Briefing by the Road Accident Fund Board

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
10 OCTOBER 2001
BRIEFING BY THE ROAD ACCIDENT FUND BOARD

Chairperson: Mr J Cronin

Documents Handed out:
Presentation to the Portfolio Committee by the Road Accident Fund Board

SUMMARY
The Road Accident Fund has been dogged with controversy around the issues of alleged improper benefiting by certain law firms of award money from claims and also the clash of interests within the board of the institution.In this meeting, the Board made a presentation highlighting the problems identified, measures taken to address them and proposals for legislative reform to enable a better and fraud-free working system within the institution.

MINUTES
The CEO of the RAF, Mr H Kgomongwe, spoke on the major challenges faced by the Fund, strategic decisions the Fund has taken and lastly proposals for legislative reforms.

Mr Kgomongwe started off by noting that there were problems of accessibility to the compensation system for the victims. This was apparently due to a lack of the Road Accident Fund presence in major medical centres throughout the country. Another problem identified was the issue of fraud. He also noted that there is a need to reiterate that the real problem lies with the high accident rate in this country and this should be addressed as a matter of priority.

Due to allegations of fraud within the Fund, Mr Kgomongwe pointed out that a firm of forensic auditors had been invited to look at the RAF's books and to determine if any malpractices had indeed taken place. The findings of this audit largely highlighted that there were poor controls, inadequate systems, insufficient separation of powers, an archaic paper-based system and noted that the computer system was being used only as a record and these loopholes prompted corrupt practices within the ranks of the Fund.

On the basis of these findings, a two-pronged approach had been adopted to remedy the problems at the RAF:
- The appointment of a board member to support management as a short-term strategy. Prof Manganyi, a board member attached to the University of Pretoria, had been given this task of meeting with the management of the Fund once a week.
- A longer term focus on seven strategic areas.

The seven strategic areas that have been identified are:
- the stabilisation of the financial position of the fund,
- staff retention and training,
- accessibility of the fund,
- fraud and corruption elimination,
- role player (stake-holder) relations,
- financial controls
- operational integrity (dealing with the accumulating number of outstanding claims and to include the legislative amendments mentioned earlier).

Mr Kgomongwe said that measures taken in the wake of the financial report included the appointment of the current CEO as of August 2001, attending to management capacity through the appointment of a finance executive, the appointment of a Chief Information Officer to head IT and the imminent appointment of a procurement, budget and policies functionary. Another issue was attending to the staff attrition rate where due to the high staff turn-over rate, a lack of appropriate managerial skills had been identified as a problem. Consequently, a skills development manager has been appointed as well as the introduction of performance remuneration and improving top-down communications.

The Chief Information Officer, Mr Sello, commented on the issue of integrity of systems and controls. An assessment study of the information base materials they need has been undertaken. They had developed a computerised information record base, which allows the tracking of an individual file up to the payment of the compensation to the victim. He pointed out that imaging and scanning of a claim file is being done so that exact copies can be retained by the Fund for reference purposes.

Mr Sello noted that they had established a good working relationship with the Department of Home Affairs to check the population register so as to verify the existence of such a person who is making a claim. Working relations had been also established with the SAPS and the Law Society to check the legitimacy of attorneys representing the claimants.

On the issue of addressing deviance, the CEO pointed out that the above systems together with closer co-operation with state resources such as the Scorpions and the Directorate of Public Prosecutions were being established. In addition, a fraud phoneline and a whistle blowing facility had been established as further measures for addressing this problem.

It had been discovered that some medical professionals were charging exorbitant fees or prolonging the treatment to gain more revenue and to combat this, properly skilled people in medical finance would be brought in to audit statements.

On the issue of accessibility, the CEO conceded that the Fund was not yet accessible enough to people. The establishment of help desks in various hospitals throughout the country with a focus on increasing awareness on the existence and role of the RAF is, according to him, an issue of utmost urgency. Mr Kgomongwe went on to add that they were seeking to improve external corporate relations through an improved media campaign.

Judge Greenberg, a board member, highlighted some of the issues that needed legislative amendments:
- the R25 000 limit on certain claims by passengers needed to be altered as the amount was hardly enough to compensate someone who had for instance suffered permanent disability as a result of the accident.
- the procedural right of medical suppliers to claim directly from the Fund needed to be amended as this system was being abused.
- it was proposed that the claims be limited to South African citizens only.
- there is a need to authorise the Fund to provide managed treatment plans under the outreach programme to injured person with medical needs extending into the future.
- the Fund would like to see the payment of substantial general damages for ongoing pain through installments rather than by way of a once-off cash lump sum.

Prof Sam Mokgokong, a board member, commented that the legislative proposals should be viewed in serious light as they would offer a solution to many of the current problems. He noted that consensus by the Board had not yet been reached on some of the proposals.

Discussion
Mr Cronin noted that the current board's active involvement in trying to solve its inherited problems meant that there were already signs of change for the better at the Fund. He felt that this was a good development as this was not the case in the past.

Mr R Ainslie (ANC) asked whether the audit report was going to be made public.

Dr Odendaal (DA) asked who had decided to order such an audit and what was the financial cost involved.

Mr J Slabbert (IFP) asked why the report was, up to this stage, being kept confidential.

Mr T Twine, a board member, replied that the report is confidential and very frank, and makes allegations against certain internal and external employees of the Fund. He also said the report leaves gaps as to within which context the findings were made. He added that the intention of the Board was to keep the report confidential pending investigation of the allegations.

Ms Xuntai informed the Committee that the Board had commissioned the audit because they were not getting proper answers to the finance-related allegations from the executive management of the Fund. She added that the summaries issued in the media had been regarded as sufficient by the Board to inform the public about the allegations. Also the identity of those implicated could not be revealed due to legal considerations.

