Grants:

Revenues from federal reimbursement type grants are recorded 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 refund due, 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, estimated based upon tax laws in effect, future
projections and historical experience. The portion of the receivable that will not be collected within sufficient time
to liquidate payables as of year end is recorded as deferred revenue on the accompanying balance sheet.

Sales and Use Taxes:

The State accrues June sales taxes that are unremitted 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 98.6% 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 and Pension Trust Funds:
Basis of Accounting:

The accounts of the enterprise funds and pension trust 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 proprietary fund component units 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.

Pension Investment:

Effective July 1, 1995 the State adopted GASB Statement No. 25 "Financial Reporting for Defined Benefit
Pension Plans and Note Disclosures for Defined Contribution Plans," which results in a change in accounting

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