The Supreme Court of Appeal (SCA) has declined an application by the Road Accident Fund (RAF) to hear an appeal regarding the accounting standards to be used in its audit process.

The Deputy Minister of Transport, Mkhuleko Hlengwa, has welcomed the SCA judgment and said the matter has unnecessarily dragged on for too long. The RAF was recently asked during a meeting of the standing committee (Scopa) how long it was prepared to continue getting negative audits while pursuing the matter legally.

The SCA judgment comes amid a longstanding dispute between the RAF and the Auditor-General of South Africa (A-G) over the appropriate accounting standards for auditing the entity.

Hlengwa, meanwhile, said the A-G has rightly adhered to the Generally Recognized Accounting Practice (GRAP) standard, whereas the RAF insisted on being audited based on International Public Sector Accounting Standard (IPSAS) 42. As a result of its insistence on applying IPSAS 42, the RAF has consistently received adverse and disclaimed audit outcomes.

Hlengwa has described the judgment as an indictment of the RAF Board. He said: "It has been the Ministry's firm position that this matter should never have escalated to the courts in the first place. Valuable time and resources have been wasted unnecessarily. I, therefore, do not expect any further legal action on this issue."

He added that despite repeated guidance from the Ministry, the RAF has failed to comply. Hlengwa emphasised that the issue must now be resolved under the Accounting Standards Board’s guidance.

"This matter has unnecessarily dragged on for too long. The RAF Board must be mindful of its fiduciary responsibilities and act in the collective interests of the entity. I expect the RAF to comply with the A-G and ensure RAF’s alignment with the appropriate accounting framework,” Hlengwa said.

This judgment - the RAF’s fourth challenge to the disclaimer - came as the SCA had to decide on a petition the fund lodged after the same court earlier refused to hear their leave to appeal in the matter over its decision to change the accounting policy. The SCA found that there were no prospects of success when the Gauteng High Court turned down their leave to appeal.

The RAF obtained a disclaimer audit opinion in 2020/21 after it used IPSAS 42, which the A-G found to be inappropriate and significantly different from the South African Standards of Generally Recognised Accounting Practice.

The RAF has, meanwhile, scored a victory last week in the Gauteng High Court, Pretoria, against the South African Revenue Service (SARS), with the court granting an interim interdict that prevents the tax authority from deducting R5.1 billion from the fund it allegedly owes Eskom or any part of it.

The dispute between the RAF and SARS was about the fund’s levy diesel refunds due to Eskom by SARS, in terms of a settlement agreement reached between Eskom and the tax authority in October last year.

The RAF is of the view that the R5.1 billion or any part thereof that SARS intends to pay to Eskom cannot be deducted from the fund’s levies collected by SARS on its behalf, since the only deduction allowed from the levies is those that are stipulated by the RAF Act, read together with the Customs and Excise Act.

Judge Ronel Tolmay said that the intended deductions of R1.2 billion for the next four months could lead to the collapse of the RAF, while SARS would not suffer any irreparable harm if the deductions were not made.

zelda.venter@inl.co.za

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Supreme Court of Appeal declines Road Accident Fund application