Ezra Chiloba, CA directors face sanctions over housing scheme

Further Chiloba was accused of clearance of exiting staff without review of mortgages being held, causing financial exposure to CA of Sh28,874,815.62

Also sucked into the matter is Secretary to the Cabinet Mercy Wanjau who has been named in a damning report for allegedly defaulting to pay her Sh18 million mortgage for her Nairobi Lavington Wood Green Terraces home since November last year to March 2023.

Wanjau has been mentioned following a house she acquired while working at CA where she was acting Director General before she was appointed by President William Ruto. At the time of her vetting for the Cabinet slot, she said she was worth Sh400 million.

During her vetting, when asked to explain how she acquired the Lavington house from CA where she used to work as assistant director, she said the purchase of the property was in line with regulations.

She said then, "It was part of the property owned by CA and it was disposed of in a transparent manner. I was residing in the house. We got financed by a Housing Finance Corporation."

When contacted for comment, Wanjau did not answer our calls or respond to text message.

This report was submitted to the full board for adoption of the resolutions and approval of the above items," CA Director Joel N. Okeng'o said.

The report dated August 8, this year, cites several irregularities in the approval of mortgages within the organisation.

There were four staff members whose mortgage applications were approved and granted without due consideration of their employment contract terms. The report highlighted that these mortgages were not insured and were undervalued, leading to significant financial risk for CAK.

The report explains that Wanjau stopped paying the mortgage in November 2022, which was a month after she was sworn in.

The Director General has also been accused of understating loan balances for former employees without factoring the interest component thereby causing a risk of loss of funds totaling Sh1,060,520.66

"For example, there are instances of junior staff approving applications by senior staff. The DG's loan application was reviewed and approved by himself and an individual junior staff member. "

"In the matter of the mortgage loan processed for the Director General, there is a direct conflict of interest and abuse of the process," the committee concluded.

The report further reads, "The process also had self-approval, contrary to expectations due to the conflict of interest presented. It is also important to note that as the applicant is the Accounting Officer of the Authority, it is questionable whether due process was followed on this loan application."

According to the audit report, there was refinancing loans (Equity Release) to CA staff amounting to Sh364,815,120 representing 55.07% of the total outstanding balance with no supporting evidence of upgrades done to the houses.

When The Standard contacted Chiloba, he texted back, "Sorry, I can't talk right now."

Other senior CA workers are implicated because their properties were also not insured, which the audit feared would likely see taxpayers lose Sh28 million.

According to the report, "Mortgage scheme repayment defaulters were mainly officers who had left the authority. The officers were cleared without due regard to outstanding obligations to the authority.

"Management should hold those responsible to account and recover the liabilities within the next 30 days," the report said.

The report has called for disciplinary actions against several officials in Human Resources department, Legal department, Finance department and Internal Audit.

The report accuses Chiloba of engaging in questionable practices related to mortgage loans and collaborating with others to circumvent proper scrutiny and approval procedures.

The report of the 9th special Barac meeting held on August 8, 2023, states, "Disciplinary action on account of gross misconduct is contemplated as the audit indicates that the Director General has fundamentally breached his obligations arising under the contract of service."

The audit report further exposes negligence in the clearance of staff exiting the organisation, resulting in the financial exposure of Sh. 28,874,815.62. It also highlights understating loan balances for former employees, risking a loss of funds totaling Sh 1,060,520.66.

The officers are accused of breaching contract obligations and failing to conduct due diligence on seller-buyer transactions. The absence of insurance for ex-employees with uninsured mortgages has exposed CA to a significant financial risk.

"One is said to have breached his obligations arising under the contract of service after he cleared staff that were exiting without a review of mortgages being held, causing financial exposure to CA of SH28,874,815.62," the report said.

"Understating loan balances for former employees without factoring in the interest component results in a risk of fund loss totalling SH1,060,520.66," according to the report.

Moreover, Chiloba's purchase of a property exceeding the one-acre limit set by the Civil Servants Housing Scheme raises questions about his adherence to the scheme's rules and regulations. The transfer of funds to an account owned by Chiloba for property purchases has raised concerns about a potential conflict of interest.

"Despite assurances from Management that there was no record of default or non-payment of the mortgage loans as shared in the Board meeting held on 3 May 2023, the audit exposed cases of default in mortgage repayment," the report said.

An internal audit report further reveals irregularities, including the lack of property inspections, valuations, and authentication of information submitted by staff, incomplete mortgage applications, and a failure to provide effective leadership in the management of the Civil Servants Housing Scheme.

The scandal has cast a shadow over CA's ethical standards and the conduct of its top officials. As stakeholders and the public demand accountability, the institution now faces a critical test of its ability to address and rectify the serious allegations brought to light by the Barac report.

"Omission of Scheme Regulations-Mortgage applications were processed and approved despite glaring omissions including property inspections, valuations and authentication of the information submitted by staff; lack of insurance cover; incomplete mortgage applications," the report said.

The report said that Chiloba, in his capacity as the Director General and accounting officer for the authority, stands accused of gross misconduct that extends across multiple facets. These include the failure to engage prequalified valuers and quantity surveyors, a lack of effective leadership in managing the housing scheme, and a dearth of clearly defined roles and responsibilities in the scheme's governance and administration.

"The conduct and integrity of the office holder when viewed against the provisions of Sections 11, 12 and 13 of the Leadership and Integrity Act is found to be in contravention of the same and in breach of the Code of Ethics," the report said.