The ongoing legal dispute between the Road Accident Fund (RAF) and the Office of the Auditor-General (A-G) shows no signs of resolution as the former remains entrenched in the battle over the appropriateness of the accounting standards it is now using.
This became evident when RAF was asked during the meeting of the standing committee (Scopa) how long it was prepared to continue getting negative audits while pursuing the matter legally.
This takes place as the judge president of the Supreme Court of Appeal (SCA) is to decide on a petition RAF lodged after the same court refused to hear their leave to appeal in a matter over its decision to change the accounting policy.
The SCA found that there were no prospects of success when the Gauteng High Court turned down their leave to appeal.
RAF obtained a disclaimer audit opinion in 2020/21 after it used the International Public Sector Accounting Standards (IPSAS) 42, which the A-G found to be inappropriate and significantly different from the South African Standards of Generally Recognised Accounting Practice.
On Tuesday, CEO Collins Letsoalo said they did not find joy in receiving disclaimer and audit opinions and that they found it difficult to deal with such audits.
“But it is our professional duty to account accurately and use professional judgment. This is what has happened in this regard. We never thought it would take this long,” he said about the legal action.
“We might have a professional way of looking at it, but we believe strongly the decision we took is the right decision, and therefore, if that results in an adverse or disclaimer in the view of the A-G, which we disagree, we have to take it to that level.
“If we don’t accept this then it means we don’t table financial statements in front of Parliament, which is the worst thing to happen.
“Yes, for as long we know what it means, certainly from the management perspective,” Letsoalo said.
Board chairperson Zanele Lorraine Francois said they did a lot of research on the use of IPSAS.
“We looked at the long-term effect of the application of wrong accounting standards. In our mind, it did not make sense for the organisation to stay with huge liability, which is not really based on calculations behind an accounting standard that is incorrect,” Francois said.
She also said it would make sense to get an independent adjudication.
“It will give a sense in terms of clarity on policy and technical but the major decision is around the sustainability of this organisation based on liability which is not calculated correctly. We will allow the court’s decision to guide us,” added Francois.
Letsoalo confirmed that RAF obtained correspondence from the Transport Department, instructing them to find a solution, which included approaching the A-G, and Accounting Standards Board.
“We have since got responses from them in this regard,” he said, adding that they were waiting for a decision of the SCA president on their petition after filing papers last year.
RAF audit committee chairperson Lekau Moses Nyama said they were in the process of consolidating the responses from ASB and the A-G to formulate a proposal to the board to make a determination.
“As a statutory committee of RAF, we are not happy, and obviously, we derive no joy from continuously getting this type of audit. We try our best to ensure there can be a technical solution that does not rise to a dispute between the auditor and the auditee,” Nyama said.
However, he said from the feedback, they continued to get “quite grey and not helpful”.
“We have asked a question on what are the other audit accounting standards that should be considered. We have not got clear answers. Where we are, we don’t want to find ourselves changing standards for the sake of achieving certain audit outcomes. We want to take a responsible decision and be able to make sure we follow a process and procure,” Nyama said.
Transport Deputy Minister Mkhuleko Hlengwa reiterated that they did not support the litigation in court between RAF and the A-G.
“It has been made abundantly clear to RAF in this forum and other forums that it remains our position that this matter should be out of court and that processes to comply must be followed.
“This matter has been in court for a protracted time. RAF has not received favourable outcomes. This matter should not be in court,” Hlengwa said.
He said the changes to the accounting standards should be done within the parameters of due diligence of the law,
Scopa chairperson Songezo Zibi said the matter should not be taken lightly.
“I hope we get a resolution as quickly as possible… It tends to take a lot of our time,” he said.
When pressed on why they persisted with the court case by DA Atkinson, Letsoalo said they were exercising their legal options.
“We believe we are on the right side of the law,” he said.
MK Party’s David Skosana again came to the defence of RAF.
“It helps to go to court as the Constitution allows it,” he said.
