Follow-up: Road Accident Fund audit outcomes & SIU investigations; with Minister

Public Accounts (SCOPA)

06 December 2023
Chairperson: Mr N Hlengwa (IFP)
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Meeting Summary

The Standing Committee on Public Accounts (Scopa) held a follow-up meeting with the Road Accident Fund (RAF) on key matters related to its litigation involving the Auditor-General of South Africa (AGSA), the tabling of its 2021/22 annual report, the appointment of the new board, and the entity's 2022/23 audit outcomes.

The RAF had disputed the 2022/23 audit findings of the AGSA, and the matter had resulted in a court case. The technical dispute revolved around the RAF's accounting standards, which the AG had indicated were wrong. The two parties now had to find a lasting resolution to both the legal and technical matters in order to chart a way forward. As a result, in a discussion between the entity, the AGSA, the Accounting Standards Board (ASB), and the Accountant-General, it was agreed that a technical committee should be established to come up with a technical solution. It was further agreed that the ASB would determine how the matter would be resolved, because the AG had made it clear it was not its responsibility to decide on an accounting matter. The RAF had then requested an extension of time to conclude this matter with outside stakeholders before the end of March 2024. The Committee agreed to their request.

The Minister of Transport said the non-tabling of the 2021/22 financial statements and annual report had been given attention. The RAF had now submitted the report to her, but there were clarity-seeking matters she had to consider. The AGSA had tabled its opinion on the report. She had sought the advice of both the legal teams of the RAF and the Department to empower her on how to table the annual report to Parliament so that the gap could be closed, because, during that period, she had not been the Minister of Transport. She was unsure if she had the right to table the 2021/22 annual report to Parliament. She needed guidance, because she had two financial statements -- one signed by the AGSA, and the other by the board.

On the matter of litigation, the RAF board said it knew the matter was critical and complex in the sense that it involved legalities. Its new board had had to go through the information presented to the previous board, and had decided to request Scopa to give it until the end of January to consider the matter and all the relevant information, to see if it would come to the same conclusion as the previous board concerning the litigation with the AGSA. The Committee agreed to this proposal.

Finally, the Special Investigating Unit (SIU) informed the Members that after its previous meeting with the Committee, it had had a discussion with the RAF board chairperson over the issue involving invoices. It appeared the RAF had not received the invoices in question. A letter with attached invoices and supporting documents had already been signed and submitted to the chairperson of the board and the chief executive officer of the RAF. Confirmation had been received that everything had gone through. Other issues related to the invoices would be raised outside of Parliament.

Meeting report

Opening remarks

The Chairperson said the meeting had been scheduled to follow up on key issues related to the status of the litigation involving the Road Accident Fund (RAF), the tabling of the 2021/22 annual report, the appointment of the new board, and the 2022/23 audit outcomes. The main issue was the litigation, where the Committee traversed a particular journey with the RAF on the matter. The entity had disputed the findings of the Auditor-General (AG) regarding the 2022/23 financial year outcomes.

Minister’s comments

Ms Sindisiwe Chikunga, Minister of Transport, said the Department had once again appeared before the Committee to engage on critical matters regarding the RAF. The RAF and, in fact, any other entity should always avail itself to appear before the Committee to demonstrate the values of accountability and transparency. The matter regarding the RAF and AG which had resulted in a court case, had remained her biggest concern. She had had numerous engagements with the board and management of the entity to understand what the problem was so that she could provide guidance as an executive authority. This matter had arisen before she was appointed as Minister of Transport. That was why she had to be fully and speedily briefed on the matter. She gathered there had been a legal and technical accounting dispute. Because of its complexity, it resulted in a feud between the RAF and the Auditor-General of South Africa (AGSA).

An amicable solution between the two entities could be found, and that was why this issue needed a technical team to find a technical solution. The Minister said had asked the board to find a speedy, alternative dispute resolution because the two government institutions were not supposed to fight each other in a court of law. There would not be any winner, whatever direction the court judgment went. She was of the view the two parties should find mechanisms to solve their differences outside of the court. This had been communicated during all the engagements the Department had with the RAF, even during its annual general meeting when the entity tabled its annual report. As a shareholder, she had not sensed any antagonistic view from either side of the AG and RAF.

