By Lehlohonolo Lehana.
The High Court in Pretoria has dismissed an urgent application by the Road Accident Fund (RAF) to prevent the Auditor-General of South Africa (AGSA) from disclosing an audit report about the fund’s financial affairs to Parliament.
After auditing the financial statements of the RAF, the AGSA issued a disclaimer opinion and audit report. The RAF wants to prevent this from being disclosed pending a review of AGSA’s findings.
In April 2021, the RAF changed its accounting policy from the International Financial Reporting Standards (IFRS) to the International Public Sector Accounting Standards (IPSAS). The AGSA argues this led to the RAF understating its liabilities by approximately R300 billion compared to the prior financial year – specifically how it dealt with insurance contracts.
By adopting the new standards, it is alleged the RAF understated its liabilities by about R300bn compared with the previous year’s valuation of the liability.
The AG said the disclaimer was on the basis that the RAF’s financial statements were not prepared in accordance with the prescribed financial reporting framework and not supported by full and proper records.
The RAF argued that if the disclaimer and audit report were published, it would lead to the RAF suffering irreparable harm.
If the AG’s report was published, the RAF’s chances of obtaining funding on its own would be substantially diminished.
In its judgment on Thursday, the court said it was not persuaded that the RAF has established a well-grounded apprehension of irreparable harm if the audited financial statements were released.
The harm the RAF might suffer would not prevent it explaining the situation when called upon to do so.
Judge Colleen Collis said the RAF conceded that nothing would stop it using its public platforms to explain the nature of the impasse between itself and the AG.
“The irreparable harm the RAF might suffer must be juxtaposed against the constitutional and statutory framework within which the AGSA is required to operate.”
In terms of the Public Finance Management Act, it is the responsibility of the executive authority — the minister of transport — to table the RAF’s annual report, annual financial statements and the AG’s report on those statements within one month of submissions to parliament.
Meanwhile the Auditor-General of South Africa (AGSA) has welcomed the Gauteng Division of the High Court’s favourable ruling in a legal matter brought to the court by the Road Accident Fund (RAF) against the national audit office.
In a statement, the AGSA said: “While we will not venture into details or merits of the case, it confirms our long-held belief that airing accounting and audit matters before the courts is not in the best interest of audit and financial accountability.”
The AGSA said it while appreciated that any auditee may approach the courts to seek relief, it emphasised that it has dispute resolution processes “that should be used to resolve audit disputes”.
“For many years, we have successfully used these processes to settle audit disputes in a fair manner, as guided by the Public Audit Act and the International Auditing Standards.
“The national audit office is committed to carry its constitutional mandate in a fair manner, without fear, favour or prejudice to all those we audit,” it said.