) Ltd, Shoprite Liquor, Tumo Transport, and Wa-Power (Pty) Ltd.
Five of the sampled debtors included well-known entities like the once popular and now defunct Cuban Linx nightclub, which reportedly owes LNDC M374,263.61, and Seolo, with a debt of M997,738.
“Of the eight debtors who did confirm their balances, five reported amounts that differ from LNDC’s records, leading to a total variance of M2,936,349.18,” the report states.
Some discrepancies were particularly striking. For instance, Kopano Textiles appears on LNDC’s books with a balance of M943,229.70, but the company’s own records show nothing. Similarly, CV Kobeli and Jaguar Shoes appear with balances of M149,770.95 and M471,346.92 respectively but were not corroborated by the debtor.
In its response, LNDC claimed that despite numerous follow-ups, phone calls, and site visits, they were unable to obtain audit confirmations from the debtors.
Further findings showed that three of the eight debtors who did confirm their balances showed a variance of M1,843,348.53 compared to LNDC records. These included Leh Math (Cuban Linx), Seolo, and Jaguar Shoes—with Jaguar proposed to be written off.
Selkol, another company flagged in the audit, reportedly disputed owing LNDC M617,102.00, explaining that the property in question was purchased from LNDC in 2004 – suggesting the debt should have already been written off.
The auditors warned that the inability to verify debtor balances severely limits the scope and reliability of the audit.
“While we note management’s efforts, the failure to secure confirmations limits our ability to accurately verify the rental debtors’ balances. It creates uncertainty about the valuation and accuracy of LNDC’s receivables. Notably, of the sample of LNDC’s receivable balance reviewed, 80 percent failed to confirm their balances while the 20 percent that did respond.”
