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 States funds.

The State self-insures toward most claims of 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 30,2000, the State,
including its component units, has recorded $224,717,000 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 three 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 auditors 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 Ernst
6c Young LLP has been included in the financial section of this report. In addition, Ernst & Young LLP performs
audits to meet the requirements of the federal Single Audit Act Amendments of 1996 and the Office of
Management and Budget (OMB) Circular A-133, "Audits of States, Local Governments and Non-Profit
Organizations"; 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 30,1999. The Certificate of Achievement is a prestigious national award
recognizing conformance with the highest standards for preparation of state and local government financial reports.

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

A Certificate of Achievement is valid for a period of one year only. The State of Maryland has received a
Certificate of Achievement for the last 20 consecutive years (fiscal years ended 1980-1999). We believe our
current report continues to conform to the Certificate of Achievement Program requirements, and we are
submitting it to GFOA.

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.

Sincerely,William Donald Schaefer
Comptroller of the Treasury
of Maryland

30 COMPTROLLER OF MARYLAND