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Audit Report on Mismanagement of Mortgage Scheme Cash Led to Chiloba’s Suspension

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Audit Report on Mismanagement of Mortgage Scheme Cash Led to Chiloba’s Suspension

Sakwa Kombo by Sakwa Kombo
September 19, 2023
in News
Reading Time: 4 mins read
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EACC request CA for documents

Last evening, it emerged that the Director General for the Communications Authority (CA) Ezra Chiloba had been immediately suspended. Following the results of an internal audit, his suspension was announced by the CA board on the 18th of September.

The CA board had instructed the Director/Risk Management and Internal Audit (D/RMIA) to undertake an Investigative Audit of the CA Staff Mortgage Scheme.

The CA board issued the directive on the 3rd of May 2023.

Consequently, the D/RMIA carried out and concluded an audit on the staff mortgage scheme on the 30th of June 2023. Thereafter, a special Board Audit and Risk Committee (BARAC) meeting was held on 8th August 2023.

BARAC’s Findings

Based on the audit report, it emerged that KES 662.4 Million Staff Mortgage Scheme had been mismanaged. The audit revealed that there was about a 20% discrepancy in valuation between Government valuers and privately contracted valuers.

BARAC’s report recommended action be taken against all implicated including Valuers and Quantity Surveyors (Q5s). The report states “should be reported to the professional bodies”.

Given the huge disparity, it was noted that the private valuation process was not procedural and intent was dishonesty. Under the Anti-corruption and Economic Crimes Act, Sections 42 and 48, the report recommends disciplinary measures and recovery of lost assets be undertaken.

Secondly, BARAC’s audit found that some CA staff members had had mortgages refinanced to the tune of KES 364.8 Million. Moreover, the staff did not provide any evidence to prove upgrades or improvements to their purchased/constructed houses to warrant the refinancing.

Initially, it had been found that mortgages worth KES 28.9 Million had been defaulted. Even more bizarre, the report claims defaulted mortgages had been approved and disbursed without consideration of the contract term.

Self Serving Interests

The audit revealed more shadowy details. It emerged the CA had paid KES 25 Million to an Account Number 0180281053527 held at Equity Bank in the name of Kitale Hilmost Ltd. This is according to seller’s instructions contained in a letter dated 5th December 2022.

Further interrogation revealed the identity of the seller via a query through the Companies Registry. It was found the sole director and shareholder of Kitale Hilmost Ltd is Ezra Chiloba Simiyu. Hence, Mr Chiloba is both the seller and the buyer at the same time.

Conflict of interest is another aspect that Mr. Chiloba is alleged to have violated. The report reveals Chiloba had applied and self-approved a mortgage loan to facilitate the purchase of property between himself and a Mr. Jacob Simiyu Wakhungu. The transaction was not subjected to interrogations and approval by any higher authority.
Additionally, the suspended DG purchased a house and land of 7 acres. Based on the the Civil Servants Housing scheme requirements, a civil servant cannot purchase land beyond one acre under a housing scheme.

It also emerges there were various understatements of loan balances for former staff of the Authority. Furthermore, there had also been inadequate approvals of Architectural Plans/Designs for the construction of the Mortgaged facilities. Due to this, the CA was left exposed to financial losses.

Lastly, it emerged the scheme had failed to undertake a timely Mortgage Insurance Protection Advance for the properties.

Actions are In Breach of the Constitution

Essentially, the claims in the report find Mr. Chiloba in contravention of section 41 and 42 of the Anti-Corruption and Economic Crimes Act. In addition, his actions contravene Sections 11, 12 and 13 of the Leadership and Integrity Act.

Therefore, BARAC recommends Mr. Chiloba be subjected to disciplinary proceedings as per Section 45 of the Employment Act 2007. Needless to say, it is these findings that gave the CA board a reason to suspend Mr. Ezra Chiloba.

Chiloba No Stranger to Audit Troubles

In 2018, Mr. Chiloba was sacked by the Independent Electoral and Boundaries Commission (IEBC). Initially, Chiloba had been sent on compulsory leave to pave the way for an audit of the procurement for election materials.

Later on, he was suspended until his termination was announced. Chiloba refused to appear before a committee to answer questions on the IEBC audit report.

Mr. Chiloba’s future at CA remains unknown and he has since been replaced by Mr. Christopher Wambua. Mr. Wambua will serve in an acting capacity.

Tags: Communications Authority of KenyaEzra Chiloba
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Sakwa Kombo

Sakwa Kombo

My Bio is in my written articles.

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