A comprehensive audit report conducted by the Communication Authority of Kenya has shed light on the reasons behind the recent departure of Ezra Chiloba from his position as Director General.
The report, presented during the 9th Special Board Audit and Risk Committee (BARAC) Meeting held on August 8, 2023, has uncovered a series of issues that ultimately led to Chiloba's exit from the Authority.
Defaults on Mortgages Worth Sh28.9M: One of the primary reasons for Ezra Chiloba's exit from the Communication Authority stems from defaults on mortgages worth Sh28.9 million.
These mortgages were approved and granted without considering the contract term, leading to financial instability within the Staff Mortgage Scheme.
Sh364.8M Refinanced Mortgages Without Evidence: The audit report highlights a significant concern regarding mortgages totalling Sh364.8 million, which were refinanced for staff members who lacked sufficient evidence of upgrades or improvements to their purchased or constructed houses.
This mismanagement of funds raised serious questions about the integrity of the scheme.
Material Variance in Property Valuation: The report also unveiled a material variance of more than 20 per cent in property valuation between the government's assessments and privately contracted valuers.
This significant discrepancy in property valuation raised concerns about the accuracy and fairness of the valuations, further eroding confidence in the Staff Mortgage Scheme.
Understated Loan Balances for Former Staff: Another noteworthy issue identified in the audit report was the understatement of loan balances for former staff members of the Authority.
This financial discrepancy pointed to a lack of oversight and control in managing loan balances, potentially causing a financial strain on the Authority.
Inadequate Approvals for Architectural Plans/Designs: Inadequate approvals of architectural plans and designs for the Construction Mortgage Facility exposed the Authority to potential abuse of the facility and financial risk.
This oversight in the approval process indicated a need for improved governance and administration of the mortgage scheme.
Failure to Secure Mortgage Insurance Protection: The report also points out a failure to secure timely Mortgage Insurance Protection Advance for the property, leaving the Authority vulnerable to financial uncertainty.
Additional Allegations of Misconduct
Apart from the mortgage scheme mismanagement, Chiloba faces allegations of misconduct while in office.
As the Director General is the Accounting Officer for the Authority, his conduct and integrity were found to be in contravention of the Leadership and Integrity Act, as well as the Code of Ethics.
One of the prominent allegations against Ezra Chiloba is his involvement in the application for and self-approval of a mortgage loan without following the established due process. This accusation suggests a breach of financial regulations and has drawn attention to the circumstances surrounding this loan.
The mortgage loan in question was reportedly intended to facilitate the purchase of a property, and it is alleged that Chiloba was involved in this transaction with another individual.
The nature of this arrangement and the identities of the parties involved have raised concerns about potential conflicts of interest and a lack of transparency.
Additionally, Ezra Chiloba faces allegations of purchasing a house and acquiring land beyond the limits specified by the Civil Servants Housing Scheme requirements.
Under this scheme, civil servants are subject to certain restrictions on property acquisition, including a one-acre limit. Chiloba's purported acquisition of property exceeding this limit has raised questions about his compliance with housing scheme regulations.
The report indicates that the loan application lacked due diligence, as it was approved by a junior staff member without sufficient evidence of the necessary checks being carried out.
“The loan application was approved by a junior staff member and there is no evidence to support that fact that the junior staff member carried out requisite due diligence and advice management including but not limited to the relationship between the seller and the buyer and the size of the property,” read the report.
Moreover, the authority remitted money to a bank account held by Chiloba under the company name Kitale Hilmost Ltd., which he also posed as the buyer.
“Further interrogation to confirm the identity of the seller vide a query through the Companies Registry revealed the sole director and shareholder of Kitale Hilmost Ltd as Ezra Chiloba Simiyu, who is also the buyer. These actions amount to an offence in accordance with Section 41 and 42 of the Anti-Corruption and Economic Crimes Act,” the statement further read.
In response to these findings, the BARAC committee issued several recommendations, including:
(i) Management should develop a Comprehensive Policy to govern the Staff Mortgage Scheme.
(ii) In development of the Policy, and in line with Board's resolution, the Authority should benchmark with other schemes from similar organizations.
(iii) Management should outsource the Staff Mortgage Scheme. Management should conduct due diligence on the required approvals from the County Governments for construction loans.
iv) Management should have a clear governance structure administration of mortgage scheme.
v) Valuers and Quantity Surveyors (QS's) involved in professional misconduct of overvaluing properties should be reported to the professional bodies while staff found culpable of colluding with the valuers be sanctioned.
BARAC noted a case of variance between the Government valuers and privately contracted valuers.
Mortgage applications whose valuations were above the standard acceptable variation given by professional Valuers of 20 per cent should be rejected.
Given the magnitude of variance, it was noted that the private valuation process was unprocedural and intent was dishonesty.
Regarding his conduct, Chiloba, as the Director General and Accounting Officer for the Authority, was found to have violated sections 11, 12, and 13 of the Leadership and Integrity Act, as well as the Code of Ethics.
This misconduct made him subject to potential disciplinary proceedings under Section 45 of the Employment Act 2007.
The audit report also emphasizes the need for disciplinary measures and recovery actions. It states: "The issue be escalated for disciplinary measures and recovery. Disciplinary inquiry should be conducted as per the Valuers Act Cap 532 and reported to the Valuers Registration Board, as well as The Anti-corruption and Economic Crimes Act, Sections 42 and 48."