The Auditor-General, who wants the amounts paid for the houses updated to reflect current market rates, has faulted the State Department for Housing and Urban Development for failing to review the rents over the past two decades.
In her 2019/20 National Government audit report, Ms Gathungu notes the state department has been losing hundreds of millions over the years due to failure to review rates and to create a framework to ensure proper management of the houses.
“Regulation 43 (d) of the Public Finance Management (National Government) Regulations, 2015 provides that an Accounting Officer shall manage, control and ensure that policies are carried out efficiently and wastage of public funds is eliminated. However, the government house rents were last reviewed in the year 2001 and are, therefore, not aligned to current market rent rates,” Ms Gathungu says.
The Auditor-General further observes that the current rates cannot keep up with maintenance costs.
Ms Gathungu says failure to review the rents has seen the government continue to operate under a tight cash-flow regime even as wastage happens.
“This is despite the civil servants’ house allowances having been reviewed several times to reflect the cost of living and the market rates for the rent. Consequently, the Government is losing out on revenue,” the report reads in part.
Government houses are among the cheapest, although agencies rarely disclose the rates.
A majority of these houses are occupied by civil servants, many of who receive updated allowances and would be the most affected if the recommendations were to be implemented.
The Auditor-General also faults the Housing department for failing to create a framework to ensure revenues from rent are deposited at the National Treasury.
The report adds failure to digitise operations could have led to theft of public cash by officials entrusted with administration of the houses.
As at June last year, the government had a total of 56,892 houses across the country, which could have earned more than Sh1.5 billion.
The Auditor-General, however, reported that in the year to June 2020, the state department collected only Sh724.3 million (or 48 per cent of the full potential).
Outdated market rates
The auditor-General’s assessment was based on the outdated market rates, meaning that if the rents are reviewed, the government could earn close to Sh3 billion yearly from the houses. This further means the amounts lost to old rates and possible theft could be more than Sh2.5 billion.
“Consequently, the state department failed to put in place measures to ensure that all rent income due was collected in accordance with the law,” Ms Gathungu said.
The government houses are categorised into institutional, police and pool houses – and into low, medium and high grades.
Impunity has seen many tenants refuse to pay rent for the houses, as others collude with rogue administrators to stay for years without paying a penny.
In January this year, the Nation saw documents from the National Housing Corporation (NHC) indicating that tenants were staying at the government’s Sadi Road Apartments in South B, Nairobi, for years without paying rent, with arrears ranging between Sh100,000 and Sh800,000.
The Auditor-General’s report says the Housing department has failed to maintain a comprehensive register showing the state of every government house, and detailing issues such as vacant houses, terms of occupancy, maintenance costs and houses with rent arrears.
“The management of government houses and collection of rent is largely manual as it is yet to be digitised. The benefits that accrue from digitization, such as ability to establish expectation on rental income from the individual ministries, departments, agencies or counties, invoicing, rent collections, booking of revenue, reconciliations and maintenance of houses have not been realised. These gaps in the manual system may lead to undetected loss of revenue,” Ms Gathungu warns.