Heavily indebted MCAs struggle to pay millions in loans by 2017

"Total recoveries plus interest accrued up to June 30, 2016, amount to Sh99,233,223, made up of amounts recovered as at June 30, 2015, of Sh44,293,732 and for the financial year ended June 30, 2016, a total recovery of Sh54,939,491," the report read. PHOTO: COURTESY

Members of the County Assembly may not be able to clear car and house loans, amounting to millions of shillings, before their terms expire in 2017.

A preliminary auditor's report for the Vihiga county assembly for the year ending June 30, 2016, indicates that 40 MCAs have outstanding loan balances of Sh79,853,776, which they must clear before leaving office next April. They will have to pay up to Sh199,634 per month to clear their loans before the 2017 elections.

According to the report, the MCAs borrowed a total of Sh179 million, with the majority getting between Sh4 million and Sh5 million.

The auditor expressed concern that the loans might not be fully recovered within the remaining period of the assembly and questioned the sustainability of the loan fund.

"Total recoveries plus interest accrued up to June 30, 2016, amount to Sh99,233,223, made up of amounts recovered as at June 30, 2015, of Sh44,293,732 and for the financial year ended June 30, 2016, a total recovery of Sh54,939,491," the report read.

It showed that cash in the bank as at June 30, 2016, was Sh50,116,736, while recoveries made in June 2016 amounted to Sh4,326,641.

The report also revealed that the car loan fund lacked necessary documentation as there was no act of the assembly to establish it, neither was there a record to show that eligible members actually applied for loans.

"Payment vouchers for the fund were not prepared and minutes of the loans management committee awarding and monitoring the recovery of loans were not maintained," read the report.

It stated that loan securities such as logbooks and title deeds were not in joint names with the assembly, neither were records maintained or bank reconciliations provided.

The report noted that Sh115 million was irregularly transferred from the fund to the county assembly imprest account and two companies to finance operations of recurrent expenses, with only Sh24 million being recovered.

Of the 40 MCAs awarded loans, only 30 complied with the one-third rule of qualifying for the loan.

According to the report, the basic salary of an MCA is Sh154,688. If a third of the basic salary rule was to be applied, then the least amount that any member should be paid is Sh51,562.

"Eight members of the scheme receive their salary at less than 30 per cent; they may suffer pecuniary embarrassment as they may be forced to borrow to meet their financial requirements, which can also lead to integrity issues," the report said.

Last year, MCAs reached out to the County Assembly Service Board to help them repay their loans before the expiry of their terms.

The assembly's car and mortgage account statements also indicated some discrepancies.

The statements obtained from Co-operative Bank Mbale Branch indicated that the account was debited with Sh200 million on July 1, 2014, and as at April 27, 2015, the account had Sh4.5 million despite members purportedly repaying their loans.

The statements further indicated that the fund administrator transferred, on diverse dates, millions of shillings to private accounts.

Yesterday, nominated MCA Nathan Kamidi read malice in the auditor's report, saying MCAs signed a five-year loan agreement that they expected to run beyond 2017.

"The government knows fully that the loans were supposed to be cleared by March 2018," he said.