15 top bosses default on Sh380m State mortgages
The loans due from the 15 officers were not being serviced and had accumulated arrears amounting to Sh15.6 million.
Fifteen senior State officers are not servicing their mortgage loans worth Sh380 million, the Auditor-General has revealed.
Nancy Gathungu revealed in an audit on the State Officers House Mortgage Scheme Fund that the loans due from the 15 officers were not being serviced and had accumulated arrears amounting to Sh15.6 million.
Top beneficiaries of the State House Mortgage Scheme Fund include cabinet secretaries, governors, the Attorney-General, the Secretary to the Cabinet and the Chief of Defence Forces (KDF) who are each entitled to a House loan of up to Sh40 million.
The State in 2015 launched the Fund to finance cheap mortgage loans of up to Sh40 million for each State officer.
The report covering the year to June 2021 cast doubt on the recoverability of Sh379,774 630 and arrears of Sh15,601,855 included in the long-term mortgage receivables.
Ms Gathungu said in a report tabled in Parliament that the statement of financial position of the State House Mortgage Scheme Fund reflects a balance of Sh2.96 billion under long-term receivables from exchange transactions (mortgage receivables) as at June 30, 202.
“However, a review of loan records revealed that loans amounting to Sh379,774 630 due from fifteen (15) individuals were not being serviced and had accumulated arrears thereof of Sh15,601,855 as at June 30, 2021,” Ms Gathungu said.
She said no evidence of measures being taken by the management of the Fund to recover the loans was provided for audit review. Further, Ms Gathungu said no provision for the doubtful debt has been made against the mortgage receivables.
“Under the circumstances, the recoverability of the loans amounting to Sh379,774 630 and arrears thereof of Sh15,601,855 included in the long-term receivables balance of Sh2,962,606,855 as at June 30, 2021 could not be confirmed,” Ms Gathungu said.
The loans cost the senior State officers 3 per cent interest, which is only a small fraction of the prevailing market rates of up to 12.39 per cent for the majority of Kenyans who borrow from commercial banks.
“Interest payable on loans shall be at the rate of at least three per cent per annum on monthly reducing balance or such other rate as may from time to time be determined by the committee,” said the Public Finance Management (State Officers House Mortgage Scheme Fund) Regulations 2015.
Under the regulations, Principal Secretaries, members of Independent Commissions, and holders of independent offices (Controller of Budget and Auditor General) are entitled to a house loan of up to Sh35 million each.
The vice commander of the KDF, commander of Kenya Air Force, commander of the Kenya Navy, Director General, of the National Intelligence Service, Inspector General of Police, and Director of Public Prosecutions access a maximum of Sh30 million for purchase or construction of a private residence.
Deputy constitutional office holders, registrar of political parties, other State officers and chief executive officers of government agencies can borrow a maximum of Sh25 million in the housing loan scheme.
The loans are repaid within 20 years or before the borrower attains the age of 70 years, whichever is earlier.
