An audit report has uncovered a staggering KES 7 billion debt owed to the Kenyan government by civil servants who benefited from the Civil Servants Housing Scheme Fund.
The scheme, designed to provide affordable housing to government workers, has been marred by mismanagement and widespread defaulting, according to Auditor General Nancy Gathungu’s report for the financial year ending June 30, 2023.
The fund, established in 2004, offered loans ranging from KES 4 million to KES 20 million at a favorable interest rate of five percent per annum. Despite these favorable terms, the majority of the over 3,000 civil servant beneficiaries have defaulted on their repayments.
“Although management provided demand letters issued to the defaulters, the amount remained outstanding as at June 2023,” Gathungu noted in her report.
The audit has raised serious doubts about the fund’s ability to recover the substantial sum, compounded by a colossal KES 109 million owed by a principal secretary in the Ministry of Lands. Additionally, rent and service charge arrears totaling KES 360 million have accumulated over a decade, further straining the fund’s financial health.
The Auditor General criticized the fund’s failure to make provisions for bad and doubtful debts, a critical accounting practice. The report also highlighted the fund’s inability to recover a KES 4.5 million debt from two individuals despite issuing demand letters. “In the circumstances, the existence of an effective mechanism to ensure recoverability of the long outstanding mortgage arrears could not be ascertained,” Gathungu stated.
Moreover, the audit revealed investments worth KES 843 million are at risk due to unclear ownership of properties. Crucial documents pertaining to land parcels on which housing units are located were not provided for the audit. “In the circumstances, ownership of the investment properties totaling KES 843,125,021 could not be confirmed,” the report warned.
“The money that some parastatals make does not belong to their boards or management. It belongs to the people of Kenya as returns on investment,” stated President William Ruto, emphasizing the need for accountability.
