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 or market, using the first-in, first-out method.

Property, Plant and Equipment:

Property, plant and equipment are stated principally at cost as of the date of acquisition or fair value as of the date of donation in
the case of gifts. Consistent with generally accepted accounting principles for governmental colleges and universities, depreciation
expense related to property, plant and equipment is not recorded.

Operating Transfers from the 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.

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 includes all transactions of the State, unless otherwise directed to be included in another fund.

Special Fund:

The Special Fund includes the transportation activities of the State, fishery and wildlife funds, shared taxes and payments of debt
service on general obligation bonds. In contrast, the GAAP special revenue funds include only the operations (other than debt
service and pension activities) of the Maryland Department of Transportation and Maryland Transportation Authority.

Federal Fund:

The Federal Fund accounts for substantially all grants from the Federal government.

Higher Education Fund:

The Higher Education Fund includes the Current Unrestricted Fund which accounts for unrestricted revenue used or available
for use in carrying out the current operations and the Current Restricted Fund of the State's colleges and universities which accounts
for restricted gifts, grants and other restricted resources.

Budgetary Fund Equities and Other Accounts:

In addition to the annual budget, the General Assembly adopts authorizations for the issuance of general obligation bonds. The
expenditures of the resources obtained thereby are accounted for in the capital projects fund. Because capital projects fund
authorizations are not part of the annual budget, capital projects fund activities are not presented in the Combined Statement of
Revenues, Expenditures and Encumbrances, Other Sources and Uses of Financial Resources, and Changes in Fund Balances -
Budget and Actual - for the year ended June 30, 2000.

All State budgetary expenditures for the general, special, federal, current unrestricted and current restricted funds are made
pursuant to appropriations in the annual budget, as amended from time to time, by budget amendments. State governmental
departments and independent agencies may, with the Governor's approval, amend the appropriations by major function within the
budgetary general fund, provided they do not exceed their total general fund appropriations as contained within the annual budget.
Increases in the total general fund appropriations must be approved by the General Assembly. For the fiscal year ended June 30,
2000, the General Assembly approved a net increase in General Fund appropriations of $73,293,000. Appropriations for programs
funded in whole or in part from the special, federal, current unrestricted or current restricted funds may permit expenditures in
excess of original special, federal, current unrestricted or current restricted funds appropriations to the extent that actual revenues
exceed original budget estimates and such additional expenditures are approved by the Governor or, in the case of the University
System of Maryland, the Board of Public Works. Unexpended appropriations from the general fund may be carried over to
succeeding years to the extent encumbrances are approved by the Department of Budget and Management, with all other
appropriations lapsing as of the end of the fiscal year. Unexpended appropriations from special, federal, current unrestricted and
current restricted funds may be carried over to the extent of (a) available resources, and (b) encumbrances approved by the
Department of Budget and Management.

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