AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 23, 1998.JUNE 4, 2001

REGISTRATION NO. 333-333-61264

AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

MAXIMUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

VIRGINIA 54-1000588
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF IDENTIFICATION NUMBER)
INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
ORGANIZATION)

1356 BEVERLY11419 SUNSET HILLS ROAD, MCLEAN,RESTON, VIRGINIA 2210120190, (703) 734-4200251-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

-------------------------------------------------------

DAVID V. MASTRAN
CHIEF EXECUTIVE OFFICERR. FRANCIS
GENERAL COUNSEL AND SECRETARY
MAXIMUS, INC.
1356 BEVERLY11419 SUNSET HILLS ROAD
MCLEAN,RESTON, VIRGINIA 2210120190
(703) 734-4200251-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:

LYNNETTE C. FALLON, ESQ. ROBERT F. WALL, ESQ.KERRY JOHN TOMASEVICH MICHAEL L. FITZGERALD
PALMER & DODGE LLP R. CABELL MORRIS, JR.SIDLEY AUSTIN BROWN & WOOD LLP
ONE BEACON STREET WINSTON & STRAWNONE WORLD TRADE CENTER
BOSTON, MASSACHUSETTS 02108-3190 35 WEST WACKER DRIVENEW YORK, NEW YORK 10048-0557
(617) 573-0100 CHICAGO, ILLINOIS 60601-9703
(312) 558-5600(212) 839-5300

-------------------------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]/ /

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]/ /

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]/ /

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]/ /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------------

CALCULATION OF REGISTRATION FEE

- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------

Common Stock, no par value........ 4,600,000 shares(2) $28.8125 $132,537,500 $36,846
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------

(1) Estimated solely for the purpose of determining the registration fee and
computed pursuant to Rule 457(c), based upon the average of the high and low
sale prices on November 16, 1998 as reported by the New York Stock Exchange.

(2) Includes a total of 600,000 shares that are subject to over-allotment
options granted to the Underwriters.
-------------------------/ /

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SUBJECT TO COMPLETION
- NOVEMBER 23, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------PRELIMINARY PROSPECTUS , 1998

[MAXIMUS LOGO]
4,000,000DATED JUNE 4, 2001

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

PROSPECTUS

3,500,000 SHARES

OFMAXIMUS-REGISTERED TRADEMARK-
HELPING GOVERNMENT SERVE THE PEOPLE-REGISTERED TRADEMARK-

COMMON STOCK

- ---------------------------------------------------------------------------------------------

We are offering 1,000,000 shares of our common stock and our existing
shareholders are offering 2,500,000 shares of our common stock.

Our common stock trades on the New York Stock Exchange under the symbol
"MMS." On May 31, 2001, the last sale price of our common stock as reported on
the New York Stock Exchange was $36.85 per share.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS, INCLUDING THOSE THAT ARE
DESCRIBED IN THE COMPANY:

- -"RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.

----------------

PER SHARE TOTAL
--------- --------

Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to MAXIMUS....................... $ $
Proceeds to the selling shareholders........................ $ $

The underwriters have an option to purchase up to an additional 525,000
shares from two of the selling shareholders, at the public offering price, less
the underwriting discount, within 30 days from the date of this prospectus to
cover overallotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The shares will be ready for delivery on or about , 2001.

------------------

MERRILL LYNCH & CO.

BEAR, STEARNS & CO. INC.

LEGG MASON WOOD WALKER
INCORPORATED

------------------

The date of this prospectus is , 2001.

DESCRIPTION OF ARTWORK FOR INSIDE FRONT COVER OF PROSPECTUS.

[Map of the United States, Puerto Rico, and the U.S. Virgin Islands, with
flags indicating the locations of MAXIMUS offices. Names of the cities in which
offices are located are spelled out adjacent to their respective flag. The map
is colored in green and the flags are in gold with a red "M".]

TABLE OF CONTENTS

PAGE
--------

Prospectus Summary.......................................... 1
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 14
Use of Proceeds............................................. 15
Market Price of Common Stock and Dividend Policy............ 16
Capitalization.............................................. 17
Selected Consolidated Financial Data........................ 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 29
Management.................................................. 40
Selling Shareholders........................................ 43
Underwriting................................................ 44
Legal Matters............................................... 47
Experts..................................................... 47
Available Information....................................... 47
Incorporation of Certain Documents by Reference............. 47
Index to Consolidated Financial Statements.................. F-1

The MAXIMUS logo, "Helping Government Serve the People" and MAXSTAR are our
registered trademarks. All other registered trademarks and trademarks used in
this prospectus are the property of their respective owners.

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.

(This page has been left blank intentionally.)

PROSPECTUS SUMMARY

THE FOLLOWING IS ONLY A SUMMARY. IT MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE FINANCIAL
STATEMENTS AND THE NOTES TO SUCH STATEMENTS. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE OVERALLOTMENT OPTION IS NOT
EXERCISED. AN INVESTMENT IN OUR COMMON STOCK INVOLVES RISK. THEREFORE, YOU
SHOULD CAREFULLY CONSIDER THE INFORMATION PROVIDED UNDER THE CAPTION "RISK
FACTORS." WE URGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY.

MAXIMUS, INC.

OUR COMPANY

We are a leading provider of program management, and consulting services and
systems solutions primarily to state and local government agencies throughout
the United States. - - MAXIMUS, Inc.
1356 Beverly Road
McLean, Virginia 22101
(703) 734-4200

NYSE SYMBOL: MMS

THE OFFERING:

- - The Company is offering 2,000,000Since our inception in 1975, we have been at the forefront of
innovation in meeting our mission of "Helping Government Serve the
shares and existing shareholders are
offering 2,000,000 of the shares.

- - The underwriters have an option to purchase an additional 600,000 shares from
the Company and selling shareholders to cover over-allotments.

- - There is an existing trading market for these shares. The reported last sales
price on November 19, 1998 was $29.75 per share.

- - We plan to use the proceeds from the offering for general corporate purposes.
We will not receive any proceeds for the shares sold by the selling
shareholders.

- - Closing: , 1998

- ----------------------------------------------------------------------------------------
Per Share Total
- ----------------------------------------------------------------------------------------

Public offering price: $ $
Underwriting fees:
Proceeds to Company:
Proceeds to selling shareholders:
- ----------------------------------------------------------------------------------------

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.

- --------------------------------------------------------------------------------

Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------

DONALDSON, LUFKIN & JENRETTE
LEHMAN BROTHERS
LEGG MASON WOOD WALKER
INCORPORATED

WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING
THIS PROSPECTUS, WE CANNOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL
THE DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN
DECLARED EFFECTIVE THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
3

[GRAPHIC]

Organizational chart showing the divisions that comprise the Company's
Consulting Group and its Government Operations Group.

TABLE OF CONTENTS

PAGE

Prospectus Summary................ 3
Risk Factors...................... 7
Use of Proceeds................... 16
Market Price of Common Stock and
Dividend Policy................. 16
Capitalization.................... 18
Selected Consolidated Financial
Data............................ 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 21

PAGE

Business.......................... 30
Management........................ 44
Selling Shareholders.............. 48
Underwriting...................... 50
Legal Matters..................... 52
Experts........................... 52
Available Information............. 52
Incorporation of Certain Documents
by Reference.................... 53
Index to Financial Statements..... F-1
4

[MAP]

A map of the United States showing the locations of the Company's offices.

[INSERT: Fold-out map showing the Company's geographical coverage. The
fold-out is a two-page fold-out of the inside front cover page.]
5

PROSPECTUS SUMMARY

The following is only a summary. You should carefully read the more
detailed information contained elsewhere in this prospectus, including the
financial statements and the notes to such statements. Unless otherwise
indicated, the information in this prospectus: (1) has been restated to give
effect to the pooling of interests combination with David M. Griffith &
Associates, Ltd. on May 12, 1998; and (2) assumes that the over-allotment option
is not exercised. Investing in the common stock being offered by the Company
involves risk. Therefore, carefully consider the information provided on pages
7-15 under the heading "Risk Factors.People-Registered Trademark-." We urge you to read this prospectus in
its entirety.

THE COMPANY

MAXIMUS, Inc. is a leading provider of program managementuse our expertise, experience and consulting
services to state and local governments throughout the United States. Our
services are designedadvanced
information technology to make government operations more efficient and
cost
effectivecost-effective while improving the quality of the services provided to program
beneficiaries. We apply an entrepreneurial, private sector approach utilizing
advanced technologycurrently have contracts with government agencies in projects in almostall 50
states, 49 of the 50 largest cities and 27 of the 30 largest counties. We have
been profitable every state inyear since we were founded. For the nationfiscal year ended
September 30, 2000, we had revenues of $399.2 million and in
markets in several foreign countries.

Program Management Services. Statenet income of
$30.5 million, and for the six months ended March 31, 2001, we had revenues of
$233.5 million and net income of $18.5 million.

We conduct our operations through three groups: our Government Operations
Group, our Consulting Group and our Systems Group. Our Government Operations
Group administers and manages state and local governmentsgovernment programs on a
fully-outsourced basis. Examples of these programs include welfare-to-work and
job readiness, child care, child support enforcement, managed care enrollment
and disability services. Our Consulting Group provides program planning and
quality assurance services to state and local government agencies, in addition
to general management consulting services and specialized services such as
assisting state and local agencies in maximizing federal funding for their
programs. Our Systems Group provides state and local agencies with systems
design and implementation to improve the efficiency and cost-effectiveness of
their program administration. We offer our own suite of proprietary software
products in addition to customized versions of popular applications such as
PeopleSoft-Registered Trademark-.

MARKET OPPORTUNITIES

We believe that providing program management, consulting services and
systems solutions to government agencies continues to represent significant
market opportunities. The federal, state and local government agencies in the
United States to which we market our services spend approximately $21more than $250 billion
annually to administer theiron health and human services programs. The costs ofBased on currently available
data published by the federal government, we estimate that states spend over
$23 billion annually to administer these programs, represents the largest line
items in manyof which we estimate only a
small portion was outsourced to private service providers, including us. We
believe that state and local government budgets. These health and human
services programs include the following:

- - Medicaid - Child Health Insurance
- - Food Stamps - Child Support Enforcement
- - Temporary Assistance To Needy - Child Care
Families - Child Welfare
- - Supplementary Security Income
- - General Assistance/General
Relief

In the last two fiscal years, we have been awarded $350 million in
contracts to help state and local health and human services agencies manage
their programs. We currently have program management contracts in New York,
California, Texas, Michigan, New Jersey, Florida, Illinois, and many other
states. In addition to the substantial revenues these contracts generate, they
also provide high-profile marketing platforms for us to demonstrate the cost
effectiveness and value of outsourcing program management services to the public
sector.

Consulting Services. We offer consulting services to every state, county
and local government agency, including health and human services, law
enforcement, parks and recreation, taxation, housing, motor vehicles, labor,
education as well as legislatures. We provide highly technical expertise to our
clients in various disciplines, including:

- - Systems planning - Program analysis and evaluation
- - Federal revenue maximization - Electronic benefits and
- - Cost allocation for program funds transfer
reimbursement claiming - Fleet management
- - Human resources management - Systems implementation

Our acquisitions of four consulting companies in 1998 added approximately
2,000 consulting contracts and 500 consultants. Many of these consulting
contracts are with
3
6

smaller cities and counties, which expands our geographic presence and enables
us to sell our full range of products and services to these local governments.
With these acquisitions, MAXIMUS believes it is the largest general management
consulting firm in the country focussed on serving state and local governments.

We believe that government agencies will continueincreasingly rely on
private service providers to turn to companies suchadminister their programs and will also
increasingly engage consultants as MAXIMUSthey seek to reduce costs and improve the
effectivenessdelivery of their programs.services.

OUR COMPETITIVE ADVANTAGES

The following competitive advantages position us to capitalize on the
significant market opportunities presented by the changes in the ways government
provides services.

- SINGLE MARKET FOCUS. We believe that we more effectively administerare the largest company dedicated
to providing program management, consulting services and systems solutions
primarily to state and local government programs due to our
ability to:agencies.

- Accept contracts where compensation is based on performance;

- AttractPROVEN TRACK RECORD. Since 1975, we have successfully completed hundreds
of large-scale program management and compensate experienced, high-level management personnel;

- Rapidly procure and utilize advanced technology;

- Vary the number of personnel on a project to match fluctuating
workloads;

- Increase productivity by providing employees with financial incentives
and performance awards and more readily terminating non-productive
employees;

- Provide employees with ongoing training and career development
assistance; and

- Maintain a professional work environment that is more conducive to
employee productivity.

We are recognized as a principal partner ofconsulting projects for state and
local government agencies for bothserving millions of beneficiaries in nearly
every state.

- ABILITY TO RESPOND TO REQUESTS FOR PROPOSALS. We have significant
expertise and experience in complying with the lengthy and complicated
bidding and proposal process in response to RFPs of government agencies.

- PROPRIETARY PROGRAM MANAGEMENT SOLUTION. We have developed a proprietary
software program, MAXSTAR-Registered Trademark-, that interfaces with
government databases and monitors and tracks cases of program
participants. We use MAXSTAR's scalable and customizable features to
reduce our project implementation time and cost.

- WIDE RANGE OF SERVICES. We leverage our experience in a wide range of
services to pursue new business opportunities and position ourselves to be
a leading e-government consulting and implementation force, as well as a
single-source provider of program management, consulting services and
consulting. With more than 100 offices
located throughout the nation, MAXIMUS has the local presence and decentralized
organizationsystems solutions to promote relationships with the executive and legislative
branches of state and local governments. With more than 2,800 employees
nationwide, the Company has more personnel experienced with government programs
than most state, city or county government agencies. As a result, we offer a
pool of program knowledge and expertise that can be utilized by state and local government agencies to supplement their own capabilities and improve their
operations.agencies.

- MARKET LEADING CONSULTING CAPABILITIES. We believe thatwe have the largest
management consulting practice dedicated to serving state and local
governments, will continue to seek our
services despite the effect of economic cycles on government budgets. In recent
years, as governments at all levels haveled by experienced budget surpluses, new
programs have been initiated to assist even more sectors of American society. In
more austere times, the size of the population enrolled in existing government
programs expands, requiring governments to spend more to administer these
programs, but facing increased pressure to do so cost-effectively.

We strive to provideconsultants with an alternative to the traditional way of doing
business for government agencies. MAXIMUS is working to fulfill its mission of
"Helping Government Serve the People(TM)" by becoming a national resource for
improving the management and service delivery capabilities of governments. Our
national scope and size provides a platform to deliver more cost effective
services by allowing us to capitalize on greater economies of scale, introduce
more specialization, and market ourestablished knowledge
base and valuable government relationships.

- EXPERIENCED TEAM OF PROFESSIONALS. We have assembled a management team of
best practices throughoutformer government executives, state agency officials, information
technology specialists and other professionals, most of whom have more
than seven years of experience in the country. We possess several business strengths that we believe provide us an
advantage over our competitors, including:

- Single market focus resulting from our thorough understandingpublic services industry.

