EB.00
State Treasurer
Operating Budget Data
($ in Thousands)
FY 00 FY 01 FY 02 % Change
Actual Working Allowance Change Prior Year
General Fund $3,976 $4,145 $5,240 $1,095 26.4%
Special Fund 285 354 424 71 20.1%
Reimbursable Fund 17,022 17,493 18,082 589 3.4%
Total Funds $21,283 $21,992 $23,747 $1,755 8.0%
! A $650,000 fiscal 2001 general fund deficiency appropriation is requested to begin funding of an
information technology modernization plan. Additional funds are included in the fiscal 2002
allowance to continue the modernization effort. (See Issue 1.)
Personnel Data
FY 00 FY 01 FY 02
Actual Working Allowance Change
Regular Positions 51.00 53.00 55.00 2.00
Contractual FTEs 0.00 0.00 0.00 0.00
Total Personnel 51.00 53.00 55.00 2.00
Vacancy Data: Permanent
Budgeted Turnover: FY 02 2.15 3.90%
Positions Vacant as of 12/31/00 6.00 11.3%
! Two new positions are included in the allowance. One is intended to support the information
technology modernization effort. The other is intended as general office support.
Note: Numbers may not sum to total due to rounding.
For further information contact: Steven D. McCulloch Phone: (410) 946-5530
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EB.00 - State Treasurer
Analysis in Brief
Issues
State Treasurer's Office Embarks on Information Technology Modernization: The State Treasurer's
Office began implementing its information technology plan earlier this fiscal year. A $650,000 deficiency
is requested in support of this effort, and the fiscal 2002 allowance includes $1.9 million, including wages
and salaries, for this purpose. It is unclear if the benefits outweigh the substantial investment being
requested. It is recommended that funding for this effort be deferred with the exception of
proposed server upgrades and PC upgrades to Windows2000 and Office2000.
Managing for Results Objectives Need Improvement: As discussed in last year's budget analysis, the
objectives listed in the State Treasurer's Office's Managing for Results submission are not adequate to
fulfill their intended function in the Managing for Results effort. The State Treasurer's Office should
reformulate its Managing for Results objectives for submission with the fiscal 2003 budget.
State Treasurer's Office Misses Arbitrage Payment : The State Treasurer's Office was more than 180
days late in remitting arbitrage earnings as required by federal law. Late payments are subject to interest
costs and possible penalties. The Treasurer should be prepared to brief the committees on the
likelihood of future arbitrage payments and procedural changes made to ensure payments are
made in a timely fashion.
Recommended Actions
Funds Positions
1. Reduce funds for contractual programming and purchase of a high $ 705,900
speed check printer related to the State Treasurer’s Office’s
information technology modernization proposal.
2. Delete new network specialist position. $ 34,709 1.0
3. Adopt committee narrative requesting the State Treasurer’s Office
to reformulate its Managing for Results objectives to be specific
measurable targets towards accomplishment of a goal.
4. Reduce deficiencyappropriation funding for information technology $ 533,000
system modernization.
Total Reductions to Fiscal 2001 Deficiency Appropriation $ 533,000
Total Reductions to Allowance $ 740,609 1.0
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EB.00 - State Treasurer
Updates
Report Submitted on Investments for the Community Services Trust Fund: The State Treasurer's
Office indicates that State law restricts the types of investments that may be made with State funds which
limits its ability to increase the return on investments for the Community Services Trust Fund.
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EB.00
State Treasurer
Operating Budget Analysis
Program Description
The State Treasurer is responsible for the management and protection of State funds and property.
To carry out these responsibilities, the State Treasurer selects and manages the depository facilities for
State funds, issues or authorizes agents to issue payments of State funds, invests excess funds, safeguards
all State securities and investments, and provides insurance protection against damage to State property
and liability of State employees. The State Treasurer also administers the sale of Maryland general
obligation bonds and serves as a member of the Board of Public Works. The Office of the State Treasurer
consists of four programs: treasury management, insurance management, insurance coverage, and bond
sale expenses.
Proposed Deficiency
A fiscal 2001 general fund deficiency appropriation totaling $650,000 is requested for the State
Treasurer's Office to support its information technologysystem modernization efforts. The modernization
initiative is discussed in Issue 1.
Governor’s Proposed Budget
As shown in Exhibit 1, the fiscal 2002 allowance for the State Treasurer’s Office increases by nearly
$1.8 million representing an 8% increase over the fiscal 2001 working appropriation. General funds
increase by nearly $1.1 million which is a 26.4% increase over the current year. Special funds increase
by nearly $71,000 (20.1%) and reimbursable funds increase by over $588,000 (3.4%).
