RAF accounting standard shift was to improve financials, former RAF official tells Parly

The former Finance General Manager at the Road Accident Fund (RAF) has told Parliament’s inquiry into financial maladministration that a battle over changing its accounting standard was aimed at improving its financial statements.

Victor Songelwa, who is appearing as a witness before Parliament’s Standing Committee on Public Accounts (SCOPA), testified that by switching to an unsanctioned accounting standard which recognises the fund as a social benefit scheme, the RAF was able to significantly reduce its liabilities on its balance sheet.

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The RAF has since lost its protracted court battle with the Auditor-General (AG) for deviating from the government’s approved accounting practice, known as Generally Recognised Accounting Practice (GRAP).

At the end of March 2020, the RAF’s claims liability stood at R331 billion

Songelwa said shifting to the IPSAS 42 accounting standard the following year reduced this figure to only around R27 billion.

However, this change did not offer a true reflection of all categories of claims in the various stages of consideration and processing. Songelwa confirmed that claims where no offers have been made are not included in the liability of the RAF under the new system.

He added that the RAF was also motivated to change its accounting standard to obtain a bank loan of between R15 billion and R20 billionto help settle claims and prevent the attachment of assets.

Songelwa stated, "One would need good financials to present to a bank to raise funding."

He said that although he knew this was not a Treasury-sanctioned accounting practice, he was powerless to do anything about it.