The transport department has had to step in after the Road Accident Fund [RAF] “wasted” R11m fighting the Auditor-General [AG] in court over an accounting standard that pushed the fund closer to financial collapse.
Speaking before the standing committee of public accounts [SCOPA], deputy minister Mkhuleko Hlengwa said his office had warned the now-suspended board of their contention that they did not support it.
The litigation originated in 2021 when the RAF unilaterally changed its accounting methodology to hide a R300bn liability, leading the AG to issue a “disclaimer of opinion” for misrepresenting the fund’s financial health.
Despite losing multiple court battles and facing punitive costs for its “unmeritorious” claims, the RAF spent more than R10.86m in legal fees attempting to bypass official standards set by the accounting standard board.
Hlengwa said, R11m later, that their [his office’s] stance had been vindicated.
“There was an allegation that the 2024 annual meeting was hostile. It was not. However, the key point of contention was the continued and reckless litigation pursued to defend an accounting standard that had already been deemed inappropriate. We made it clear that we did not support this course of action. R11m later, we have been vindicated. Before the board was disestablished, it conceded that we were correct and that corrective action was necessary,” he said.
He added that the situation had become wholly untenable.
“I raised the matter sharply because I was not prepared to micromanage the board, but we do have an executive oversight responsibility over an entity that manages public funds. A significant amount of time was wasted pursuing an accounting standard that was a doomsday from the start, having been changed unilaterally without due process. This has cost the RAF and the public. That is why we intervened,” Hlengwa said.
We cannot simply assume that our current records reflect the total spend
— Alfredina Themba, security control chairperson of the audit and risk committe
RAF interim board members testified on Tuesday and were asked whether the fund would be able to recoup the legal fees lost.
Alfredina Themba, security control chairperson of the audit and risk committee, said they’d still have to look at the specific reasons why the board made the decision in the first place.
“We cannot simply assume that our current records reflect the total spend; we need to know the specific costs associated with ‘pulling out.’ We are now assessing whether we are legally positioned to litigate against any party under these circumstances ... So, no, we have not yet determined how we will recoup the funds, if that becomes necessary,” Themba said.
Sowetan
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