An audit on the Agricultural Finance Corporation (AFC) has revealed systemic mismanagement, fraud, and operational failures that could cost taxpayers and farmers hundreds of millions.
The findings, released by Auditor General Nancy Gathungu, paint a picture of a government agency in disarray, struggling to recover loans, manage payroll, and safeguard public funds.
The review, covering the financial year ending June 30, 2024, highlights unresolved cases of misappropriation. At AFC’s Eldoret branch, officials overdrew KSh11.8 million in 2018. Despite a court ruling in AFC’s favour in May 2024, management has failed to recover the funds. Gathungu warned that “the recoverability of the amount could not be ascertained.”
Loan irregularities were widespread. In Kapsabet, 13 farmers secured KSh22.6 million using fraudulent title deeds. Although AFC won court judgments, no warrants had been executed to reclaim the money. Meanwhile, seven AFC directors held loans worth KSh48.9 million, with five in arrears adding up to a whopping KSh35.7 million. Only KSh4.8 million was classified as bad debt, raising concerns about overstated income.
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Short-term loans were also poorly managed. Of the KSh889 million owed by clients, KSh225 million has remained unpaid for over a decade. Even after hiring an external recovery agency, AFC made little progress.
Payroll mismanagement were also exposed with nearly 250 employees having salary deductions exceeding the legal two-thirds limit, violating the Employment Act. Two staff members in acting roles for over six months earned KSh1.9 million in allowances, breaching internal policy. Collective bargaining agreements were backdated, ignoring guidance from the Salaries and Remuneration Commission.
The audit flagged serious flaws in AFC’s loan processing system. A KSh9.9 million loan appeared fully repaid in management records but showed KSh4.8 million outstanding in the system. Forty loans totalling to KSh35.7 million were missing entirely. Some were disbursed before approval, while others had inflated principal amounts, suggesting possible embezzlement.
It was also revealed that AFC listed KSh1.1 billion in assets, yet 33 plots valued at KSh191 million lacked documentation. One parcel in Kimilili had no ownership papers, while land in Nanyuki and Kerugoya had never been valued.
By Masaki Enock
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