Unrestricted revenue is accounted for in the current unrestricted fund. Restricted gifts, grants, endowment
income and other restricted resources are accounted for in the current restricted fund, loan funds, endowment
and plant funds. Revenue and expenditures are reported in the current restricted fund when financial resources
are used for the current operating purposes for which they have been provided. Transactions related to the
various student loan programs operated by the educational institutions are accounted for in loan funds. Resources
dedicated to the acquisition and investment in property, plant and equipment are accounted for in the plant funds.
To the extent current funds are used to finance plant assets, the amounts so provided are accounted for as (1)
expenditures, in the case of normal replacement of movable equipment and library books; (2) mandatory transfers,
in the case of required provisions for debt repayment and interest, and equipment renewals and replacements; and
(3) transfers of a nonmandatory nature in all other cases. 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.

Grant Revenues:

Federal reimbursement type grants are recorded as revenues when the related expenditures are incurred in
the unrestricted current fund and when the cash is received or expenditures are incurred in the restricted current
fund. A portion of the fund balance of the restricted current fund represents cash received in excess of grant
expenditures which is subject to refund to the Federal government if not expended for its intended purpose.

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 year-end
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 governmental colleges
and universities, depreciation is not provided for the cost of property, plant and equipment.

Operating Transfers from State:

A substantial portion of the higher education fund's current unrestricted and plant fund expenditures are
funded through appropriations from the State's general fund and capital projects fund, respectively, at the time
the expenditures are encumbered or paid.

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.

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