A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

1.  Accrual Basis

 The accompanying financial statements have been prepared principally on the accrual basis in accordance with the generally accepted accounting principles set forth for public colleges and universities.  The statement of current funds revenues, expenditures, and other changes is a statement of financial activities of current funds related to the current reporting period.  It does not purport to present the results of operations or the net income or loss for the period as would a statement of income or a statement of revenues and expenses.  The University is a component unit of the State of Vermont, as it receives an annual appropriation from the State.

 To the extent that current funds are used to finance plant assets, the amounts so provided are accounted for as (1) expenditures, in the case of normal replacement of movable equipment and library books; (2) mandatory transfers, in the case of required provisions for debt amortization and interest and equipment renewal and replacement; and (3) transfers of a nonmandatory nature in all other cases.

2.  Fund Accounting

 In order to ensure observance of limitations and restrictions placed on the use of resources available to the University, the accounts of the University are maintained in accordance with the principles of "fund accounting."  This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified.  Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups.  Accordingly, all financial transactions have been recorded and reported by fund group.  Within each fund group, fund balances restricted by outside sources are so indicated and are distinguished from unrestricted funds allocated to specific purposes by action of the Board of Trustees.  Externally restricted funds may only be utilized in accordance with the purposes established by the source of such funds and are in contrast with unrestricted funds over which the Board of Trustees retains full control to use in achieving any of its institutional purposes.  A summary of fund group definitions follows:

 - Current Funds - Funds available for current operations, including those for restricted as well as unrestricted purposes.

 - Loan Funds - Funds available for loans to students.

 - Endowment and Similar Funds - Funds subject to the restrictions of gift instruments requiring in perpetuity that the principal be invested and only the income be utilized.  Term endowment funds are similar to endowment funds except that upon the passage of a stated period of time or the occurrence of a particular event, all or part of the principal may  be expended.  While quasi-endowment funds have been established by the Board of Trustees for the same purposes as endowment funds, any portion of quasi-endowment funds may be expended subject to donor-imposed restrictions.

 - Plant Funds - Funds to be used for the construction, rehabilitation and acquisition of physical properties for institutional purposes, funds accumulated for the retirement of indebtedness thereon and funds already expended for plant properties.

 - Agency Funds - Funds held by the University acting as custodian or fiscal agent.  The funds are deposited with the University for safekeeping, to be used or withdrawn by the depositor at will.  The transactions of this fund do not affect the statement of changes in fund balances.

 All gains and losses arising from the sale, collection, or other disposition of investments and other noncash assets are accounted for in the fund which owned such assets.  Ordinary income derived from investments, receivables, and the like is accounted for in the fund owning such assets, except for income derived from investments of endowment and similar funds, which income is accounted for in the fund to which it is restricted or, if unrestricted, as revenues in unrestricted current funds.

 All other unrestricted revenue is accounted for in the unrestricted current fund.  Restricted gifts, grants, appropriations, endowment income, and other restricted resources are accounted for in the appropriate restricted funds.  Restricted current funds are reported as revenues and expenditures when expended for current operating purposes.

3.  Investments

 The University reports investments of all funds at fair value.  The University records its purchases and sales of investments on a trade date basis.

4.  Government Appropriations and Grants

 Revenues associated with contracts and grants are recognized as related costs are incurred.  The University has recorded reimbursement of indirect costs relating to government contracts and grants at a predetermined rate.

5.  Contracts and Grants

 As of June 30, 2000, the University had been awarded contracts and grants approximating $35,698,000 ($33,724,000 as of June 30, 1999) for which funds had not been received and expenditures had not been incurred.

 Funds received from grants and contracts are recorded as revenue when expenditures are made for designated purposes.

6.  Gifts and Private Grants

 Gifts are recorded as revenues upon receipt.  Gifts other than cash are recorded at their fair value at the date of contribution.

7.  Endowment and Similar Funds

 Income earned on unrestricted and restricted endowment funds is recorded as revenue when earned.

 The University's primary objective for investments of endowments is to provide a satisfactory return on investment for the support of University operations based upon the Prudent Person Principle.  The University's specific investment objective is to maintain an average annual real total return (net of investment management fees) of at least 5% over the long-term (rolling five year periods).  Real total return is the sum of capital appreciation (or loss) and current income adjusted for inflation by the Consumer Price Index.

 Deposits with trustees in endowment and agency funds represent amounts held under deferred giving arrangements.  Of these amounts, $94,000 and $348,000, respectively, are reported at cost.  The University believes that any difference between cost and fair value is immaterial.

8.  Pensions

 The Board of Trustees has authorized the University to pay guaranteed pension benefits to certain retirees employed prior to July 1, 1946.  The actuarial determination of nonvested cumulative amounts to be paid from unrestricted current funds as guaranteed pension benefits from July 1, 2000 through June 30, 2009 is $140,000.  Such payments were $50,000 and $52,000 in fiscal 2000 and 1999, respectively.  Payments for the faculty early retirement plan approved by the Board of Trustees in October, 1980, were $768,000 in fiscal 2000 and $677,000 in fiscal 1999.

9.  Deposits and Investments

 During 2000, the University realized a net gain of  $11,970,000 from the sale of investments.  The calculation of realized gains is independent of the calculation of the net increase in the fair value of investments.  Realized gains and losses on investments that had been held in more than one fiscal year and sold in the current year may have been recognized as an increase or decrease in the fair value of investments reported in the prior year.  The net increase in the fair value of investments during 2000 was $15,327,000.  This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year.  The unrealized gain on investments held at year-end was $39,072,000.

10.  Employee Benefits

 The University provides health and dental insurance to retired and disabled employees and their families during their lives and life insurance until age 70.

 The health, dental and life insurance plans are paid by the University on a premium basis at the same rates as active employees.  The total cost for active and retired employees for health, dental and life insurance, net of employee contributions, was $15,169,000 in 2000 and $14,365,000 in 1999.

 Of the 3,933 employees receiving benefits during the year ended June 30, 2000, 2,984 were active and 949 were retired.

11.  Compensated Absences

 The University accrues amounts for compensated absences (principally vacation allowances) as earned.  The amounts are included in accrued liabilities.

 As of June 30, 2000, $7,833,000 was accrued for vacation pay of which $4,737,000 was charged to current unrestricted funds and $3,096,000 was included in deferred charges to be recovered from restricted funds when paid.

12.  Pledges Receivable

 The University follows the practice of not recording pledges receivable in the financial statements.  Such pledges were not significant at June 30, 2000 and 1999.

13.  Income Tax Status

 The University has received a letter from the Internal Revenue Service recognizing the University as an organization which is tax-exempt on related income under Section 501 (a) of the Internal Revenue Code.