How did the Malacca government's coffers bounce back from a deficit in 2004 to a whopping RM119.26 million surplus in 2005?

DAP secretary-general Lim Guan Eng, who spotted the startling difference in the state's accounts, will seek clarification from Auditor-General Ambrin Buang in Putrajaya tomorrow.

He told reporters at the DAP office in Parliament House today that he is not satisfied with Ambrin's explanation to date.

In 2004, the state was declared bankrupt after the auditor's report showed a RM35.76 million deficit. However, the following year saw a surplus of RM119.26 million.

Lim, an accountant by training, had first raised the issue early this month when he wrote to the New Straits Times (NST) on Sept 9, alleging a cover up in the state accounts by the Auditor-General.

Ambrin responded in a letter dated Sept 18, saying that the state audit office had treated consolidated public trust funds - one of three main categories of finances in all state accounts - as 'assets' and not 'liabilities' as done in previous years.

"It is not proper to treat all (trust funds) amounting to RM194.57 million as liabilities due to the fact that the source of funds being put into these accounts are mainly from government's contributions and not from the public," he said in the letter.

Ambrin also commented on the matter in the NST yesterday: "The crux of the matter is the treatment of trust funds. Trust funds with contributions from the government should be referred to as assets and not liabilities.

"That is all there is to it. There has been no cover-up. Covering up such a thing is a serious matter as liabilities have to be repaid. Examples of funds categorised as assets are grants meant for specific purposes."

Ambrin said states must rectify this problem and not do what Malacca had been doing, adding that a directive to standardise ways of treating such trust funds would be issued soon "to avoid misunderstandings over state accounts".

'National problem'

Lim, however, noted today that consolidated trust funds should be recorded under 'liabilities' rather than assets, because the funds are public and do not belong to the state.

"A trust is something held on behalf of other people, it is not (the state's money). How can you say it is (the state's funds)?" he asked.

Lim also observed that Malacca is the only state where public trust funds are recorded under 'assets'. In all other states, this is placed under 'liabilities'.

"This is not a state-level problem, it is a national-level problem. He is saying that the other 13 states' accounts are wrong because they included the trust funds as liabilities rather than assets," said Lim.

"If (the accounts in) 2004 are wrong, then you must say they are wrong. It questions the veracity of our accounting records. Are you falsifying and manipulating accounting records?"

He said Ambrin's "indulgence in creative accounting" would give rise to manipulated accounts resulting in unreliable financial statements.

Lim, a former Kota Melaka member of Parliament, said inconsistent application of accounting principles would affect investors confidence.

In recent weeks, media reports had highlighted critical comments from the Auditor-General's Report on weaknesses in financial management by government agencies.