General endowment funds are subject to the restrictions of gift instruments requiring that the principal
be invested in perpetuity and that only the income be utilized. Term endowment funds are similar to general
endowment funds except, upon the passage of a stated period of time or the occurrence of a particular event,
all or part of the principal may be expended. Quasi-endowment funds have been established by the institutions
for the same purpose as general endowment funds, except any portion of quasi-endowment funds may be
expended. The balances of the fund groups which comprise the endowment funds are general endowment
$34,718,000, term endowments $86,000, and quasi-endowments $6,583,000.

Student Revenues:

Student tuition and fees are fully recognized as revenues in the fiscal year in which the related courses
or activities are principally conducted. Student tuition and fees applicable to future courses and activities and
collected as of the end of the fiscal year are recorded as deferred revenue.

Accounts and Notes Receivable:

An allowance for doubtful receivables is provided for estimated losses expected to be incurred in collection.
The estimated losses are based on historical collection experience and a review of the status of existing
receivables.

Inventories:

Inventories are stated at the lower of cost, using the first-in, first-out method, or market.

Property, Plant and Equipment-
Property, plant and equipment are stated principally at cost at date of acquisition or fair value at date

of donation in the case of gifts. Consistent with generally accepted accounting principles for colleges and

universities, depreciation is not provided for the cost of plant assets.

Operating Transfers from State's General Fund:

A substantial portion of the higher education fund's current unrestricted expenditures, including current
payments for retirement costs and fringe benefits, are funded through appropriations from the general fund
at the time the expenditures are encumbered or paid. The current year retirement funding exceeded the
expense, including amortization of unfunded liabilities over 40 years and interest thereon, by approximately
$7,345,000; this excess reduced the liability for retirement costs recorded in the higher education fund.
Accrued retirement costs are expected to be funded principally through future State appropriations.

3. Budgeting and Budgetary Control:

The Maryland Constitution requires the Governor to submit to the General Assembly an annual balanced
budget for the following fiscal year. This budget is prepared and adopted for the following five Budgetary
Funds:

General Fund:

The General Fund is the fund in which all general transactions of the State are recorded, unless otherwise
directed to be included in another fund.

Special Fund:

The Special Fund includes all of the transportation activities of the State (except for the Maryland
Transportation Authority), fishery and wildlife funds, shared taxes and payments of debt service on general
obligation bonds, whereas the GAAP Special Revenue Fund includes only the operations (other than debt
service) of the Maryland Department of Transportation Trust Fund.

Federal Fund:

The Federal Fund is the fund in which principally all grants from the Federal government are recorded.

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