Thursday, September 21, 2006

Malacca's Elegant Accounting in Low Gravity?

Has there been dodgy accounting of the Malacca government’s coffers?

In 2004, the state was declared bankrupt (what an utter disgrace!) after the auditor’s report showed a RM35.76 million deficit. However, the following year saw a surplus of RM119.26 million.

This is one humongous bounce back of low gravitational magnitude!

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 is not satisfied with Ambrin's explanation.

Lim raised the issue on 9 September, alleging a cover up in the state accounts by the Auditor-General.

But 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.

said: “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.”

“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.”

In fact, Ambrin went further by advising all states to rectify this problem and not do what Malacca had been doing. He would be issuing a directive to standardise ways of treating such trust funds would be issued soon
“to avoid misunderstandings over state accounts”.

But Lim, an accountant by training, said that consolidated trust funds should be recorded under ‘liabilities’ rather than assets, because the funds are public and do not belong to the state.

He declared:
“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)?”

Lim pointed out that Malacca is the only state where public trust funds are recorded under ‘assets’. In all other states, this is placed under ‘liabilities’.

He shot back at Ambrin:
“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.”

“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 warns that Ambrin’s ‘indulgence in creative accounting’ would result in manipulated accounts resulting in unreliable financial statements, which in turn would affect investors’ confidence.

Maybe the government doesn't want to see Malacca's accounts being painted red all the time, as that too may affect investors' confidence, a view totally opposite to Lim's more-logical concerns.

All kow-tim?

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