As Parliament’s inquiry into the Road Accident Fund (RAF) gets under way, National Treasury officials and accounting experts have told MPs that the Fund tried to solve an operational and financial crisis through a change in accounting standards – a move that has left it with three adverse audit opinions, unresolved court battles, and still no credible set of financial statements.
The Standing Committee on Public Accounts (SCOPA) this week began its formal oversight inquiry into the RAF’s finances and governance – the culmination of nearly a year of requests for reliable financial information from the Fund.
The inquiry, which runs until November, will examine the RAF’s growing backlog of unpaid claims, suspended staff, procurement irregularities, and long-standing accounting disputes that have left the entity effectively unaudited for years.
This week, SCOPA heard evidence from the Department of Transport, the RAF, the Auditor-General of South Africa (AGSA), National Treasury, the Accountant-General, and the Office of the Chief Procurement Officer. The Special Investigating Unit is scheduled to present tomorrow (10 October).
Opening the technical presentations yesterday, the Auditor-General, Shabeer Khan, told SCOPA that the RAF had received adverse audit outcomes for the past three financial years and has not yet submitted its financial statements for 2024/25.
“The adverse audit outcomes are due to the RAF not using the Generally Recognised Accounting Practice [GRAP] that is prescribed in the PFMA [Public Finance Management Act]. RAF has instead utilised IPSAS 42, an international public sector accounting standard. That’s really been the core of what has been a disagreement between RAF and the Auditor-General, which has also led to the litigation between the two parties,” the Khan
‘They made this an accounting problem’
During yesterday’s hearing, Lindy Bodewig, chief director at National Treasury, told MPs that the RAF’s management appeared to believe the Fund’s solvency crisis could be resolved through accounting entries rather than by improving internal systems.
“They had revenue from the fuel levy and these massive liabilities for possible claims – reported, unpaid, or not yet finalised. The Auditor-General started asking whether they were a going concern. So, to address that, the Road Accident Fund made this an accounting problem,” Bodewig said.
“They started to look at when to recognise a liability, whether some of it could be in the notes as a contingent liability, and whether they could change the size of the liability from an accounting point of view. What we didn’t see them doing was asking what processes they had in place to settle or validate claims. The focus purely was on accounting.”
Bodewig said that better systems to record, verify, and settle claims could have changed the liability picture substantially – but those operational reforms never took priority.
How standards are set – and where RAF went wrong
Jeanine Poggiolini, technical director at the Accounting Standards Board (ASB), explained that the RAF’s adoption of IPSAS 42 was irregular because it bypassed the legal process required to deviate from the prescribed GRAP.
“Because the standards are issued in law under the PFMA, any deviation or exemption must be directed to the Minister of Finance. It’s a public process – the minister outlines the proposed exemption, it’s gazetted, and open for comment before a final decision is made,” Poggiolini said.
“Even if an exemption were granted, the entity must still achieve fair presentation. So, you could cross all the t’s legally, but your financial statements could still fail to fairly present the entity’s affairs.”
The RAF did not follow this process and instead sought to defend its position through prolonged litigation against the Auditor-General, despite repeated court rulings affirming that only the ASB and the Minister of Finance can determine the applicable accounting standards for public entities.
A new standard in the making
Poggiolini also briefed SCOPA on the ASB’s ongoing development of a dedicated Standard of GRAP on Social Benefits, which will eventually govern how entities such as the RAF, the Unemployment Insurance Fund, and the Compensation Fund report their liabilities.
She said IPSAS 42, issued internationally in 2019 after three decades of development, was not appropriate for South Africa’s social schemes because it recognised liabilities too late in the process – effectively once all eligibility criteria were verified.
“That would produce very low liabilities, which would not be appropriate for our schemes,” she said.
The ASB therefore based its proposed GRAP standard on IPSAS 42 but adapted it for local conditions, introducing clearer criteria for recognising liabilities and distinguishing between funded and unfunded schemes. The first draft was released for comment in 2023, with a second consultation round now under way.
“We will hopefully approve the final standard in 2026 if everything goes according to plan,” Poggiolini said, adding that the Minister of Finance would then determine its effective date and transitional arrangements.
‘RAF must decide what it is’
In closing, Karen Maree, the Accountant-General, told MPs that Treasury can advise and guide, but it remains RAF management’s responsibility to apply the correct accounting framework.
“It is their responsibility to make sure that they did apply the correct accounting standard,” Maree said. “Our guidance to RAF in the next few months will be to assess whether they’re in the social benefit side of it. If they are not, they should apply GRAP 19. If they are in the social benefits, they need to decide whether it’s social assistance or social security insurance – and the accounting treatment of that differs.”
She added that Treasury has already presented the RAF with detailed guidance on how each of its products should be treated, reminding the Fund that “the key principle is the economic substance over the legal form”.
“They need to identify where each of their products lies. But it’s up to management to take it further, and as the ASB finalises the new standard, we’ll assist with implementation,” Maree said.
What comes next
SCOPA’s inquiry will continue through November, with further evidence to be heard from RAF executives and other stakeholders. The committee aims to table its final report – and recommendations on accountability and reform – before the National Assembly by the end of the year.
For the RAF, which remains without audited financial statements and faces mounting unpaid claims, the hearings mark a pivotal test of whether governance and financial integrity can be restored after years of turmoil.
