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.

The State continues to replace commercial insurance with self insurance coverage wherever feasible. The State
self insures for most claims for risk of loss, including general liability, property and casualty, workers'
compensation, environmental and anti-trust liabilities and certain employee health benefits. All funds, agencies and
authorities of the state participate in the self insurance programs. As of June 30, 1995, the State has recorded
$160,862,000 in liabilities associated with its self-insurance programs.

Commercial insurance coverage is purchased for specialized exposures such as aviation hull and liability,
steam boiler coverage and certain transportation risks.

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 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 Arthur Andersen, LLP been included in the financial section of this report. In addition, Arthur Andersen,
LLP performs audits to meet the requirements of the federal Single Audit Act of 1984, OMB Circular A-128, and
OMB Circular A-133; 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, 1994.This was the State's 15th consecutive award.

In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and
efficiently organized comprehensive annual financial report, whose contents conform to program standards.Such
reports must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive
annual financial report continues to conform to Certificate of Achievement Program requirements, and we are
submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of the Comprehensive Annual Financial Report on a timely basis could not have been
accomplished without the efforts and dedication of the staff of the General Accounting Division with assistance
from other personnel from the various departments and agencies of the State.

I will be pleased to furnish additional information on the State's finances upon request.

Cordially yours,

Louis L. Goldstein
Comptroller of the Treasury
of Maryland

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