She had been kept abreast of all the efforts by stakeholders involved in the matter. She had been informed by the AG the opinion issued could not be exposed to any form of dispute resolution, because that would be tantamount to negotiating its own issued opinion. The Committee had to ascertain a way for the two parties to find a lasting resolution on both the legal and technical matters in order to chart a way forward. The previous board had taken a resolution on this matter and it was important to understand the implications of changing the policy of the RAF. The priority of the new board was to find solutions to this matter. She indicated the board had assured her it would subject itself to all kinds of accountability, and confirmed she was not close to the board personally.

Concerning the non-tabling of the annual report of 2021/22 to Parliament, she said the issue had been given attention. The entity had now submitted the report to her, but there were clarity seeking matters she had to consider. The AG had tabled its opinion on the report. She had sought advice from the legal teams of both the RAF and the Department to empower her on how to table the annual report to Parliament so that the gap could be closed, because, at that time, she had not been the Minister of Transport. Therefore, she was unsure whether she had the right to table the 2021/22 annual report to Parliament. Clarity should be provided on the issue, and avenues to bring the two parties together should be found.

RAF board's actions

Ms Zanele Francois, Chairperson, RAF Board, confirmed that the entity had briefed the Committee on its 2022/23 annual report on 29 November, and there had been outstanding matters regarding the position of the current board regarding the current litigation with the AG. After the Scopa meeting on 29 November, the board indicated it knew the matter was critical and complex in the sense that it involved legalities. With these legal matters, the board had to go through the information that had been presented to the previous board. It reiterated that the new audit committee had to go through both sides of the story regarding the genesis of the matter before it could take a decision, because the audit committee had a responsibility to resolve any matter that arose between the auditor and auditee. The board resolution was to request Scopa to give it enough time, up until the end of January 2024, to consider the matter and all relevant information to see if it would come to the same conclusion as the previous board concerning the litigation with the AG. She then asked the Committee to grant the board enough time to go through the information in order to reach a resolution.

Pertaining to the submission of the heads of arguments, she had been informed by the management that filing heads of arguments was a standard process when a matter was before the courts. The management then proceeded on the understanding that the previous board's decision had remained unchanged. However, it knew that information still had to be presented before the board. That information had gone to the legal sub-committee of the board so that the board could be fully informed by 1 December about the process that had unfolded at the end of October. The matter was deliberated on by the board. Unfortunately, the Scopa meeting had happened before the 1 December board meeting.

Ms Francois said the board had met the AG on 4 December. The AG's representatives indicated they could only discuss technical matters, and would not discuss litigation because its lawyers were absent. The engagement was therefore only on 'nitty-gritties' around technical matters. It was agreed to come up with a technical solution, because it was critical to get to the root of the litigation, as well as to deal with the future objectives of how to audit the RAF to ensure its financial statements fairly presented the work of the organisation, given the existing dispute.

Discussions were held with some bodies to provide directives to assist on how the next audit should be done. It was then agreed to put together a technical team comprising RAF technical experts in the audit committee and the AG, but the AG made it clear they were auditors and it was not their responsibility to make a decision on an accounting matter. It was therefore agreed that the office of the AG should be part of the structure, but the Accounting Standards Board (ASB) would determine how the matter would be resolved. The main players in the technical committee would be the ASB and office of the Accountant-General. The resolution was therefore to set up this technical committee and to fast-track the matter before the end of the financial year, to come up with temporary solutions if no long-term solutions were in place by that time. The plan was to work with various stakeholders and resolve the matter before the end of March 2024.


The Members then debated whether Mr Collins Letsoalo, Chief Executive Officer (CEO), RAF, should be allowed to brief the Committee or not.

Mr S Somyo (ANC) suggested the Committee should discuss matters raised by both the Minister and the Chairperson of the RAF before allowing the CEO to brief the Committee.

