Accrued Workers' Compensation Costs:

The accrued workers' compensation costs represent the liability for anticipated claims and claims expense for
State employees. The State records expenditures in the general fund and other funds as the claims are paid. The
accrued workers' compensation costs are reported in the general long-term debt account group and accrued as a
liability for the proprietary fund type and higher education fund.

Employee Benefit Costs:

Substantially all expenditures for pension, health and Federal social security benefits of governmental fund
types are reported as program expenditures in the respective funds when paid. Benefit costs applicable to the
proprietary fund type and higher education fund are reflected as expenses or expenditures in the respective funds.

The State also provides, in accordance with State Merit System Laws, postemployment health care benefits to
retired employees and their dependents (generally employees who retired before July 1, 1984, employees who
retired on or after July 1, 1984, with at least 5 years of creditable service and employees who receive disability
retirement allowances or special death benefits). The State subsidizes approximately 50% to 90% of covered
medical and hospitalization costs, depending on the type of insurance plan. The State assesses a surcharge for
postemployment health care benefits which is based on health care insurance charges for current employees.
During fiscal year 1993 these benefits amounted to $41,649,000. There are 24,529 participants currently eligible
to receive benefits.

Principally all full-time employees accrue annual leave based on the number of years employed up to a
maximum of 25 days per calendar year. Earned annual leave may be accumulated up to a maximum of 45 days as of
the end of each calendar year. Accumulated earned but unused annual leave for general government employees is
accounted for in the general long-term debt account group. Liabilities for accumulated earned but unused annual
leave applicable to proprietary fund type and the higher education fund are reported in the respective funds.

Total Memorandum Only:

The "Total Memorandum Only" column represents an aggregation of the individual combined financial
statements and does not represent consolidated financial information.

B. Governmental Fund Types, Expendable Trust and Agency Funds:
Basis of Accounting:

The accounts of the general, special revenue, debt service, capital projects, expendable trust and agency funds
are maintained and reported using the modified accrual basis of accounting. Under the modified accrual basis of
accounting, revenues are susceptible to accrual and recognized in the financial statements when they are both
measurable and available to finance operations during the fiscal year or liquidate liabilities existing at the end of
the fiscal year. Material revenues susceptible to accrual include: federal grants, personal income taxes, sales and
use tax, and motor vehicle fuel and excise taxes. Expenditures are recognized when obligations are incurred as a
result of receipt of goods and services. Modifications to the accrual basis of accounting include:

• Interest on long-term obligations reflected in the general long-term debt account group is recognized in the
debt service fund when it becomes payable.

• Inventories of materials and supplies are recorded as expenditures when purchased. Such inventories are
not material.

• Obligations for retirement costs, workers' compensation costs and employees' vested annual leave and sick
leave are recorded as expenditures when paid.

• Encumbrances represented by executed and unperformed purchase orders and contracts, which are
approved by the Department of Budget and Fiscal Planning, are recorded as reservations of fund balance as
of the end of the fiscal year.

Grants:

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

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