Taxpayers are at risk of losing close to Sh1 billion to county employees defaulting on car loans and mortgages advanced to them, reports have shown.

The reports by Auditor General Nancy Gathungu have revealed that many staffers of the county executives are either delaying or avoiding the payments.

In some instances, staff have died, resigned or their contracts expired before clearing the loans, thus threatening to sink public money.

Scrutiny of reports on staff car loan and mortgage for 10 county executives for 2020-21 reveals a similar trend where beneficiaries are taking up to six or more months to repay their loans.

The reports show that the devolved units gave the loans without seeking for security from their employees.

The county executives are from Samburu, Homa Bay, Trans Nzoia, Kericho, Turkana, Kiambu, Nakuru, Baringo, Embu and Taita Taveta.

The counties have established Car Loan and Mortgage Funds anchored on legislation passed by their respective county assemblies.

However, executives are constantly breaching the legislation and regulations that are meant to guide the Funds and safeguard taxpayers’ money from loss.

In Samburu, the county is at risk of losing Sh81.46 million as some employees and executive committee members have since left the county after they either resigned or their contracts ended.

The loans were advanced under the Samburu County Executive Staff Mortgage Scheme Fund that manages the loans.

“…...the recoverability is doubtful and no provision for likely impairment was made in the financial statements. Further, there was no evidence of recovery measures instituted,” the report reads.

In addition, the Fund advanced some Sh102.13 million to 23 staff members whose monthly salary had not been affected in the payroll.

This, the auditor noted, contravened section 12(1) of the PDM (Samburu County Executive Staff Mortgages Scheme Fund) Regulations, 2016.

In Kericho, the county risks losing Sh15 million which was advanced to an employee who passed on in March 2021.

“However, no records have been provided to confirm whether the late officer was in possession of a mortgage insurance as required by the regulations,” the report reads.

Further, repayment of more than Sh157.82 million that was disbursed to staff under the Kericho county Executive Staff Mortgage Scheme Fund is doubtful.

The auditor also noted that the individual beneficiary loan files lacked loan application forms, minutes of loan approvals and title deeds for mortgaged parcels, exposing the flaws in the management of the fund.

In Homa Bay, Gathungu said in her report that repayment of Sh69.02 million is overdue.

In addition, the amount was not supported by relevant documents to prove their authenticity.

Miles away in Trans Nzoia county, recovery of Sh2.31 million that was given to a member of staff who resigned from service is in doubt.

PFM (Trans Nzoia County Executive Car Loan and Mortgage Scheme Fund) Regulations, 2018, provides that the committee may call in a loan and in default and sell the motor vehicle or charged property by public auction where the borrower is in breach of the terms under the loan agreement.

“No recovery has been made since February 2020 and no efforts have been put in place to ensure full recovery,” the report reads in part.

The county also disbursed Sh10.4 million under the Trans Nzoia ECLMF but failed to provide crucial documents to authenticate the disbursement.

“In the circumstances, the completeness and accuracy of disbursed loans of Sh10.40 million could not be confirmed,” the report states.

Some Sh48.8 million loans were also overdue.

The county failed to provide beneficiaries’ application forms, sales agreements, valuation reports of insurance cover for motor vehicles and approved designs of proposed residential properties.

In Turkana, the county advanced unsecured loans to its staff.

The county advanced Sh57.58 million loan to 12 staff members but the beneficiaries did not maintain a mortgage protection policy and a fire policy with an insurance firm.

“There was no evidence to show that the property acquired through the scheme have been charged to the fund contrary to Regulation 20(b) of the PFM (Turkana County Executive State and Public Officers Mortgage Scheme Fund) Regulations, 2016,” the report states.

In Kiambu, the auditor has declared as non-performing, some Sh18.11 million that was advanced to members who are no longer employees of the county government.

In Nakuru, 15 borrowers with outstanding loans of Sh4.05 million have defaulted on repaying their loans.

“There was no evidence by the loan management committee of administrative or legal action to recover the debts,” Gathungu said in the report.

“Further, management did not make provisions for bad debts or disclose non-performing loans in the financial statements."

In Baringo, the county, some Sh47.97 million advanced to staff are overdue.

In Embu, the auditor doubted the recoverability of some Sh110.85 million that was advanced to eight executive committee members.

At the time of the audit, only three months were remaining before the terms of the CECs expired.

“The security for loans including logbooks and title deeds were not provided for audit. It could therefore not be confirmed that they had a charge registered in the name of the county government and kept in custody by the Fund administrator,”’ the report reads.

In Taita Taveta county, Sh5 million advances as car loans were unsecured as the county staff who benefited from the loan had their car logbooks bearing names only.

“This is contrary to Regulation 21(2) of the Taita Taveta County Government Employees Car Loan and Mortgage Fund Regulations, 2016,” the report reads.

The Regulation requires the logbook of a vehicle subject to a loan from the Fund to be issued jointly between the financier and the borrower.