Five top officials of the Communications Authority of Kenya face various actions over an alleged mismanagement of Staff Mortgage Scheme.
Director General, Director of Human Resources, Director of Legal Services, Director of Finance, and internal auditor are on the spotlight over their actions which exposed the scheme to a number of risks.
A summary finding of the Special Board Audit and Risk Assurance Committee (BARAC), discovered failure by management to put in place a Comprehensive Policy Manual to guide in the Administration of the CA Staff Mortgage Scheme, therefore exposing to the authority to financial loss.
The report also found staff mortgage being approved and granted without consideration of the contract term and/or term of service thus leading to loan default amounting to Sh28,874,815.62.
According the findings, the management also failed to implement board resolution that required the authority to have a list of prequalified valuers leading to over-valuation of properties.
Despite assurances from Management that there was no record of default or non-payment of the mortgage loans as shared in the Board meeting held on 3 May 2023, the audit exposed cases of default in mortgage repayment.
On Monday, Communications Authority Chairperson Mary Mungai announced the suspension of Director General Ezra Chiloba, replacing him with Christopher Wambua on an acting capacity.
According to documents, conflict of interest allegations forms part of the reasons why Communications Authority of Kenya Director General Ezra Chiloba was suspended early this week.
According to a report of the Special Board Audit and Risk Assurance Committee (BARAC), there was gross misconduct of the process to acquire a mortgage by Chiloba. The investigation report found issues with the approval of the loan which it says was done by a junior officer, and raised alarm over self-approval of the loan.
“Disbursement of the loan of Shs 25,000,000 to Kitale Hilmost LIMITED. A Company Search with the Business Registration Bureau revealed that the seller entity is owned entirely, as the sole shareholder and the sole director, by Ezra Chiloba Simiyu, the Director General who is also the buyer in this case. This is reasonably construed to be demonstrative of an intent to defraud the Authority,” the report says.
Chiloba is also accused of failure to insure property under the scheme for staff who exited service, negligence of duty, failure to undertake due diligence on transactions between the seller and the buyer and failure to undertake timely mortgage insurance protection advance for the property.
Actions for considerations in Chiloba’s case also includes over valuation of property by 64.47 per cent which is contrary to the entitlement of one acre resulting in a mortgage of Sh25,000,000 instead of Sh16,720,000. Clearance of exiting staff without review of mortgages being held causing financial exposure to CA of Sh28,874,815.62 and understating loan balances for former employees without factoring the interest component thereby causing a risk of loss of funds totalling Sh1,060,520.66.
Apart from the five top officials, the board is also considering actions against ex-staff in default, which is not limited to compulsory acquisition of Mortgage Insurance Protection by the Authority that will be subsequently charged upon the loanee, and reversion to market rates due to default of the loan.
The Staff Mortgage Scheme at Communications Authority of Kenya was introduced at the inception of the Authority in 1999. The Scheme was meant to enhance staff welfare and facilitate them to acquire decent residential houses either for their current occupation or ultimate occupation upon retirement.
The Scheme is administered Internally by the Human Resources and Administration Department. The Authority has from time to time issued circulars and guidelines aimed at improving the management of the scheme and aligning it with Government guidelines on mortgage loan schemes for the State and Other Public Officers of the Government of Kenya.
The latest circular (HCA Circular No. 1 ‘B’ of 2021) was issued in March 2021 and this was aimed at aligning the management of the Scheme with guidelines issued by the Salaries and Remuneration Commission (SRC) via circulars Ref No. SRC/ADM/CIR/1/13 Vol. III (128) dated 17th December 2014 and Ref No. SRC/ADM/CIR/1/13 Vol III (130) dated 29th January 2015.
The total size of the loan book for the Scheme as at June 2023 as per the payroll records was Sh662,405,123.94.
Communications Authority of Kenya Director General Ezra Chiloba Suspended – Kenyan Wallstreet
