FIDUCIARY FUND TYPES

Transactions related to assets held by the State in a trustee or agency capacity are accounted for in fiduciary
fund types. Fiduciary fund types are comprised of:

1. The expendable trust fund, which reflects the transactions, assets, liabilities and fund equity of the
Unemployment Insurance Program. This fund is used to account for the unemployment taxes collected
from employers, federal revenue received and remittance of benefits to the unemployed, and is accounted
for on a flow of current financial resources measurement focus.

2. The pension trust funds, which reflect the transactions, assets, liabilities and fund equities of the State
administered retirement and pension systems, and is accounted for using the flow of economic resources
measurement focus.

3. Agency funds, which account for the receipt and disbursement of various taxes and federal grant proceeds
collected by the State for distribution to the Federal government and political subdivisions, patient and
prisoner accounts, amounts in the custody of the State Treasurer to be paid to holders of refunded
transportation bonds and amounts withheld from employees and invested in the Deferred Compensation
Plan as directed by the employee.

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 fund
types. 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 and the higher education fund, are reflected in the general
fixed assets account group at the time of acquisition. The general fixed assets are stated at cost or estimated
historical cost. Donated fixed assets are recorded at their fair market value at the time donated. Depreciation is
not provided for general fixed assets. 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:

General obligation and transportation bonds payable, capital lease obligations, unmatured long-term loans
from other funds, accrued workers' compensation costs and accrued annual leave 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
therefore, are presented as a discrete entity in a separate column in the combined balance sheet. This fund
includes the combined activities of the University of Maryland System, St. Mary's College of Maryland, Morgan
State University and Baltimore City Community College.

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.

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