SEVERAL current and former governors are on the spot after
revelations that they have been disbursing public funds disguised as loans, in
what appears to be a strategy to win voter support.
Senators have directed the Ethics and Anti-Corruption
Commission to investigate the county chiefs.
This is after it emerged that billions advanced under the so-called empowerment funds—especially around election periods—have largely
gone unrecovered.
In some cases, county governments set up funds without clear
recovery mechanisms, while others ignored laws requiring enforcement and
penalties for defaulters.
The matter came to light during Senate hearings, where the
County Public Investments Committee has been grilling governors over ballooning
non-performing loans.
“EACC should just take up the matter. Even if we allowed you
to recover the money, you would come back here and report that nothing has been
recovered,” the committee ruled during one session.
In addition, the committee directed the Controller of Budget
to establish the number of empowerment funds operated by the counties, the amounts
disbursed, loans issued and the outstanding recoveries.
Committee chairman Godfrey Osotsi raised concerns about the
timing of the disbursements, noting that most of the funds are released close
to elections.
Since Monday, the committee has questioned four governors
over the trend of non-recovery of loans issued to individuals, groups and
cooperatives.
They are Paul Otuoma (Busia), Benjamin Cheboi (Baringo),
Julius Malombe (Kitui), and Jeremiah Lomorukai (Turkana).
The funds were disbursed during the tenure of their predecessors.
“This is emerging as a common problem across several
counties. What is becoming clear is that this money was being disbursed during
election periods — and in some cases it was probably used to campaign against
you,” Osotsi told Governor Malombe.
In Busia, the county government is at risk of losing Sh130
million after it offered loans to some of its employees and cooperative
societies.
The funds include Busia Agricultural Development Fund, the Busia
County Cooperative and Enterprise Development Fund and the Busia County Public
Officers Revolving Fund.
Among the beneficiaries of the funds are county employees.
Apparently, the law that created the funds did not provide
for required collateral for the loans, rendering them free money.
The unsecured loans were flagged off by Auditor General
Nancy Gathungu in her latest report for the financial year ending June 30,
2024.
“These were inherited loans, and we had put a line that we
are not disbursing loans until we correct the anomaly that is in the act as we
pursue the cooperatives that were given,” Otuoma said.
In Turkana, the auditor flagged over Sh500 million that the county
government has been unable to recover.
The money was advanced to women, youth and employees of the
county dating back more than four years ago.
The funds include Turkana County Youth and Women Fund,
Turkana County Cooperative Development Fund, Biashara Fund, Turkana County
Education Fund and Emergency Fund.
“The loans were still outstanding more than two years after
their expected full repayment period, and the management has not provided
satisfactory explanations on the measures taken to ensure recovery of the
outstanding loans,” the report states.
In his response to the committee, Governor Lomorukai said
that the county has procured a Loan Management System that has also integrated
the Turkana County Youth and Women Empowerment Fund.
“The Loan Management System will enhance accountability and
transparency, improve repayment monitoring and consistency, financial inclusion
and capacity building, data-driven decision-making and sustainability of the
revolving fund,” he said.
In Kitui, the county is yet to recover Sh157.31 million disbursed under
the Kitui County Empowerment Fund.
The details contain the audit report for the year ended June 30,
2024.
“Further, the sustainability of the fund is at risk due to high default
rates,” the report reads.
Apparently, the law that created the funds provides for a clear
mechanism for recovery of the loans.
“It is apparent that the county government of Kitui was
intentional in not recovering this fund,” nominated Senator Raphael Chimera
said.
“I am reading their own legislation here, Kitui County
Subsidiary Legislation 2021. The sections of this law are very clear on how
they intend to recover these loans. We don’t understand why you don’t want to follow what you
have put through as your own legislation.”
Confirming that the fund was being used as a political tool,
Governor Malombe said political figures in the previous administration told residents
not to repay the money.
“You appreciate the circumstances we operate in. We are not
giving any more loans,” the governor said.
In Bungoma, the county has failed to recover Sh4.81 million
that has been outstanding in the last three fiscal years from the 2021-22 financial
year.
The funds were disbursed under the Bungoma County Persons
with Disabilities Empowerment Fund for the year ended June 30, 2024.
“In the circumstances, the fund has not been achieving its
objective over the years, which threatens the sustainability of services for
which it was created,” the report states.
Under the Bungoma County Youth and Women Enterprise Fund, some
Sh23.38 million has been outstanding in the last four financial years from 2020-2021.
“In the circumstances, accuracy, validity and recoverability
of receivables from exchange transactions balance of Sh23.38 million could not
be confirmed,” the report says.
In Laikipia, some Sh18.45 million loans disbursed under the
County Enterprise Fund are non-performing.
“It was noted that although the loans were long overdue for
repayment, they remained unrecovered at the end of the year under review,” the audit
report for the 2023-24 financial year states.
“No action has been taken by the fund management to
recover the long outstanding loans. Further, the loans were not insured or
backed by any collateral.”
In addition, some Sh20.88 million disbursed under the Laikipia
County Cooperative Development Fund is yet to be recovered, with the auditor doubting
the recoverability of the funds.
The amount is part of the Sh47.22 million the county is yet
to recover from the loanees.
“As a result, the valuation and accuracy of the current
portion of long-term receivables from exchange transactions, balance of Sh47.22
million, could not be confirmed,” the report states.
In Mombasa, some Sh53.88 million disbursed under the Mombasa
County Consolidated Revolving Fund has been outstanding for a long period.
However, there was no evidence that loan agreements were
signed by the loan beneficiaries. ln addition, Management did not provide
evidence that the loans were secured.
“It was also not possible to know the terms and conditions
of loans advanced since loan documents were not provided for audit review,” the
report states.
In Meru, some Sh28.20 million disbursed under the Meru
County Investment and Development Corporation Fund, which has been long outstanding,
is yet to be recovered.
INSTANT ANALYSIS
County governments operate several funds. They include
County Emergency Fund and specific development funds like the Ward Development
Fund and the County Assembly Fund, which provide financial support for
emergencies, community projects, and legislative functions. They also
operate several empowerment funds. However, the recoverability of the funds
disbursed as loans for empowerment is in doubt.