Personnel items account for $478,000 of the increase. This includes funding for two new positions
as well as annualization of the fiscal 2001 increments and cost-of-living allowance and the general salary
increase. One of the new positions is a computer network specialist requested to support the office’s
systems modernization effort (see Issue 1.) The other new position being requested is a management
associate to provide general office support.
The majority of the non-personnel increases ($936,000) is included to support the office’s information
technology modernization effort. This effort includes contractual programming support, server and high
speed printer purchases, and software upgrades.
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EB.00 - State Treasurer
Exhibit 1
Governor's Proposed Budget
State Treasurer
($ in Thousands)
General Special Reimbursable
How Much It Grows: Fund Fund Fund Total
2001 Working Appropriation $4,145 $354 $17,493 $21,992
2002 Governor's Allowance 5,240 424 18,082 23,747
Amount Change $1,095 $71 $589 $1,755
Percent Change 26.4% 20.1% 3.4% 8.0%
Where It Goes:
Personnel Expenses
New positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64
Fiscal 2002 general salary increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Increments, fiscal 2001 increase phase-in and other . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Employee and retiree health insurance rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Retirement contribution rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24)
Turnover adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Other fringe benefit adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
System Modernization
Contractual programming support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555
Equipment leases - computer servers and high speed printer . . . . . . . . . . . . . . . . . . . . 306
Connectivity upgrades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Windows2000/Office2000 upgrade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Packaged application software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Further Items
Contractual programming support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Statewide insurance coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
New pool car and associated expenses - assigned to insurance risk management 18
function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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EB.00 - State Treasurer
Check printing supplies - safety paper, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Computer equipment replacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24)
Other Changes 60
Total $1,755
Note: Numbers may not sum to total due to rounding.
Performance Analysis: Managing for Results
Selected performance measures for the State Treasurer’s Office are shown in Exhibit 2. The
deficiencies of the State Treasurer's Office's Managing for Results efforts are discussed in Issue 2.
Exhibit 2
Program Measurement Data
State Treasurer
Fiscal Years
Ann. Ann.
Actual Actual Est. Actual Est. Est. Chg. Chg.
1998 1999 2000 2000 2001 2002 98-00 00-02
Percent of time cash
flow projections meet
cash flow requirements n/a n/a 99% 99% 99% 99% n/a 0.0%
Rate of return on
investments 5.54% 5.18% 5.25% 5.61% 5.5% 5.5% n/a n/a
90-day Treasury Bill
Rate 5.16% 4.60% n/a 5.38% 5.11% 4.75% n/a n/a
Ratio of State return to
90-day Treasury Bill
Rate 1.07 1.13 n/a 1.04 1.07 1.07 -1.4% 1.4%
Average number of days
to reconcile bank
accounts 45 30 30 30 30 30 -18.4% 0.0%
Average life span of an
open insurance claim
(days) n/a n/a n/a n/a 130 110 n/a n/a
Source: State Treasurer
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EB.00 - State Treasurer
Issues
1. State Treasurer's Office Embarks on Information Technology Modernization
The State Treasurer's Office hired a consultant in fiscal 2000 to develop an information technology
(IT) master plan. The master plan developed plans for two IT initiatives. The first is a system
modernization effort, and the second involves conversion of the insurance function to a paperless office
to facilitate providing insurance information over the Internet.
System Modernization
The system modernization effort would involve upgrading and improving the office's networks and
data communications abilities, improvement of specialized software used by the office, replacement of
computer servers and a high speed check printer, and conversion of all user systems within the office to
the Windows2000 operating system and Office2000 applications.
The Information Technology Project Request (ITPR) Form, the submittal of which is required by the
Department of Budget and Management, indicates costs of the modernization efforts are multi-year but
only fiscal 2002 costs are broken out in the form itself. The fiscal 2002 costs associated with this effort,
including salaries and wages, is $1.9 million. A fiscal 2001 deficiency request of $650,000 also relates to
this effort. The ITPR anticipates the replacement of computer servers and the high speed check printer
through use of five-year capital equipment leases; therefore, costs would continue through fiscal 2006.
The $650,000 deficiency would be used for the following purposes:
! $416,000 for contractual programming support for 9/1/00 through 3/31/01;
! $109,000 for contractual programming support for 4/1/01 through 6/30/01;
! $117,000 for the first year of a five-year capital lease for an AS/400 computer server; and
! $8,000 unexplained.
