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It is persisting with its litigation against the Auditor-General despite high-level requests that it stop.
The Road Accident Fund is now hoping the Judge President of the Supreme Court of Appeal will side with it. Picture: Supplied
The Department of Transport (DoT) is dragging its heels in addressing governance issues at the Road Accident Fund (RAF).
Transport Minister Barbara Creecy said in July 2024, shortly after her appointment, that governance at the RAF is something that has to be sorted out “as a matter of priority” – and in October 2024 confirmed she had written a letter to the RAF to request the board not to continue with the legal challenge to the Auditor-General’s (AG) disclaimer of the fund’s 2020/21 annual financial results.
Creecy said that when she had a reply to that letter, she would know what to do next.
She added that the RAF has lost the third court case challenging the AG’s disclaimer and the question is not whether the fund should have launched the litigation in the first place but if it should continue.
“My view is that we should not – and I guess I am the shareholder,” she said.
This is a reference to the High Court in Pretoria dismissing the RAF’s legal challenge against the AG’s disclaimer with costs, resulting in the RAF filing an application for leave to appeal, which was dismissed.
The RAF then petitioned the Supreme Court of Appeal (SCA) for leave to appeal, which was also dismissed, resulting in the fund appealing to the Judge President of the SCA for reconsideration of the matter, where the decision is still pending.
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The AG issued a disclaimer to the financial results because the fund had unilaterally adopted a different accounting standard, resulting in the fund’s liabilities for outstanding claims plummeting to R34 billion in 2022/23 from R331 billion in 2019/20.
Despite Creecy’s letter to the RAF board and the board’s response remaining unclear, the RAF has continued with its legal challenge to the AG’s disclaimer.
Responding to a Moneyweb query on 27 January 2025, the DoT said:“The Ministry has received the response from the RAF Board.
“The Deputy Minister is applying his mind on the response received and will further engage the board on the matter and a public pronouncement will be made,” it said.
“It has to be noted that the RAF falls under the delegated responsibilities of the Deputy Minister.”
Moneyweb sent a follow-up request to the DoT for confirmation of the date on which the RAF board response was received but it has not responded.
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The RAF’s litigation against the AG surfaced again in parliament’s standing committee on public accounts (Scopa) meeting with the fund last week.
RAF CEO Collins Letsoalo confirmed to Scopa that the RAF received correspondence from “the executive authority instructing us that we must try to find solutions”.
Letsoalo said these solutions included going back to the Accounting Standards Board (ASB) and the AG, which the RAF has done, and it has received a response from them.
However, he did not elaborate on the response, adding that the RAF is waiting for the outcome of its appeal to the Judge President of the SCA.
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Letsoalo handed over to the chair of the RAF audit committee, whose name is not known to Moneyweb, who confirmed that the RAF received a letter from the DoT guiding it on what to consider to explore issues of accounting policy.
“From an audit committee point of view, we indeed wrote to ASB. We also wrote to AG,” the audit committee chair said.
“We are in the process of consolidating that feedback to then formulate a proposal that we will then send to the board to make a determination.
“As the statutory committee of the RAF, which is the audit committee, we are not happy and obviously we derive no joy from continuously getting these type of audit outcomes and we are trying our best to ensure that there can be a technical solution that doesn’t give rise to a dispute between the auditor and the auditee,” he said.
“I think the feedback we continue to get is quite grey and it’s not helpful many of the times.
“We have asked the question as well about what other audit or accounting standards … should be considered. We haven’t got a clear answer,” he added.
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RAF board chair Zanele Francois told Scopa the board considered the matter extensively and did a lot of research “before we arrived at that [litigation] decision”.
Francois said the board also looked at the long-term effect of the application of “a wrong accounting standard”.
“In our mind, with that kind of research, it just didn’t make sense that the organisation will stay with this huge liability, which is not real based on a calculation behind an accounting standard that is not correct,” she said.
“We just realised it wouldn’t be in the best interest of the organisation and also the fact that it’s sitting in court.
“It will make sense to get an independent adjudicator that will give us an objective view of this.
“It will really give a sense in terms of clarity on the policy … but the major decision is around the sustainability of this organisation based on the liability, which is not calculated correctly.
“That is why we supported the decision of the executive and we will allow the court decision to guide us when it comes,” she said.
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Deputy Minister of Transport Mkhuleko Hlengwa then entered the fray and reiterated the DoT does not support this cause of action of being in court insofar as the RAF and the AG are concerned.
“I think that has been made abundantly clear to the RAF in this forum and other forums.
“It remains our position that this matter should be out of court and that the processes, including but not limited to the engagement with the ASB, must be followed.
“This matter has been in court for a protracted period of time and in every instance the RAF has not received a favourable court outcome and that remains a fundamental concern to us in the Ministry,” he said.
Hlengwa added that the RAF previously reported to Scopa that the ASB had indicated that it was in the process of developing an applicable accounting standard and therefore it remains the transport ministry’s outlook that this should have been the maintained position.
Hlengwa, who was Scopa chair prior to being appointed to his current position, previously castigated the RAF in meetings of the committee.
In a Scopa meeting in March 2024, he suggested the committee institute action to declare the RAF board members delinquent directors for this “fishing expedition” of oversight by the courts related to the AG’s RAF audit disclaimer.
This article was republished from Moneyweb. Read the original here.
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