Road Accident Fund: Mbalula can’t use sub judice excuse to evade accounting any longer

Transport Minister Fikile Mbalula should be called before Parliament to account on the Road Accident Fund (RAF), regardless of ongoing court action against the Auditor-General (AGSA).

This was the gist of a legal opinion sought by MPs, which said Mbalula can no longer hide behind the sub judice rule to avoid answering questions about the ailing entity.

The Standing Committee on Public Accounts requested a legal opinion after the minister earlier this month declined to appear over AGSA’s disclaimer audit opinion on RAF, citing the ongoing litigation between the two entities.

The dispute between the AGSA and the RAF is in relation to the latter’s financial statements and an accounting method used.

Parliament’s legal adviser Fatima Ebrahim said the sub judice reasons given by Mbalula could have an implication on the committee’s oversight work if allowed to stand.

“The sub judice rule is not applicable to this matter and should not be used to frustrate the oversight process of Parliament. The constitutional functions of Parliament cannot in any event be trumped by internal rules and processes,” she wrote.

AGSA tabled the RAF disclaimer audit opinion report in Parliament on 31 May.

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The RAF took AGSA to court after the latter issued a finding on its use of the International Public Sector Accounting Standard 42, Social benefits (an international accounting standard for social benefits) commonly referred to as IPSAS 42, which AGSA deemed unsuitable.

As per court papers, AGSA says the accounting standard is in conflict with the Generally Recognised Accounting Practice (GRAP) framework applicable to the RAF.

According to AGSA, said Ebrahim, this accounting method resulted in “material misstatements in claim expenditures, current and non-current liabilities, and disclosure notes.”

AGSA further claimed that the use of the new accounting policy resulted, “by the stroke of a pen”, in the removal of liabilities exceeding R300 billion.

However, RAF is adamant that the previous International Financial Reporting Standards: 4 Insurance Contracts is inefficient and does not allow for the provision of social insurance, and is therefore not appropriate for an entity that does not make a profit.

The entity, which falls under Mbalula’s ministry, is dogged by financial problems and backlogs in processing accident claims. It has been technically insolvent since 1981.

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‘Mbalula and RAF should account’

Ebrahim told the MPs that a judgment was issued in respect of the first part of the litigation in favour of AGSA, with the court ruling that AGSA was legally bound by legislation.

Judgment on the second phase is yet to be heard.

“The minister has not tabled the necessary reports on the basis that the audit report is being subjected to a review process. Presumably, the minister finds himself in a quandary as he is reportedly not in possession of the annual report, which the RAF has indicated it cannot finalise until the review application is heard.

“These documents are ordinarily tabled and considered together as only the complete set can paint a full picture of the financial health of an entity.”

The notion by the RAF that the annual report does not exist is concerning, she said.

“The minister should further be asked to account on the issue of the failure to secure the annual report from the RAF notwithstanding the review process. The tabling of an explanation for the delay does not absolve the minister from the responsibility to comply with the tabling prescripts in the PFMA.”

She added that oversight work “should not be stifled” by litigation processes that may take years to resolve.

“Bottom line is that we need to hear from the minister and from the RAF directly. To simply sit back and wait for legal process to unfold cannot be. For now, Scopa is legally required to look at the audited financial statements and attend to the issue of the annual report.”

‘RAF a headache that turned into a migraine’

Scopa members agreed with Ebrahim, saying that the sub judice excuse interfered widely with oversight work.

Chairperson Mkhuleko Hlengwa said the RAF’s actions were “unprecedented”  

“In the past we would have AGSA completing the tasks within the prescripts of the law and tabling reports to Parliament. But here, the hearing [on the audit opinion and annual report] was set but the minister instead drew attention to the fact that the matters are in court. It’s unprecedented.”

Democratic Alliance (DA) MP Benedicta Van Minnen said there shouldn’t be delays anymore regarding RAF.

But African National Congress (ANC) MP Bheki Hadebe raised concerns about making recommendations before the court case was finalised.

“We know that the AGSA does not possess a right on the adopted accounting standards. It is a Treasury prerogative through the Accountant General.

“If we were to hold RAF accountable for failing to obtain a clean audit, what if the court rules in favour of RAF? What do we do should the court rule otherwise?” he asked.

Hlengwa said although the issues were up for discussions, the tabled RAF audit opinion was binding, as per legal advice.

“We will have to look into all these variables. The AGSA opinion is before Parliament, notwithstanding the litigation. RAF cannot continue on this path of not being held accountable because of litigation.

“RAF has been a headache… this litigation turned has turned that into a migraine. It’s indicative of the extent of problems at RAF,” said Hlengwa.

The RAF, said ANC MP Nokuzola Tolashe, should also detail how much it spent on the court challenge.

“Also, the public must get to understand what we are dealing with as a committee when it comes to those who are supposed to be the custodians of the laws of this country.”

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