The Road Accident Fund (RAF) has again failed to comply with prescribed accounting standards used in the country when submitting its 2022-23 financial statements for auditing to Auditor-General Tsakani Maluleke.
This emerged when the Office of the Auditor-General made a presentation on the RAF’s audit outcomes to the standing committee on public accounts (Scopa) on Wednesday.
Scopa heard that the RAF obtained a clean audit in 2019-20, then a disclaimer for the two following years and now an adverse opinion with findings.
Lwazi Khuse, senior manager in charge of the audit of RAF, said they found that the financial statements produced by the entity had not been fairly stated.
“They are not credible for the purpose of one to make an informed decision,” Khuse said.
He said the RAF adopted a new accounting framework, Ipsas 42, that was not consistent with the principles of the standards of generally recognised accounting practice and directives of the Accounting Standards Board.
“The resultant impact of adopting a framework that is not consistent with prescribed frameworks in the country is that, first and foremost, when you account for claims, you have the first event being an accident date and ultimately the date when all administrative requirements are met,” he said.
“RAF is accounting for claims only at the time when all administrative requirements of the claim are met and thereby understate exposure to liabilities because there are claims in the process between the date when the accident happened and when administrative requirements have been met.”
The entity’s liability stood at R327 billion in 2019-20 when the RAF obtained a clean audit, and this was reduced to R34bn when the new framework was adopted.
“We are also indicating that there is an accumulated deficit to the value of R24 billion and this then brings material uncertainty over the RAF’s ability to continue as a going concern,” Khuse said.
They were concerned that their recommendations were not being implemented timeously because the management team disagreed with their findings.
The AG also found that there was a lack of oversight in financial reporting and an inadequate review of annual performance plans.
There were material misstatements in submitted performance reports, which were adjusted by the RAF during the audit.
Although the financial statement reflected a value of zero owing to change in legislation on reporting irregular expenditure, the AG found the irregular expenditure to be around R33 million because the RAF disputes their findings.
“We also highlight the cumulative balance is about R444m, of which R362m is under investigation. These matters have taken long and it is reflected in the number of suspensions in some instances where employees are on suspension for prolonged periods of time.”
The RAF had disagreed with their findings and took them to court for issuing the audit report. However, in April the high court dismissed the RAF’s application but it indicated its intention to appeal the judgment.
“The matter is before the Supreme Court of Appeal. We are also calling on the committee to continue to assist us with resolving the disagreement pertaining to accounting treatment and also ensure there is effective consequence management,” Khuse said.
On the ongoing litigation, committee chairperson Songezo Zibi said Transport Minister Barbara Creecy should come to talk to the committee
“It appears to be just unbelievable to me that there is an ongoing dispute that will potentially go to the Constitutional Court,” he said.
His sentiments were echoed by EFF MP Veronica Mente-Nkuna, who said Scopa should get to the bottom of the dispute between the A-G and RAF and reach a conclusion. “We have two sister entities taking each other to court over a simple thing of accounting standards ... We need to look for an appropriate remedy,” she said.
ANC MP Gijimani Skosana said it was curious that the RAF’s overall performance was at 57% when it obtained a clean audit but strangely its performance was at 91% when it obtained an adverse audit.
“Does it mean during the clean audit they were strictly focused on getting a clean audit and did not care about the performance?” Skosana asked.
Cape Times