THERE are poor chances of the recovery of the 15.91bn/- loan issued to the Dar es Salaam City Council by the National Social Security Fund (NSSF)’s, the latest state audit report says.

Charles Kichere, the Controller and Auditor General (CAG), made this observation in a section on the performance of state financial institutions and social security schemes, affirming that in 2007, the NSSF entered into an agreement with the city council to provide a loan of 10bn/- for the construction of a city business park.

The report says that the loan amount was insufficient to complete the project, requiring the council to make three addendums to raise additional funds of 3.41bn/-, taking the principal loan to 13.41bn/-.

Audit of the disbursed funds showed that a total of 15.91bn/- was disbursed, exceeding the agreed amount of 13.41bn/- by 2.50bn/-. NSSF was unable to provide auditors with evidence to support the basis of disbursement of an additional 2.5bn/-, it stated. 

The city council did not obtain Treasury guarantee nor the title deed of the land being placed in its name, contrary to Article 3 of the loan agreement.

It stipulated that no disbursement should be made unless the council had acquired a government guarantee of at least 60 percent to cover both principal and interest, while the title deed of the land would mandatorily be in the name of the council, it further noted.

As of 30th June 2024, NSSF recorded a total loan to the same entity of 27.61bn/, comprising both principal and interest, where audit assessment of the council’s loan repayment indicated that it was abysmal.

Since 2014, the council had only paid  80m/-, despite the repayment obligation commencing that year following a two-year grace period from 2012, as stipulated in Article 7 of the agreement.

“The loan was required to be repaid fully from 1st January 2009 to 31 December 2018,” the report intoned, elaborating that no repayment plan had been agreed upon by the two parties despite the repayment period having expired.

The absence of a government guarantee, an agreed repayment plan and a title deed for the land as mortgage security indicates that the loan is unsecured, posing a risk to its recoverability, it asserted.

The report suggests that NSSF and the city council perform comprehensive reconciliation to agree on the outstanding loan balance, demanding that the fund obtain a commitment from the council on when the outstanding balance.

It would arise from reconciled principal and interest to determine when it will be fully repaid through an agreed repayment schedule, “while making a follow up on the government guarantee and title deed to secure the loan,” it further demanded

On the other hand, CAG found NSSF recorded contribution receivables amounting to 1.06trn/- eligible for collecting during fiscal 2023/24 but was not yet collected. A total of 582.63bn/-, being 55 percent of 1.06trn/- remained outstanding for more than 12 months, it observed.

As at 30 June 2024, NSSF had rentals receivable of 23.87bn/-. The aging analysis report showed that 19.57bn/-, equivalent to 82 percent, were aged more than 12 months while 4.30bn/- were aged less than 12 months.

The rental receivable records indicated that out of the collectable 23.87bn/-, 4.83bn/- was due from government institutions, 15.54bn/- from deceased, ceased or closed operations, while 3.50bn/-was expected from active tenants. 

The CAG was overly concerned about the recoverability of rental receivables amounting to 15.54bn/- owed to debtors with the status of deceased, ceased or closed operations, noting that it presents a direct risk of non-recoverability and deficiencies in the follow up mechanism.

A large portion of contribution receivables tie up funds that could have been invested in more promising opportunities for more returns, the report added.