27TH SEPTEMBER 2023
The County Assembly of Embu has directed the Development Bank of Kenya Limited (DBK Ltd) to transfer Ksh 110 million held as collateral back to the county and declared a 2017 car loan and mortgage fund schema a fraud.
A report of the Public Accounts Committee on examination of the reports of the Auditor General on Financial Statements of Executive Car Loan and Mortgage Scheme for years 2019, 2020 and 2021 also wants the bank to pursue recovery of outstanding loan balances amounting to Ksh 36.2M from a former Deputy Governor and five former County Executive Committee Members.
The report of the committee chaired by Gaturi South MCA Paul Muchangi revealed that, the Embu County Executive contravened provisions of Salaries and Remuneration Commission (SRC) Circular Ref SRC/ADM/CIR/1/13 Vol. III (128) dated 17th December, 2014 by entering into an agreement with DBK Ltd before developing Regulations for the Scheme Fund’s implementation.
The report shows that the county had so far lost more than Ksh 20M as the interest earned from fixed deposits and the 3% charged on loan beneficiaries because the terms of the agreement favored DBK Ltd by dictating that the interest was utilised as an administration cost for running the scheme fund and the Ksh 110M earned no interest as fixed deposits for the entire 10-year period.
In addition, the report indicates that suspiciously, DBK Ltd expressed interest in administering the fund on 7th December 2017, it was accepted and the agreement signed on the same day. The Regulations for administration of the fund were however published vide Gazette Supplement No.2 of 14th February, 2018. This indicates that the Agreement was done prior to the making of the Regulations guiding on the Scheme Fund, thus rendering the agreement null and void for lacking regulation at the time of signing.
The report noted DBK Ltd is a government entity and the the bank’s status as a parastatal influenced the direct procurement by the County Government of Embu. However, Ward Representatives wondered why other banks which are semiautonomous government agencies did not get an equal chance to express interest to administer over the fund.
Again, the report observed that despite being guaranteed a maximum of five years in office, the loan repayment period for the beneficiaries was up to of ten (10) years which was contrary to paragraph III of the SRC Circular SRC/TS/CGVOT/3/61/Vol V(42) dated 27th June, 2017 and Regulation 16 of the Public Finance Management (Embu County Executive Car and Mortgage Loan (Committee Members) Scheme Fund) Regulations, 2018. This means that the beneficiaries left office without clearing their loans.
The report further recommended that the Development Bank of Kenya pursues recovery of outstanding loan balances amounting to Ksh 36.2 million held by the former Deputy Governor and five former County Executive Committee (CEC) Members as listed: David Kariuki Njeru Ksh. 20.72M, Suleiman Ndwiga Kariuki Ksh 1.82M, Jamleck Muturi John Ksh 1.43M, Joanne Mwende Kiema Ksh 3.96M, Patrick Njiru Waganagwa Ksh 4,09M and Josphat Muriuki Kithumbu Ksh 4,16M. The bank was ordered to pursue the defaulters independently as they had deposited collateral independently.
The Assembly also heard that the Management Committee of the Car Loan and Mortgage (Committee Members) Scheme Fund was not appointed as required by Regulation 6(1) of the Public Finance Management (Embu County Executive Car and Mortgage Loan Committee (Committee Members) Scheme Fund Regulations, 2018 and there were no documented minutes to show that it held meetings to deliberate on matters regarding the Scheme Fund.
In the same line, there was no position of the Principal Finance Officer in the Embu County staff Establishment to be appointed as the Administrator of the Scheme Fund as required by Regulation 7 of Finance Management (Embu County Executive Car and Mortgage Loan Committee (Committee Members) Scheme Fund) Regulations, 2018, meaning the Ksh 110M fund lacked a substantive administrator.
