Deloitte warns of Shelter Afrique's $40.7m in bad loans
What you need to know:
In a whistleblower account last year, former finance director Godfrey Waweru said that dud loans were declared based on the desired net results despite a large proportion of the portfolio having repayment difficulties and having been restructured several times.
The auditors have also recommended disciplinary action against managing director James Mugerwa and Mr Waweru for a conflict of interest in the handling of Amana Capital placement, which is owned by an independent director of Shelter Afrique, Hardwork Pemhiwa.
Shelter Afrique auditors Deloitte have raised the red flag over $40.7 million in restructured loans that it says may not be recovered.
The findings appear to confirm allegations of tampering with the books, raised by former finance director Godfrey Waweru last year.
“During the period under review, we confirmed that out of the 11 loans we reviewed, nine were restructured multiple times at the end of the grace period when their repayments became due,” the report prepared for Shelter Afrique’s board by Deloitte reads.
The confidential audit report seen by The EastAfrican lists several projects in Kenya, Zambia and Rwanda whose repayments were treated as having minimal chances of recovery.
The auditors have also faulted Mr Waweru for failing to notify the board of the malpractices, saying this contravened the code of ethics for members of the Institute of Certified Public Accountants of Kenya.
In a whistleblower account last year, Mr Waweru said that dud loans were declared based on the desired net results despite a large proportion of the portfolio having repayment difficulties and having been restructured several times.
The auditors also found that no valuations of the projects were done by Shelter Afrique in 2015 to determine the specific provisions that should have been considered. It also revealed that the status of the loans was changed from non-performing to performing, to address conditions at the time of appraisals.
“Based on the audit, it appears that approximately $6.05 million is at risk, meaning that the probability of its recovery is uncertain,” the auditors said.
Disciplinary action
The auditors have also recommended disciplinary action against managing director James Mugerwa and Mr Waweru for a conflict of interest in the handling of Amana Capital placement, which is owned by an independent director of Shelter Afrique, Hardwork Pemhiwa.
Mr Pemhiwa was accused of conflict of interest as he used his personal company to do business with the lender through a three-month placement of the lender’s $5 million with Chase Bank, thereby earning commission.
“The sourcing and selection of Amana Capital didn’t comply with lender’s procurement policy. Also the funds were invested at Chase Bank at an interest of 12.25 per cent against the initially agreed 13.25 per cent. The board should consider taking disciplinary action against the managing director.
Mr Mugerwa is also on the spot for $7,845 in cash advances that is unaccounted for, and a further $102,500 in education benefit allowance that he was advanced without any supporting documentation contrary to the human resources policy.
