How fraudsters have been bleeding the Road Accident Fund for millions
The Road Accident Fund (RAF), which was introduced to help crash victims, is bleeding money – recording a R8.43 billion deficit for the 2022/23 financial year.
While the RAF has in the past attributed much of its financial pain to unscrupulous lawyers and what it called “criminal syndicates” seeking to exploit the fund, it has also become apparent that many shortfalls are also internal.
The State Investigating Unit (SIU) has been investigating “serious maladministration in the affairs of the RAF” and “any irregular, improper or unlawful conduct” for some time – and it presented a progress update on its ongoing investigations to the Standing Committee of Public Accounts on Wednesday, November 29.
The full investigation – expected to be completed by mid-2024 – has been divided into four phases, which look into:
- Duplicate claims-payments made to attorneys, claimants, sheriffs, and change of mandates.
- Procurement and tender irregularities (Fruitless and wasteful expenditure).
- Payments made to service providers in terms of RAF Act and/or contract.
- Fraudulent claims.
Duplicate claims payments and change of mandates
As of March 1, 2021, 102 law firms have been found to have received duplicate payments from the RAF, amounting to over R340 million. The report says that evidence was found “pointing to criminality wherein trust account monies were misappropriated.”
The SIU approached these legal practitioners about these massive losses incurred by the state, getting several to sign acknowledgements of debt (AoD). Nearly R71 million worth of AoDs have been signed, with R41.5 million being recovered from some of these practitioners.
So far, five legal practitioners have been referred to the Legal Practice Council (LPC), while twelve law firms/legal practitioners have been referred to the National Prosecuting Authority (NPA).
The SIU also reconciled over R276 million paid directly to the RAF, thus recovering over R317.67 million (93,4% of the money lost to double payments) to date.
It was found that various attorneys who received duplicate payments have since been struck off the practitioner’s roll, some have been suspended, and others have since passed away.
The investigation is currently trying to identify the RAF officials who caused the duplicate payments, as well as provide disciplinary referrals to those implicated. Individuals implicated in criminality who left the employment of the RAF will be referred to the NPA.
Investigations into major banks are also ongoing, trying to identify the reasons as to why millions were retained after writs were served to them.
Fruitless and wasteful expenditure
There are currently eight contracts that were awarded to service providers resulting from questionable procurement processes that are being investigated by the SIU. Some of these contracts were flagged by the Auditor General of SA.
Notably, the RAF cancelled a contract which consisted of the panel of attorneys who represented them in case disputes in court. Subsequently, from 2018 until the 2nd quarter of 2023, R4.78 billion was issued against the RAF in default judgments.
One critical judgement came when a claimant was awarded a default court order of over R11.1 million; however, the RAF failed to pay on time, resulting in R500 thousand interest being awarded to the claimant.
Other tender allegations being investigated include:
- Awarding an expired tender for cleaning and security services;
- Fleet services that were not delivered;
- Incorrect procurement process in acquiring the Johannesburg office building;
- Due process was not followed in the procurement of the head office building;
- A R36 million office furniture contract (that escalated to R40 million);
- A R1.8 million SAP license contract that the RAF is not using;
- A budgeted R742 million underperforming claims backlog contract that finished early, with R312.6 million being spent and R530 thousand used for travel and accommodation.
All investigations are still ongoing and the SIU said that there may be potential NPA referrals.
Payments made to Service Providers
The RAF reimburses service providers for services rendered to car accident victims. This includes ambulance claims, hospital claims, doctors’ claims and other experts.
The allegations that the SIU is investigating include the overpricing of services and inflating invoices submitted to the RAF. So far, the investigation has identified possible collusion between RAF employees and service providers.
However no conclusions have been made as the investigation is ongoing.
Fraudulent claims
There are allegations that there was an attempt to change the bank account/s of the service providers. So far, the SIU has found that RAF employees “made fraudulent [bank] account changes on the RAF system and redirected monies meant for services providers into their personal bank accounts.”
Thus far, over R1.9 million was found in the personal bank accounts of those employees.
There are also investigations into fraudulent claims made to the RAF by claimants across the country, continent and globe. However, this is still ongoing, and no final findings have been made as of yet.
Looking forward
Despite ongoing investigations, the SIU has presented preliminary systemic recommendations for the RAF. These include:
- Periodic bank reconciliation in order to prevent and detect possible duplicate payments;
- Prior to effecting payments, perform checks and balances on whether there had been any writs of execution on the claim;
- Perform a review of the claims payment process.
The final findings of the first phase is expected to be released on 31 March 2024, with the other phases following in the months after.
Read: Big changes for the Road Accident Fund in South Africa – lawyers fight back
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