While generally accepted accounting principles and standards of financial reporting for
state governmental units are not well developed nor uniformly applied at this time, the
State's accounting records are maintained and its financial statements are prepared gener-
ally in accordance with methods customarily used by governmental units.

Generally, the State follows the modified accrual basis of accounting. The State records
revenues on a cash basis rather than an accrual basis, except for Federal revenues which
are susceptible to accrual and recorded when earned. Additionally, certain State taxes per-
taining to one fiscal year but collected in the subsequent fiscal year are recorded as rev-
enues in the fiscal year to which they pertain. Expenditures are recorded on the cash basis
during the year and an encumbrance system is employed to account for expenditure com-
mitments (purchase orders and contracts) which remain outstanding at the end of the year.

It is my opinion that the exhibits, supporting statements and schedules presented herein
cover areas of fiscal operations of our State Government which by Constitutional and Legis-
lative mandate have been entrusted to the Office of the Comptroller of the State of Mary-
land. However, if any additional information relative to the contents of this report is de-
sired, my co-workers and I will be most pleased to furnish it to you.

Cordially yours,

LOUIS L. GOLDSTEIN
Comptroller