RAF officials behind R337m loss scot free

Left road accident fund without being held accountable for irregular spend; doubt over entity’s ability as going concern

ROAD Accident Fund (RAF) officials who permitted the fund to incur R337 million in irregular expenditure left without being held accountable for financial misconduct.

The fund made the startling revelation in its financial statements in its annual report submitted to Parliament last week.

The 2017/18 annual report contained an audit report by Auditor-General Kimi Makwetu which found the finances of the fund in shambles.

In his audit report, Makwetu said no effective steps were taken to prevent irregular expenditure that arose mainly from non-compliance with supply chain processes.

“Irregular expenditure amounting to R337 507 000 was incurred on Project Siyenza awarded in the 2013/14 financial year,” Makwetu said. The project was aimed at reducing the backlog in claims, legal costs and claim processing costs.

The RAF disclosed in its financial statements that R1.3 million in irregular expenditure was incurred in 2017/18 while R34m was for prior years.

Both Financial Sector Conduct Authority chairperson Peter Mathebula and acting chief executive Linda Xingwana-Jabavu said three written warnings and one verbal warning were issued to employees and four others were counselled as a result of financial misconduct where they were found to have contravened the Public Finance Management Act.

“Disciplinary action could not be taken against employees in two matters, as the employees were no longer employed by the RAF.

“One disciplinary hearing is pending conclusion. No dismissals have taken place,” Mathebula and Xingwana-Jabavu said in the annual report.

The report shows that action was not taken in the R337m Siyenza project as the undisclosed number of employees no longer worked for te RAF.

Three employees were slapped with counselling. Two written warnings were issued for non-compliance with supply chain management legislation in a matter that incurred R1.293 million in irregular expenditure. And a verbal warning was issued for poor management of a R28 000 contract.

In another R3.5m contract, one employee received counselling, another a written warning and a third left the RAF.

The pair, however, defended the irregular expenditure in eight instances in 2017/18, saying it reflected a 37% reduction in the 15 instances totalling R6 billion in the previous year.

Xingwana-Jabavu said they were plugging loopholes that made the fund vulnerable to abuse by employees and stakeholders.

“Our legal and forensic teams have relentlessly pursued fraudsters and those stealing from the RAF.

“The result is that many attorneys have been struck off the roll, doctors and SAPS officials arrested and many touts are in jail or serving suspended sentences for RAF fraud-related matters,” she said.

“Compared to R901m during the previous year, R1.45 billion of fraudulent claims were identified before payment was made as 10 people were arrested for fraud against the RAF,” Xingwana-Jabavu said.

Makwetu also found that the RAF incurred a net deficit of R26.3 billion as at March 2018 and its liabilities exceeded its assets by billions.

“A material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern,” he said.