ACCOUNT GROUPS

Account groups are used to establish accounting control and accountability for the State's general fixed
assets, and the unmatured principal of its general long-term debt and other long-term obligations of
governmental funds. General fixed assets do not represent financial resources available for appropriation and
expenditure, nor does the unmatured principal of general long-term obligations require current appropriation
and expenditure of governmental fund financial resources.

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 the 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 and capital lease obligations 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:
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 16). 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.

Employee Benefit Costs:

Substantially all expenditures for pension, health and Federal Social Security benefits of governmental fund
types, including approximately $422,817,000 of expenditures applicable to teachers and other employees of
political subdivisions and $30,523,000 applicable to retired employees and their dependents, are reported as
program expenditures in the respective funds. Material benefit costs applicable to the proprietary fund type and
higher education fund are reflected as expenses in the appropriate funds.

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