Mr W Seremane (DP) expressed concern that the audit report had been made available to the Board in February and yet up to this stage it had not informed the Committee of these developments. He disagreed with Ms Xuntai about the public being given adequate information on the report through the so-called summaries.

Mr T Abrahams (UDM) pointed out that it should be borne in mind that the RAF and not necessarily its board had a negative image in the public eye and because of this he felt that more clarity should have been prioritised in issuing the media summaries.

Mr B Farrow (DP) asked if those implicated had been taken through the legal process

Mr J Slabbert (IFP) said that he could not see why the board members would like to protect those implicated by the report. He suggested that the Board was afraid of the shock with which the public might respond to the details of the forensic audit report.

The Chair intervened and pointed out that perhaps there might be an impression that identities of the implicated were mentioned in the report, which might not be the case. He suggested that the Committee ask the Board to make public (at least to the Committee) certain sections of the report.

Mr B Farrow (DA) noted that they were not looking for specifics such as the identities of the accused, but rather the general contents of the report and reasons why the Board is not making that available.

Mr Slabbert believed that the report in its entirety should be made public.

The Chair wanted to know the number of people who are said to have either resigned or been fired in the light of the allegations.

Mr G Maluleke, the Vice-Chair of the Board, replied that at its last meeting, the Board had extensively deliberated on the issue of releasing the report to the public. Some of the actions taken were to let the audit section continue with the investigations. He noted that several arrests had been made as well - with the intervention of the Scorpions. It was precisely because of the ongoing investigations that the Board felt that releasing the report was not appropriate at this stage as several people with influential positions had been implicated and the investigators were in the process of confirming the leads. Releasing the report would probably alert some of the people implicated.

Mr S Mkhize, the Human Resources Director of the Fund, informed the Committee that about 8 employees had been dismissed so far and about 22 current employees were still under investigation.

Prof Mokgokong pointed out that the procedure adopted by the auditors was not exhaustive in any way and was based on random sampling. This meant that the figures could be either exaggerated or underestimated so the full complexity of the situation was very much a sensitive issue.

Ms P de Lille (PAC) asked the board why this report cannot be accessible to the MPs at least and pointed out that if this does not happen, she would use whatever steps necessary to access the report.

In answer to Mr J Niemann (DP) asking if any Board members were part of the audit Committee, Mr Maluleke said that this was not the case.

Mr Farrow asked why a board member is part of the managerial team and whether this going to continue as he felt that there should be a separation of powers between the board and the day-to-day managers of the Fund.

Mr G Schneemann (ANC) asked the Board about their views on allegations that certain members work for or own firms, which make claims to the Fund.

Mr J Slabbert (IFP) asked if it is true that the Vice-Chair is a partner in one of the law firms, which make claims to the Fund.

Ms Xuntai responded on the issue of corporate governance, pointing out that several members sit on the boards of other private and public companies. She informed the Committee that the board has been divided into sub-committees looking into the issues of audit, the executive, renumeration and other functions. These committees have their own terms of reference but are governed overall by decisions of the board as a whole.

Board involvement in the executive was a temporary measure in the light of the various allegations against some employees of the fund.

On the issue of conflict of interests, Mrs. Xuntai noted that the board had had its members declare their interests in companies both involved and not involved in the claiming of compensation from the Fund. She pointed out that the issue is that a board of this nature has to have people from both legal and medical professions who have expertise on matters dealing with the issue road accidents claims. MPs should not make the assumption that serving on the board means representing one's own interests. She added that there should be a distinction between trouble making and raising legitimate concerns for transparency. She also pleaded with the Committee not to allow the mostly sensational questions raised in the media to cloud its judgement of the processes involved in appointing and including this board.

Prof Mokgokong added that it should be understood that people with the right knowledge and experience will serve on the RAF board. Therefore experienced lawyers, who in all probability have established practices which are also helping victims to submit their claims will be appointed, the issue of conflicting interests withstanding. The same applies to the medical profession where he made reference to himself as a neuro-surgeon who is frequently asked for his opinion and expertise as a doctor on crash victims while at the same time being a board member because his knowledge and standing in the profession is recognised.

Mr G Maluleke, the Vice-Chair of the Board, acknowledged that he has a law firm involved in the claims process. He has five partners who deal with claims but he is not part of the procurement committee of the board contrary to reports. He added that the board is a non-executive organ and therefore does not get involved in the direct goings-on at the RAF and is merely overseeing its proper functioning.

The Chair noted that as a solution to the issue of conflict of interests, the selection committee's interviewing process should be more transparent so that the impression of malpractice is eradicated. He felt that perhaps the committee should put together a report identifying the problems inherent in the system used for the appointment of board members.

Mr Slabbert wanted to know what kind of cooperation existed between Judge Satchwell (of the Road Accident Fund Commission) and the Board.

Mr R Ainslie (ANC) asked if the legislative proposals were made to the Board or were made by the Board. Mr Cronin replied that these proposals were by the board and as noted earlier, some of them had not been conclusively deliberated on by the board. He encouraged the board to think out the remaining issues in their legislative proposals rather quickly so that the Committee can push the issue with the Minister.

Ms P de Lille (PAC) concurred with the Chair on this point. She felt that the Minister of Transport should be encouraged to make these legislative proposals law sooner rather than later. On the other issues, she suggested that everyone should wait for the Satchwell report.

Mr Maluleke mentioned that there is a working relationship between the board and Judge Satchwell and that they deliberated on various issues of common concern as well as exchanging information as necessary.

Meeting Adjourned.