Auditor General makes damning findings against Road Accident Fund

AUDITOR-General Tsakani Maluleke has made damning findings against the Road Accident Fund (RAF), which has obtained a disclaimer of audit opinion for the 2020-2021 financial year.

The report was released despite the RAF taking Maluleke’s audit report on judicial review after it failed in its bid to interdict its publication.

In her report published last week Thursday, Maluleke said she was unable to obtain sufficient appropriate audit evidence for claims liabilities totalling R27.8 billion and claims expenditure amounting to R37.1 billion as disclosed in the financial statements.

“The entity has amended the accounting policy to recognise claims liabilities and claims expenditure in accordance with International Public Sector Accounting Standards (IPSAS) 42, Social benefits,” she said.

Maluleke said the use of IPSAS 42 was not appropriate as the timing of recognising the liability was significantly different to the South African Standards of Generally Recognised Accounting Practice.

She also said she found that the claims liabilities, claims expenditure and related disclosure notes were understated.

“I was unable to quantify the misstatement amount as an actuarial valuation is required to compute the value of the liability based on the types of outstanding claims using certain judgements and assumptions and the resultant adjustment to the claims expenditure.

“Consequently, I was unable to determine if any further adjustments were necessary to the claims liabilities as disclosed in the statements of financial position which is an amount of R27,850 million (2019-2020 R25,546 million), note 12 to the financial statements, claims expenditure amounting to R37,107 million (2019-2020 R43,896 million) as disclosed in the statement of financial performance and note 19 to the financial statements.”

On Wednesday, RAF spokesperson William Maphutha said the fund stood by its decision to review and set aside the audit report based on its arguments in the court papers.

“Consequently, RAF will not be commenting or responding to anything contained in the impugned audit report as tabled by the AGSA (Auditor-General South Africa),” Maphutha when contacted for comment.

Despite the on-going litigation, Maluleke is not backing down saying there was nothing in law stopping her from publishing the report.

In a letter sent to National Assembly Speaker Nosiviwe Mapisa-Nqakula March 31, she said she signed the RAF audit report on December 21 and the report was submitted to RAF the same day.

“At the date of signing this correspondence, I am advised that there is nothing in law preventing me from publishing the audit report, if not tabled by the executive authority,” she said.

Maluleke told Mapisa-Nqakula that a minister was expected to table in the National Assembly the annual report, audited financial statements and audit report, within one month after the head of the public entity received the audit report.

Mbalula, who has since written to Mapisa-Nqakula and National Council of Provinces chairperson Amos Masondo, said the reason he has not tabled the report was because RAF has declared a dispute with the Auditor-General and approached the courts to seek a judicial review of the findings of the AGSA.

“The review application is currently before court and the outcome may materially affect the content and the conclusions of the report,” he said.

In her report, Maluleke said the RAF disclosed that it had accumulated a deficit of R13.5 billion and its total liabilities exceeded its assets by R13.4 billion.

“I was unable to confirm the extent of the understatement of the claims liabilities and claims expenditure which may have an impact on the amounts,” she said.

Maluleke also said RAF did not include all irregular expenditure in its financial statements.

“This was due to management not adjusting the financial statements to disclose irregular expenditure of R90,559, 290 in the current period.”

She noted that effective and appropriate steps were not taken to prevent irregular expenditure amounting to R92,994,309.

Maluleke also found RAF did not implement adequate systems and measures to ensure that the financial statements were prepared in accordance with the appropriate accounting framework.

“The accounting policy adopted by RAF in the prior years is appropriate and the entity should consider reverting back to it until such time that the local accounting standard for entities with insurance like activities is developed by the standard setter

“Any changes to the accounting policy in future should be done in accordance with the requirements of the standards.”

Cape Times