Home News State loses Sh1bn yearly to rent defaulters — report

State loses Sh1bn yearly to rent defaulters — report

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The government loses over Sh1 billion in rent from its housing scheme every year due to non-payment by civil servants and outdated rent rates, a new report shows.

The 2019-20 audit report has revealed gaps in the management of the 56,892 houses owned by the government, leading to huge losses of revenue due to the government. 

According to the report, the State Department of Housing uses rent rates that were last reviewed in 2001. It has not put in place any policy on government houses and lacks a proper register on the houses.

It shows that the government was supposed to net Sh127.04 million from the units monthly, translating to about Sh1.52 billion annually, in 2019-2020.

However, rent collections on houses for the financial year amounted to Sh724.29 million, leading to underperformance of Sh800.28 million.

The report revealed that some government agencies, especially county governments, make deductions from their staff salaries for rent but never make remittances to the Ministry of Housing.

During the year, the counties deducted Sh113.40 million but only remitted Sh16.37 million to the State Department, resulting in unremitted revenue of Sh97.03 million as of June 30 last year.

“Consequently, the State Department failed to put in place measures to ensure that all rent income due was collected per Regulation 43(c) of the PFM (National Government) Regulations, 2015,” the report reads in part.

The regulation requires an accounting officer to ensure that all Appropriations-In-Aid due to a national government entity are collected and properly accounted for under the relevant laws, rules and regulations.

The report indicts ministry officials for failing to review the rental rates to align to the current market rates to enable the government to reap maximum returns from the houses.

“This is despite the civil servants’ house allowances having been reviewed severally to reflect the cost of living and the market rates for the rent,” Gathungu said in the report.

The ministry has not developed policies or guidelines and rolled out the same to manage the allocation of vacant houses in the various counties.

Further, the ministry has not digitised the management of houses and collection of rent to seal loopholes associated with manual collections.

“The benefits that accrue with digitization such as the ability to establish an expectation on rental income from the individual Ministries, Departments, Agencies or Counties, invoicing, rent collections, booking of revenue, reconciliation and maintenance of houses have not been realized.”

“These gaps in the manual system may lead to undetected loss of revenue,” the report says.

The audit further revealed several gaps in the management of the houses register, warning the lack of an updated register could expose the houses to the risk of theft.

According to the inventory of government houses availed for audit review, the 56,892 houses were categorised into institutional, police and pool houses.

The houses are further categorised into low, medium and high grades.

However, the register maintained by the State Department did not contain key information such as the dates of occupancy and vacancy, occupants’ details and reason for non-occupancy

“The register was also incomplete as some police houses were not included,” Gathungu said.

Failure to maintain a comprehensive register makes it difficult to keep track of government houses and tenants about occupancy, vacancy of the houses, houses with rent arrears and their respective maintenance costs, the auditor said.

This is contrary to Regulation 139(1)(a) of the PFM Regulations, 2015.

The regulations provide that the accounting officer of a national government entity shall take full responsibility and ensure that proper control systems exist for assets and that preventative mechanisms are in place to eliminate theft, security threats, losses, wastage and misuse.

 

Edited by Kiilu Damaris



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