As indicated by the first item, the Treasurer spent over $400,000 on this initiative prior to the General
Assembly having the opportunity to comment on whether or not the initiative should be pursued. The
State Treasurer's Office does have a contingency plan to cover this expense should the General Assembly
choose not to support the modernization initiative. This would require all work currently underway to
be halted, two IT related positions currently vacant to remain vacant, and the possible use of funds
budgeted for banking fees should actual fees turn out to be less than the estimate. The Treasurer should
explain why substantial funds were committed to a project that had not received legislative
approval.
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EB.00 - State Treasurer
The funds requested for fiscal 2002 would include $555,000 in additional contractual programming
support including work to complete the office's Transaction Reconciliation System, and $45,000 to
connect to the Annapolis Campus Network and upgrade PCs to Windows2000 and Office2000. In
addition, $306,000 is included to provide the second lease payment on the AS/400 server as well as the
first of five annual lease payments for the purchase of a high speed check printer. Also included in this
amount is just over $38,000 to provide for the replacement of two Netfinity web servers and one network
server.
One of the functions of the IT master plan and ITPR is to link IT initiatives to the agency's Managing
for Results efforts. While these documents do reference many of the office's objectives, as discussed in
Issue 2 most of the office's objectives do not conform to the Managing for Results guidelines of being
specific measurable targets towards the accomplishment of a goal. Without adequate objectives, it is
impossible to evaluate whether the expenditure of additional resources is worthwhile.
The IT master plan indicates that three performance measures will be used to measure the success of
the modernization project:
! average number of days to reconcile bank accounts;
! percent of dollars disbursed to vendors by electronic means; and
! portion of funds available for investment.
For bank account reconciliation, the office's stated objective is to do the reconciliations within 30 days of
receipt of the bank statement. The office is already meeting this objective and has since fiscal 1999. It
is unclear what the benefit of increasing the percent of dollars disbursed to vendors by electronic means
is because the goal of maintaining the most effective and efficient banking services for the State and the
objective of maximizing the use of electronic payments do not provide any measurable data to indicate
what the savings associated with doing so would be. Finally, the portion of funds available for investment
in fiscal 2000 was 99.7%. The benefits of achieving the last 0.3% are likely to be outweighed by the costs,
and it is not clear how much system modernization would further this effort.
Although the need for the overall modernization plan is unclear, portions of the project would stand
alone and could be accomplished without carrying out other items. These include providing for
connection to the Annapolis Campus Network and PC upgrades to Windows2000 and Office2000
($45,000) and possibly the purchase of the AS/400 server to replace the current server which is becoming
obsolete ($117,000/year for five years.) It is recommended that the components of system
modernization other than the PC upgrades to Windows2000/Office2000 connection to the
Annapolis Complex Network and the servers, be deferred until the State Treasurer's Office
provides a cost benefit analysis which demonstrates that the improvements sought outweigh the
substantial costs being considered.
Insurance Paperless Office Conversion
The paperless office conversion is being proposed to help meet the eMaryland IT goals and the State
Treasurer's Office's goals of improving its services to citizens and business partners. The effort involves
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EB.00 - State Treasurer
enhancing insurance claim processing and insurance trust fund management and moving these functions
to a web-based system. The fiscal 2002 costs of $150,000 are relatively modest. Contractual
programming costs comprise the majority of the fiscal 2002 funds being requested. The ITPR for this
initiative indicates that there will be maintenance and enhancement costs associated with this initiative in
fiscal 2003 - 2005 but does not provide specific dollar amounts for these items.
The ITPR lists the initiative as supporting two objectives in support of the goal to improve information
processing and access of insurance claim data:
! to establish the framework to allow for the public access on insurance claim information through the
Internet; and
! to establish the information technology infrastructure that will support processing an insurance claim.
This goal and two objectives are new to the State Treasurer's Office's Managing for Results submission.
No new performance measures were added although the IT master plan indicates that the success of the
project would be measured by the percent improvement in accuracy and efficiency of processing an
insurance claim. It is unclear how these items will be measured. The Treasurer should be prepared to
explain how improvements in the insurance function will be measured and what the out-year costs
of this initiative will be.
2. Managing for Results Objectives Need Improvement
As discussed in last year’s analysis, the performance measures reported by the State Treasurer’s Office
suffer from the lack of objectives that are specific measurable targets towards the accomplishment of a
goal. Many of the objectives instead utilize phrases such as “maximize,” “where feasible,” and “as cost
effectively as possible.” These types of objectives make it impossible to determine from the performance
indicators whether or how much progress is being made towards meeting the stated goals. It was
suggested in last year’s budget analysis that the State Treasurer’s Office refine its Managing for Results
criteria by restating objectives as specific measurable targets. Other than adding new goals and objectives
related to information technology modernization, no changes were made to the office’s Managing for
Results items. The following committee narrative is recommended.
