Cash Management

During the year, temporary surpluses of cash in general governmental funds were invested in repurchase
agreements and U.S. Treasury and agency obligations with maturities ranging from one to 181 days and in time
deposits ranging from 180 to 365 days. As of June 30,1990, the State's cash resources for general governmental
funds were invested as follows: in repurchase agreements, 70.7 percent; in U.S. Treasury and agency obligations,
27.0 percent; and in certificates of deposit and other, 2.3 percent. The average yield on maturing investments
during the year was 8.6 percent, as compared to 9.1 percent in the prior year, and the amount of interest received
was $125,518,000, which was $33,000 less than the previous year.

Risk Management

The State is involved in legal proceedings, which normally occur in government operations. Such proceedings,
in the opinion of the Attorney General, are not likely to have a material adverse impact on the financial position of
the State's funds, with the possible exception of litigation pertaining to the past savings and loan crisis, the
outcome of which cannot presently be determined.

Shortly after the savings and loan crisis, the State enacted legislation which created the Maryland Deposit
Insurance Fund Corporation (MDIFC), an agency of the State, and required savings accounts of all associations
operating in the State to be insured by either MDIFC or FSLIC. Six of the associations are currently in
receivership, four of which the insured accounts have been acquired by four different banks. The State repaid
insured depositors who had funds in these failed associations.

In addition, the State is very active in the management of its fleet safety program and its various inspection
services pertaining to property, plant, and equipment. The State recently replaced commercial insurance with
self-insurance for a number of minor coverages. Other self-insured risks include: damage to State property below
the limits of the blanket catastrophic policy, fidelity bond, volunteer accident, deductibles on numerous
commercial policies, and judgement and settlements arising from actions in which the violation of a constitutional
right is asserted.

OTHER INFORMATION

The statutes of the State require an audit of every unit of the Executive and Judicial branches of government,
including the Comptroller of the Treasury's records, by the Legislative Auditor at least every two years. The
Legislative Auditor is required to be and is a certified public accountant. The Legislative Auditor makes fiscal,
compliance and performance audits of the various agencies and departments of the State and issues a separate
report covering each of those audits. Although certain of those reports include presentations of detailed financial
data and contain expressions of opinion thereon, the audits are usually not made for that purpose. The primary
purpose of the reports is to present the Legislative Auditor's findings relative to the fiscal management of those
agencies and departments.

Additionally, my office requires an audit of the State's general purpose financial statements by a firm of
independent certified public accountants selected by an audit selection committee composed of members from the
Executive and Legislative branches of State government. This requirement has been complied with, and the
opinion of Deloitte & Touche has been included in the financial section of this report. Deloitte & Touche also
performs audits to meet the requirements of the federal Single Audit Act of 1984,0MB Circular A-128, and 0MB
Circular A-110; such information being contained in other reports.

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate
of Achievement for Excellence in Financial Reporting to the State of Maryland for its comprehensive annual
financial report for the fiscal year ended June 30,1989.

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