Intergovernmental Expenditures:

General, special revenue and capital projects fund revenues paid to political subdivisions, and bond proceeds
granted to political subdivisions and other public organizations, are recorded as intergovernmental expenditures.
Direct grants and other payments to, or on behalf of, political subdivisions are recorded as current expenditures.

Capital Outlays:

Principally all capital expenditures for the acquisition or construction of State general fixed assets are reported
as capital outlays in the capital projects fund.

C. Enterprise Funds, Pension Trust Funds, Investment Trust Fund and Component Units—Proprietary Funds:
Basis of Accounting:

The accounts of the enterprise funds, investment trust fund, pension trust funds, and component units—
proprietary funds are maintained and reported using the accrual basis of accounting. Under this method, revenues
are recorded when earned and expenses are recorded at the time liabilities are incurred. For the enterprise funds
and component unit proprietary funds, the State has selected the option to apply all applicable GASB pronouncements
and only FASB Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting
Research Bulletins (ARB) issued on or before November 30, 1989.

Grants:

Revenues from federal reimbursement type grants are recorded when the related expenses are incurred.

Property, Plant and Equipment:

Significant property, plant and equipment of enterprise funds are stated at cost. Depreciation of the cost of
property, plant and equipment of the enterprise funds is provided on the straight-line basis over estimated useful
lives of 25 to 50 years for depreciable real property, 5 to 10 years for building improvements, and 3 to 10 years for
equipment. Construction period interest is capitalized. Repairs and maintenance are charged to operations in the
period incurred. Replacements, additions and betterments are capitalized.

Debt Refinancing:

The gain or loss associated with enterprise fund debt refinanced is deferred and amortized to interest expense
over the life of the debt.

Lottery Revenues, Prizes and Operating Transfers:

Revenues and prizes of the Maryland State Lottery Agency (Lottery) are primarily recognized when drawings
are held. Certain prizes are payable in deferred installments. Such liabilities are recorded at the present value of
amounts payable in the future. State law requires the Lottery to transfer to the State revenues in excess of
amounts allocated to prize awards, operating expenses and capital expenditures. The excess revenues from certain
select games are transferred to the State's general fund, which then transfers the amounts to the Maryland
Stadium Authority for operations and to cover the State's capital lease payments to the Maryland Stadium
Authority.

Provisions for Insurance and Loan Losses:

Current provisions are made for estimated losses resulting from insuring loans and uncollectible loans. Loss
provisions are based on the current status of insured and direct loans, including delinquencies, economic conditions,
loss experience, estimated value of collateral and other factors which may affect their realization.

Inventories:

Inventories of the enterprise funds are stated at the lower of cost or market, using the first-in, first-out method.

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