State Treasurer's Office's Managing for Results Objectives: Managing for Results is a major
budgetary initiative which attempts to relate budget expenditure to the accomplishment of specified goals.
In order to be effective in guiding spending, the objectives adopted by agencies must be specific
measurable targets toward the accomplishment of a goal. Most of the objectives contained in the State
Treasurer's Office's Managing for Results submission do not meet this criteria. The State Treasurer's
Office is requested to reformulate its objectives for submission with the fiscal 2003 budget.
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EB.00 - State Treasurer
Information Request Author Due Date
Reformulation of Managing for Results State Treasurer's Office With submission of
Objectives to be specific measurable fiscal 2003 budget.
targets.
3. State Treasurer's Office Misses Arbitrage Payment
Issuers of tax-exempt financing are required by federal tax law to remit arbitrage earnings by the fifth
anniversary after the settlement date of the tax-exempt sale. Arbitrage results when the interest income
on invested proceeds from the tax-exempt financing exceeds the interest paid on the proceeds by the
issuer. Arbitrage earnings submitted after the five-year anniversary of the sale, but within 60 days of the
anniversary, must include interest on the earnings. Payments submitted more than 180 days after the
anniversary may be subject to a penalty of up to half of the arbitrage earning.
The State Treasurer's Office is responsible for administering Maryland's general obligation bond sales
and tracking the investment of funds for the purpose of determining arbitrage. Maryland realized arbitrage
earnings on the March 1995 bond sale but did not remit the earnings until October 2000. While this was
more than 180 days past the five-year anniversary of the settlement date, the office indicates that only
interest on earnings was required. The payment, including interest, totaled $200,074. This amount is
being requested as a fiscal 2001 deficiency appropriation in the Public Debt budget.
The State Treasurer's Office indicates that this payment was overlooked because the State has not
experienced any arbitrage earnings for several years. However, the large cash balances in the general
obligation bond proceeds account the past few years may result in the need to remit further arbitrage
earnings in the future. The State Treasurer's Office indicates that prior to each budget cycle the State's
bond council will do the necessary calculations to determine if arbitrage earnings need to be remitted and
the payments will be included in the budget for Public Debt. The Treasurer should be prepared to brief
the committee on the likelihood of additional arbitrage earnings and any other procedural changes
made to ensure payments are remitted in a timely fashion.
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EB.00 - State Treasurer
Recommended Actions
Amount Position
Reduction Reduction
1. Reduce funds for contractual programming and $ 705,900 GF
purchase of a high speed check printer related to the
State Treasurer’s Office’s information technology
modernization proposal. The reduction allows funds
included for replacement of aging computer servers,
connection of the State Treasurer’s Office to the
Annapolis Campus Network, and the upgrading of PCs
to Windows2000 operating system and Office2000
applications.
2. Delete new network specialist position. If the system 34,709 GF 1.0
modernization initiative is deferred, the State
Treasurer’s Office can convert one of two existing
information technology related positions that are
currently vacant to serve as a network specialist.
3. Adopt the following narrative:
State Treasurer's Office's Managing for Results Objectives: Managing for Results is a major
budgetary initiative which attempts to relate budget expenditure to the accomplishment of
specified goals. In order to be effective in guiding spending, the objectives adopted by agencies
must be specific measurable targets toward the accomplishment of a goal. Most of the objectives
contained in the State Treasurer's Office's Managing for Results submission do not meet this
criteria. The State Treasurer's Office is requested to reformulate its objectives for submission
with the fiscal 2003 budget.
Information Request Authors Due Date
Reformulation of Managing State Treasurer’s Office With submission of the fiscal
for Results Objectives to be 2003 budget
specific measurable targets.
Amount Position
Reduction Reduction
4. Reduce deficiency appropriation funding for $ 533,000 GF
information technology system modernization. The
reduction allows only funds for the first of five annual
lease payments for the purchase of a new AS/400
server.
Total Reductions to Fiscal 2001 Deficiency $ 533,000
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EB.00 - State Treasurer
Total General Fund Reductions to Allowance $ 740,609 1.0
Updates
1. Report Submitted on Investments for the Community Services Trust Fund
The 2000 Joint Chairmen's Report requested the State Treasurer to submit a plan to increase the
return on investments for the Community Services Trust Fund. The Treasurer submitted a letter on July
13, 2000, which indicated that State law restricts the types of investments the Treasurer can make and
therefore limits his ability to increase investment returns for the Community Services Trust Fund. The
Treasurer did note his efforts to maximize investments for the State generally and that the trust fund
earnings benefits from these efforts as well.