OUR GROWTH STRATEGY

Our goal is to be the leading provider of the
regulationsprogram management, consulting
services and operations of government agencies, with an emphasis onsystems solutions to state and local governmentsgovernment agencies. Our
strategy to achieve this goal includes the following:

- AGGRESSIVELY PURSUE NEW BUSINESS OPPORTUNITIES. We intend to market new
and healthinnovative solutions based on our experience, established
methodologies and human services programs;systems. We also intend to invest in the early
identification of government bid opportunities and to submit competitive
bids that leverage our proven solutions from past projects.

- Proven track record established by more than 23 years of providing
successful government program management and consulting services;
4
7

- WideCONTINUE TO DEVELOP COMPLEMENTARY SERVICES. We intend to continue
broadening our range of services in order to respond to the evolving needs
of our clients and to provide additional cross-selling opportunities.

- RECRUIT HIGHLY SKILLED PROFESSIONALS. We intend to attract and retain
experienced government personnel by leveraging our reputation as a premier
government services consultant with a single market focus.

- PURSUE STRATEGIC ACQUISITIONS. While most of our revenue growth has been
internally generated, we intend to continue to selectively identify and
pursue attractive acquisition opportunities to broaden our services,
enhance our technical capabilities and expand our client base.

We believe that meetswe are well-positioned to benefit from the increasing demands ofcontinued
increase in demand for new program management, consulting services and systems
solutions that has arisen in an environment characterized by changing regulation
and evolving technology. We believe that fiscal pressures will compel state
governments to continue to rationalize program operations and upgrade existing
technology to operate more cost-efficient and productive programs. To achieve
these efficiencies, we believe that many government and other public sector clientsagencies will turn to
outside experts, including us, for integrated vendor offerings;

- Proprietary case management software program, known as MAXSTAR(TM),
that reduces project implementation time and cost; and

- Experienced team of professionals who thoroughly understand the
marketing, assessment and delivery of services to government agencies.

THE OFFERING

Common stock offered:
By the Company............................. 2,000,000 shares
By the selling shareholders................ 2,000,000 shares
------------------
Total.............................. 4,000,000 shares
Common stock to be outstanding after the
offering................................... 20,225,468 shares(a)
Use of proceeds.............................. We intend to use the estimated net
proceeds of $55.7 million that we will
receive from the offering for general
corporate purposes, including: working
capital; expansion of existing operations,
including the acquiring of a new
headquarters; strategic acquisitions of
related businesses; and investment in
systems infrastructures and new
technologies. See "Use of Proceeds." We
will not receive any proceeds from the
shares sold by the selling shareholders.

- ------------------------------

(a) Based on shares outstanding as of November 13, 1998. Excludes 1,141,506
shares issuable upon exercise of options outstanding as of November 13, 1998
and an additional 2,418,591 shares reserved for issuance under the Company's
various equity plans.help.

------------------------

We were incorporated in Virginia in September 1975 and our principal
executive offices are located at 1356 Beverly11419 Sunset Hills Road, McLean,Reston, Virginia
22101.20190. Our world wide webwebsite address is http://www.maxinc.com. Our web site iswww.maximus.com. The contents of our
website are not part of thethis prospectus. Our telephone number is
(703) 734-4200.
5251-8500.

8THE OFFERING

Common stock offered:

By MAXIMUS................................. 1,000,000 shares
By the selling shareholders................ 2,500,000 shares
-----------------
Total.................................... 3,500,000 shares

Shares outstanding after the offering........ 22,605,669 shares

Use of proceeds.............................. We intend to use the net proceeds of this offering for
general corporate purposes, including:

- working capital;

- expansion of existing operations;

- strategic acquisitions of complementary businesses;
and

- investment in systems infrastructures and new
technologies.

We will not receive any proceeds from the sale of
shares by the selling shareholders.

Risk factors................................. See "Risk Factors" beginning on page 6 for a discussion
of factors you should carefully consider before
deciding to buy shares of our common stock.

NYSE symbol.................................. "MMS"

- ------------------------

The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of May 31, 2001 and
(1) includes 95,362 shares of common stock issuable upon exercise of vested
stock options to be exercised prior to completion of this offering by the
selling shareholders and (2) excludes 3,949,313 shares issuable upon exercise of
options outstanding as of May 31, 2001 and an additional 730,843 shares reserved
for issuance under our 1997 Equity Incentive Plan and our 1997 Director Stock
Option Plan.

SUMMARY CONSOLIDATED FINANCIAL DATA(a)DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

We have presented below information derived from our consolidated statements
of income and balance sheet. Our consolidated financial statements for the three
years ended September 30, 2000 have been audited by Ernst & Young LLP,
independent auditors. The summary consolidated financial data for the six months
ended March 31, 2000 and as of and for the six months ended March 31, 2001 have
been derived from unaudited financial statements which, in the opinion of our
management, reflect all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of this data. You should read the following
information in conjunction with our consolidated financial statements and
related notes, as well as "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

YEARSSIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, ------------------------------------------------------
1994 1995MARCH 31,
------------------------------------------------------- -------------------
1996 1997 1998 1999 2000 2000 2001
----------- -------- -------- -------- -------- -------- --------
(UNAUDITED)

STATEMENT OF INCOMEOPERATIONS DATA:
Revenues:
Government Operations Group.................. $11,779 $16,951Group......... $ 20,68177,211 $ 65,75797,369 $139,263 $177,428 $221,177 $105,210 $127,069
Consulting Group....... 42,720 51,275 58,462 69,955 94,210
SSA Contract(b)........ 2,943 14,314 56,530 31,612 --
------- -------Group.................... 53,620 64,327 83,017 99,979 119,917 54,396 72,302
Systems Group....................... 9,661 11,659 21,834 42,133 58,070 23,578 34,150
-------- -------- -------- -------- -------- -------- --------
Total revenues...... 57,442 82,540 135,673 167,324 233,473revenues.................... 140,492 173,355 244,114 319,540 399,164 183,184 233,521
Cost of revenues...................... 106,258 127,170 181,403 224,912 272,620 126,334 159,300
-------- -------- -------- -------- -------- -------- --------
Gross profit............. 15,742 25,342 34,134 45,356 60,573profit.......................... 34,234 46,185 62,711 94,628 126,544 56,850 74,221
Amortization of goodwill and other
acquisition related intangibles..... -- -- -- 260 3,212 645 2,751
Income from operations... 3,323 8,161 12,340 12,661 23,119operations................ 12,094 12,713 24,131 43,262 51,510 25,498 31,210
Net income(c)............income(1)......................... $ 2,10311,517 $ 7,3539,530 $ 11,79315,514 $ 9,33427,626 $ 14,45430,468 $ 16,226 $ 18,523
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic..................Basic............................... $ 0.16 $ 0.59 $ 0.94 $ 0.69 $ 0.84
Diluted................ $ 0.16 $ 0.59 $ 0.940.87 $ 0.67 $ 0.82
Shares used in computing
earnings per share:
Basic.................. 12,938 12,507 12,573 13,508 17,237
======= =======0.86 $ 1.35 $ 1.45 $ 0.77 $ 0.87
======== ======== ======== Diluted................ 12,938 12,507 12,573 13,893 17,596
======= =============== ======== ======== ========
Diluted............................. $ 0.87 $ 0.65 $ 0.85 $ 1.32 $ 1.42 $ 0.76 $ 0.85
======== ======== ======== ======== ======== ======== ========
Weighted average shares outstanding:
Basic............................... 13,273 14,208 17,937 20,537 21,055 21,019 21,179
======== ======== ======== ======== ======== ======== ========
Diluted............................. 13,273 14,593 18,296 20,891 21,424 21,427 21,804
======== ======== ======== ======== ======== ======== ========

SEPTEMBER 30, 1998
--------------------------
AS OF MARCH 31, 2001
-------------------------
ACTUAL ADJUSTED(D)AS ADJUSTED(2)
-------- --------------
(UNAUDITED)

BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments........................................investments........ $ 32,97748,344 $ 88,70582,398
Working capital...................................... 77,022 132,750capital............................................. 146,723 180,777
Total assets......................................... 120,543 176,271
Long-term debt....................................... 454 454assets................................................ 270,274 304,328
Total debt.................................................. 355 355
Total shareholders' equity........................... 84,699 140,427equity.................................. 230,067 264,121

- ------------------------------

(a) All prior period amounts have been restated to reflect our combination with
David M. Griffith & Associates, Ltd. ("DMG") in May 1998, which was
accounted for using the pooling of interests method of accounting. See Note
3 of Notes to Consolidated Financial Statements.

(b) Represents revenue under a significant contract with the federal Social
Security Administration (the "SSA CONTRACT"), which terminated pursuant to
legislative action that eliminated the program. No further revenues were
earned on the SSA Contract after March 31, 1997. See "Risk Factors --
Legislative Change and Political Developments," "-- Variability of Quarterly
Operating Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

(c)(1) For the three yearsyear ended September 30, 1996, and during fiscal year 1997 up to and
including June 12, 1997, we elected to be treated as an S corporation and
our income was taxed for federal and most state purposes directly to our
shareholders. As a result, the earnings per share figures are not directly
comparable. In connection with our initial public offering, our
S corporation status terminated and we recorded a deferred tax charge
against income of $2.6 million for the cumulative differences between the
financial reporting and income tax basis of certain assets and liabilities
at June 12, 1997. Subsequent to June 12, 1997, we have recorded state and
federal income taxes based on earnings for those periods.

(d)(2) As adjusted to give effect to the sale by the Company of 2,000,0001,000,000 shares of our common
stock and the receipt of the estimated net proceeds from such sale.this offering. See
"Use of Proceeds."

65
9
RISK FACTORS

InvestingYOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION IN THIS
PROSPECTUS, INCLUDING OUR FINANCIAL STATEMENTS AND RELATED NOTES. ADDITIONAL
RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US, OR RISKS THAT WE CURRENTLY
CONSIDER IMMATERIAL, MAY ALSO IMPAIR OUR OPERATIONS. IF ANY OF THE FOLLOWING
EVENTS ACTUALLY OCCURS, OUR BUSINESS COULD BE HARMED WHICH COULD CAUSE THE
TRADING PRICE OF OUR COMMON STOCK TO DECLINE AND YOU COULD LOSE ALL OR PART OF
YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

IF WE FAIL TO SATISFY OUR CONTRACTUAL OBLIGATIONS, OUR ABILITY TO COMPETE FOR
FUTURE CONTRACTS AND OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED.

Our failure to comply with contract requirements or to meet our client's
performance expectations when performing a contract could materially and
adversely affect our financial performance and our reputation, which, in sharesturn,
would impact our ability to compete for new contracts. Our failure to meet
contractual obligations could also result in substantial actual and
consequential damages. In addition, our contracts often require us to indemnify
clients for our failure to meet performance standards. Some of our contracts
contain liquidated damages provisions and financial penalties related to
performance failures. Although we have liability insurance, the common stock involvespolicy limits
may not be adequate to provide protection against all potential liabilities.

IF WE FAIL TO ESTIMATE ACCURATELY THE FACTORS UPON WHICH WE BASE OUR CONTRACT
PRICING, WE MAY HAVE TO REPORT A DECREASE IN REVENUES OR INCUR LOSSES ON THOSE
CONTRACTS.

We derived approximately 47% of our fiscal 2000 revenues from fixed-price
contracts and approximately 18% of our fiscal 2000 revenues from
performance-based contracts. For fixed-price contracts, we receive our fee if we
meet specified objectives or achieve certain units of work. Those objectives
might include placing a high degreecertain number of welfare recipients into jobs,
collecting target amounts of child support payments, completing a particular
number of managed care enrollments, or delivering a planning document under a
consulting arrangement. For performance-based contracts, we receive our fee on a
per-transaction basis. These contracts include, for example, child support
enforcement contracts, in which we often receive a fee based on the amount of
child support collected. To earn a profit on these contracts, we must accurately
estimate costs involved and assess the probability of meeting the specified
objectives, realizing the expected units of work or completing individual
transactions, within the contracted time period. We recognize revenues on these
contracts, including a portion of estimated profit, as costs are incurred. Under
this method, anticipated revenues for the full contract are recorded as the
costs are incurred, not when the bills are sent or when the payment is made.
Therefore, if a contract is cancelled or re-negotiated after work has been
performed, previously recognized revenue would be reversed and charged to
earnings at that time. The reversal of previously recognized revenue could
adversely affect our financial risk.results. In deciding whetheraddition, we review these contracts
quarterly and adjust revenues to invest, you should carefully considerreflect our current expectations as to the
following
risk factorstotal anticipated costs of each contract. These adjustments affect the timing
and amount of revenue recognized and could adversely affect our financial
results.

IF WE ARE UNABLE TO MANAGE OUR GROWTH, OUR PROFITABILITY WILL BE ADVERSELY
AFFECTED.

Sustaining our growth has placed significant demands on our management as
well as on our administrative, operational and financial resources. For us to
continue to manage our growth, we must continue to improve our operational,
financial and management information systems and expand, motivate and manage our
workforce. If our growth comes at the expense of providing quality service

and generating reasonable profits, our ability to successfully bid for contracts
and our profitability will be adversely affected.

GOVERNMENT ENTITIES HAVE IN THE PAST AND MAY IN THE FUTURE TERMINATE THEIR
CONTRACTS WITH US EARLIER THAN WE EXPECT, WHICH MAY RESULT IN REVENUE
SHORTFALLS.

Many of our government contracts contain base periods of one or more years,
as well as option periods covering more than half of the contract's potential
duration. Government agencies do not have to exercise these option periods. The
profitability of some of our contracts could be adversely impacted if the option
periods are not exercised. Our contracts also typically contain provisions
permitting a government client to terminate the contract on short notice, with
or without cause. The unexpected termination of significant contracts could
result in significant revenue shortfalls. If revenue shortfalls occur and are
not offset by corresponding reductions in expenses, our business could be
adversely affected. We cannot anticipate if, when or to what extent a client
might terminate its contracts with us.

GOVERNMENT UNIONS MAY OPPOSE OUTSOURCING OF GOVERNMENT PROGRAMS TO OUTSIDE
VENDORS SUCH AS US, WHICH COULD LIMIT OUR MARKET OPPORTUNITIES.

Our success depends in part on our ability to win profitable contracts to
administer and manage health and human services programs traditionally
administered by government employees. Many government employees, however, belong
to labor unions with considerable financial resources and lobbying networks.
Unions have in the past and are likely to continue to apply political pressure
on legislators and other informationofficials seeking to outsource government programs. For
example, union lobbying was instrumental in this document.influencing the Department of Health
and Human Services to deny a petition to allow private corporations to make Food
Stamp and Medicaid eligibility determinations in Texas. Union opposition may
result in fewer opportunities for us to service government agencies.

WE MAY LOSE EXECUTIVE OFFICERS AND SENIOR MANAGERS ON WHOM WE RELY TO GENERATE
BUSINESS AND EXECUTE PROJECTS SUCCESSFULLY.

