The Road Accident Fund (RAF) has spent more than R60-million paying off employees allegedly unfairly dismissed and in “fruitless expenditure” on contracts whose value were dubious, an internal RAF audit report in the possession of the Mail & Guardian shows.
The report states that the fund, a parastatal, is failing to comply with the Public Funds Management Act (PFMA) requirements and the King II Code of Corporate Governance —the benchmark by which corporations measure their compliance with corporate governance standards.
The internal audit, given to senior RAF managers last month, shows that the fund had spent R61,1-million during the past financial year settling contracts that had no value or paying off staff it had illegally fired.
The audit was discussed this week when the parliamentary portfolio committee on transport met to consider amendments to the RAF Act. The committee decided the amended legislation will only be finalised next year.
One consultant to the RAF was paid R8,55-million (of a R18-million contract) before the RAF realised that “the consultants were not meeting their legal obligations” and the contract terminated in October last year, the audit report says.
The report further states that the RAF lost R1,04-million when it abandoned the computerised salaries payment system “due to disputes between the software vendors and RAF technology partner African Legend Technologies as well as poor systems development and implementation procedures. There is no evidence of any legal recourse taken to address this matter.”
Other documents in the M&G’s possession show that the fund, set up to compensate victims of road accidents or their dependents, had, by October this year, spent more than R7-million paying suspended or allegedly unfairly dismissed staff.
In one example Dennis Beea, a senior manager, forensics, also mentioned in the audit, was still drawing a salary and benefits almost 18 months after he last put in a day’s work at the RAF.
Beea was suspended in June 2001 on allegations of conflict of interest because he had allegedly appointed an auditing firm, Ikanyeng, which he founded and of which he was CEO, immediately before taking a post with the RAF.
He was found not guilty, but instead of returning to work was granted special leave at full pay — which he still enjoys. The post has been filled, meaning two people are being paid for one post.
Another employee, Justice Chris Greenland, a former high court judge, was summarily dismissed, the audit says. This was on grounds of “incompatibility” with the fund’s CEO Humphrey Kgomongoe, individuals linked to the RAF told the M&G this week.
Greenland took the matter to the Labour Court but in an out-ofcourt settlement he was given a golden handshake of just less than R1-million.
The audit says RAF chief finance officer Duncan Anderson is still in his job after he was found guilty of irregularly advancing R56-million to a company that acts as an agent for parties (lawyers, doctors or road accident victims or their families) owed money by the RAF.
Anderson was given a written warning after the disciplinary hearing chairperson ruled that he had not personally benefited from the irregularity, the audit says.
The RAF has recouped R8-million of the money and has senior legal counsel advice that it can and should pursue the recovery of the balance. It has not done so.
RAF spokesperson Themba Mhambi confirmed to the M&G that the matter had not been pursued.
“The RAF has not pursued the path recommended because it and [the company involved], in the course of the auditor general’s audit have done a reconciliation of the balance and the RAF is satisfied that the balance has been used to pay valid claims,” said Mhambi.
The M&G has been told that recently appointed RAF chairperson Willie Huma had his company, Yarona Creative Management Consultants, hired to facilitate three board lekgotlas when there had not been tenders for the jobs.
Mhambi said it was unnecessary for the board to call for tenders for services worth less than R500 000. These could be secured by the decision of the CEO. Yarona had quoted R155 000.
“Besides that, because a decision to use an external party to facilitate the lekgotla was taken a week before the lekgotla, urgency dictated that a known specialist in management consulting be approached,” said Mhambi.
According to the internal audit report, the fund spent more than it earned, causing it to overspend by R500-million in the past financial year.
“The fund does not have an approved investment policy and procedures in place, as required in terms of the PFMA Treasury Regulations,” says the report.
It adds that there were no monthly management accounts to assist with the monitoring of expenditure against departmental budgets.
The report says the RAF spent a further R16-million on a new financial accounting system when an upgrade of the existing system would have cost R800 000 and given similar results.
Last year the RAF roped in Ebony Management Consultants, costing R5-million, but has chosen not to implement any of their recommendations, the report says.
Mhambi denied that the consultants’ recommendations had not been implemented saying they were used in new mission statements, remuneration structures and the establishment of support structures.
According to the report the RAF lacks a strategic plan and, therefore, direction. This exposed the fund “to risk of continuing with operations which had little or no impact on the sustainability of the organisation”.