The Road Accident Fund (RAF) continues to struggle with debt, accumulating a deficit for more than a decade, with its liabilities far exceeding its assets.
By March 31 this year the deficit had ballooned to R2.3bn, while the entity failed for a fifth consecutive year to meet its target of reducing three-year-old claims.
These revelations emerged on Wednesday during a presentation by the Auditor-General of South Africa (Agsa) to parliament’s standing committee on public accounts (Scopa), on the second day of the ongoing inquiry into allegations of maladministration, financial impropriety and misuse of public funds at the RAF.
Scopa adopted the terms of reference for the inquiry in July, focusing on the 2020/21 to 2024/25 financial years. However, the committee said that earlier actions that may have contributed to current problems would also be scrutinised.
Years of audit chaos
Auditor-general Tsakani Maluleke told MPs that the RAF’s audit outcomes have remained stagnant for five years due to the fund’s continued use of an unauthorised accounting standard (IPSAS 42) to develop its claims policy.
“RAF received a disclaimer of opinion in the 2020/21 financial year after changing its accounting policy for claims liabilities to use the principle of IPSAS 42, which was not approved for use in South Africa,” said Maluleke.
She said the situation worsened between 2022/23 and 2024/25, when the fund received an adverse audit opinion with material findings.
These findings show procurement processes that were neither fair, transparent, competitive nor cost-effective, compromising key pillars of public procurement under section 217(1) of the constitution
— Tsakani Maluleke, auditor-general
“This was due to the use of accounting standards that are not allowed. The Agsa therefore disagreed with RAF on how provisions for outstanding claims and related expenditure were accounted for.”
She cited the failure of the accounting authority to implement corrective measures or address internal control deficiencies flagged by auditors as a key driver of the continued poor outcomes.
What Scopa will probe
Scopa’s inquiry will cover seven key areas with financial implications, including:
- governance failures and oversight by the minister and board;
- financial management and compliance with the Public Finance Management Act;
- procurement and supply chain irregularities;
- legal and litigation expenditure;
- fraud, corruption and whistle-blower reports;
- automation and claims processing; and
- governance and human resource matters.
Scopa chairperson Songezo Zibi said the inquiry was inquisitorial rather than adversarial, aimed at “uncovering the truth, holding the RAF accountable and ensuring public funds serve their rightful purpose of supporting accident victims”.
Leadership instability and material irregularities
RAF CEO Collins Letsoalo was suspended in June after being implicated in an investigation relating to a R79m office lease in Johannesburg and alleged financial mismanagement and corruption.
Maluleke said the RAF received an adverse opinion this year with material findings on compliance with laws and regulations.
“Material misstatements were identified in the completeness of irregular expenditure. The full extent of irregular expenditure could not be determined as it was not fully disclosed in the financial statements,” she said.
She also flagged serious procurement and contract management irregularities, including:
- three bidders who were awarded tenders worth R165m, but who failed to meet mandatory requirements were not disqualified;
- one compliant bidder for a tender of R37m was unfairly disqualified;
- two cases of non-compliance with quotation processes; and
- one contract where expenditure exceeded the awarded value.
“These findings show procurement processes that were neither fair, transparent, competitive nor cost-effective, compromising key pillars of public procurement under section 217(1) of the constitution.”
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