AG calls on Scopa to follow up with RAF on audit report
THE Office of the Auditor-General South Africa (Agsa) has called on the Standing Committee On Public Accounts (Scopa) to follow up with the board of the Road Accident Fund (RAF) on the progress made to address findings in the 2020-21 audit report.
Agsa also said Scopa should enhance its oversight on RAF on the appointment of six key executives at the embattled entity which obtained a disclaimer audit opinion.
This emerged when Agsa briefed Scopa on the entity’s financial statements and disclaimer, which RAF has taken on judicial review.
Briefing the committee, Agsa’s Vinay Rambali said RAF had been unqualified in 2017-18 and 2018-19 only for it to receive a clean audit in 2019-20 and then a disclaimer in 2020-21.
Rambali said the woes of RAF were due to the change in accounting policy and how they accounted for claims liability as well as non-disclosure of irregular expenditure.
“They used the International Public Sector Accounting Standards (IPSAS) to formulate accounting policy. We found it was in conflict with Generally Recognised Accounting Practice (GRAP), which is applicable to RAF,” he said.
According to Rambali, RAF was to have incurred R27 billion in liabilities, compared to R330 billion recorded in 2019-20 and R272bn in 2018-19.
“Based on the change of accounting policy, RAF did not recognise any liability registered on the system or accidents incurred but not reported.
“The only liability recorded was for claims requested not paid and claims made an offer but not paid,” he said, adding that the change in accounting policy led to a reduction in the amount of claims liability.
“We concluded that this misstatement was pervasive. It affected the material account balance and transactions on the financial statements. We felt we don’t get the true extent of the liability of the RAF due to the change in accounting policy,” Rambali added.
He told Scopa of the dispute resolution that was followed by RAF through the Office of Accounting-General (OAG), with RAF not accepting the feedback from OAG in December.
“We had no legal basis to delay the finalisation of the audit, hence we finalised the audit and issued the audit report on 21 December.”
Rambali said the AG had concluded that the financial statements submitted
were not prepared in accordance with the prescribed financial reporting framework and were not supported by full and proper records.
He also said there were other areas of material misstatement, in claims expenditure and irregular expenditure, with RAF identifying an additional R92.9 million in contracts where price evaluation was not done.
“We requested a written presentation from the accounting authority to confirm they have fulfilled responsibility in preparation and presentation of financial statements in the applicable framework and to be provided information. We were not provided with that written presentation,” Rambali said.
Rambali said the disagreement over accounting treatment of claims liability has negatively affected the relationship between RAF and AGSA.
“This has also diverted attention from addressing other audit-related matters and reflecting on the performance of the entity.” Some of the MPs wanted to know the reason why RAF changed the accounting policy and whether there was a mechanism for Agsa to know about the change before it did the audit, among other things.
Nicholas Mokwena, Agsa's deputy business unit manager, said RAF was allowed to change its accounting policy but that had to be done within the prescribed framework.
“After they changed, we engaged and indicated we don't believe that change is appropriate. We were not finding each other on the matter,” Mokwena said.