The Road Accident Fund (RAF) has obtained an adverse audit opinion for the 2022/23 financial year from Auditor-General Tsakani Maluleke.
In her report, Maluleke said the RAF’s financial statements did not present fairly the financial position of the fund as at March 2023.
She said the financial performance and cash flows for the year then ended in accordance with the Standards of Generally Recognised Accounting Practice (Grap) and the requirements of the Public Finance Management Act.
All outstanding amounts meeting the definition of a liability were not recognised in accordance with Grap, she said.
This was because RAF in 2020/21 amended its accounting policy to recognise claims liabilities in accordance with International Public Sector Accounting Standards (Ipsas) 42 social benefits.
“The use of Ipsas 42 is not appropriate as it fundamentally differs with the Standards of Grap's conceptual framework for general purpose financial reporting in terms of the timing of recognising liabilities.
“Furthermore, the Accounting Standards Board (ASB) has prescribed the standards and pronouncements that are contained in the Grap Reporting Framework for public entities.”
Maluleke said claims liabilities, claims expenditure and related disclosure notes were understated.
“I was unable to determine if any further adjustments were necessary to the claims liabilities as disclosed in the statements of financial position with an amount of R34 194 million (2021/22, R25 965 million), note 12 to the financial statements, claims expenditure of R53 922 million (2021/22, R44 953 million) as disclosed in the statement of financial performance and note 19 to the financial statements and consequently the net liability position, claims liability, deficit for the year and accumulated deficit amount disclosed in note 32 of the financial statements,” she said.
The A-G stated that the financial statements indicated that an accumulated deficit of R23 936 million was incurred during the year ending March 2023, and the current liabilities exceeded its total assets by R23 823 million.
“These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the public entity's ability to continue as a going concern.”
The RAF’s board did not implement adequate measures to ensure that the financial statements were prepared in accordance with the appropriate accounting framework, Maluleke said.
“The accounting policy adopted by the RAF in the prior years, up to the 2019/20 financial year is appropriate. The entity should consider reverting back to it until such time that the local accounting standard for entities with insurance-like activities is developed by the standard setter.”
RAF Board chairperson Zanele Francois noted that the entity’s strategic journey and performance were overshadowed by the continued dispute between the RAF and Maluleke over the RAF’s new accounting policy.
Francois said the overall audit outcome of the RAF improved compared to the year before an adverse audit opinion was expressed compared with the disclaimer of opinion received in the prior year.
“The RAF engaged meaningfully with the AGSA throughout the audit process and the audit report issued for the 2022/23 financial year is modified only as a result of the ongoing disagreement between the RAF and the AGSA regarding the accounting treatment of claims liabilities and expenditure,” she said.
Meanwhile, Transport Minister Sindisiwe Chikunga said they were grateful that the audit process for the year under review was concluded.
Chikunga said the adverse finding was due to liabilities and a change in the RAF’s accounting policy.
She said the court hearing between the A-G’s office and the RAF was scheduled for January and February 2024 after the parties could not find each other.
“The A-G and RAF were advised by the former minister to find an amicable solution and settle out of court.
“There will be no winners when settled by a court. We insist that as much as possible they find an amicable solution,” Chikunga said.
Cape Times