MCAs default on car and house loans

At least five county assemblies are on the verge of losing millions of shillings in unpaid car loans and mortgages advanced to their respective members who failed to capture their seats in the 2017 elections.

According to Auditor-General Edward Ouko’s report for the year ending June 30, 2018 and tabled in the Senate, the affected counties are Nairobi, Busia, Nyamira, Kiambu and Kwale.

Mr Ouko says the county assemblies advanced huge sums of money to MCAs without any form of security, contrary to the Public Finance Management (PFM) Act, thus putting taxpayers’ money at great risk in case of default.

In Nairobi, 10 MCAs received car loans way above the recommended amounts.

The audit revealed a variance of Sh12.7 million between the total amount of car loans issued to the MCAs and the values indicated in the valuation reports by the Automobile Association of Kenya.

“It is evident that the loans issued to the MCAs exceeded the value of their vehicles contrary to the Public Finance Management (Nairobi City County Assembly Car Loan and Mortgage Scheme Fund) Regulations 2017,” Mr Ouko says.

The former MCAs pocketed Sh12.7 million without proof of security.

They include Mr Abraham Njihia Sh3.1 million instead of Sh2.9 million, Mr Redson Otieno Sh2.8 million instead of Sh2.5 million, Mr Elijah Stazo Sh3 million instead of Sh1.5 million and Ms Beatrice Gakuru Sh2.8 million instead of Sh2.1 million.

The others are Mr Fuad Hussein Sh3.7 million instead of Sh1.6 million, Ms Eve Malenya Sh3 million instead of Sh1.6 million, Mr Lawrence Otieno Sh4.4 instead of Sh2.3 million, Mr Mark Mugambi Sh3.3 million instead of Sh1.3 million, Mr Charles Thuo Sh2.8 million instead of Sh1.3 million and Ms Grace Muthami Sh3.4 million instead of Sh2.4 million.

Nyamira assembly is also finding it tough to recover over Sh4 million loaned to the former MCAs after the expiry of their term of service.

The recovery, Mr Ouko warned, seemed to be “uncertain”, noting that the assembly failed to charge security for the loans.

The auditor also noted that the fund did not have a charge register and the securities provided, such as logbooks, were not charged as prescribed in the fund’s regulations or held jointly in the name of the fund and borrowers. This is risky as it will be impossible to dispose of the securities in case of default.

Meanwhile, about Sh78 million in car loans was dished out to 38 MCAs without the vehicles’ valuation reports, and about Sh100 million was given as housing loans without supporting documents contrary to the PFM Act.

Missing in the applications are copies of approved designs of the proposed residential property, bills of quantities, official search of title deeds to the property intended to be bought and copies of the properties’ sale agreement.

In Busia 11 MCAs accessed loans without providing security.