Counties risk losing millions in unpaid car loans, mortgages to MCAs

Auditor General Edward Ouko when he appeared before the Senate County Public and Investment Committee at County Hall, Nairobi on Wednesday 24/04/19. [Boniface Okendo,Standard]

A host of county assemblies risk losing millions of shillings in unpaid car loans and mortgages, an audit report has warned.

Auditor General Edward Ouko says some assemblies advanced huge loans to MCAs without any form of security, putting the taxpayer’s money at risk in the event the county lawmakers default.

In Nyamira, the assembly has run into trouble in recovering at least Sh4 million it advanced to some MCAs who lost in the last poll.

“Included in the current portion of long term receivables of Sh15, 904,222 is an amount of Sh4, 022,860 owed by the previous members which had not yet been recovered,” reads tabled in the Senate.

The report says that Nyamira failed to charge security for the loans it advanced to the MCAs in what now poses great risk in the event the members default in serving the loan facilities.

“It was noted that the fund did not have charge register in place and the securities provided such as logbooks were not charged as prescribed in fund’s regulations or held jointly in the name of the fund and respective borrowers,” adds the report.

It warns: “This poses a great risk as it will be impossible to dispose of the securities in the case of default and whereby the Fund is not registered as a party.”

Nyamira is further on the spot over the issuance of car loans totaling to Sh78 million to 38 MCAs without obtaining valuation report of the vehicles contrary to the requirements.

It also emerged that the assembly advanced Sh100 million for housing loans for the county assembly mortgage scheme without any supporting documents.

Some of the documents cited as missing in the applications include copies of duly-approved designs of the proposed residential property, bills of quantities in respect of the proposed development, renovation or repairs, official search of the title to the property intended to be purchased and the copy of the sales agreement relating to property.

In Nairobi, 10 MCAs received car loans above what they needed to purchase their vehicles.

The report has revealed a variance of at least Sh12,727,800 between the total amount of car loans issued to the MCAs and the values indicated in the valuation reports by Automobile Association of Kenya for their respective cars.

In Busia, review of members’ personal ledgers, fund account bank statements revealed that 11 MCAs accessed loan facilities without providing the needed security for the loans.

It emerged that all the title deeds presented as security in spite of being charged by a lawyer as security, were not valued to ascertain the value of land presented as security.

“All the logbooks were registered in joint names of the borrower and the County Public Service Board. In the circumstances, the fund did not fully adhere to the laws and regulations governing the operations of the fund,” says the report tabled in Parliament.

The audit further revealed that the outstanding balances of recoveries yet to be banked totaled Sh59,784,885.

“During the year under review, the county assembly borrowed from the fund Sh8, 100,000 (2016/2017 — Sh45, 320,452) bringing the cumulative debt to Sh53, 420,452 which has not been refunded,” it reads.

Kiambu County Assembly has also been fingered after records of the staff mortgage recovery ledger, which reflects a balance of Sh736.4 million, differed with documents presented amounting to Sh1.3 million.

“The staff mortgage recovery ledger reflects a balance of Sh736, 462,462 as at June 30, 2018 which, however, differs with the underlying supporting documents balance of Sh1, 382,276.10 as of the date,” reads the report.

In Kwale, the assembly is on the spot over irregular operation of the fund as it started operating before being approved.