The risks set
out below mayabilities of our executive officers and our senior managers to generate
business and execute projects successfully is important to our success. While we
have employment agreements with some of our executive officers, these agreements
do not prevent them from terminating their employment with us. The loss of an
executive officer or senior manager could impair our ability to secure and
manage engagements.

GOVERNMENT AGENCIES MAY INVESTIGATE AND AUDIT OUR CONTRACTS AND, IF ANY
IMPROPRIETIES ARE FOUND, WE MAY BE REQUIRED TO REFUND REVENUES WE HAVE RECEIVED,
TO FOREGO ANTICIPATED REVENUES AND MAY BE SUBJECT TO PENALTIES AND SANCTIONS,
INCLUDING PROHIBITIONS ON OUR BIDDING FOR RFPS.

The government agencies we contract with have the authority to audit and
investigate our contracts with them. As part of that process, the government
agency reviews our performance on the contract, our pricing practices, our cost
structure and our compliance with applicable laws, regulations and standards. If
the agency determines that we have improperly allocated costs to a specific
contract, we will not be exhaustive.

Keepreimbursed for those costs and we will be required to
refund the amount of any such costs which have been reimbursed. If a government
audit uncovers improper or illegal activities by us or we otherwise determine
that these risk factorsactivities have occurred, we may be subject to civil and criminal
penalties and administrative sanctions, including termination of contracts,
forfeitures of profits, suspension of payments, fines and suspension or
disqualification from doing business with the government. Any adverse
determination could adversely impact our ability to bid for RFPs in mindone or more
jurisdictions.

WE MAY INCUR SIGNIFICANT COSTS BEFORE RECEIVING RELATED REVENUES WHICH COULD
RESULT IN CASH SHORTFALLS.

When we are awarded a contract to manage a government program, we may incur
significant expenses before we receive contract payments, if any. These expenses
include leasing office space, purchasing office equipment and hiring personnel.
As a result, in certain large contracts where the government does not fund
program start-up costs, we are required to invest significant sums of money
before receiving related contract payments. In addition, payments due to us from
government agencies may be delayed due to billing cycles or as a result of
failures to approve governmental budgets in a timely manner. Moreover, any
resulting cash shortfall could be exacerbated if we fail to either invoice the
government agency or to collect our fee in a timely manner.

INACCURATE, MISLEADING OR NEGATIVE MEDIA COVERAGE COULD ADVERSELY AFFECT OUR
REPUTATION AND OUR ABILITY TO BID FOR GOVERNMENT CONTRACTS.

The media frequently focuses its attention on our contracts with government
agencies. If the media coverage is negative, it could influence government
officials to slow the pace of outsourcing government services, which could
reduce the number of RFPs. The media also focuses its attention on the
activities of political consultants engaged by us, even when you read "forward-looking" statements
elsewhere in this prospectus. Thesetheir activities
are statements that relateunrelated to future eventsour business, and time periodswe may be tainted by adverse media coverage
about their activities. Moreover, inaccurate, misleading or the Company's expectations. Generally, the words
"anticipate," "expect," "intend"negative media
coverage about us could harm our reputation and, similar expressions identify
forward-looking statements. Forward-looking statements involve risksaccordingly, our ability to bid
for and uncertainties, and future events and circumstances could differ significantly
from those anticipated in the forward-looking statements.

RELIANCE ONwin government contracts.

WE OBTAIN MOST OF OUR BUSINESS THROUGH RESPONSES TO GOVERNMENT CLIENTSRFPS. WE MAY NOT
BE AWARDED CONTRACTS THROUGH THIS PROCESS IN THE FUTURE AND CONTRACTS WE ARE
AWARDED MAY NOT BE PROFITABLE.

Substantially all of our clients are state or local government authorities.
To market our services to government clients, we are largelyoften required to respond
to government requests for proposals ("RFPS").RFPs. To do so effectively, we must estimate accurately our cost structure
for servicing a proposed contract, the time required to establish operations and
likely terms of the proposals submitted by competitors. We must also assemble
and submit a large volume of information within aan RFP's rigid timetable. Our
ability to respond successfully to RFPs will greatly impact our business, and we cannot guarantee that we willbusiness. We may
not be awarded contracts through the RFP process or thatand our proposals willmay not
result in profitable contracts.

RISKS ASSOCIATED WITH GOVERNMENT CONTRACTING

Early TerminationWE MAY BE UNABLE TO ATTRACT AND RETAIN SUFFICIENT QUALIFIED PERSONNEL NECESSARY
TO SUSTAIN OUR BUSINESS.

Our delivery of Contracts. Manyservices is labor-intensive. When we are awarded a
government contract, we must quickly hire project leaders and case management
personnel. The additional staff also creates a concurrent demand for increased
administrative personnel. The success of our Government Operations Group,
Consulting Group and Systems Group requires that we attract, develop, motivate
and retain:

- experienced and innovative executive officers;

- senior managers who have successfully managed or designed government
contracts contain
base periods of oneservices programs in the public sector; and

- information technology professionals who have designed or more years, as well as option periods covering more than
half of the contract's potential duration. Government agencies generally have
the right not to exercise these option periods. A decision not to exercise
option periods could impact the profitability of some of our contracts. Our
contracts typically also contain provisions permitting a government client to
terminate the contract on short notice, with or without cause. The unexpected
termination of one or more significant contracts could resultimplemented
complex information technology projects.

Innovative, experienced and technically proficient individuals are in significant
revenue shortfalls. The natural expiration of especially large contracts can
also present management challenges. If revenue shortfalls occurgreat
demand and are not
offset by corresponding reductions in expenses, our businesslikely to remain a limited resource. We may be unable to continue
to attract and retain desirable executive officers and senior managers. Our
inability to hire sufficient personnel on a timely basis or the loss of
significant numbers of executive officers and senior managers could be adversely
affected. We cannot be certain if, when or to what extent a client might
terminate any or all of its contracts with us.

Contracts Subject to Audit. The Defense Contract Audit Agency ("DCAA"),
and certain other government agencies, have the authority to audit and
investigate any government contracts. These agencies review a contractor's
performance on its contract, its pricing practices, its cost structure and its
compliance with applicable laws, regulations and standards. Any costs found to
be improperly allocated to a specific contract will not be reimbursed, while
costs already reimbursed must be refunded. Therefore, a DCAA audit could result
in a substantial adjustment to our revenue. No material adjustments resulted
from audits completed through 1993, and we believe that adjustments resulting
from subsequent audits will not adversely
affect our business.

If a government
audit uncovers improper or illegal activities, a contractor may be subject to
civil and criminal penalties and administrative sanctions, including termination
of contracts, forfeitures of profits, suspension of payments, fines and
suspension or disqualification from doing business with the government.

7
10

Discouragement of Revenue Consulting by Federal Officials. To avoid higher
than anticipated demands for federal funds, federal government officials
occasionally discourage state and local authorities from engaging private
consultants to advise them on maximizing federal revenues. We cannot be certain
that state and local officials will not be dissuaded from engaging us for
revenue maximization services.

Relationships with Political Consultants. We occasionally engage marketing
consultants, including lobbyists, to establish and maintain relationships with
elected officials and appointed members of government agencies. The
effectiveness of these consultants may be reduced or eliminated if a significant
political change occurs. Implementation of term limits for certain elected
officials, for instance, would require us to confront political change on a more
regular basis. Because we cannot be certain that we will successfully manage our
relationships with political consultants, our business may be adversely
affected.

RISKS INVOLVED IN MANAGING GOVERNMENT PROJECTS

Risk of Fixed-Price and Performance-Based Contracts. We derived
approximately 46% of our fiscal 1998 revenues from fixed-price contracts and
approximately 18% of our fiscal 1998 revenues from performance-based contracts.
For fixed-price contracts, we receive our fee if we meet specified objectives or
achieve certain units of work. Those objectives might include placing a certain
number of welfare recipients into jobs, collecting target amounts of child
support payments, or completing a particular number of managed care enrollments.
For performance-based contracts, we receive our fee on a per-transaction basis.
Such contracts include, for example, child support enforcement contracts, in
which we often receive a fee based on the amount of child support collected. To
earn a profit on these contracts, we rely upon accurately estimating costs
involved and assessing the probability of meeting the specified objectives,
realizing the expected units of work, or completing individual transactions,
within the contracted time period. We recognize revenues on these contracts on a
"costs incurred" method. Therefore, we review these contracts quarterly and
adjust revenues to reflect our current expectations. These adjustments affect
the timing and amount of revenue recognized and could adversely affect our
financial results. If we fail to estimate accurately the factors upon which we
base our contract pricing, then we may have to report a decrease in revenues or
incur losses on these contracts.

Failure to Meet Contract Performance Standards. Our inability to satisfy
adequately our contractual obligations could adversely affect our financial
condition. Our contracts often require us to indemnify clients for our failures
to meet certain performance standards. Some contracts contain liquidated damages
provisions and financial penalties related to performance failures. In addition,
in order for our Government Operations Group to bid on certain contracts, we are
required to secure our indemnification obligations by posting a cash performance
bond or obtaining a letter of credit. If a claim is made against a performance
bond or letter of credit, the issuer of the bond could demand higher premiums.
Increased bond premiums would adversely affect our earnings and could limit our
ability to bid for future contracts. In addition, a failure to meet our client's
expectations when performing on a contract could materially and adversely affect
our reputation, which, in turn, would impact our ability to compete for new
contracts.

Termination of Large Contracts. Upon termination or expiration of a
contract between our Government Operations Group and a state or local
government, we have to evaluate whether, and in what capacity, we can continue
employing persons that formerly serviced the contract. Unless we enter into a
new contract using those same employees or

otherwise re-assign them, their employment must be terminated. The reassignment
or termination of a large number of employees makes significant demands on our
management and administrative resources.

Relationships with Government Entities.IF WE FAIL TO ESTABLISH AND MAINTAIN IMPORTANT RELATIONSHIPS WITH GOVERNMENT
ENTITIES AND AGENCIES, OUR ABILITY TO SUCCESSFULLY BID FOR RFPS MAY BE ADVERSELY
AFFECTED.

To facilitate our ability to prepare bids in response to RFPs, we rely in
part on establishing and maintaining relationships with officials of various
government entities and agencies. These relationships enable us to provide
informal input and advice to the government entities and agencies prior to the
development of an RFP. Because
we cannotWe also engage marketing consultants, including
lobbyists, to establish and maintain relationships with elected officials and
appointed members of government agencies. The effectiveness of these consultants
may be certain that we willreduced or eliminated if a significant political change occurs. We may be
unable to successfully manage our relationships with government entities and
agencies and with elected officials and appointees and any failure to do so may
adversely affect our business may be adversely affected.

Significant Start Up Costs. When we are awardedability to bid successfully for RFPs.

THE FEDERAL GOVERNMENT MAY REFUSE TO GRANT CONSENTS AND/OR WAIVERS NECESSARY TO
PERMIT PRIVATE ENTITIES, SUCH AS US, TO PERFORM CERTAIN ELEMENTS OF GOVERNMENT
PROGRAMS.

Under current law, in order to privatize certain functions of government
programs, the federal government must grant a contractconsent and/or waiver to manage a
government program, our Government Operations Group can incur significant
start-up expenses before we receive any contract payments. These expenses
include leasing office space, purchasing office equipment and hiring personnel.
As a result, in certain large contracts where the
petitioning state or local agency. If the federal government does not fund
program start-up costs, we are requiredgrant a
necessary consent or waiver, the state or local agency will be unable to
invest significant sumsoutsource that function to a private entity, such as us, which could eliminate
or reduce the value of money
prior to receiving related contract payments.the contract.

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY FUTURE LEGISLATIVE CHANGE AND POLITICAL DEVELOPMENTS

Dependence on Legislative Programs.CHANGES THAT WE
DO NOT ANTICIPATE OR TO WHICH WE DO NOT RESPOND EFFECTIVELY.

The market for our services is
dependentdepends largely on federal and state legislative
programs. These programs can be modified or amended at any time by acts of
federal and state governments. For example, in 1996, Congress amended the Social
Security Act to eliminate social security and supplemental income benefit
payments based solely on drug and alcohol disabilities. That amendment resulted
in the termination of our substantial contract with the federal Social Security
Administration (the "SSA
CONTRACT"), which related to the referral and monitoring of the treatment of
recipients of these benefits.

Future legislative changes that we do not
anticipate or respond to effectively could occur and adversely affectMoreover, part of our business.

Dependence on Welfare Reform Act. We expect thatgrowth strategy includes aggressively pursuing
opportunities created by the Welfare Reform Act and other federal and state
initiatives, which we believe will continuebe implemented to encourage long-term changes
in the nation's welfare system. Part of our growth strategy includes
aggressively pursuing these opportunitiessystem by seeking new contracts to administer and new
health and welfare programs to manage. However, there are many opponents of
welfare reform. Asreform and, as a result, future progress in the area of welfare reform
is uncertain. The repeal of the Welfare Reform Act, in whole or in part, could
adversely affect our business. Also, we cannot be certain thatFurther, if additional reforms will beare not proposed
or enacted, or thatif previously enacted reforms will not
beare challenged, repealed or
invalidated.

Restrictions on Privatization. Under current law, in orderinvalidated, our growth strategy could be adversely impacted.

IF WE DO NOT SUCCESSFULLY INTEGRATE THE BUSINESSES THAT WE ACQUIRE, OUR RESULTS
OF OPERATIONS COULD BE ADVERSELY AFFECTED.

We may be unable to privatize
certain functions of government programs, the federal government must grant a
consent and/manage businesses that we have acquired or waiver to the petitioning state or local agency. For example, in
May 1997 the Department of Health and Human Services refused to grant a waiver
to the State of Texas permitting private corporations, rather than public
employees, to decide eligibility of applicants for Food Stamps and Medicaid
benefits. Although MAXIMUS did not bid on the Texas projects,that we may
face
similar obstacles in pursuing future health and human services contracts.

9
12

RISKS OF ACQUISITION STRATEGY; RISKS OF COMPLETED ACQUISITIONS

Our business strategy includes expanding our operations, breadth of service
offerings and geographic scope by acquiring or combining with related
businesses. To date, we have combined with four consulting firms and are still
in the process of integrating their operations. We cannot be certain that we
will be able to continue to identify, acquire and manage additional businesses profitably or integrate them successfully without incurring substantial
expenses, delays or other problems. Furthermore,problems that could negatively impact our results of
operations. To date, we have combined with twelve firms and have acquired
substantially all of the assets of two firms and a division of another firm. We
are still in the process of integrating the operations of several of these
firms.

Moreover, business combinations may
involve specialadditional risks, including:

- Diversiondiversion of management's attentionattention;

- Lossloss of key personnelpersonnel;

- Assumptionassumption of unanticipated legal liabilitiesor financial liabilities;

- Amortizationour becoming significantly leveraged as a result of the incurrence of debt
to finance an acquisition;

- unanticipated operating, accounting or management difficulties in
connection with the acquired entities;

- amortization of acquired intangible assets, including goodwill; and

- Dilutiondilution to our earnings per shareshare.

