Scopa outraged at 'stubborn' RAF continued litigation against the AG

 Parliament’s Standing Committee on Public Accounts (Scopa) has expressed concern that the Road Accident Fund (RAF) is still litigating against the auditor-general (AG) over its new accounting model. 

It emerged at Wednesday’s Scopa meeting that the fund - which was instructed by former transport minister Fikile Mbalula to find an alternative dispute resolution mechanism – could not agree with the AG on its accounting practice.

RAF’s deputy chair Nomonde Mabuya-Moloele said the two institutions met in May but could not resolve the disputed matters. 

"We were specifically instructed to follow alternative methods that could be less confrontational than going to court."

Mabuya-Moloele said when Mbalula and his successor, Sindisiwe Chikunga, instructed them to find an alternative dispute resolution mechanism, they were planning to appeal a previous court ruling to the Supreme Court of Appeals in Bloemfontein. 

"We pulled out to give the alternative dispute resolution mechanism a chance. But the bigger issue is that we needed to resolve all disputes that are related to the AG and unfortunately, we didn’t resolve all those issues. We couldn’t." 

She confirmed there was a matter before court and that other outstanding matters were likely to end up there. 

RAF started using a new accounting policy in preparing its financial statements for the 2020/2021 financial year. It continued with the same in 2021/2022 financial year. 

The new accounting standard did not fairly and accurately reflect the fund’s contingency liability for outstanding and future claims, by some R300bn, according to the AG. 

The policy which makes the fund’s books look good has been rejected by the Accounting Standards Board (ASB), the AG and the National Treasury. 

RAF approached the court in 2021 in a bid to stop the AG from delivering her report on the organisation for the 2021/2022 financial year. It did not want the AG to publish its disclaimer of opinion and audit report on its financial affairs pending a review of the AG's findings.

It argued that if the disclaimer and audit report were published, it would lead to RAF suffering irreparable harm. 

An AG representative at Wednesday’s parliament meeting said the fund retained its disclaimed audit for the 2021/2022 financial year and the 2022/2023 audit was in progress. 

"We still have got difference of opinion on that accounting policy. We still disagree and litigation is ongoing." 

The official said at the May meeting, AG Tsakani Maluleke said as long as RAF continued to litigate against the AG, they too will continue to defend their findings. 

Mabuya-Moloele told Scopa that RAF is classified as a social benefit fund and not an insurer, and hence it insisted on a different accounting standard. 

"We were classified as that in 2016. The only difference is we are the first board to say 'can we revisit our classification accordingly'?" 

She said they were not being stubborn or arrogant but wanted to be engaged on the change of the accounting policy. 

Hlengwa came down hard on RAF, saying it was odd that the fund was insisting on an accounting practice that the national Treasury, the AG and the Accounting Standards Board have said is wrong. 

"RAF digs in its heels and remains adamant that they are an island of correctness in a sea of wrongness. Everybody else is wrong.  

"You’ve got a ministerial directive to pull out of court, I’m not sure how we proceed with this kind of stubbornness. We had all these entities in your presence and not one of them agrees with you."

He wasn’t convinced by Mabuya-Moloele's classification explanation, saying the fund should have asked first before making the changes. 

"But you made the change and then engaged in a debate about it."

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