Mbalula and Auditor General at odds over delayed RAF audit report

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Auditor-General Tsakani Maluleke.
Auditor-General Tsakani Maluleke.
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  • Auditor General Tsakani Maluleke submitted the Road Accident Fund's audit report to Parliament, despite the fund's attempts to stop her. 
  • In June last year, the RAF announced that it cut its liabilities by over R300 billion by simply changing an accounting policy.
  • But the Auditor General found the change was inappropriate.

Auditor General Tsakani Maluleke has written to National Assembly Speaker Nosiviwe Mapisa-Nqakula, telling Parliament that she submitted the Road Accident Fund's (RAF) audit report for the 2020-21 financial year, despite the fund going to great lengths to prevent its publication.

However, Minister of Transport Fikile Mbalula said in his own letter that he could not table the RAF annual report and financial statements, because of changes in the entity's accounting policy where it relates to claims liabilities.

In June last year, the RAF announced that it cut its liabilities by over R300 billion by simply changing an accounting policy.

The change dealt with the International Financial Reporting Standards (IFRS) the RAF was using, specifically how it dealt with insurance contracts.

But in her letter to Nqakula, Maluleke said her office evaluated the change in accounting policy and concluded that it was inappropriate.  

In February the North Gauteng High Court in Pretoria dismissed a case by the RAF to prevent the publication of the audit report.

READ | Road Accident Fund loses urgent bid to prevent publication of Auditor-General report

"RAF has embarked on a litigation process to prevent me from making this audit report public and seeking an order to set aside my audit report. The first part of the order seeking an interdict to prevent me from making the audit report public, was heard and dismissed by the Gauteng High Court," said Maluleke.

Maluleke said the RAF applied for leave to appeal that judgment and sought to review the audit report in what she says has been a protracted, delayed process.

"At the date of signing this correspondence, I am advised that there is nothing in law preventing me from publishing the audit report, if not tabled by the executive authority," Maluleke said.

The submission of an annual report complete with financial statements and an audit report is a legal requirement for organs of state in terms of the Public Finance Management Act within the conclusion of that annual report's respective year by the end of March. The tabling of the final report in Parliament is done by the minister, as a member of the legislature.

Citing the PFMA read with the Public Audit Act (PAA), Maluleke said if an audit report is not tabled in Parliament within a month after its first sitting after an Auditor General submits it, the Auditor General must promptly publish the report.

She said she wrote to RAF management indicating to them that the PFMA and PAA required her to release the audit report, to which RAF management replied that they had already written to Parliament explaining the reasons for the delay.

"I noted the response from the executive authority, however, the PAA requires me to publish the audit report if not tabled and I am advised that I do not have a legal basis for not publishing the audit report.

"As such, I will not be exercising the discretionary powers to issue a special report on the delay as stated in section 65 of the PFMA as there is no legal basis for the delay. More so since the court has stated that there is no basis for the audit report not to be made public," said Maluleke.

READ | Why a simple accounting change may have slashed the Road Accident Fund's liabilities by R300bn

However, Minister of Transport Fikile Mbalula wrote in his own letter to the speaker that the RAF advised him that it was unable to comply with the PFMA to submit its annual report and audited financial statements to him for tabling in Parliament.

"The Accounting Authority contends that the dispute with the Auditor-General, currently before the courts, has a material effect on its ability to meet the requirements of section 55 of the PFMA.

"Section 55 of the PFMA requires that the annual report and financial statement tabled before Parliament must fairly present the state of affairs of the public entity, its business, its financial results, its performance against predetermined objectives and its financial position as at the end of the financial year concerned. In the light of the above, I am therefore unable to table the annual report, annual financial statements, and the audit report of the Road Accident Fund at this stage," said Mbalula.

Mbalula maintained that a review application was before the courts and that "the outcome may materially affect the content and the conclusions of the report".

The RAF has been hit with financial and governance challenges over the years, with only one clean audit in the last five financial years. Its 2020-21 audit outcomes are unaccounted for as the audit could not be finalised.

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