Civil servants have failed to repay more than Sh7 billion that the government lent them to acquire homes.
Fresh details show that the government workers were yet to repay the loans issued under the Civil Servants Housing Scheme Fund.
An audit of the fund for June 30, 2023, revealed that the affected civil servants have ignored demand letters for repayment.
Auditor General Nancy Gathungu has cast doubt the fund would ever recover the unpaid Sh7,167,222,242.
“Although management provided demand letters issued to the defaulters, the amount remained outstanding as at June 2023,” she said.
The government established the tenant purchase scheme in 2004 to provide housing loan facilities to civil servants under the National Housing Policy for Kenya.
This was for either purchasing or constructing a residential house, developing housing for sale or rental units.
More than 3,000 civil servants took up the loans, of which the majority are yet to repay.
“In the circumstances, the full recovery of the long outstanding receivables couldn’t be confirmed,” Gathungu said.
She reveals in her report for the period to June 30, 2023 that a principal Secretary for Lands owes the fund Sh109 million.
Some rent and service charge arrears of Sh360 million have also been flagged after it turned out that it has remained outstanding for more than 10 years.
The auditor general raised concerns that the management has not provided for bad and doubtful debts.
The policy required employers to facilitate their employees to acquire housing, among other things.
This was aimed at encouraging them to own their own houses through housing finance loans or the sale of houses constructed through the scheme.
Civil servants could borrow between Sh4 million and Sh20 million depending on their seniority and affordability.
The loan was to be repaid within 20 years or before the borrower attained the age of 60 years.
The interest payable on the loan is at the rate of five per cent per annum on a monthly reducing balance.
An applicant was facilitated up to 90 per cent with a down payment of only 10 per cent expected, the same to be recovered through the check-off system.
State officers have now declined loans granted to them for acquiring houses after the civil servants failed to repay the loans.
The state officers' mortgage scheme fund had a development budget of Sh1 billion during the year under review.
However, loan disbursements during the year amounted to a paltry Sh254 million, which accounted for about 25 per cent of the budget.
Consequently, Sh754 million of the budgeted funds for the mortgage were not taken up by the state officers.
Gathungu said the overall objectives of the fund may have not been achieved under the circumstances.
“My opinion is not modified in respect of this matter,” the auditor general said.
The mortgage fund also had issues of non-performing loans, the report reveals, detailing two individuals as unlikely to repay Sh4.5 million.
The audit established that the amounts remained outstanding, despite the scheme issuing demand letters to the defaulters.
“In the circumstances, the existence of an effective mechanism to ensure recoverability of the long outstanding mortgage arrears could not be ascertained.”
At the same time, the fund’s investments to the tune of Sh843 million is at risk of grabbing.
Gathungu said ownership documents for parcels of land on which some housing units are located were not provided for audit.
The properties include Kileleshwa Gichugu I, Kileleshwa Gichugu II, Kilimani-Denis Pritt, Park Road-Nairobi, Jogoo Road Nairobi, Kibera High rise, Mukenia South B, Kileleshwa flats, Shauri Moyo-Kisumu, Kiambu, Bondeni-Nakuru, Machakos, Embu and Ruiru.
“In the circumstances, ownership of the investment properties totalling Sh843,125,021 could not be confirmed,” the audit report reads.
An audit of the fund conducted eight years into its existence revealed that it fell below the expectations of the stakeholders.
Then Auditor General Edward Ouko recommended that the houses be allocated to public servants in semi autonomous government agencies, independent offices and parastatals to widen its customer base.
While it advised that a larger portion of the fund be issued to civil servants to build their own homes, a number have defaulted in repayment.
Gathungu raised concerns that past audit queries at the fund remain unresolved, citing contravention of the Public Finance Management Act, 2012.