Ezra Chiloba, director general of the Communications Authority of Kenya (CA), was suspended on Monday night as a result of his improper handling of a Ksh.662 million staff mortgage scheme.
The handling of the CA Staff Mortgage Scheme has cost the authority millions of shillings in losses in recent years, according to an audit.
According to a report from the Special Board Audit and Risk Committee meeting on August 8, Chiloba applied for and self-approved a Kshs. 25 million mortgage loan to help him and Jacob Simiyu Wakhungu buy a home without having the specifics of the transaction reviewed and approved by a higher authority.
Furthermore, it is claimed that he bought a house and seven acres of land, which is more than the one-acre maximum allowed by the Civil Servants Housing Scheme requirement.
The audit committee notes that a junior staff member approved Chiloba’s loan application, but there is no proof that this person performed the necessary due diligence and advice management, including but not limited to evaluating the relationship between the seller and the buyer and the size of the property.
Additionally, it was discovered that Kitale Hilmost Ltd, Chiloba’s firm, was the name on the bank account to which the Authority had sent the funds.
The investigation identifies significant anomalies in the scheme’s administration, showing that the staff mortgage was approved and given without taking the contract length or terms of service into account, resulting in a loan default of Ksh 28,874,815.62.
A real estate expert from the State Department of Housing and Urban Development, 14 government valuers from the State Department of Lands, and an internal auditor from the National Treasury all participated in the audit, which revealed a discrepancy between government and privately contracted valuers in property valuation of more than 20%.
For instance, one of the homes Chiloba himself purchased through the plan had a valuation discrepancy of Ksh. 10.7 million.
For employees who have left the Authority, there have been instances of mortgage repayment default.
Mercy Wanjau, a former director general of CA and current secretary to President William Ruto’s Cabinet, is one of the individuals who has fallen behind on her Ksh.19.9 million mortgage payments since November of last year. She is required to make monthly payments of Ksh. 108,267.
The auditors also noted instances where loan sums for former Authority employees who left their jobs or retired were understated.
For instance, Ms. Wanjau’s outstanding mortgage loan was Ksh. 18,381,266 as of June 30 according to the CA documents, but the audit revealed that it was actually Ksh. 18,583,571 instead.
Daniel Kiprop, a long-time manager for the Authority who is now retired, had his loan balance lowered from Ksh. 1,045,847 to Ksh. 939,834.
Additionally, the auditors discovered that there were no site visits or inspections of the homes that were mortgaged under the program, as well as insufficient approvals of architectural plans or designs for the construction mortgage facility.
The audit discovered that CA personnel did not handle documents and documentation properly when administering the plan. Additionally, they neglected to cover the property of departing employees under the plan’s insurance.
Lack of timely mortgage insurance protection advance for the property, lax internal controls in the approval and authorisation of the mortgage applications, and refinancing loans to CA staff without proof of the upgrades or improvements for their purchased or under construction homes are some other irregularities noted in the audit report.
The auditors noted that there was a direct conflict of interest and misuse of the process in the case of Mr. Chiloba’s mortgage loan process, indicating that there was also a failure to perform due diligence on transactions between the seller and the buyer.
According to the payroll records examined by the auditors, the total loan book for the Scheme as of June 2023 was Ksh.662,405,123.94, divided into loans for construction worth Ksh.72,243,324; loans for home purchases worth Ksh.196,471,864; loans for loan refinancing worth Ksh.364,815,120; and outstanding loan balances for ex-staff worth Ksh.28,874,815.
As a result, the committee advised taking formal disciplinary action against Chiloba for the flagrant misuse of the program administration.