Kenyans risk losing millions in MCAs mortgages — audit

MCAs are not providing securities for car loans and mortgages advanced to them, risking millions of taxpayers’ money, a new report shows.

The report by Auditor General Nancy Gathungu shows they are not providing the crucial documents to secure public cash advanced to them but still get the facility.

In some cases, the County Assembly Service Boards are not doing due diligence to confirm the authenticity of documents provided as security.

Last year, the government advanced car grants to the MCAs but the same was not extended to mortgages.

The MCAs were required to clear outstanding tax from the initial or running loan to the taxman to qualify for the grant.

The requirement locked out many ward reps from the grants.

Analysis of the reports for the period ending June 30, 2019, two years before they got Sh4.5 billion grant windfall, tabled in the senate shows non-provision of security is widespread across the 47 county assemblies.

Those who applied for the car loans before the introduction of the grant were required to surrender logbooks to secure public funds.

Those seeking mortgage loans are mandated to provide title deeds to secure public funds in case of a default.

In Kakamega, the county assembly could not prove Sh65.08 million disbursed to 76 MCAs as mortgage and car loans were secured.

The management, according to the report, had said the documents had been seized by the Ethics and Anti-Corruption Commission.

“No evidence was provided for audit to confirm that the loans were secured as required by Regulation 9 of the Public Finance Management Act (Kakamega County Assembly Loans and Mortgage Fund Regulations, 2014,” the report reads.

In Elgeyo Marakwet, Gathungu says Sh279.39 million disbursed to MCAs and the assembly staff as mortgage and car loans are insecure.

There were no copies of designs, bills of quantities, an official search of the title, valuation reports of cars from a registered valuer and an official search of the title to confirm its authenticity.

A transfer deed duly signed by the members of the scheme and a letter authorising the board to sell the property in case of default in payment was not availed.

Logbooks for the cars purchased were not jointly issued between the board and the members.

“The Fund is exposed to the risk of default by the members before recovery of the full loans,” Gathungu said. 

In Kajiado, MCAs and staff who benefitted from Sh5.8 million mortgage and car loan were secured with securities whose market value was lower than the value of the loans issued.

Further Sh6.2 million was disbursed to members and staff of the county assembly. However, the title deeds and valuation reports were not provided contrary to the law.

Regulation 104(1) of the Public Finance Management (County Governments) Regulations, 2015 requires the provisions of such documentary evidence.

The report revealed some Sh2 million was advanced to MCAs but there was no logbook or documentary evidence of change of ownership to the loan beneficiary and the financier.

This is contrary to section 9(1)(e)(i) of the Public Audit Act, 2015.

“In the circumstances, the Fund Management is in breach of the law,” the report reads.

In Turkana where Sh40.30 million disbursed to 13 MCAs and staff who applied for mortgages and car loans are not secure.

Car loans approved and disbursed were not supported by motor vehicle logbooks issued in the joint names of Turkana assembly and the member, comprehensive motor vehicle insurance and motor vehicle valuation reports.

Regulation 10 (3), 11(1) and 17 (2) of the Public Finance Management (Turkana County Assembly Staff Car Loan Scheme Fund) Regulations, 2016 provides for the provision of the documents.

Mortgage loans disbursed were not supported by copies of approved designs of the proposed residential property, bills of quantities and official searches of title deeds to the properties intended to be purchased.

Edited by Kiilu Damaris