The Chairperson indicated the CEO should be given a chance to explain the technical aspects and all things that were operational in nature that had been dealt with before and on 4 December.

Mr B Hadebe (ANC) suggested the Committee should engage with the Minister and RAF chairperson on the technical and operational matters, even though there were outstanding issues related to the court matter, and also to consider the request of the board chairperson for the extension of time to finalise matters by the end of January. He said the CEO should give the Committee compelling reasons why it should grant the entity an extension of time to conclude matters by the end of January.

The Chairperson said the CEO should be allowed to brief the Committee so that the Members could know if all the parties concerned were in the same page, and asked the CEO to confine himself to the litigation issues.

Mr Letsoalo informed the Committee the RAF's dispute with the AG was contained in paperwork containing more than 4 000 pages. The audit committee was new, and had asked to be briefed on various matters. They should be given an opportunity to apply their minds to the voluminous work that has been done. Hence, time should be granted to finish the work by the end of January. The work had already started. A technical committee had been established, comprising the Office of the AG, the Office of the Accountant General, and the ASB. All those role players should also be available to the audit committee and the board for decision-making.

The heads of arguments were expected to be filed at the end of October, but they were not provided to the board. The legal team had had to provide some extra information and submit it during December. The AG was supposed to file its heads of arguments during November 2023. but would now present its heads of arguments during December. The board had been working hard to get information related to the heads of arguments from the legal sub-committee and executive management of the entity, including decisions taken by the previous board on this matter.

Mr Somyo asked the entity to provide the Committee with a detailed report on what had been discussed with the AG and progress so far, so that the Committee could consider the request for an extension of time, and get feedback at the end of January 2024 on the matters it had raised. He asked the Minister to confirm the date on which the annual report of the entity had been tabled to Parliament, including the annual general meeting of the board. This would assist the Committee in granting the extension of time until the end of January.

Minister Chikunga said the annual general meeting of the board was in December. The annual report for 2022/23 was signed after that by the AG and the board. It was tabled before the Minister, and the Department had called for an annual general meeting (AGM) and signed off resolutions. The report was tabled on 3 November, and had included the 2023 financial statements.

Mr Somyo said the matters that should be dealt with were technical. He then proposed an extension of time should be granted for the RAF board and the Minister to finalise all the outstanding matters. He further suggested the board and executive authority should forward a report to the Committee about the postponement of the matter, indicate the Committee had granted them what they had asked for, and that they would provide feedback to the Committee on the technical matters dealt with. Since there had been an annual general meeting on the currently audited financial statements and annual report tabled in Parliament, all that was left to be dealt with was something technical in nature, and for there to be a dispute resolution instead of resolving matters in court.

Mr Hadebe agreed with Mr Somyo but emphasised that the matter should be treated with urgency and that everything had to be submitted in writing, with all the supporting documents or statements. The change in accounting policy had resulted in adverse findings from the AG, and the accounting authority (the board) had failed to implement adequate control measures to ensure financial statements were prepared using generally recognised accounting standards (GRAP). Another failure had been that of not implementing control measures against those responsible for not using accepted accounting standards. Timeframes for entities to be engaged by the board should be provided to the Committee in writing, including the proposed dates of engagements. He suggested the Committee should deal with Special Investigating Unit (SIU) matters, and not deal with court and litigation issues. He sought clarity on why the 2021/22 financial statements and annual report had not been submitted.

Minister Chikunga said during the financial year of 2021/22, and up to the end of March 2023, she had been the Deputy Minister in the Department. Therefore, if she were to attend an AGM, she would require a proxy as a shareholder. She needed to be guided as to whether she could now attend the AGM as a shareholder today, or if she still needed a proxy from the former Minister, because when they receive reports from the entities, whether the AG and board have signed them, the shareholder still needed to approve that through the resolutions of the AGM before the report was tabled in Parliament. As a matter of fact, if one had issues one disagreed on, one could, as the shareholder, deny it. With the current financial statements, it was now easy for her because everything had happened during her tenure as Minister, but for the matter under discussion, she had been the Deputy Minister of Transport, and she would have required a proxy from the Minister who was then a shareholder, to attend the AGM. She stated she was unsure what the status should be like, because there had been no precedents in this regard.

