Modifications to the accrual basis of accounting to reflect the modified accrual basis include the following:

• 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.

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

Grants:

Revenues from federal reimbursement type grants are recognized when the related expenditures are incurred. Distributions of
food stamp benefits are recognized as revenues and expenditures when the benefits are distributed to individual recipients.

Income Taxes:

The State accrues the net income tax receivable or records a deferred revenue based on estimated income tax revenues and
refunds due relating to the fiscal year, that will not be collected or paid until after the fiscal year end. This accrual is computed based
on projected calendar year net tax collections, tax laws in effect, future projections and historical experience.

Sales and Use Taxes:

The State accrues June sales taxes that are not remitted at year end as a receivable. These taxes are considered measurable and
available since they represent June collections that are remitted to the State in July by merchants who collect the related sales tax.

Property Taxes:

The State levies an annual tax for the fiscal year beginning July 1 and ending June 30 on all real and personal property subject to
taxation, due and payable each July 1 (lien date), based on assessed values as of the previous January 1, established by the State
Department of Assessments and Taxation at various rates of estimated market value. Each of the counties, Baltimore City and
incorporated municipalities establish rates and levy their own tax on such assessed values. The State tax rate since 1982 has been
maintained at 21c per $100 of assessed value. Unpaid property taxes are considered in arrears on October 1, and penalty and interest
of 1% is assessed for each month or fraction of a month that the taxes remain unpaid. Current collections are 98.7% of the total tax
levy for the fiscal year. Property taxes are accrued to the extent they are collected within 60 days of year end.

Escheat Property:

Escheat property is property that reverts to the State's general fund in the absence of legal claimants or heirs. The escheat activity
is reported in the general fund and a liability is recognized for the estimated amount that ultimately will be reclaimed and paid.

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

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