A former RAF official says the fund faked financial stability by excluding billions in unpaid claims from its balance sheet.
An actuary has described as “an accounting sleight of hand”, a move that masked the fund’s insolvency and misled parliament and the public.
In an affidavit submitted to the standing committee on public accounts (Scopa), Itayi Charakupa, a former Road Accident Fund (RAF) senior actuarial manager, revealed how the embattled entity’s 2020-21 financial statements understated its true claims liability by hundreds of billions of rands through an unauthorised accounting policy change.
“The RAF’s underlying obligation to accident victims did not disappear; it was under-reported.”
RAF hid R326 billion in liabilities
“In reality, the outstanding claims liability was around R340 billion,” he said.
Charakupa told the Scopa hearing into alleged procurement irregularities and mismanagement that the RAF abandoned the approved IFRS 4 accounting standard and replaced it with IPSAS 42, a framework designed for social benefits rather than insurance-type obligations.
Under the new system, only a narrow slice of liabilities, settled claims and offers not yet paid, were recorded in the financials, while the bulk of outstanding and unreported claims were quietly pushed off the balance sheet.
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According to Charakupa, as of March 2021, the RAF’s total liability should have been R356.1 billion, not the R29.6 billion reflected in its annual statements.
He said the change understated liabilities by R326.5 billion and that this “paper reduction” had no basis in actuarial reality and gave the false impression that RAF’s finances had stabilised.
According to Charakupa, the auditor-general, Tsakani Maluleke, subsequently issued a disclaimer of opinion for the 2020-21 accounts, citing the use of an unauthorised accounting standard that “materially misstated” the RAF’s financial position.
True financial crisis
Charakupa detailed how his actuarial unit had, for years, applied rigorous valuation standards rooted in Actuarial Society guidance (APN 401) standard in short-term insurance.
The methodology included all reported and unreported claims projected through statistical models based on accident data, claim duration, and payout trends.
“Essentially, they erased billions in pending obligations with a policy change,” Charakupa said.
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He said before the switch, the RAF had consistently received unqualified audits, with the auditor-general validating its actuarial valuations and that the 2020 policy change ended that record overnight.