Also, client dissatisfaction or performance problems atwith an acquired firm
could materially and adversely affect our reputation as a whole. Furthermore, we
cannot be certain thatFurther, the
acquired businesses willmay not achieve anticipatedthe revenues and earnings.

CHALLENGES RESULTINGearnings we anticipated.

FEDERAL GOVERNMENT OFFICIALS MAY DISCOURAGE STATE AND LOCAL GOVERNMENTAL
ENTITIES FROM GROWTH

Sustaining growth has placed significantENGAGING US, WHICH MAY RESULT IN A DECLINE IN REVENUES.

To avoid higher than anticipated demands on management as well as
on our administrative, operational and financial resources. To manage our
growth, we must continue to improve our operational, financial and management
information systems and expand, motivate and manage our workforce. However, our
growth and management of large-scale health and human services programs must not
come at the expense of providing quality service and generating reasonable
profits. We cannot be certain that we will continue to experience growth or
successfully manage it.

OPPOSITION FROM GOVERNMENT UNIONS

Our success derives in part from our ability to win profitable contracts to
administer and manage health and human services programs traditionally
administered byfor federal funds, federal
government employees. Government employees, however, typically
belong to labor unions with considerable financial resources and lobbying
networks. Unions are likely to continue to apply political pressure on
legislators and other officials seeking to outsource government programs. For
example, union lobbying was instrumental in influencing the Department of Health
and Human Services to deny a petition to allow private corporations to make Food
Stamp and Medicaid eligibility determinations in Texas. Union opposition may
slow welfare reform and result in fewer opportunities for MAXIMUS to service
government agencies.

RELIANCE ON KEY EXECUTIVES

The abilities of our executive officers, including David V. Mastran and
Raymond B. Ruddy, and our senior managers to generate business and execute
projects successfully is important to our success. While we have employment
agreements with certain of our executive officers, these agreements are
terminable under certain conditions. The loss of a key executive could impair
our ability to secure and manage engagements. To limit some of this risk, we
have obtained key-man life insurance policies on Dr. Mastran and Mr. Ruddy in
the amounts of $6,100,000 and $3,950,000, respectively.

10
13

ATTRACTION AND RETENTION OF EMPLOYEES

Delivery of the services provided by MAXIMUS is labor-intensive. When we
are awarded a government contract, we must quickly hire project leaders and case
management personnel. The additional staff also creates a concurrent demand for
increased administrative personnel. The success of our Government Operations
Group and Consulting Group requires that we attract, develop, motivate and
retain:

- Experienced and innovative executive officers

- Senior managers who have successfully managed or designed health and
human services programs in the public sector

- Information technology professionals who have designed or implemented
complex information technology projects

Innovative, experienced and technically proficient individuals are in great
demand and are likely to remain a limited resource. We cannot be certain that we
can continue to attract and retain desirable executive officers and senior
managers. A failure to hire sufficient personnel on a timely basis could
adversely affect our business. The loss of significant numbers of executive
officers and senior managers could produce similar adverse consequences.

COMPETITORS; EFFECTS OF COMPETITION

Intensification of Competition. Competition to provide certain program
management and consulting services tooccasionally discourage state and local government agencies has
intensified.authorities from
engaging private consultants to advise them on maximizing federal funding. If
state and local officials are dissuaded from engaging us for revenue
maximization services, we will not receive contracts for, or revenues from,
those services.

WE FACE COMPETITION FROM A VARIETY OF ORGANIZATIONS, MANY OF WHICH HAVE
SUBSTANTIALLY GREATER FINANCIAL RESOURCES THAN WE DO, AND WE MAY BE UNABLE TO
COMPETE SUCCESSFULLY WITH THESE ORGANIZATIONS.

Our Government Operations Group competes for program management contracts
with the following:

- Localgovernment services divisions of large organizations such as Lockheed
Martin Corporation, Electronic Data Systems, Inc. and Accenture;

- specialized service providers such as Benova, Inc., Policy Studies
Incorporated, Affiliated Computer Services, Inc. and America Works, Inc.;
and

- local non-profit organizations such as the United Way, and Goodwill Industries
- Government services divisions of large organizations such as Andersen
Consulting, Lockheed Martin Corporation and Electronic Data Systems,
Inc.

- Specialized service providers such as America Works, Inc., Policy
Studies Incorporated, and Benova, Inc.

MAXIMUS'sCatholic Charities.

Our Consulting Group competes with:

- Thethe consulting divisions of the "Big 5" accounting firmsfirms; and

- small, specialized consulting firms.

Our Systems Group competes with a large number of competitors, including
Unisys, KPMG, Accenture, Litton PRC (a Northrop Grumman Company), Peregrine
Systems, Inc. and Electronic Data Systems, Inc.

Many of these companies are national and international in scope and have
greater resources than MAXIMUS.we have. Substantial resources could enable certain
competitors to initiate severe price cuts or take other measures in an effort to
gain market share. In addition, we aremay be unable to compete for athe limited
number of large contracts because we are sometimes unablemay not be able to meet aan RFP's
requirement to obtain and post a large cash performance bonds.bond. Also, in certainsome
geographic areas, we face competition from smaller consulting firms with
established reputations and political relationships. We cannotmay be certain that we willunable to compete
successfully against our existing or any new competitors.

See "Business --
Competition."

1110

CompetitionWE MAY NOT RECEIVE SUFFICIENT PAYMENTS IN A QUARTER TO COVER ALL OF OUR COSTS
INCURRED IN THAT QUARTER.

A number of factors cause our payments and operating results to vary from
Former Employees. In additionquarter to competitionquarter, including:

- the progression of contracts;

- the levels of revenues earned on fixed-price and performance-based
contracts (including any adjustments in expectations for revenue
recognition on fixed-price contracts);

- the commencement, completion or termination of contracts during any
particular quarter;

- the schedules of government agencies for awarding contracts;

- the term of awarded contracts; and

- potential acquisitions.

Changes in the volume of activity and the number of contracts commenced,
completed or terminated during any quarter may cause significant variations in
our cash flow from existing competitors, we may experience competition from former employees.
Although MAXIMUS has entered into non-competition agreements with some of its
senior level employees, we cannot be certain thatoperations because a court would enforce these
contracts. Competition by former employees could adversely affect our business.

ADVERSE PUBLICITY

The naturerelatively large amount of our expenses
are fixed. Moreover, we incur significant operating expenses during the start-up
and early stages of large contracts with state and local government authorities
frequently generates media attention.typically do not receive corresponding
payments in that same quarter.

WE ARE CURRENTLY SUBJECT TO INVESTIGATIONS BY THE DISTRICT ATTORNEY'S OFFICE OF
NEW YORK COUNTY AND THE UNITED STATES ATTORNEY'S OFFICE FOR THE SOUTHERN
DISTRICT OF NEW YORK REGARDING TWO CONTRACTS AWARDED TO US BY THE NEW YORK CITY
HUMAN RESOURCES ADMINISTRATION. IF DETERMINED ADVERSELY, WE COULD BE REQUIRED TO
PAY PENALTIES AND BE SUBJECT TO ADMINISTRATIVE SANCTIONS.

In particular, our managementJanuary 2000, the New York City Human Resources Administration submitted
two contracts that it had awarded to us for the performance of health
and humanwelfare-to-work
services programs and revenue maximization services have occasionally
received negative media coverage. This negative coverage could influence
government officials and slow the pace of welfare reform. The media also focuses
its attention on the activities of political consultants engaged by us, even
when their activities are unrelated to our business. MAXIMUS may be subject to
adverse media attention relating to the activitiesComptroller of individuals who are not
under its control. In addition, we cannot assure thatNew York City to be registered. Under New York
law, the media will accurately
cover our activities or that MAXIMUS willcontracts must be ableregistered in order for us to anticipate and respond in a
timely manner to all media contacts. Inaccurate or misleading media coverage or
our failure to manage adverse coverage could adversely affect our reputation.

LITIGATION

DMG Litigation. On May 12, 1998, we acquired DMG. DMG is currently
defending against a lawsuit arising out of consultation services provided to
underwriters of revenue bonds issued by Superstition Mountains Community
Facilities District No. 1 (the "DISTRICT") in 1994. The bonds were issued to
finance construction of a water waste treatment plant in Arizona.receive payment.
However, the District was unableComptroller refused to serviceregister the bondscontracts alleging
improprieties in the procurement process and eventually declared bankruptcy.in our conduct. The New York
Supreme Court, Appellate Division--First Department ordered the Comptroller to
register the contracts in October 2000 after finding no wrongdoing in our
conduct. Nevertheless, this matter continues to be the subject of investigations
being conducted by certain government agencies. The District voluntarily came outAttorney's Office
of bankruptcyNew York County and is currently operating under a
forbearance agreement with the sole purchaser of the bonds, Allstate Insurance
Company ("ALLSTATE"). A consolidated action arising out of these events is
pending in the U.S. District CourtUnited States Attorney's Office for the Southern
District of Arizona against DMG and
thirteen other named defendants. The parties making claims against DMGNew York, in the
lawsuit, Allstate and the District, allege that DMG made false and misleading
representations in the reports DMG prepared included among the exhibitsresponse to the
bond offering memoranda. DMG's reports concerned the accuracy of certain
financial projectionsrequests made by the District regarding its ability to serviceComptroller, are
investigating the bonds. Allstate seeks as damages $32.1 million, the principal amountfacts underlying this matter. These offices reviewed some of
bonds it
purchased together with accruedour documents and unpaid interest; the District seeks actualinterviewed some of our employees in 2000 and special damages, prejudgment interest2001. We believe
that our actions were lawful and costs. MAXIMUS intends to defend
against these claims vigorously. However, given the preliminary stageappropriate and, although there can be no
assurance of this
litigation,a favorable outcome, we cannot assure that we will be successful in defending this
lawsuit.

Suit by Former Officer. We are currently defending a lawsuit brought by a
former officer, director and shareholder of MAXIMUS alleging that, at the time
he resigned from the Company in 1996 and became obligated to sell his MAXIMUS
shares back to the Company, we failed to disclose to him material information
regarding the potential value of his MAXIMUS shares. The former officer seeks
damages in excess of $10 million. We do not believe that this claim has merit
and intend to oppose it vigorously. However, given the early stage of this
litigation, we cannot assure that we will be successful in our defense.

Suit by Network Six. We are currently defending a lawsuit that was
commenced against MAXIMUS and other parties by Network Six, Inc. ("NETWORK
SIX"). MAXIMUS had been engaged by the State of Hawaii to monitor the
implementation of a

12
15

statewide automated child support system being performed by Network Six. Network
Six alleges that we tortiously interfered with and abetted Hawaii in the alleged
breach of its contract with Hawaii. We believe that Network Six's claims are
without merit and intend to defend this action vigorously. We do not believe
that this actionmatter will have a
material adverse effect on our financial condition or results of operations.

Because this action is in the early stages of
discovery, we cannot assure that we will be successful in defending this
lawsuit.

VARIABILITY OF QUARTERLY OPERATING RESULTS

A number of factors cause our revenues and operating results to vary from
quarter to quarter. These factors include:

- The progress of contracts

- The levels of revenues earned on contracts (including any adjustments
in expectations on revenue recognition on fixed-price contracts)

- The commencement, completion or termination of contracts during any
particular quarter

- The schedules of government agencies for awarding contracts

- The term of awarded contracts

- The reactions of the market to announcements of potential acquisitions

- General economic conditions

Changes in the volume of activity and the number of contracts commenced or
completed during any quarter may cause significant variations in our operating
results because a relatively large amount of our expenses are fixed.
Furthermore, on occasion we incur greater operating expenses during the start-up
and early stages of significant contracts.

SIGNIFICANT UNALLOCATED NET PROCEEDS

A substantial portion of the anticipated net proceeds of this offering has
not been designated for specific uses. Therefore, the board of directors will
have broad discretion with respect to the use of the net proceeds of this
offering. See "Use of Proceeds."

INFLUENCE OF PRINCIPAL SHAREHOLDERS

Following this offering, our executive officers will own beneficially 43.6%
of MAXIMUS's common stock. Certain executive officers, who will hold
approximately 35.7% of the outstanding shares after this offering, have agreed
to hold their shares until June 2001, subject to certain exceptions. In
addition, each of Dr. Mastran and Mr. Ruddy, who will hold together
approximately 33.3% of the common stock, has agreed to vote to elect the other
to the board of directors, as long as the other person owns or controls at least
20% of the outstanding common stock. Mr. Ruddy currently owns less than 20% of
the outstanding shares of common stock and, accordingly, Dr. Mastran is no
longer obligated to vote to elect Mr. Ruddy to the board of directors. Mr. Ruddy
has also agreed to vote his shares of common stock in a manner instructed by Dr.
Mastran until September 30, 2001. As a result, these officers can significantly
influence the outcome of matters requiring a shareholder vote, including the
election of the board of directors. This

13
16

could adversely affect the market price of our common stock or delay or prevent
a change in control of MAXIMUS.

POSSIBLE VOLATILITY OFRISKS RELATED TO THIS OFFERING

OUR STOCK PRICE MAXIMUSIS VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR
ABOVE THE PRICE YOU PAID FOR THEM.

We first publicly issued common stock on June 13, 1997 at $16.00 per share
upon the
closing of itsin our initial public offering (the "IPO").offering. Between June 13, 1997 and November 19, 1998,May 31, 2001, the
closing sale price has ranged from a high of $32.56$39.50 per share to a low of $17.00$17.38
per share. The market price of our common stock could continue to fluctuate
substantially due to a variety of factors, including:

- Quarterlyquarterly fluctuations in results of operationsoperations;

- Thethe failure to be awarded a significant contract on which we have bidbid;

- Thethe termination by a government client of a material contractcontract;

- Thethe announcement of new services by competitorscompetitors;

- Acquisitions and mergers

- Politicalpolitical and legislative developments adverse to the privatization of
government servicesservices;

- Changeschanges in or failure to meet earnings estimates by securities analystsanalysts;

- Changes in accounting principles

- Salessales of our common stock by existing shareholders or the perception that
these sales may occur;

- Negative publicityadverse judgments or settlements obligating us to pay damages;

- Lossnegative publicity; and

- loss of key personnel

Our ability to meet securities analysts' quarterly expectations may also
influence the market price of our common stock.personnel.

In addition, overall volatility has often significantly affected the market
prices of securities for reasons unrelated to a company's operating performance.
In the past, securities class action litigation has often been commenced against
companies that have experienced periods of volatility in the price of their
stock. Securities litigation initiated against MAXIMUSus could cause us to incur
substantial costs and could lead to the diversion of management's attention and
resources.

See
"Market Price of Common Stock and Dividend Policy."

CERTAINOUR ARTICLES OF INCORPORATION AND BYLAWS INCLUDE PROVISIONS THAT MAY HAVE
ANTI-TAKEOVER EFFECTS

Virginia law and ourEFFECTS.

