RAF and AG urged to settle amicably
Transport minister Sindisiwe Chikunga has called on the Road Accident Fund (RAF) and auditor-general (AG) Tsakani Maluleke to reach an “amicable solution” outside the courtroom over their legal rows regarding a “technical accounting dispute”.
Chikunga, the RAF board and its CEO, Collins Letsoalo, appeared before the standing committee on public accounts (Scopa) on Wednesday at which the minister said she had implored the RAF board and the auditor-general to consider alternative dispute resolution mechanisms rather than slugging it out in court.
The RAF approached the court in 2021 in a bid to stop the auditor-general from delivering a report on the organisation for the 2021/22 financial year. It did not want the office of the auditor-general to publish its disclaimer of opinion and audit report on its financial affairs pending a review of its findings.
A disclaimer is the worst possible audit outcome and signifies an entity’s accounts cannot be relied on. It often indicates the organisation is in serious financial trouble and poorly managed.
The RAF is regarded as one of the biggest threats to the state’s finances, as the government would be obliged to step in and make payments should the fund fail to honour settled claims.
At the heart of the dispute between the RAF and the auditor-general is the fund’s controversial decision to adopt new accounting standards, which the auditor-general said had resulted in it understating its liabilities by about R300bn compared with the previous year.
The RAF changed its accounting policy from International Financial Reporting Standards to the International Public Sector Accounting Standards after realising the escalation of its liabilities coincided with an accounting policy adopted in the 2013/14 financial year applicable to insurance contracts.
The RAF has argued its liabilities and payment obligations could not be equated to those of an insurance company.
The new accounting policy — which the RAF used in preparing its statements for 2020/21 and 2021/22 — has been rejected by the Accounting Standards Board, the auditor-general and the National Treasury.
Chikunga told Scopa on Wednesday that she had “numerous engagements” with the RAF over its legal tussle. She said the issue could be handled differently to ensure “we reach an amicable solution”.
“I believe we do need a technical team to look into [the] matter and find a solution ... on audit standards and the case at hand. I’ve impressed [on] the board to consider other dispute resolution mechanisms as I believe that the two government institutions should not be fighting each other in a court of law,” she said.
“I’ve personally had conversations with the AG ... on the matter. There will be no winners no matter which direction the court judgment goes ... both parties must engage and seek a less confrontational mechanism outside the court,” Chikunga said, noting there are no “antagonistic views” from the RAF or the auditor-general.
“The issue is that the former board of RAF took a resolution on the matter. We have a new board, [the] priority matter [is] to find [a] solution on this matter with urgency.”
RAF board chair Zanele Lorraine Francois described the legal issue as a “critical matter”, which the board is on top of. She urged Scopa to give the board until January to “go through information and resolve on the matter regarding litigation”. The RAF board met senior managers from the auditorgeneral’s office on December 4 to deliberate on the technical issues, she said. “We understood we need to resolve this matter.”
The RAF is responsible for providing appropriate cover to all road users in SA, and rehabilitating and compensating people injured due to motor vehicle collisions. It collects about R43bn a year through a fuel price levy, but has been financially unsustainable for decades and dogged by allegations of corruption, malfeasance and fraud.