4. Agency funds account for the receipt and disbursement of various taxes and federal grant proceeds collected
by the State for distribution to the Federal government, political subdivisions and patient and prisoner
accounts.

ACCOUNT GROUPS

General Fixed Assets Account Group:

General fixed assets acquired or constructed for use by the State in the conduct of its activities, other than
activities accounted for in the proprietary fund type, the nonexpendable trust fund and higher education fund,
are reflected in the general fixed assets account group at the time of acquisition. As of June 30, 1980, the State
established and recorded in the general fixed assets account group the estimated cost of general fixed assets based
on available historical cost records. Activity subsequent to June 30,1980, is recorded at cost. Donated fixed assets
are recorded at their fair market value at the time donated. Infrastructure assets, consisting principally of highways,
roads and bridges are not recorded in the general fixed assets account group.

General Long-Term Debt Account Group:

Unmatured long-term general obligation and transportation bonds payable, accrued leave and retirement costs
related to general governmental activities are reflected in the general long-term debt account group.

HIGHER EDUCATION FUND

Transactions related to the financial activities of State higher education institutions are accounted for in the
higher education fund. The financial statements of this fund have been prepared in accordance with the American
Institute of Certified Public Accountants' Industry Audit Guide-Audits of Colleges and Universities and,
accordingly, are presented as a discrete entity in a separate column in the combined balance sheet.

2. Summary of Significant Accounting Policies:

A. All Funds:

Cash and Short-Term Investments:

Substantially all cash and short-term investments are maintained by the State Treasurer on a pooled basis.
Repurchase agreements, consisting principally of U.S. Government securities purchased with agreements to resell,
are reported as cash and short-term investments. The State Treasurer takes possession of the U.S. government
securities put up as collateral, which have a market value of approximately 110% of the principal. Certain funds
have disbursed amounts in excess of their equity in the cash and short-term investments.

Grants:

Federal reimbursement type grants are recorded as revenues when the related expenditures, or expenses,
are incurred.

Retirement Costs:

Substantially all State employees participate in one of seven State retirement systems (see Note 15). The
State also provides retirement benefits to teachers and certain other employees of its political subdivisions.
Retirement expenditures for governmental fund types represent amounts contributed by the State for the fiscal
year. The excess amounts of actuarially determined retirement costs over the amounts recorded as expenditures
are carried in the general long-term debt account group. For the proprietary fund type and higher education fund,
retirement costs have been provided on the accrual basis predicated on actuarial valuations. The excess of retirement
costs provided over amounts funded is carried as a liability in the respective funds.

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