She was pleased the AG and board signed the financial statements, even though there had been an adverse finding. She was in need of a legal opinion on how to table the report and financial statements signed off by the AG, but disputed by the board. Even then, an AGM would have to be held to sign things off, and that was what she needed guidance on. For instance, in the AGM, one has to approve that the AG was paid an X amount of money in his/her presence. One needed to approve the work of the audit and risk committee. That was why she needed a legal opinion on these decisions for her as a person and going forward. These matters sounded technical, but they had legal implications.

Mr Hadebe pointed out there were two financial statements -- one signed by the board, and the other by the AG. That was the challenge faced by the Minister, because she did not know which one to take to comply with section 65 of the Public Finance Management Act (PFMA). He suggested the Minister should follow the prescripts of the PFMA and submit the statements signed by the AG. The Committee also required legal assistance on the matter so that it was able to do its work, because the executive authority had not tabled annual reports and audit reports. It had become a common phenomenon that when things did not go right, entities did not table annual documents and audit reports, and this should not be allowed to continue.

The Chairperson read the Committee a report from the AG. It was about the submission made by the AG. He said this was an urgent matter if the Minister sought a legal opinion. These things piled up when they had not been addressed, and one got the idea there had been no sense of urgency from the RAF. He wondered how long this period of extension and consultation was going to be. The AG had made determinations already. He said it was shocking to learn that a new board, appointed on 1 October, had told the Committee during its meeting on 29 November that it was learning for the first time about heads of arguments that had been filed -- something that was key in the audit outcomes. The Committee had learnt in that meeting that the CEO had signed the heads of arguments that were submitted to the court. The matter before the board was not new, because the current chairperson of the board had been with the previous board to ensure continuity and no gaps in the decision-making process.

He said the Committee was going around in circles because it had met the AG, the ASB, the Accountant-General and National Treasury to confirm the accounting policies used by the entity were not correct. The biggest thing facing the RAF involved compliance matters. He could not understand why the entity was continuing to engage with the AG while its fight with the AG was before the court. This could snowball into a difficult legal process for the purposes of oversight and accountability, and had had a material impact on the financial status of the entity when it had not been in the loop about what was happening, and had come up with its own accounting policies when it had been told they were wrong.

To be in court with the AG was a big matter. It would have been important for the entity to take the board along before proceeding to the next step in court. In addition, the Committee did not have a problem with the Minister seeking legal opinions on certain matters, but it had a dilemma when the audit outcomes were being negotiated, especially when statutory bodies had been saying the accounting tools used by the entity were incorrect. Stubbornness from the entity was not acceptable. The directive had been that the entity had to pull out of the court processes, and if that did not happen, Parliament would join the AG to assert compliance with standard processes.

Minister Chikunga said the Department had attended the meetings of the Committee last year and given feedback to the then Minister. The Department was taking the matter seriously. These matters were raised at the AGM convened on 1 November so the board could find an amicable solution. The Department believed this was a technical matter requiring all four institutions to resolve the issue. The court matter was another issue to be addressed. Guidance should be provided around the matter of standards. After the November AGM, it was proposed to the chairperson of the board that it should set up a technical team that would address the accounting standards so that the entity could be audited as an insurance scheme or social benefit scheme. The technical teams must meet frequently to come up with an agreement, because they did not have time to advise the Department.

Referring to the 2021/22 financial year report, she said she had been at the Department of Public Service and Administration (DPSA) at that time, but not with the Department of Transport. That was why it was important to know the role she should play if she convened an AGM to deal with matters of the past. She wanted to know if she would sit in the AGM as a current Minister, or as a person who was with the DPSA, or a Deputy Minister who was not a shareholder. That was the legal opinion she required, because she could not sign the 2021/22 financial year documents when she was not the Minister at that time. The legal opinions were for other entities as well.

Mr Letsoalo said he had never signed the heads of arguments submitted on 30 October, and he did not know the person who had stated that he had signed them. He had dealt with other legal matters related to the board.

