A report by Auditor General Nancy Gathungu has revealed how 128 Busia county employees disguised themselves as farmers to benefit from “free” agricultural loans, exposing the devolved unit to a possible loss of Sh50.7 million in non-performing loans.
Governor Paul Otuoma was put on the spot by senators on Monday over the scandal, which stems from the Busia County Agricultural Development Fund (BCADF).
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The fund was created to support small-scale farmers but has now been marred by irregularities, weak laws and outright abuse.
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According to the Auditor General’s report for the financial year ending June 30, 2024, at least Sh53.7 million was disbursed to farmers between 2016 and 2024 without any form of collateral.
The period spans the regimes of former Governor Sospeter Ojaamong and his successor, Otuoma.
Initially, only 63 staff members admitted to receiving loans, but a deeper audit unearthed 128 county employees pocketing Sh4.8 million from the kitty.
The revelations point to a collusion between the county executive and county assembly, who allegedly watered down the Busia County Agricultural Development Fund Act, 2014, to remove provisions on security and recovery mechanisms.
The fund, designed to be a revolving scheme, is now at risk of collapse.
Appearing before the Senate County Public Investments and Special Funds Committee, Governor Otuoma admitted the loans were given without safeguards, blaming a “defective law” he inherited.
“The money was meant for small-scale farmers who could not get commercial loans. Initially, we thought only farmers benefited, but an audit revealed county staff were also involved,” Otuoma told the committee.
He said his administration has written to defaulters and proposed amendments to tighten the law. However, senators accused him of dragging his feet.
Machakos Senator Agnes Kavindu and nominated senators Raphael Chimera and Hamida Kibwana questioned why recovery efforts only started in March 2024, two years into Otuoma’s tenure.
“It seems Busia is giving free money, and no one is serious about recovery,” Chimera said.
Busia Senator Okiya Omtatah pressed the governor to act against officers who knowingly approved unsecured loans, warning that Article 226(5) of the Constitution holds public officials personally liable for loss of public funds.
“Crack the whip. Pursue both the officials and the beneficiaries,” Omtatah said.
Committee chairperson Godfrey Osotsi suggested the county starts by deducting loans directly from employees’ salaries, saying, “Sh53.7 million is not pocket change.”
The senators also flagged irregularities in another kitty — the Busia Cooperatives Enterprise Development Fund — where 92 co-operatives received Sh106 million between 2014 and 2019 without collateral.
By June 2023, only Sh39.4 million had been repaid, with just Sh2.8 million recovered from defaulters.
Governor Otuoma told the committee that the county attorney had been directed to initiate legal proceedings.
But nominated senator George Mbugua raised doubts on whether the money ever reached the co-operatives, hinting it may have been pocketed by rogue officials.
“We can’t let this money disappear, especially given the poverty levels in Busia,” Omtatah said, calling for former county officials to also be summoned.
As the grilling went on, senators warned that unless recovery action is taken, Busia risks setting a dangerous precedent where public funds are looted with impunity.
INSTANT ANALYSIS
The unsecured loans were flagged by the Auditor General Nancy Gathungu in her latest report for the financial year ending June 30, 2024. According to the auditor, the statement of financial position reflects the current portion of long-term receivables from exchange transactions of Sh67.4 million, which relates to loans issued to various cooperative societies. However, no evidence was provided in support of collateral pledged on the loans issued.
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