Road Accident Fund loses legal dispute with Auditor-General

The RAF said it was disappointed with the decision of the North Gauteng High Court. File Picture

The RAF said it was disappointed with the decision of the North Gauteng High Court. File Picture

Published Apr 20, 2024


Parliament’s standing committee on the auditor-general believes that the Road Accident Fund (RAF) will soon table its financial statements after the Gauteng High Court in Pretoria ruled against it in its dispute with the Auditor-General.

The Auditor-General has welcomed the judgment of the high court and it said it affirms her mandate.

“The AG, Tsakani Maluleke, welcomes this judgment and says it affirms the AGSA’s constitutional mandate to audit and report, which must be exercised without fear, favour and prejudice,” said spokesperson for the AG Harold Maloka.

However, the RAF said it was taking legal advice and could appeal the judgment of the court.

Chairperson of the committee Sakhumzi Somyo said this was a protracted legal dispute between the AG and RAF.

The RAF could not table its audited financial statements in Parliament for the 2020/21 financial year after the auditor-general gave it a disclaimer.

This led to a dispute over accounting standards used by the RAF when it compiled its annual financial statements. .

In the court case the RAF wanted the disclaimer to be set aside.

“The RAF failed in both applications. It has lost its court bid to change the accounting standard used to compile its annual financial statements in defiance of the Accounting Standards Board, the Auditor-General, and its line department, the Department of Transport.

“We are hoping that the RAF will comply and table the annual financial report to Parliament as prescribed by the court,” said Somyo.

The RAF said it was weighing its options and could appeal the judgment of the court.

The High Court found that the RAF’s change of its accounting standards improved its financial statements.

“The result of this change in accounting methodology is that the RAF’s liabilities suddenly plunged from R327 billion reflected in the 2019/20 financial year to R34bn reflected in the 2020/21 financial year. This astronomical improvement in the RAF’s financial statements is attributable to the RAF an accounting standard known as the International Public Sector Accounting Standards (IPSAS), which effectively changed its treatment of payables and liabilities in its annual financial statements: in previous years the RAF used the International Financial Reporting Standards (IFRS) accounting standard on insurance contract. It is this with which the AG took issue and thus issued the disclaimer,” read the judgment.

It said the RAF did not budge on the use of IPSAS standards that it had adopted to compile its annual financial statements for the financial year in question.

But there were discussions between the AG and RAF to resolve the dispute. This spanned several months with the the Auditor-General, Tsakani Maluleke, and her officials.

The matter was later referred to the Office of the Accountant-General to resolve the dispute.

The judgment said the accountant-general did not support the RAF.

There were further meetings between the parties, but the RAF maintained its position.

In December 2021, there was a meeting where the two parties reached a stalemate.

The court found that the RAF was incorrect to suggest there was no engagement between itself and the AG when there were meetings and correspondence.,

The court also dismissed the argument by the RAF that the AG abandoned the dispute resolution mechanism.

“The ASB (Accounting Standards Board) is unequivocal in its position that IPSAS has not been adopted as an accounting standard in South Africa because of the manner it treats liabilities.”

But the RAF said it could appeal the judgement of the high court. It said it raised 17 grounds to review the findings of the Auditor-General, but the court did not address any of theses issues.

The road agency also said the court had misdirected itself on a number of points.

“Therefore, having read the judgement, we are now taking legal counsel with a view to launch our leave to appeal,” said the RAF.

It said it was disappointed by the decision of the court.