FREDERICTON (CP) - Premier Bernard Lord and his Conservative government have obscured New Brunswick's true financial picture by claiming to have a surplus when they were actually deep in the red, the province's auditor general said Wednesday.

In his annual report on New Brunswick's finances, Daryl Wilson said the government misled the public last November when it issued a news release claiming to have managed a $1 million surplus, despite difficult times.

"The books are closed for the last fiscal year, and the results prove that we managed well in spite of very difficult times," Finance Minister Jeannot Volpe stated in the news release.

"The surplus is $1 million for 2002-2003."

Wilson said that statement was incorrect.

In fact, he said, the province recorded a deficit of $109.4 million.

"In my opinion, it trivializes the value of audited financial statements when a news release can convey a message which is entirely different from what is disclosed in the statements," Wilson wrote in his report.

Neither Lord nor Volpe was available for comment on Wednesday.

This is just the latest criticism of the Lord government's handling of the province's finances.

Opposition politicians have repeatedly questioned how the Conservatives could have claimed during the election campaign in May and June that the finances were in great shape, only to discover a few months later that the province is actually facing a $300 million deficit in the coming fiscal year.

Volpe is currently holding public hearings, seeking advice from people on how to cope with the looming deficit.

The Tories won the provincial election in June, but barely. They saw their comfortable majority in the New Brunswick legislature reduced to just one seat.

Opposition Liberal Leader Shawn Graham accused Lord and his government of attempting to deliberately mislead the people of New Brunswick about the true state of finances.

He said the province is running two sets of books. He said one set shows an artificial surplus designed to persuade voters that everything is fine, and the other shows the real situation - a growing deficit and mushrooming debt of almost $7 billion.

"Any CEO of a financial institution, if they recorded a deficit of this magnitude and then tried to mislead the shareholders, they'd either be fired for incompetence or investigated for fraud," Graham said.

Wilson said the deficit confusion revolves around a fund of about $200 million set up by the Conservatives a few years ago, called the fiscal stablization fund.

The Lord government said the money was a rainy day fund to be used to help manage the province's finances over the long term.

When the government saw the $109.4 million deficit in last year's books, it drew down from the stabilization fund to cover off the loss. It then claimed a $1 million surplus.

Wilson said stabilization funds, which can be found in several other provinces as well as New Brunswick, cannot be used to artificially manufacture a surplus.

"In our world, in the public sector, the surplus for the year is the difference between the amount of money you bring in and the amount of money you spend," the financial watchdog said.

"To take money out of a bank account does not give you any more money in that year. That's basically what happened. They (the Tory government) took money out of a special bank account and sort of indicated that maybe that's new revenue. It's just money that was in a bank account."

Wilson also examined New Brunswick's high rates of absenteeism in its civil service.

He said New Brunswick has the highest rate in the country of civil servants calling in sick, each averaging 10.4 days a year.

Wilson also noted the month with the highest number of sick days is October.

He would not speculate whether that might have something to do with the start of hunting season in the province.