The Chairperson said it had been stated in the previous meeting that the heads of arguments had been signed, and he could provide evidence for that. He suggested the issue should be clarified.

Ms Hlengiwe Khumalo, Chief Financial Officer (CFO), RAF, admitted she had made a mistake by saying the CEO had signed the heads of arguments. The heads of arguments had been submitted by their attorneys. The CEO signed only affidavits.

Ms A Beukes (ANC) said there was something strange in the RAF. Body language and attitude spoke volumes. She could see that they were all seeking a solution for the matter. The report to be given to the Committee should include the process that would be followed, progress so far, and the driver of this specific matter. As government, they wanted closure on the matter. There should be open communication between the chairperson of the board and Committee. She wanted to know if the chairperson of the board had appointed the technical team and indicated what it should do. When Scopa visited the RAF, some officials were scared and did not want to talk with Committee Members. She agreed the board should be given time, but there should be urgency and a will to resolve the matter, and there should be someone who would be responsible for driving the process. She asked the chairperson of the board how the Committee should deal with the matter.

The Chairperson commented that what the Minister had said had clarified matters, because it was solution-oriented so that they could come out of the situation.

Ms Francois said the technical committee was not new, and had been there since there was a review of the accounting policy that would be appropriate for the RAF. The current standard of accounting had been replaced and covered insurers. It was in line with the Insurance Act. The RAF was a social benefit fund instituted under the RAF Act. That was why this matter was technical and critical, because there was a need for an appropriate standard suiting the entity. That was why the AG had agreed that the entities should get together and discuss an acceptable standard appropriate for the entity. All the parties were looking for a long-term solution. The technical committee was being resuscitated. A meeting had already taken place with the new audit committee and AG, which was why they were going to meet the ASB and the Office of the Accountant-General to conclude this matter. This internal process included external stakeholders like the AGSA and the Office of the Accountant-General. Timelines could not be put in place without engaging with them first. That was why they were talking of the end of the financial year to finalise this matter, and the board would report to the Committee at the end of January 2024.

The Chairperson stated that the Minister had concluded the issue, and the entity should find the right procedure that works. It must be approved and correct.

Mr Somyo wanted to know if there was a technical committee, how it was constituted, and if it had a leader. The proposal had already been agreed upon, and Members needed only an outline which covered all his questions.

Mr Hadebe asked the entity to indicate how it planned to deal with outside stakeholders so that it did not tell the Committee it could not meet certain stakeholders.

The Chairperson said the end of Jan 2024 was the deadline for the board to report to the Committee on the issue of court, and to determine if it would continue with the court case or not. The end of the financial year matter involved the technical aspects with outside stakeholders, and the entity had to work out the milestone projections.

Minister Chikunga requested permission to respond in writing to the concerns of the Members, to make sure everything was detailed and accurate.

Ms M Lesoma (ANC), Chairperson of the Portfolio Committee on Transport, said she appreciated the joint sessions with Scopa so that Members could have evidence-based perceptions about matters. She indicated the discussion had led to improvements. There were various structures and actors within the structures with legal responsibilities, and no one could change that. South Africa had laws that needed to be complied with by Departments and entities. The company secretary played an important role on the board to ensure it complied with the legal prescripts and to fast-track the board on things that should be prioritised. The matter involving the signing of heads of arguments needed to be addressed. Even if there had been a mistake about who signed them, the Committee would indicate they had misled Parliament. She also agreed with the Committee on the idea of a project plan with timelines. She appealed to the Committee to finalise all these matters before the seventh Parliament came in.

The Chairperson asked the executive management of the RAF to submit a letter to the Committee that corrected the statement it had made in the previous meeting that the CEO had signed and filed the heads of arguments.

Mr Hadebe said Ms Khumalo had apologised for making a mistake by saying the CEO had signed the heads of arguments, but indicated that in future, officials should not respond to questions for the sake of responding if they were unsure about the answers. He requested that the apology be sent in writing.