Our Articles of Incorporation and By-Lawsbylaws include provisions that may be deemed to have anti-takeover effects. These provisions may delay,
deter or prevent a takeover attempt that shareholders might consider desirable.
DirectorsFor example, our Articles of MAXIMUSIncorporation provide that our directors are to be
divided into three classes and are elected to serve staggered three-year terms. This
structure could impede or discourage an attempt to obtain control of us by
preventing shareholders from replacing our entire board in a single proxy
contest, making it more difficult for a third party to take control of us
without the Company. As a shareholderconsent of MAXIMUS, you doour board of directors. Our Articles of Incorporation
further provide that our shareholders may not possess the power to take any action in writing without
a meeting. This prohibition could impede or discourage an attempt to obtain
control of us by requiring that any actions required to be taken by shareholders
be taken at properly called shareholder meetings.

THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK AFTER THIS
OFFERING COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE.

Our executive officers, directors and the selling shareholders, who
collectively beneficially own approximately 34.2% of our outstanding common
stock (approximately 21.8% of our outstanding common stock after completion of
this offering), have agreed to hold their shares until 90 days after this
offering, subject to certain exceptions. At that time, approximately 5,053,992
shares of common stock held by them will be eligible for immediate resale, of
which 4,957,703 will be subject to volume and manner of sale restrictions.
Sales, or the availability for sale, of shares of our common stock by these or
other shareholders could cause the market price of our common stock to decline.
In addition, Virginia law imposes certain limitations812,420 shares held by one shareholder will become freely tradable
on June 5, 2001, and special voting
requirements on affiliated transactions. Furthermore, Virginia law denies voting
rightsapproximately 3,857,852 additional shares of common stock
issuable upon exercise of vested stock options are currently available for
immediate resale.

OUR EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP OWN SUFFICIENT SHARES OF OUR
COMMON STOCK TO SIGNIFICANTLY AFFECT THE RESULTS OF ANY SHAREHOLDER VOTE.

Our executive officers and directors beneficially own approximately 33.6% of
our common stock (approximately 21.5% of the outstanding common stock after
completion of this offering). Two of those individuals, Dr. Mastran and
Mr. Ruddy, together beneficially own approximately 31.3% of our common stock
(approximately 20.3% of the outstanding common stock after completion of this
offering). Mr. Ruddy has agreed to vote his shares acquiredof common stock in control share acquisitions, unless granteda manner
instructed by

Dr. Mastran until September 30, 2001. As a result, these executive officers and
directors have the ability to significantly influence the outcome of matters
requiring a shareholder vote.

14
17

RISKS ASSOCIATED WITH YEAR 2000 COMPLIANCE

Internal Year 2000 Compliance. MAXIMUS is auditing its internal softwarevote, including the election of our board of directors,
amendments to our organizational documents, or approval of any merger, sale of
assets or other major corporate transaction. The interests of these executive
officers and hardwaredirectors may differ from yours and the systems of its acquired companies for Year 2000 compliancethese executive officers and
is implementing corrective actions, where necessary, to address computer
problems associated with the Year 2000. The MAXSTAR case management software
used in all our major projects has been upgraded to be Year 2000 compliant. All
MAXSTAR-based applications must also be reviewed and upgraded, where necessary,
which is now scheduled to be completed by March 31, 1999. Our telephone systems
must also be Year 2000 compliant, which is also scheduled for completion by
March 31, 1999. We will continue to implement whatever remedial actions are
necessary to make us Year 2000 compliant. We do not believe that remedial
measures taken to correct any Year 2000 problems will materially impact our
operations or financial results. However, if our remediation plans do not
succeed, then wedirectors may experience adverse effects on our business. Furthermore, we
cannot assure that the costs of remediation will not exceed our current
estimates, or that our corrective actions will be completed before any Year 2000
problems occur.

Services Provided by MAXIMUS Affecting Clients' Year 2000 Compliance.
MAXIMUS assists in assessing, evaluating, testing and certifying government
client systems affected by Year 2000 problems. In addition, we provide quality
assurance of Year 2000 compliance conversions performed by third parties for our
clients. Although MAXIMUS has attempted to minimize its liability for potential
clients' system failures, we cannot assure that we will not become subject to
legal action if a client sustains Year 2000 problems. If such legal action is
brought and resolved against us, we could suffer adverse effects on our
business.

Reliance on Vendors' and Clients' Year 2000 Compliance. In order to
perform our government contracts, we rely to varying extents on information
processing performed by vendors, governmental agencies and entities with which
we contract. We have inquired about these parties' potential Year 2000 problems
where necessary. Based on responses to these inquiries, our management believes
that we would be able to continue to performdelay or prevent us from entering into transactions
that would result in a change in control, including transactions in which our
contracts without experiencing
material negative financial impact. However, we cannot assure that Year 2000
related failuresshareholders might otherwise receive a premium over the then current market
price for their shares.

WE HAVE BROAD DISCRETION IN THE USE OF PROCEEDS OF THIS OFFERING.

We have not designated the anticipated net proceeds of this offering for
specific uses. Accordingly, our management will have considerable discretion in
the information systemsapplication of vendors or clientsthe net proceeds of this offering and you will not occur. Any system failures could interfere withhave the
opportunity, as part of your investment decision, to assess whether the proceeds
are being used appropriately. See "Use of Proceeds."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These forward-looking
statements appear principally in the sections entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
Forward-looking statements may appear in other sections of this prospectus as
well. Generally, the forward-looking statements in this prospectus use words
like "anticipate," "believe," "could," "estimate," "expect," "future," "intend,"
"may," "opportunity," "plan," "potential," "project," "will," and similar terms.

These forward-looking statements include statements about:

- our ability to properly manage
contracted projects and could adversely affect our business.

UNCERTAINTIES RELATED TO INTERNATIONAL OPERATIONS

Moststrategic plans;

- the future of our international operations are currently paidindustry;

- the activities of competitors;

- anticipated expenses;

- anticipated sources of future revenues; and

- our need for by the World
Bank and the U.S. Agency for International Development in U.S. dollars. However,
as we expand our operations into developing countries we may encounter a number
of additional risks. The risks to our potential expected international revenues
include:

- Adverse currency exchange rate fluctuations

- Inability to collect receivables

- Difficulty in enforcing contract terms through a foreign country's
legal system

Foreign countries could also impose tariffs, impose additional withholding
taxes or otherwise tax our foreign income. See
"Business -- Services -- Consulting Group."

FORWARD LOOKING STATEMENTS

Statements that are not historical facts, includingfunds.

Forward-looking statements about the
Company's confidence and strategies and expectations about future contracts,
market opportunities, market demand and acceptance of the Company's products are
forward looking statements

15
18

that involve risks and uncertainties. These uncertainties includeOur actual
results could differ significantly from the results discussed in the
forward-looking statements in this prospectus. Many factors could cause or
contribute to these differences, including the factors discussed in the section
of this prospectus entitled "Risk Factors." You should carefully read this
entire prospectus, particularly the section entitled "Risk Factors," before you
make an investment decision.

The forward-looking events discussed in this prospectus might not occur.
Therefore, you should not place undue reliance on government clients; risks associated with government contracting; risks involved
in managing governmental projects; legislative change and political
developments; opposition from government unions; challenges resulting from
growth; adverse publicity; and legal, economic and other risks detailed in this
Prospectus.our forward-looking
statements.

USE OF PROCEEDS

TheIf we sell 1,000,000 shares of our common stock in this offering at an
assumed offering price of $36.85 per share, we estimate that our net proceeds
will be $34,053,569, after deducting the underwriting discount and estimated
offering expenses that are payable by us. We will not receive any proceeds from
the sale of our common stock by the Companyselling shareholders. Additionally, we will
not receive any proceeds if the underwriters exercise the overallotment option
granted to them by two of the common stock offered
hereby, assuming a public offeringselling shareholders. However, we will receive
approximately $1,605,250 representing the aggregate exercise price of $29.75 per share and after deducting
underwriting discounts and commissions and estimatedthe stock
options through the exercise of which some of the selling shareholders will
acquire their shares.

We plan to use the net proceeds from this offering expenses, will be
approximately $55.7 million ($ if the underwriters' over-allotment
option is exercised in full). The Company anticipates that these funds will be
used for general corporate
purposes, including:including for working capital;capital, expansion of existing operations,
strategic acquisitions of complementary businesses or entities, including
establishment of aacquisitions that may be larger than those we have made in the past, and
investment in systems infrastructures and new headquarters; and
strategic acquisition of related businesses. The Company hastechnologies. We have no present
plans, commitments, understandings or agreements or understandingsto acquire any business. We
cannot estimate precisely the allocation of the proceeds among these uses, and
is not presently conducting
negotiations with respect to any acquisitions. The Company'swe may use some of the proceeds from this offering for other purposes. Our
management will have broad discretion to allocate proceeds from this offering to
uses that it believes are appropriate. Pending such uses,We plan to invest the net proceeds of
this offering will be invested in short-term, investment grade, interest-bearing securities.
The principal purposesecurities or
guaranteed obligations of this offering is to obtain additional working capital.

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders. See "Selling Shareholders."United States or its agencies.

MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock commencedOur common stock began trading on June 13, 1997 on the New York Stock
Exchange under the symbol "MMS." The following table sets forth, for the fiscal
periods indicated, the range of high and low closing prices for the
Company'sour common stock
on the New York Stock Exchange.

HIGH LOW
-------- --------

YEAR ENDED SEPTEMBER 30, 1997:1999:
First Quarter............................................. $37.00 $26.50
Second Quarter............................................ 39.50 22.00
Third Quarter (from June 13, 1997)........................ $18 3/8 $17Quarter............................................. 31.56 23.13
Fourth Quarter............................................ 32 14/16 17 14/1636.00 27.38
YEAR ENDED SEPTEMBER 30, 1998:2000:
First Quarter............................................. $31 9/16 $22 9/16$35.38 $21.25
Second Quarter............................................ 30 14/16 2338.19 30.25
Third Quarter............................................. 32 9/16 25 1/832.06 20.44
Fourth Quarter............................................ 31 20 7/1624.44 19.50
YEAR ENDEDENDING SEPTEMBER 30, 1999:2001:
First Quarter............................................. $34.94 $18.44
Second Quarter............................................ 36.91 29.20
Third Quarter (through November 19, 1998)................. $32 $25 7/8May 31, 2001)...................... 38.26 26.90

The closing price of theour common stock on November 19, 1998,May 31, 2001, as reported on the
New York Stock Exchange was $29.75$36.85 per share. As of November 19, 1998,May 31, 2001, there were
167133 holders of record of the Company'sour common stock.

16
19

As an S corporation prior to the IPO, the Companyour initial public offering, we made a series
of cash distributions to shareholders representing our earnings of the Company taxed or taxable
to suchthose shareholders. The CompanyWe made the final such distributionlast of those distributions at the end of
fiscal year 1997. Since that time, the Company haswe have retained, and currently anticipatesanticipate
that itwe will continue to retain, all of itsour earnings for development of the Company's business and does not anticipate paying any cash
dividendsuse in the foreseeable future.developing our
business. Distributions reported during fiscal year 1998 were related solely to
S corporation distributions by companies MAXIMUSwith which we combined with during the year.
The distributions were to thesethose companies' former shareholders and related to
earnings prior to combining with MAXIMUS.us. Future cash dividends, if any, will be paid
at the discretion of the Company's Boardour board of Directorsdirectors and will depend, among other things,
upon the Company'sour future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and such other factors as
the Boardour board of Directorsdirectors may deem relevant. 17We do not anticipate paying any cash
dividends in the foreseeable future.

16
20
CAPITALIZATION

The following table sets forth, as of September 30, 1998, theMarch 31, 2001, our actual
capitalization of the Company and capitalization as adjusted for the sale of the 2,000,0001,000,000
shares of Common Stockour common stock offered hereby by the Company at an assumed public
offering price of $29.75 per share (the closing price on November 19, 1998),us in this prospectus after deducting
underwriting discounts and commissions and estimated offering expenses. TheYou
should read the following table should be read in conjunction with the Consolidated Financial Statementsconsolidated financial
statements and related Notes theretonotes included elsewhere in this prospectus.

AS OF SEPTEMBER 30, 1998MARCH 31, 2001
-------------------------
ACTUAL AS ADJUSTEDADJUSTED(1)
-------- --------------
(IN THOUSANDS)

Cash and cash equivalents and short term
investments.........................................short-term investments........ $ 32,97748,344 $ 88,70582,398
======== ========
Long-term debt........................................Total debt.................................................. $ 454355 $ 454355
Shareholders' equity:
Common stock, no par value; 30,000,00060,000,000 shares authorized;
18,225,39021,233,805 shares issued and outstanding; 20,225,39022,233,805
shares issued and outstanding as adjusted(a)....................... 66,535 122,263adjusted(2)............ 135,680 169,734
Accumulated other comprehensive income.................... (13) (13)
Retained earnings................................... 18,164 18,164earnings......................................... $ 94,400 $ 94,400
-------- --------
Total shareholders' equity....................... 84,699 140,427equity.............................. $230,067 $264,121
-------- --------
Total capitalization........................ $ 85,153 $140,881capitalization.................................... $230,422 $264,476
======== ========

- ------------------------------------------------------

(1) Assumes net proceeds from the sale of 1,000,000 shares of our common stock
in this offering of $34,053,569, after deducting the underwriting discount
and estimated offering expenses of $1 million payable by us.

(2) Excludes: (a) Excludes: (i) an aggregate of 1,093,7524,187,856 shares issuable upon exercise of
stock options outstanding at September 30, 1998,March 31, 2001, plus an additional 1,966,423731,769
shares reserved for issuance in connection with future stock options and
other awards under the Company'sour 1997 Director Stock Option Plan and 1997 Equity
Incentive Plan; and (ii) 500,000(b) 360,854 shares reserved for issuance under the Company'sour 1997
Employee Stock Purchase Plan. See Notenote 10 to the Consolidated Financial Statements.

18consolidated financial
statements.

17
21
SELECTED CONSOLIDATED FINANCIAL DATA
The(IN THOUSANDS, EXCEPT PER SHARE DATA)

We have derived the selected consolidated financial data presented below as
of September 30, 1999 and 2000 and for each of the three years in the period
ended September 30, 2000 from our consolidated financial statements and the
related notes which have been audited by Ernst & Young LLP, independent
auditors. We have derived the selected consolidated financial data presented
below as of September 30, 1997 and 1998 and for each of the threetwo years in the
period ended September 30, 1998 are
derived1997 from the Company's Consolidated Financial Statements and related Notes
theretoour financial statements, not included in
this prospectus, which have been audited by Ernst & Young LLP, independent auditors,
exceptLLP. The selected
consolidated financial data for the six months ended March 31, 2000 and as of
and for the six months ended March 31, 2001, have been derived from unaudited
financial statements which, in the opinion of DMG,our management, reflect all
adjustments, consisting of normal recurring accruals, necessary for a consolidated subsidiary, which
through Decemberfair
presentation of this data. Results for the six months ended March 31, 1997 were audited by other independent auditors. The
selected financial data presented below as2001 are
not necessarily indicative of results that may be expected for the fiscal year
ending September 30, 1994, 1995 and 1996
and for each of the two years ended September 30, 1995 are derived from the
Company's financial statements, not included in this Prospectus, which have been
audited by Ernst & Young LLP or the Company's predecessor accountants, and DMG's
independent auditors. The selected financial data give retroactive effect to the
combination with DMG, which was accounted for using the pooling of interests
method.2001. The selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statementsconsolidated financial statements and related
Notesnotes thereto and other financial information appearing elsewhere in this
prospectus.

YEARSSIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, --------------------------------------------------
1994 1995MARCH 31,
---------------------------------------------------- ---------------------
1996 1997 1998 (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)1999 2000 2000 2001
-------- -------- -------- -------- -------- -------- ----------
(UNAUDITED)

STATEMENT OF INCOME DATA:
Revenues:........................ $57,442 $82,540 $135,673 $167,324 $233,473
Government Operations Group.......... $ 77,211 $ 97,369 $139,263 $177,428 $221,177 $105,210 $127,069
Consulting Group..................... 53,620 64,327 83,017 99,979 119,917 54,396 72,302
Systems Group........................ 9,661 11,659 21,834 42,133 58,070 23,578 34,150
-------- -------- -------- -------- -------- -------- --------
Total revenues................... 140,492 173,355 244,114 319,540 399,164 183,184 233,521
Cost of revenues................. 41,700 57,198 101,539 121,968 172,900
------- -------revenues....................... 106,258 127,170 181,403 224,912 272,620 126,334 159,300
-------- -------- -------- -------- -------- -------- --------
Gross profit..................... 15,742 25,342 34,134 45,356 60,573profit........................... 34,234 46,185 62,711 94,628 126,544 56,850 74,221
Selling, general and administrative
expenses........ 11,983 15,781 20,238 25,323 33,783expenses............................. 20,584 26,100 34,909 50,626 67,947 30,707 40,260
Stock option compensation, merger,
deferred compensation and ESOP
expense(a)............ 436 1,400expense(1)........................... 1,556 7,372 3,671 ------- -------480 225 -- --
Amortization of goodwill and other
acquisition-related intangibles...... -- -- -- 260 3,212 645 2,751
Legal settlement expense............... -- -- -- -- 3,650 -- --
-------- -------- -------- -------- -------- -------- --------
Income from operations........... 3,323 8,161 12,340 12,661 23,119operations................. 12,094 12,713 24,131 43,262 51,510 25,498 31,210
Interest and other income
(expense)...................... (131) (72) (17) 777 1,775
------- ------- income.... (47) 921 1,823 3,604 3,045 2,149 454
-------- -------- -------- -------- -------- -------- --------
Income before income taxes....... 3,192 8,089 12,323 13,438 24,894taxes............. 12,047 13,634 25,954 46,866 54,555 27,647 31,664
Provision for income taxes(b).... 1,089 736taxes(2).......... 530 4,104 10,440 ------- -------19,240 24,087 11,421 13,141
-------- -------- -------- -------- -------- -------- --------
Net income.......................income............................. $ 2,10311,517 $ 7,3539,530 $ 11,79315,514 $ 9,33427,626 $ 14,454
======= =======30,468 $ 16,226 $ 18,523
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic..........................Basic................................ $ 0.160.87 $ 0.590.67 $ 0.940.86 $ 0.691.35 $ 0.84
======= =======1.45 $ 0.77 $ 0.87
======== ======== ======== Diluted........................ $ 0.16 $ 0.59 $ 0.94 $ 0.67 $ 0.82
======= ======= ======== ======== ======== Shares used in computing earnings
per share:
Basic.......................... 12,938 12,507 12,573 13,508 17,237
======= ===============
Diluted.............................. $ 0.87 $ 0.65 $ 0.85 $ 1.32 $ 1.42 $ 0.76 $ 0.85
======== ======== ======== Diluted........................ 12,938 12,507 12,573 13,893 17,596
======= =============== ======== ======== ========
Weighted average shares outstanding:
Basic................................ 13,273 14,208 17,937 20,537 21,055 21,019 21,179
======== ======== ======== ======== ======== ======== ========
Diluted.............................. 13,273 14,593 18,296 20,891 21,424 21,427 21,804
======== ======== ======== ======== ======== ======== ========

(footnotes on following page)

19FOOTNOTES ON FOLLOWING PAGE

18
22

AS OF SEPTEMBER 30,
----------------------------------------------------
1994 1995------------------------------------------------------- AS OF
1996 1997 1998 1999 2000 MARCH 31, 2001
----------- -------- -------- -------- -------- ---------------
(UNAUDITED) (UNAUDITED)

BALANCE SHEET DATA:
Cash and cash equivalents and short-
term investments..................short-term
investments.............................. $ 9903,397 $ 2,64051,875 $ 3,39432,980 $ 51,86998,882 $ 32,97738,334 $ 48,344
Working capital..................... 9,012 15,677 25,101 65,389 77,022capital............................ 25,467 66,108 78,478 150,472 127,812 146,723
Total assets........................ 28,404 36,392 48,720 111,497 120,543
Long-term debt...................... 4,835 4,224assets............................... 50,993 113,884 126,002 223,036 256,903 270,274
Total debt................................. 331 1,596 820 578 764 355
Redeemable common stock.................... 31,758 -- -- 454
Redeemable common stock............. 15,390 21,362 31,683-- -- --
Total shareholders' equity
(deficit)......................... (5,309) (4,201) (4,679) 67,913 84,699 equity....... (3,651) 69,041 86,787 175,479 208,933 230,067

- ------------------------------

(a)------------------------

(1) In January 1997, the Companywe issued options to various employees to purchase 403,975
shares of our common stock at a formula price based on book value. During
1997, the Companywe recorded a non-recurring charge against income of $5,874,000 for
the difference between the IPOinitial public offering price and the formula
price for all options outstanding. The CompanyWe recorded a deferred tax benefit
relating to the charge in the amount of $2,055,000. The option exercise
price is a formula price based on the book value of theour common stock at
September 30, 1996, and was established pursuant to a pre-existing
shareholder agreement.

(b)(2) For the three yearsyear ended September 30, 1996, and during fiscal year 1997 up to and
including June 12, 1997, the Companywe elected to be treated as an S corporation and
theour income of the Company was taxed for federal and most state purposes directly to the Company'sour
shareholders. In connection with its IPO, the Company'sour initial public offering, our
S corporation status terminated and the Companywe recorded a deferred tax charge
against income of $2,566,000 for the cumulative differences between the
financial reporting and income tax basis of certain assets and liabilities
at June 12, 1997. Subsequent to June 12, 1997, the Company haswe have recorded state and
federal income taxes based on earnings for those periods. Income taxes
provided for periods prior to the
IPOour initial public offering related primarily
to operations of DMG.

20David M. Griffith & Associates, Ltd., a company we merged
with during 1998 in a transaction accounted for as a pooling of interests.

19
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As an important partTHE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER SUBSTANTIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY
FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. YOU SHOULD READ THE FOLLOWING DISCUSSION TOGETHER WITH OUR FINANCIAL
STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We are a leading provider of program management, consulting services and
systems solutions primarily to state and local government agencies throughout
the Company's growth strategy, it has recently
completed combinations with four consulting firms, Spectrum Consulting Group,
Inc. and Spectrum Consulting Services, Inc. (collectively, "SPECTRUM")United States. Since our inception in March
1998, David M. Griffith & Associates, Ltd. ("DMG") in May 1998, and Carrera
Consulting Group ("CARRERA") and Phoenix Planning & Evaluation, Ltd. ("PHOENIX")
in August 1998, all of which were accounted for as poolings of interests
combinations. See "-- Business Combinations." Prior year amounts1975, we have been restatedat the forefront of
innovation in meeting our mission of "Helping Government Serve the People." We
use our expertise, experience and advanced information technology to reflectmake
government operations more efficient and cost-effective while improving the
combinationquality of services provided to program beneficiaries. We currently have
contracts with DMG. The Spectrum, Carrera and Phoenix
combinations were accounted for as immaterial poolings of interests, and,
accordingly, the Company's previously issued financial statements were not
restated to reflect these combinations.

OVERVIEW

The Company provides program management and consulting services primarily
to government agencies in all 50 states, 49 of the United States. Founded in 1975,50 largest cities
and 27 of the Company has30 largest counties. We have been profitable every year since inception. The Company conducts itswe
were founded. For the fiscal year ended September 30, 2000, we had revenues of
$399.2 million and net income of $30.5 million, and for the six months ended
March 31, 2001, we had revenues of $233.5 million and net income of
$18.5 million.

Prior to October 2000, we conducted our operations through two groups,groups: the
Government Operations Group and the Consulting Group. The Government Operations Group administersIn October 2000, we
reorganized our groups to better focus and manages government healthmanage our existing and human services programs, including disability services, managed care enrollment,
welfare-to-work and job readiness and child support enforcement. Thefuture
technology assets. Our core technology assets were moved from our Consulting
Group provides consulting services to every state, county and local government
agency, including health and human services, law enforcement, parks and
recreation, taxation, housing, motor vehicles, labor, education and
legislatures.

The Company'sour newly created Systems Group. Accordingly, prior period financial
information has been reclassified to reflect current period presentation of
segment information.

Our revenues are generated from contracts with various payment arrangements,
including: (i)(1) fixed-price; (2) costs incurred plus a fixednegotiated fee
("COST-PLUS"cost-plus"); (ii)
fixed-price; (iii)(3) performance-based criteria; and (iv)(4) time and materials
reimbursement (utilized(used primarily by the Consulting Group). For the fiscal year
ended September 30, 1998,2000, the most recent period for which this information is
available, revenues from these contract typesfixed-price contracts were approximately 24%, 46%,47% of total
revenues; revenues from cost-plus contracts were approximately 19% of total
revenues; revenues from performance-based contracts were approximately 18% of
total revenues; and 12%, respectively,revenues from time and materials reimbursement contracts
were approximately 16% of total revenues. Traditionally, federal
government contracts have been cost-plus and a majority of theour
contracts with state and local government agencies have been fixed-price and
performance-based.
Fixed priceperformance-based and federal government contracts have been cost-plus.
Fixed-price and performance-based contracts generally offer higher margins but
typically involve more risk than cost-plus or time and materials reimbursement
contracts because the Company iswe are subject to the risk of potential cost overruns or
inaccurate revenue estimates.

Effective January 1, 1997,We recognize revenues from cost-plus contracts, including a pro rata amount
of the Social Security Actnegotiated fee, as costs are incurred. We recognize revenues from
fixed-price, performance-based and time and materials reimbursement contracts,
including a portion of 1935 was amendedour estimated profit, as costs are incurred. Each
quarter, management reviews the costs incurred, the revenues recognized and
billings from government contracts to eliminate Social Security Income and Supplemental Security Disability Insurance
benefits based solely on drug and alcohol disabilities. As a result, the Social
Security Administration terminated the SSA Contract effective at the end of
February 1997. All services provided to the Social Security Administration were
completed in the quarter ended March 31, 1997. The SSA Contract contributed
$56.5 million, $31.6 million and $0 to the Company's revenues in fiscal years
1996, 1997 and 1998, respectively.adjust recognized revenue amounts.

The Government Operations Group's contracts generally contain base periods
of one or more years as well as one or more option periods that may cover more
than half of the potential contract duration. As of September 30, 1998, the
Company's2000, our
average Government Operations contract duration was 3 1/2approximately 2.3 years. The
Company'sOur
Consulting Group is typically engaged forcontracts had performance periods in excess ofranging from one month to
approximately two years. Indicative of the long-term nature of

21Our average Systems Group contract duration was
1.5 years.

the Company's engagements, approximately 61% of the Company's fiscal 1998
revenues were in backlog as of September 30, 1997.

The Company'sOur most significant expense is cost of revenues, which consists primarily
of project relatedproject-related employee salaries and benefits, subcontractors, computer
equipment and travel expenses. The Company'sOur ability to accurately predict personnel
requirements, salaries and other costs as well as to effectively manage a
project or to achieve certain levels of performance can have a significant
impact on the service costs related to the Company's fixed priceour fixed-price, performance-based and
performance-basedtime and materials reimbursement contracts. Service cost variability has little
impact on cost-plus arrangements because allowable costs are reimbursed by the
client. The
profitability of the Consulting Group's contracts is largely dependent upon the
utilization rates of its consultants and the success of its performance-based
contracts.

Selling, general and administrative expenses consist of management,
marketing and administration costs including salaries, benefits, travel,
recruiting, continuing education and training, facilities costs, printing,
reproduction, communications and equipment depreciation.

During 1997, the Company recognized two significant charges against income.
The completion of its initial public offering ("IPO") resulted in the
termination of the Company's S corporation status. As a result, the Company
recorded a non-recurring deferred tax charge of $2.6 million for the cumulative
differences between the financial reporting and income tax basis of certain
assets and liabilities at June 12, 1997, the day prior to the IPO. In connection
with the IPO, on January 31, 1997, certain key employees of the Company
surrendered rights to purchase shares of Common Stock of the Company in exchange
for options to purchase shares of Common Stock at an exercise price of $1.46 per
share. The Company recognized a non-cash compensation charge against income of
$5.9 million, the difference between the initial public offering price and the
option exercise price for all outstanding options. The option exercise price was
based on the adjusted book value of the Common Stock at September 30, 1996, and
was established pursuant to pre-existing compensation arrangements with these
employees.

BUSINESS COMBINATIONS AND ACQUISITIONS

As part of itsour growth strategy, the Company expectswe intend to continue to selectively
identify and pursue complementary business combinationsbusinesses to expand itsour geographic reach expandand
the breadth and depth of its service offerings and enhance the Company's consultant
base. In furtherance of this growth strategy, the Company combined with four
consulting firms during 1998 in transactions accounted for as poolings of
interests.

As of March 16, 1998, the Company acquired all of the outstanding shares of
capital stock of Spectrum in exchange for 840,000 shares of Common Stock.
Spectrum, based in Austin, Texas, provides management consulting services that
focus on assisting public sector organizations in solving complex business
problems related to automation. Spectrum's operations complement and expand the
Company's existing information technology and systems planning and integration
consulting service offerings. At the time of the combination, Spectrum had
approximately 37 consultants and three other employees.

As of May 12, 1998, the Company acquired all of the outstanding capital
stock of DMG in exchange for 1,166,179 shares of Common Stock. DMG, based in
Northbrook, Illinois, provides consulting services to state and local government
and other public sector clients throughout the United States. DMG's operations
complement the Company's

22
25

existing management consulting and information technologyour services and expandto enhance our customer base,
including pursuing acquisitions that may be larger than those we have made in
the Company's service offerings to include a broad rangepast. Since the beginning of financial planning,
cost management and various other consulting services aimed atfiscal 2000, we have completed the public
sector. At the time of the combination, DMG had approximately 375 consultants
and 40 other employees.

