AFC directors owe agency Sh58 million – auditor

Revelations have emerged about millions of shillings Agricultural Finance Corporation directors owe the state agency.

The latest report by Auditor General Nancy Gathungu says the directors are yet to repay Sh58.19 million AFC loaned them.

The development puts a spotlight on the defaulting directors who are supposed to approve loans to customers.

AFC is mandated by law to assist in the development of agriculture and agricultural industries.

The agency gives loans to farmers, cooperative societies incorporated Corporation representatives’ private companies, public bodies, local authorities and other persons engaging in agriculture.

The report says of the total amount loaned to directors, some Sh35.66 million has been referred to the debt recovery agency for collection.

This means taxpayers are at risk of losing the money.

“Included [in the mid-term loans to customers] is Sh58.193 million under directors’ loans as disclosed in Note 9 (a) to the financial statements,” the report for the period ended June 30 last year says.

“The balance comprises of seven loan accounts out of which five of the loan accounts are in arrears amounting to Sh35.66 million and which have been referred to the debt recovery unit.”

Gathungu says records provided for audit revealed that the six accounts have been graded as non-collectable even upon disposal of attached securities as per the existing credit policy.

“Although a provision of Sh4.83 million has been made on directors’ loans, this may be inadequate. In the circumstances, the accuracy and recoverability of the director loan balance of Sh58.19 million could not be confirmed,” the report says.

The debt owed by the directors is part of the Sh305.98 million the agency is yet to collect from its customers.

The debt comprises Sh225.13 million which has been pending for more than one year as well as Sh22.66 million whose securities (title) deeds were fraudulent.

“Review of the short-term loan portfolio schedule provided reflects arrears of loans amounting to Sh225.13 million that have been outstanding for more than one year,” the report says.

The revelations come days after Agriculture Cabinet Secretary Mithika Linturi threatened to make public names of politicians and government officials who owe the agency millions of shillings.

Linturi said some officers, among them MPs and governors in the current and former regimes, have failed to refund the agency.

The move has prevented other farmers from taking loans.

“I will release the list of shame of MPs and members of the Executive who have taken money and are not paying,” Linturi said.

He spoke when he appeared before the Senate last week.

The report says the maturity period of the loan was June 30 last year and earlier periods with some being outstanding for more than 10 years.

“No sufficient explanation was provided by management on the steps taken to recover these amounts," it says.

"In the circumstances, the accuracy, completeness and recoverability of short-term loans to customers of Sh225.13 million could not be confirmed."

According to the report, the agency advanced loans amounting to Sh22.66 million to some 13 farmers in Kapsabet.

The information available indicates that AFC advanced the amount against various collaterals in the form of fraudulent title deeds.

It filed seven cases in court against the fraudsters and judgment was entered in its favour.

However, the corporation had not executed the warrants issued as at June 30 last year and details on the other cases have not been provided.

“In the circumstances, the accuracy and recoverability of loans amounting to Sh22.66 million issued on fraudulent titles could not be confirmed,” Gathungu said.