Mr Somyo added that the Committee accepted the apology on the matter. He asked if the new board had been gazetted, and for the advertisement for the board members to be given to the Committee, as well as the short-listed names and acceptance letter from the Minister.

Minister Chikunga indicated the board was short of one member to constitute the full board of the entity. A memo had been submitted to the Cabinet. That member would have been appointed already, but this item was deferred to another date by the Cabinet. Once it had been attended to by the Cabinet, the whole board would be gazetted. The board was legal, and only required gazetting. Gazetting could be done before or after the appointment of the individual.

Mr Somyo said that gazetting should happen at an early stage.

Minister Chikunga said the legislation stated one appoints and then gazettes. The board had been appointed, even though it had not been gazetted. The vacant position had to be filled, and then the board must be gazetted.

The Chairperson indicated there had been a particular reason why gazetting had been part of the value chain. He then asked the Minister to conclude the gazetting process urgently. Gazetting had been there for a reason.

Mr Somyo added it was advisable to complete the entire value chain, because the process of gazetting usually took time, so it was better to appoint and gazette until the board had been fully constituted.

The chairperson asked if the appointed executives of the board had been vetted.

Ms Francois said before any executive was appointed, they would first check financial and criminal records. The board had been informed that the process of preliminary vetting had taken place. There had always been delays on the side of the State Security Agency (SSA) when it came to vetting. She asked to be allowed to respond in writing about which executives had been vetted by SSA, and to advise when the process would be completed.

The Chairperson wanted to know if the CEO, CFO and company secretary had been vetted.

Mr Letsoalo said his forms had been completed and submitted to the SSA.

The CFO said she had not even received an acknowledgement after submitting her forms.

The Company Secretary said he had resubmitted his application, but had heard nothing from the SSA.

The Chairperson requested that a report should be submitted to the Committee about all the vetting of the executives, including the date and submission of application forms.

SIU report on RAF invoices matter

The SIU reported that after their previous meeting with the Committee, it had had a discussion with the chairperson of the board about the invoices. It appeared the RAF did not receive the invoices. The SIU had then written a letter stating that the invoices and supporting documents had been submitted to the RAF. The letter with attached invoices and supporting documents had already been signed and submitted to the chairperson of the board, and the CEO of the RAF. The matter would be taken forward to see if all the invoices had been received. Emails containing invoices were sent to the RAF, and confirmation was received. Everything went through. Other issues related to the invoices would be raised outside of Parliament.

Mr Hadebe said it was safe to allow the process to unfold and get a response from the RAF on 31 January 2024.

The Chairperson hoped this matter would be concluded speedily, as the RAF had always been in the news for the wrong reasons. The Committee had visited the RAF and had left the entity feeling despondent. It had concluded that things were bad at the RAF. There had been a climate of fear, and toxicity, and the Committee was received with hostility. The audit outcomes confirmed why the Committee was concerned. Along the way, it became clear the RAF was going to need a bailout. The Committee was also thinking of opening a Committee hotline so that it could receive information from the public, because they had been complaining a lot about the RAF. He said the RAF should learn to do things according to the book.

The Committee had been aware that Scopa had irritated the RAF. The appointment of the new board was a step to stabilise governance. The Committee had been doing this exercise to lend a hand in terms of accountability and stability. He asked the Minister to talk with people at the RAF to empower herself about what had been going on there and take the right steps. Things were not right at the RAF.

Minister Chikunga pointed out the RAF Act had been drafted by lawyers, and this ensured that the RAF should be in court. The Act should therefore be reviewed, because the RAF had been for the claimants. The RAF had established a call centre for claimants to get information about their situation. The big percentage of RAF payouts for claimants went to the lawyers. That was not acceptable. Claimants had been given meagre percentages of the money. There was a case where the RAF paid the claimant R5.6m, but the claimant got only R57 000 from the lawyers. There were reasons for the Department and Committee to be concerned about the entity. On the other hand, positive things had been happening. It had employed 300 people to man the call centre. The RAF would continue to be in the news because educated people, like medical doctors, specialists, and lawyers, were behind the claimants for the wrong reasons.

The meeting was adjourned.


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