NDB dumps Auditors ove P500m impairment
Auditors found the impairment against nonperforming loans worth P200m NDB board rejected the auditors’ opinion NDB continues to make losses
An unexplained P500 million impairmen- by auditors in 2018 has delayed the National Development Bank ( NDB) from having an up- to- date financial statement.
Board Chairman Wilfred Mpai said the opinion given by the then auditors over the impairment was not satisfactory or justified.
He said this is because the bank’s non- performing loans at the time stood at P200 million. The financially- struggling NDB has been failing to produce audited financials on time since 2018.
Mpai who joined NDB as Board Chairperson in December 2018 said the bank has been making a loss since 2014. He said it was that year that it made a loss of P84 million.
“As a development bank we work in a risky agricultural space, which is a sector that other banks that are not development banks do not venture into. We could not accept the P500m impairment without justifications.
“Non- performing loans were high culminating in the reduction of the balance sheet in value. The genesis of the problems that happened started in March 2018. The auditors finished in July 2018 and they were uncomfortable to sign the financials until the shareholders signed a letter of comfort.
“That process took seven months because this was not just an ordinary letter of committal. It had to be a letter that quantifies how much the shareholder stated will support the entity with. Now this goes into a whole drift area which is the budget”, Mpai said.
Mpai who was appearing before the Parliamentary Statutory Bodies and State Enterprise Committee said the financials could not be released in September 2018 but were only released in March 2019.
He said it was at that time that the bank had to start a new three circle of appointment of new auditors.
This took us between April and July, and we started in August which was only a month away from the September 2019 deadline, he said, adding that the bank appointed the same auditors. He said that when they arrived at the issue of the P500million impairment, they questioned and challenged the figure.
“We went to the central bank to speak about this issue. We wanted the auditors to confirm this number.
It was based on this that we said unless we correct things we cannot continue with the relationship.
“We refused to take that opinion of the impairment from the auditors while they could not justify it. This would have been wrong. We further approached Botswana Accountancy Oversight Authority ( BAOA) on the matter and the conversation was we have an impasse and cannot agree.
“In December 2019 management advised that we terminate contract with the auditors but we did not agree with the decision as we felt there is an opportunity to further work together.
“We parted ways when now the auditors stated that the Risk Profile is heightened and the next management fee will be double”, Mpai said, revealing further that the auditors were getting P800 000 per year which was now going to be P1.6 million.
He told the committee that they are ready to appoint new auditors and are awaiting approval from the Ministry of Finance and Economic Development.
“We have impressed upon the management and the new auditors that the audits need to be done backto- back”.
The board chairman said intention is to produce 2020 financials by March 2022, financials for 2021 by May 2022 and catch up with 2022 financial by September same year.
He said preparations for such a process is not easy and takes up to 18 months explaining to the committee that it would not be possible to have the audited financial before the committed dates.
“The delays in all this were beyond our control. The P500m was compared to our non- performing loan. You can only impair on that loan book.
“We sought third opinion from another audit firm who were working with our internal auditors. We wanted them to validate our model and understand the differences that were there with our auditor.
“The length it took us to get where we are, is because of such delays”, said Mpai, adding that it was on the strength of the third opinion that they terminated the contract because the figure did not make sense.