The mismanagement of a Ksh.662 million staff mortgage scheme is at the centre of Monday night’s suspension of Communications Authority of Kenya (CA) Director General Ezra Chiloba, Mwanzo Media has established.
An audit has revealed that the authority has seen losses of millions of shillings in recent years in the administration of the CA Staff Mortgage Scheme.
A report of the Special Board Audit and Risk Committee meeting held on August 8 says Chiloba applied for and self-approved a Kshs.25 million mortgage loan to facilitate the purchase of a property between himself and Jacob Simiyu Wakhungu without subjecting the transaction details to interrogation and approval by a higher authority.
He is also said to have purchased a house and seven acres of land which is beyond the required one-acre limit provided by the Civil Servants Housing scheme requirement.
The committee notes that Chiloba’s loan application was approved by a junior staff member and there is no evidence to support the fact that the junior staff member carried out requisite due diligence and advice management including but not limited to the relationship between the seller and the buyer and the size of the property.
Additionally, the bank account to which the Authority remitted the money was found to be in the name of Kitale Hilmost Ltd, which was found to be Chiloba’s company.
The report notes major irregularities in the administration of the scheme, indicating that the staff mortgage was approved and granted without consideration of the contract term or terms of service, leading to loan default amounting to Ksh.28,874,815.62.
According to the audit conducted by an internal auditor from the National Treasury, a real estate professional from the State Department of Housing and Urban Development and 14 government valuers from the State Department of Lands, there is a discrepancy of more than 20 per cent in property valuation between the government and privately contracted valuers.
For instance, there is a value disparity of Ksh.10.7 million in one of the properties Chiloba himself acquired under the scheme.
There are also cases of default in mortgage repayment for staff who have exited the Authority.
“Despite assurances from Management that there was no record of default or non-payment of the mortgage loans as shared in the Board meeting held on 3 May 2023, the audit exposed cases of default in mortgage repayment,” reads the report.
In one of the cases, CA’s former Director General Mercy Wanjau, who is now secretary to President William Ruto’s Cabinet, has defaulted on repayment of her Ksh.19.9 million mortgage since November last year. She is supposed to be paying Ksh.108,267 every month.
UNDERSTATED LOAN BALANCES
The auditors further flagged cases of understatement of loan balances for former staff of the Authority who resigned or retired.
In the case of Ms Wanjau who resigned, for instance, the CA records placed her outstanding mortgage loan as of June 30 at Ksh.18,381,266, while the audit found it to be Ksh.18,583,571.
For one of the Authority’s long-serving managers Daniel Kiprop who is now retired, his loan balance was understated from Ksh.1,045,847 to Ksh.939,834.
There were also inadequate approvals of architectural plans or designs for the construction mortgage facility and auditors also found out that there were no site visits and inspection of houses mortgaged under the scheme.
CA officials did not conduct adequate records and documentation management in the administration of the scheme, the audit found. They also failed to insure property under the scheme for staff who exited service.
Other irregularities flagged in the audit report are failure to undertake timely mortgage insurance protection advance for the property, poor internal controls in the approvals and authorisation of the mortgage applications, and refinancing loans to CA staff that lack evidence of the upgrades or improvements for their purchased or construction houses.
“Refinancing amounted to Kes.364,815,120 representing 55.07% of the total outstanding balance and with no supporting evidence of upgrades done to the houses,” the report says.
There was also a failure to undertake due diligence on transactions between the seller and the buyer, with the auditors noting that in the matter of the mortgage loan process for Mr Chiloba, there was a direct conflict of interest and abuse of the process.
The total size of the loan book for the Scheme as of June 2023 as per the payroll records seen by the auditors was Ksh.662,405,123.94, distributed into construction loans of Ksh.72,243,324; house purchase loans of Ksh. 196,471,864; loan refinancing loans of Ksh.364,815,120 and outstanding loan balances for ex-staff of 28,874,815.
Consequently, the committee recommended that explicit disciplinary actions be undertaken against Chiloba for the gross abuse of the scheme administration.
The committee further recommends that sanctions be applied against CA’s Director of Human Resources, Director of Legal Services, Director of Finance and the Authority’s Internal Auditor.
Following Chiloba’s suspension, CA’s chairperson Mary Mungai announced Christopher Wambua’s appointment as Director General in Acting Capacity effective Monday until further notice.
Chiloba previously served as the CEO of the Independent Electoral and Boundaries Commission. He was appointed as CA Director General in September 2021 and was set to hold the position for a 4-year renewable term.