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EB.00 - State Treasurer
Appendix 1
Current and Prior Year Budgets
Current and Prior Year Budgets
State Treasurer
($ in Thousands)
General Special Federal Reimb.
Fund Fund Fund Fund Total
Fiscal 2000
Legislative
Appropriation $4,060 $247 $0 $17,441 $21,749
Deficiency
Appropriation 0 0 0 0 0
Budget
Amendments 32 38 0 0 70
Reversions and
Cancellations (116) 0 0 (419) (535)
Actual
Expenditures $3,976 $285 $0 $17,022 $21,283
Fiscal 2001
Legislative
Appropriation $4,128 $354 $0 $17,493 $21,974
Budget
Amendments 18 0 0 0 18
Working
Appropriation $4,145 $354 $0 $17,493 $21,992
Note: Numbers may not sum to total due to rounding.
Budget amendments in fiscal 2000 and 2001 increased general and special funds related to salary
review increases and deferred compensation match amounts. The reimbursable fund reversion in fiscal
2000 results from the purchase of less commercial insurance than estimated.
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Object/Fund Difference Report
State Treasurer
FY01
FY00 Working FY02 FY01 - FY02 Percent
Object/Fund Actual Appropriation Allowance Amount Change Change
Positions
01 Regular 51.00 53.00 55.00 2.00 3.8%
Total Positions 51.00 53.00 55.00 2.00 3.8%
Objects
01 Salaries and Wages $ 2,882,758 $ 2,853,520 $ 3,331,828 $ 478,308 16.8%
02 Technical & Spec Fees 25,523 11,000 21,000 10,000 90.9%
03 Communication 42,670 69,246 96,276 27,030 39.0%
04 Travel 37,581 25,300 36,800 11,500 45.5%
EB.00 - State Treasurer
07 Motor Vehicles 15,257 5,017 23,816 18,799 374.7%
08 Contractual Services 2,385,753 2,848,102 3,619,163 771,061 27.1%
09 Supplies & Materials 295,598 222,542 262,572 40,030 18.0%
10 Equip - Replacement 179,946 27,901 311,000 283,099 1014.7%
14
11 Equip - Additional 15,045 8,697 6,699 (1,998) (23.0%)
13 Fixed Charges 15,407,550 15,920,695 16,037,492 116,797 0.7%
14 Land & Structures (4,477) 0 0 0 0.0%
Total Objects $ 21,283,204 $ 21,992,020 $ 23,746,646 $ 1,754,626 8.0%
Funds
01 General Fund $ 3,976,023 $ 4,145,304 $ 5,240,468 $ 1,095,164 26.4%
03 Special Fund 284,761 353,518 424,428 70,910 20.1%
09 Reimbursable Fund 17,022,420 17,493,198 18,081,750 588,552 3.4%
Total Funds $ 21,283,204 $ 21,992,020 $ 23,746,646 $ 1,754,626 8.0%
Appendix 2
Note: Full-time and contractual positions and salaries are reflected for operating budget programs only.
Fiscal Summary
State Treasurer
FY01 FY01
FY00 Legislative Working FY00 - FY01 FY02 FY01 - FY02
Unit/Program Actual Appropriation Appropriation % Change Allowance % Change
01 Treasury Management $ 4,473,039 $ 4,545,852 $ 4,563,494 2.0% $ 5,870,198 28.6%
01 Insurance Management 1,283,438 1,248,526 1,248,526 (2.7%) 1,588,448 27.2%
02 Insurance Coverage 15,382,170 15,900,000 15,900,000 3.4% 16,008,000 0.7%
01 Bond Sale Expenses 144,557 280,000 280,000 93.7% 280,000 0%
Total Expenditures $ 21,283,204 $ 21,974,378 $ 21,992,020 3.3% $ 23,746,646 8.0%
General Fund $ 3,976,023 $ 4,127,662 $ 4,145,304 4.3% $ 5,240,468 26.4%
Special Fund 284,761 353,518 353,518 24.1% 424,428 20.1%
EB.00 - State Treasurer
Total Appropriations $ 4,260,784 $ 4,481,180 $ 4,498,822 5.6% $ 5,664,896 25.9%
Reimbursable Fund $ 17,022,420 $ 17,493,198 $ 17,493,198 2.8% $ 18,081,750 3.4%
15
Total Funds $ 21,283,204 $ 21,974,378 $ 21,992,020 3.3% $ 23,746,646 8.0%
Appendix 3