Written by Koena Mashale | 11 March, 2025 | Sowentan Live
The auditor-general (AG) has raised concerns that the Road Accident Fund (RAF) may not remain financially sustainable in the foreseeable future due to severe solvency challenges with liabilities exceeding assets.
The AG said this might affect claim payments to road accident victims.
This follows the AG’s audit report for the 2023/24 financial year, presented to the Standing Committee on Public Accounts (Scopa) in parliament on Tuesday.
The report revealed that the RAF’s liabilities exceed its assets, with an accumulated deficit of R25.5bn, raising questions about its long-term sustainability.
“A material uncertainty on going concern was reported as the entity has solvency challenges with liabilities exceeding assets…Solvency challenges may impact the ability of the entity to pay accident claims and fulfill its mandate. These factors are indicators that RAF has financial difficulties and may not be able to pay liabilities as they fall due,” said Nicholas Mokoena, deputy business unit leader from the AG.
Mokoena attributed the root causes of this deficit to a lack of oversight regarding financial reporting and compliance and related internal controls.
“Ineffective preventative controls in place to ensure compliance with laws and regulations. There is no response by management in implementing actions to address prior year audit findings, with specific reference to the inappropriate use of IPSAS 42 as an accounting standard for the recognition and measurement of claims liability,” he said.
Council member Giyimani Skosana raised concerns over the irregular expenditure of over 90% that has not been addressed.
The entity recorded R440m in irregular expenditure with the majority of the amount still unresolved.
The biggest portion, R362m, relates to Project Siyenza, where contracts were awarded based on criteria that were not part of the original bidding process, a non-compliance issue first identified in the 2017/18 audit, with money still to be recovered.
An additional R78m in irregular expenditure was flagged due to incorrect price evaluations which violated preferential procurement policy regulations.
“We’ve got a hooping R440m which is not dealt with, or it’s still being processed, maybe. That’s a very huge amount of money. And I see that of this R440m, R362m is said to be under investigation, which may relate to Project Sienza. So I just want to find out, is there any tangible progress in relation to that particular investigation?” asked Skosana.
Mokoena acknowledged that over 90% of this expenditure has not been addressed.
“The latest update we have is that the SIU (Special Investigating Unit) is still investigating this irregular expenditure. It may be appropriate to follow up with the SIU regarding the status of their investigation. From our discussions with the RAF, it appears that the investigation remains ongoing, and we have not received any indication from the SIU that it has been concluded.
“Regarding the remaining R78-million, that amount is currently under investigation. They are in the process of taking disciplinary action against individuals found guilty as a result of this investigation,” he said.
Several recommendations were made by the AG, and one included effective oversight over quality of annual financial statements.