As of August 31, 1998, the Company acquired all of the outstanding shares
of capital stock of Carrera in exchange for 1,137,420 shares of Common Stock.
Carrera, based in Sacramento, California, provides consulting services that
focus on assisting public sector entities implement large-scale, software-based
human resource and financial systems. At the time of the combination, Carrera
had 78 consultants and eight other employees.

As of August 31, 1998, the Company acquired all of the outstanding shares
of capital stock of Phoenix in exchange for 254,545 shares of Common Stock.
Phoenix, based in Rockville, Maryland, provides consulting services to public
sector entities in planning, implementing and evaluating the utilization of
various electronic commerce technologies, such as electronic benefits transfer,
electronic funds transfer and electronic card technologies. At the time of the
combination, Phoenix had 11 consultants and three other employees.

RESULTS OF OPERATIONS

The following
table sets forth, for the periods indicated, selected
statements of income data as a percentage of revenues:transactions:

YEARS ENDED SEPTEMBER 30,
--------------------------
REVENUES: 1996 1997 1998INTANGIBLE ASSETS
ACQUIRED COMPANY DESCRIPTION OF BUSINESS DATE PURCHASE PRICE RECORDED
- --------------------- ----------------------- ---------------- ------------------ ------------------

Opportunity America Employment training and May 11, 2001 $750,000 $725,000
LLC placement

Strategic Partners Activity-based costing July 19, 2000 $1,800,000 $1,609,000
International LLC systems

Technology Management Child support April 29, 2000 $9,674,000 $10,036,000
Resources collection services

Valuation Resource Asset inventorying and April 14, 2000 $4,500,000 $3,585,000
Management, Inc. valuation services

Asset Works, Inc. Infrastructure April 12, 2000 $8,613,000 $8,674,000
management systems

3-G International, Smart-card systems March 31, 2000 $7,000,000 plus $7,054,000
Inc. an earn-out of (excludes May
$1,126,000 paid earn-out payment)
May 2001

Crawford Consulting, Web-enabled information March 20, 2000 $16,750,000 $11,887,000
Inc. systems

Public Systems, Inc. Client-server October 20, 1999 $5,000,000 $4,540,000
management systems

RESULTS OF OPERATIONS

YEAR ENDED SEPTEMBER 30,
------------------------------------ SIX MONTHS ENDED
1998 1999 2000 MARCH 31, 2001
-------- -------- -------- ----------------

Revenues:
Government Operations Group........................ 15.2% 39.3% 59.6%Group......................... 57.0% 55.5% 55.4% 54.4%
Consulting Group................................... 43.1 41.8 40.4
SSA Contract....................................... 41.7 18.9 --Group.................................... 34.0 31.3 30.0 31.0
Systems Group....................................... 9.0 13.2 14.6 14.6
----- ----- ----- -----
Total revenues..................................revenues.................................... 100.0 100.0 100.0 100.0
Cost of revenues...................................... 74.3 70.4 68.3 68.2
----- ----- ----- -----
Gross profit:
Government Operations Group........................ 20.3 22.3Group......................... 18.0 19.7 23.1 21.5
Consulting Group................................... 36.9 37.6 37.7
SSA Contract....................................... 14.7 13.9 --Group.................................... 37.4 41.6 41.7 43.9
Systems Group....................................... 30.4 42.8 44.0 44.4
----- ----- ----- -----
Total gross profit as percentage of total
revenues...................................... 25.2 27.1 25.9revenues........................................ 25.7 29.6 31.7 31.8
Selling general and administrative expenses......... 14.9 15.1 14.5
Stock option compensation, merger,expenses........... 14.3 15.8 17.0 17.2
Merger, deferred compensation and ESOP expense......................expense........ 1.5 0.2 0.1 --
Amortization of goodwill and other acquisition-related
intangibles......................................... -- 0.1 0.8 1.2
4.4 1.5Legal settlement expense.............................. -- -- 0.9 --
----- ----- ----- -----
Income from operations............................... 9.1 7.6operations................................ 9.9 13.5 12.9 13.4
Interest and other income (expense).................. -- 0.4 0.8income............................. 0.7 1.1 0.7 0.1
----- ----- ----- -----
Income before income taxes........................... 9.1 8.0 10.7taxes............................ 10.6 14.6 13.6 13.5
Provision for income taxes........................... 0.4 2.4 4.5taxes............................ 4.2 6.0 6.0 5.6
----- ----- ----- -----
Net income........................................... 8.7% 5.6% 6.2%income............................................ 6.4% 8.6% 7.6% 7.9%
===== ===== ===== =====

23SIX MONTHS ENDED MARCH 31, 2001 COMPARED TO SIX MONTHS ENDED MARCH 31, 2000

REVENUES. Our total contract revenues increased 27.5% to $233.5 million for
the six months ended March 31, 2001 from $183.2 million for the same period in
2000. Revenues of our Government Operations Group increased 20.8% to
$127.1 million for the six months ended March 31, 2001 from $105.2 million for
the same period in 2000. This increase was due to an increase in the number of
contracts plus revenue totaling $2.8 million received during the six month
period ended March 31, 2001 from entities acquired after the start of the six
month period ended March 31, 2000. Revenues of our Consulting Group increased
32.9% to $72.3 million for the six months ended March 31, 2001 from
$54.4 million for the same period in 2000. This increase was due to an increase
in the number of contracts plus revenue totaling $4.2 million received during
the six month period ended March 31, 2001 from entities acquired after the start
of the six month period ended March 31, 2000. Revenues of our Systems Group
increased 44.8% to $34.1 million for the six months ended March 31, 2001 from
$23.6 million for the same period in 2000. This increase was primarily due to
revenue totaling $10.1 million received during the six month period ended
March 31, 2001 from entities acquired after the start of the six month period
ended March 31, 2000. For the six months ended March 31, 2001 compared to the
six months ended March 31, 2000, our overall growth in revenue was 18.1%
excluding the revenue from entities we acquired after the period ended
March 31, 2000.

GROSS PROFIT. Our total gross profit increased 30.6% to $74.2 million for
the six months ended March 31, 2001 from $56.9 million for the same period in
2000. Gross profit of our Government Operations Group increased 16.3% to
$27.3 million for the six months ended March 31, 2001 from $23.5 million for the
six months ended March 31, 2000. As a percentage of Government Operations

26Group revenues, Government Operations Group gross profit decreased to 21.5% for
the six months ended March 31, 2001 from 22.3% for the same period in 2000. The
decrease was due to additional revenue being recognized in the six months ended
March 31, 2000 upon the completion of one contract. Gross profit of our
Consulting Group increased 43.0% to $31.7 million for the six months ended
March 31, 2001 from $22.2 million for the same period in 2000. As a percentage
of Consulting Group revenues, Consulting Group gross profit increased to 43.9%
for the six months ended March 31, 2001 from 40.8% for the same period in 2000,
primarily due to improved margins. Gross profit of our Systems Group increased
35.8% to $15.2 million for the six months ended March 31, 2001 from
$11.2 million for the same period in 2000 due to increased revenues. As a
percentage of Systems Group revenues, Systems Group gross profit decreased to
44.4% for the six months ended March 31, 2001 from 47.3% for the same period in
2000, due primarily to a decline in software license sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our SG&A expenses increased
31.1% to $40.3 million for the six months ended March 31, 2001 from
$30.7 million for the same period in 2000. The primary reasons for the increase
in SG&A costs were the increase in marketing and proposal preparation
expenditures incurred to pursue further growth and, to a lesser extent, the
increase in corporate and administrative staff to 192 at March 31, 2001 from 183
at March 31, 2000. As a percentage of our revenues, our SG&A expenses increased
to 17.2% for the six months ended March 31, 2001 from 16.8% for the same period
in 2000.

AMORTIZATION OF GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES. In the
quarter ended March 31, 2001, we incurred $2.8 million of amortization expense,
as compared to $0.6 million for the same period in 2000. The increase is due to
amortization of $56.0 million of goodwill and other acquisition-related
intangible assets we recorded in connection with acquisitions we completed
through fiscal year 2000.

INTEREST AND OTHER INCOME. The decrease in interest and other income to
$0.5 million for the six months ended March 31, 2001 as compared to
$2.1 million for the same period in 2000 was due to a decrease in the average
balance of funds we invested.

PROVISION FOR INCOME TAXES. Our provision for income tax for the six months
ended March 31, 2001 was 41.5% of income before income taxes as compared to
41.3% for the six months ended March 31, 2000. This increase was due to
differences in the amounts of certain expense items, primarily amortization of
intangible assets, some of which is not deductible for tax purposes.

YEAR ENDED SEPTEMBER 30, 19982000 COMPARED TO YEAR ENDED SEPTEMBER 30, 1997

Revenues. Total1999

REVENUES. Our total revenues increased 39.5%24.9% to $233.5$399.2 million in fiscal
19982000 from $167.3$319.5 million in fiscal 1997.1999. Revenues of our Government Operations
Group revenues
increased 43.0%24.7% to $139.3$221.2 million in fiscal 19982000 from $97.4$177.4 million in
fiscal 19971999. This increase was due to an increase in the number of contracts in
the Child Support
Enforcement, Managed Care Enrollment and Welfare Reform divisionsgroup plus revenue totaling $8.0 million received from entities acquired
after the start of the group
and revenues from three Managed Care contracts totalling $18.1 million purchased
from another company in February 1998. Excluding the SSA Contract, which had
$31.6 millionperiod ended September 30, 1999. Revenues of revenues in fiscal 1997, Government Operations Group revenues
increased 111.8% as compared to fiscal 1997.our
Consulting Group revenues increased 34.7%19.9% to $94.2$119.9 million in fiscal 19982000 from
$70.0$100.0 million in fiscal 19971999. This increase was due to an increase in the
number of contracts, and revenues totaling $3.9 million from companies which merged
with the Companypurchased in
fiscal 1998 in transactions accounted for as pooling2000 and revenue growth from companies that we purchased during fiscal
1999. Revenues of interests. Revenues from the merged companies accounted for as immaterial
poolings totalled $16.9our Systems Group increased 37.8% to $58.1 million in fiscal
1998.

Gross Profit. Total2000 from $42.1 million in fiscal 1999. This increase was due primarily to
revenues totaling $14.6 million from companies purchased in fiscal 2000.

GROSS PROFIT. Our total gross profit increased 33.5%33.7% to $60.6$126.5 million in
fiscal 19982000 from $45.4$94.6 million in fiscal 1997.1999. Gross profit of our Government
Operations Group increased 45.7% to $51.0 million in fiscal 2000 from
$35.0 million in fiscal 1999. As a percentage of Government Operations Group
revenues, Government Operations Group gross profit increased 31.4% to $25.123.1% in fiscal
2000 from 19.7% in fiscal 1999. This increase was primarily due to improved
gross margins on a few

projects within the Group. Gross profit of our Consulting Group increased 20.1%
to $50.0 million in fiscal 19982000 from $19.1$41.6 million in fiscal 1997.1999. As a
percentage of Consulting Group revenues, Consulting Group gross profit remained
relatively unchanged. Gross profit of our Systems Group increased 41.8% to
$25.6 million in fiscal 2000 from $18.0 million in fiscal 1999. As a percentage
of Systems Group revenues, Systems Group gross profit increased to 44.0% in
fiscal 2000 from 42.8% in fiscal 1999. The improvement in gross margin for the
Systems Group was due primarily to the impact of a 50.6% margin realized by one
division in the Group.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our SG&A expenses increased
34.2% to $67.9 million in fiscal 2000 from $50.6 million in fiscal 1999. As a
percentage of revenues, Government Operations Group gross
profit decreased to 18.0% in fiscal 1998 from 19.6% in fiscal 1997 primarily due
to anticipated lower gross margins on the three purchased Managed Care
Enrollment contracts. Consulting Group gross profit increased 34.7% to $35.4
million in fiscal 1998 from $26.3 million in fiscal 1997 due principally to the
increased revenues. As a percentage of revenues, Consulting Group gross profit
was 37.7% in fiscal 1998 and 37.6% in fiscal 1997.

Selling, General and Administrative Expenses. Total selling, general and
administrativeSG&A expenses increased 33.6% to $33.8 million in17.0% for fiscal 19982000 from
$25.3 million in15.8% for fiscal 1997.1999. This increase in costs was due to increases in boththe number
of non-project professional and administrative personnel and the amount of
professional fees necessary to support the Company'sour growth and marketing and proposal
preparation expenditures incurred to pursue further growthgrowth. During fiscal 2000,
the total number of support staff employees increased and we further expanded
the Government Affairs and Investor Relations unit and the impactInformation Systems
unit. In fiscal 2000, the number of business combinationsadministrative and systems personnel
increased 33.6% to 342 from 256 in fiscal 1999 and the number of employees
increased from 3,285 total employees at September 30, 1999 to 4,205 total
employees at September 30, 2000.

MERGER, DEFERRED COMPENSATION AND ESOP EXPENSES. During fiscal year 2000,
we incurred $0.2 million of non-recurring expenses in connection with
acquisitions we completed during the year. These expenses consisted of legal,
audit and due diligence expenses. During fiscal year 1999, we incurred
$0.5 million of non-recurring expenses in connection with acquisitions. These
expenses consisted of legal, audit and due diligence expenses.

AMORTIZATION OF GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES. During
fiscal year 2000, we incurred $3.2 million of amortization expense related to
the $56.1 million of goodwill and other acquisition-related intangible assets we
recorded in connection with acquisitions we completed during fiscal 1999 and
fiscal 2000. During fiscal year 1999, we incurred $0.3 million of amortization
expense related to the $7.6 million of goodwill and other acquisition-related
intangible assets we recorded in connection with the acquisitions we completed
during the year.

LEGAL SETTLEMENT EXPENSE. In the fourth quarter of fiscal 2000, we incurred
an expense of $3.7 million to settle, without admission of fault or liability by
us, litigation brought against us by a former officer, director and shareholder
in connection with our repurchase of his shares following his resignation in
1996.

PROVISION FOR INCOME TAXES. Income tax expense increased 25.2% to
$24.1 million in fiscal 2000 from $19.2 million in fiscal 1999. As a percentage
of income before income taxes, the income tax expense increased to 44.2% for
fiscal 2000 from 41.0% for fiscal 1999. This increase was due primarily to the
non-deductibility of the legal settlement expense discussed above.

YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO YEAR ENDED SEPTEMBER 30, 1998

REVENUES. Our total revenues increased 30.9% to $319.5 million in fiscal
1999 from $244.1 million in fiscal 1998. Revenues of our Government Operations
Group increased 27.4% to $177.4 million in fiscal 1999 from $139.3 million in
fiscal 1998. This increase was due to an increase in the number of contracts in
the group. Revenues of our Consulting Group increased 20.4% to $100.0 million in
fiscal 1999 from $83.0 million in fiscal 1998. This increase was due to an
increase in the number of contracts, revenues totaling $5.1 million from
companies we purchased in fiscal 1999 and revenue growth from companies that
merged with us in fiscal 1998 in transactions accounted for as immaterial
poolings of interests. These companies had $2.2 million of pre-merger revenues
in fiscal 1998 that were not included in our reported fiscal 1998 revenue.
Revenues of our Systems Group increased 93.0% to

$42.1 million in fiscal 1999 from $21.8 million in fiscal 1998. This increase
was primarily due to revenue growth of $18.1 million from companies that merged
with us in fiscal 1998 in transactions accounted for as immaterial poolings of
interests. These companies had $11.5 million of pre-merger revenues in fiscal
1998 that were not included in our reported fiscal 1998 revenue.

GROSS PROFIT. Our total gross profit increased 50.9% to $94.6 million in
fiscal 1999 from $62.7 million in fiscal 1998. Gross profit of our Government
Operations Group increased 39.6% to $35.0 million in fiscal 1999 from
$25.0 million in fiscal 1998. As a percentage of Government Operations Group
revenues, Government Operations Group gross profit increased to 19.7% in fiscal
1999 from 18.0% in fiscal 1998. This increase was primarily due to improved
gross margins on two of the three Health Management Services contracts we
purchased in fiscal 1998. Gross profit of our Consulting Group increased 34.1%
to $41.6 million in fiscal 1999 from $31.0 million in fiscal 1998. As a
percentage of Consulting Group revenues, Consulting Group gross profit increased
to 41.6% in fiscal 1999 from 37.4% in fiscal 1998. The improvement in gross
margin for the Consulting Group was due to improved operating efficiencies
within the group. Systems Group gross profit increased 171.6% to $18.0 million
in fiscal 1999 from $6.6 million in fiscal 1998. As a percentage of Systems
Group revenues, Systems Group gross profit increased to 42.8% in fiscal 1999
from 30.4% in fiscal 1998. The improvement in gross margin for the Systems Group
was due primarily to the impact of a 50.0% margin realized by one division in
the Group, which constituted 45.1% of fiscal 1999 Systems Group revenues,
compared to only 20.3% of fiscal 1998 Systems Group revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our total SG&A expenses
increased 45.0% to $50.6 million in fiscal 1999 from $34.9 million in fiscal
1998. As a percentage of revenues, SG&A increased to 15.9% for fiscal 1999 from
14.3% for fiscal 1998. This increase in costs was due to increases in the number
of non-project professional and administrative personnel and the amount of
professional fees necessary to support our growth and marketing and proposal
preparation expenditures incurred to pursue further growth. We established a
Government Affairs and Investor Relations unit at the end of fiscal 1998 and
significantly increased the size of our Information Systems unit during fiscal
1999. From September 30, 19971998 to September 30, 19981999 the number of administrative
and systems personnel increased 18%23.1% from 125208 to 147256 and the Company grewtotal number of
employees increased from 1,8002,870 total employees at September 30, 19971998 to more than 2,8003,285
total employees at September 30, 1998. As a percent1999.

MERGER, DEFERRED COMPENSATION AND ESOP EXPENSES. During fiscal year 1999,
we incurred $0.5 million of revenues,
selling, generalnon-recurring expenses in connection with
acquisitions we completed during the year. These expenses consisted of legal,
audit and administrative expenses decreased slightly to 14.5% for
fiscal 1998 from 15.1% for fiscal 1997.

Stock Option Compensation, Merger, Deferred Compensation and ESOP Expenses.due diligence expenses. During fiscal year 1998, the Companywe incurred
$3.7 million of non-recurring expenses in connection with acquisitions we
completed during the mergers with Spectrum, DMG, Carrera and Phoenix.year. These expenses consisted of legal, audit, broker,
trustee, deferred compensation and other expenses and the acceleration of
expenses related to stock appreciation rights for DMG employees totallingof one of our
acquired companies totaling $0.9 million.

During fiscal year
1997,AMORTIZATION OF GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES. We
incurred $0.3 million of amortization expense related to the $7.6 million of
goodwill and other acquisition-related intangible assets we recorded in
connection with its IPO, the Company recognized a non-recurring
compensation expense of $5.9 million for stock options granted to employees.
Alsoacquisitions during fiscal 1999. We did not incur any
amortization expenses in fiscal 1997, the Company incurred $1.5 million1998 because we accounted for all acquisitions
we completed during that fiscal year as poolings of deferred compensation
expenses for DMG employees related to plans which were terminated subsequent to
the merger with the Company.

PROVISION FOR INCOME TAXES. Our income in their personal tax
returns. Accordingly, the Company was not

24
27

subject to federal and most state income taxes until June 12, 1997, the day
prior to the completion of the initial public offering. Upon completion of the
IPO, the Company's S corporation status was terminated and the Company became
subject to federal and state income taxes.

Income tax expense increased 154.4%84.3% to
$19.2 million in fiscal 1999 from $10.4 million in fiscal 1998 from
$4.1 million in fiscal 1997.1998. As a percentage
of income before income taxes, theour income tax expense increased to 41.0% for
fiscal 1998 is 41.9% compared to 30.5%1999 from 40.2% for fiscal 1997.
The fiscal 1998 tax expense1998. This increase was adversely impacted by $0.5 million due primarily to the
nondeductibility of certain merger related expenses. Additional information
regarding income tax expense is in Note 9 to the consolidated financial
statements contained in this document.

YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO YEAR ENDED SEPTEMBER 30, 1996

Revenues. Total revenues increased 23.3% to $167.3 million in fiscal 1997
from $135.7 million in fiscal 1996. Government Operations Group revenues
increased 26.1% to $97.4 million in fiscal 1997 from $77.2 million in fiscal
1996 due to an increase in the number of projects offset by a decrease in
revenue from the SSA Contract, which was terminated in February 1997. The SSA
Contract contributed $31.6 million to fiscal 1997 revenues as compared to $56.5
million to fiscal 1996 revenues. Excluding the SSA Contract, Government
Operations Group revenues increased 218.0% to $65.8 million in fiscal 1997 from
$20.7 million in fiscal 1996 due to increases in the numbers of contracts in the
Welfare Reform, Managed Care Enrollment Services, and Child Support Enforcement
divisionseffect of the group. Consulting Group revenues increased 19.7% to $70.0
million in fiscal 1997 from $58.5 million in fiscal 1996 due to an increase in
the number of contracts and increased revenues from management studies, fleet
consulting, franchise fee consulting, revenue maximization contracts and
international business.

Gross Profit. Total gross profit increased 32.9% to $45.4 million in
fiscal 1997 from $34.1 million in fiscal 1996. Government Operations Group gross
profit increased 52.1% to $19.1 million in fiscal 1997 from $12.5 million in
fiscal 1996. As a percentage of revenues, Government Operations Group gross
profit increased to 19.6% in fiscal 1997 from 16.2% in fiscal 1996 primarily due
to the decreased revenue volumetermination of the SSA Contract in fiscal 1997, which had a
lower gross profit margin than other contracts in the group, and to favorable
profit recognition adjustments on two large projects. Excluding the SSA
Contract, Government Operations Group gross profit as a percentage of revenues
increased to 22.3% in fiscal 1997 from 20.3% in fiscal 1996. Consulting Group
gross profit increased 21.7% to $26.3 million in fiscal 1997 from $21.6 million
in fiscal 1996 due to principally to the increased revenues. As a percentage of
revenues, Consulting Group gross profit increased to 37.6% in fiscal 1997 from
36.9% in fiscal 1996 which represents normal variability of gross profit from
period to period.

Selling, General and Administrative Expenses. Total selling, general and
administrative expenses increased 25.1% to $25.3 million in fiscal 1997 from
$20.2 million in fiscal 1996. This increase in costs was due to increases in
both professional and administrative personnel and professional fees necessary
to support the Company's growth and marketing and proposal preparation
expenditures incurred to pursue further growth. As a percent of revenues,
selling, general and administrative expenses increased to 15.1% for fiscal 1997
from 14.9% for fiscal 1996.

Stock Option Compensation, Merger, Deferred Compensation and ESOP Expenses.
During fiscal year 1997, in connection with its IPO, the Company recognized a
non-recurring compensation expense of $5.9 million for stock options granted to
employees.

25
28

The Company incurred $1.5 million in fiscal 1997 and $1.6 million in fiscal 1996
of deferred compensation expenses for DMG employees related to plans which were
terminated subsequent to the merger with the Company.

Provision for Income Taxes. Prior to the IPO, the Company and its
shareholders elected to be treated as an S corporation under the Internal
Revenue Code. Under the provisions of the tax code, the Company's shareholders
included their pro rata share of the Company's income in their personal tax
returns. Accordingly, the Company was not subject to federal and most state
income taxes until June 12, 1997, the day prior to the completion of the initial
public offering. Upon completion of the IPO, the Company's S corporation status was terminated and the Company became subject to federal and state income taxes.

As a percentage of income before income taxes, the income tax expense for
fiscal 1997 is 30.5% compared to 4.3% for fiscal 1996. Additional information
regarding income tax expense is in Note 9 to the consolidated financial
statements contained in this document.

26Control Software, Inc.
upon its merger with us.

25
29
QUARTERLY RESULTS

Set forth below are selected income statement data for the eight quarters
ended September 30, 1998. ThisMarch 31, 2001. We derived this information is derived from unaudited quarterly
financial statements whichthat include, in the opinion of our management, all
adjustments necessary for a fair presentation of the information for such
periods. ThisYou should read this information should be read in conjunction with the Consolidated
Financial Statementsconsolidated
financial statements and related Notesnotes thereto contained elsewhereincluded in this Prospectus.prospectus.
Results of operations for any fiscal quarter are not necessarily indicative of
results for any future period.

QUARTERSQUARTER ENDED
---------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
JUNE 30, SEPT. 30,
1996 1997 1997 1997 1997 1998 1998 19981999 1999 1999 2000 2000 2000 2000 2001
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues:
Government Operations Group.............Group........... $ 8,029 $15,551 $19,158 $23,019 $27,772 $32,189 $36,844 $42,45847,427 $ 48,640 $ 51,180 $ 54,030 $ 55,629 $ 60,338 $ 60,483 $ 66,586
Consulting Group.... 15,811 17,096 16,906 20,142 19,875 21,042 24,394 28,899
SSA Contract........ 22,511 9,082 19Group...................... 24,796 27,641 27,141 27,255 31,150 34,371 35,539 36,763
Systems Group......................... 11,945 10,455 11,362 12,216 18,798 15,694 16,894 17,256
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues.................... 84,168 86,736 89,683 93,501 105,577 110,403 112,916 120,605
Cost of revenues........................ 58,467 61,318 62,085 64,249 71,832 74,454 77,254 82,046
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit:
Government Operations Group........... 9,494 10,078 11,167 12,347 12,733 14,736 12,786 14,554
Consulting Group...................... 10,452 11,032 11,327 10,855 12,352 15,448 15,076 16,655
Systems Group......................... 5,755 4,308 5,104 6,050 8,660 5,765 7,800 7,350
-------- -------- -------- -------- -------- -------- -------- --------
Total gross profit................ 25,701 25,418 27,598 29,252 33,745 35,949 35,662 38,559
Selling, general and administrative
expenses.............................. 13,844 12,737 15,426 15,281 18,036 19,204 19,751 20,509
Merger, deferred compensation and ESOP
expense............................... 152 210 -- -- 210 15 -- --
Amortization of goodwill and other
acquisition-related intangibles....... 88 172 274 371 1,079 1,488 1,392 1,359
Legal settlement expense................ -- -- -- -- -- 3,650 -- --
-------- ------- ------- ------- ------- ------- ------- -------
Total revenues........ 46,351 41,729 36,083 43,161 47,647 53,231 61,238 71,357
Cost of revenues...... 35,826 29,882 25,272 30,988 35,452 38,937 46,217 52,294
-------- ------- ------- ------- ------- ------- ------- -------
Gross profit.......... 10,525 11,847 10,811 12,173 12,195 14,294 15,021 19,063
Selling, general and
administrative
expenses............ 5,715 6,065 6,171 7,372 8,172 8,377 7,105 10,129
Stock option
compensation,
merger, deferred
compensation and
ESOP expense........ 392 509 6,077 394 467 907 1,972 325
-------- ------- ------- ------- ------- ------- ------- --------------- -------- -------- -------- --------
Income (loss) from operations.......... 4,418 5,273 (1,437) 4,407 3,556 5,010 5,944 8,609operations.................. 11,617 12,299 11,898 13,600 14,420 11,592 14,519 16,691
Interest and other income.............. 64 23 143 547 527 526 384 338income............... 965 1,364 1,050 1,099 366 530 288 166
-------- ------- ------- ------- ------- ------- ------- --------------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes........ 4,482 5,296 (1,294) 4,954 4,083 5,536 6,328 8,947taxes.............. 12,582 13,663 12,948 14,699 14,786 12,122 14,807 16,857
Provision for income taxes............... 416 666 907 2,115 1,592 2,237 2,549 4,062taxes.............. 5,131 5,756 5,288 6,133 6,188 6,478 6,145 6,996
-------- ------- ------- ------- ------- ------- ------- --------------- -------- -------- -------- -------- -------- --------
Net income (loss).....income.............................. $ 4,0667,451 $ 4,630 $(2,201)7,907 $ 2,8397,660 $ 2,4918,566 $ 3,2998,598 $ 3,7795,644 $ 4,8858,662 $ 9,861
======== ======= ======= ======= ======= ======= ======= =============== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic...............Basic................................. $ 0.320.36 $ 0.38 $ 0.36 $ 0.41 $ 0.41 $ 0.27 $ 0.41 $ 0.46
======== ======== ======== ======== ======== ======== ======== ========
Diluted............................... $ 0.35 $ 0.37 $ (0.17) $ 0.18 $ 0.16 $ 0.20 $ 0.23 $ 0.27
Diluted............. $ 0.32 $ 0.36 $ (0.17)0.40 $ 0.170.40 $ 0.150.26 $ 0.190.40 $ 0.22 $ 0.260.45
======== ======== ======== ======== ======== ======== ======== ========

The results of operations for the quarter ended June 30, 1997 include two
significant nonrecurring charges, a $5.7 million charge ($3.7 million after tax)
for the difference between the IPO price and the formula price for stock options
outstanding and a $2.6 million charge to record deferred income taxes upon
termination of the Company's S corporation status.

The Company'sOur revenues and operating results are subject to significant variation from
quarter to quarter depending on a number of factors, includingincluding:

- the progress of contracts,contracts;

- revenues earned on contracts,contracts;

- the commencement and completion of contracts during any 27
30

particular
quarter,quarter;

- the schedule of the government agencies for awarding contracts,contracts; and

- the term of each contract that the Company haswe have been awarded and
general economic conditions.awarded.

Because a significant portion of the Company'sour expenses are relatively fixed,
successful contract performance and variation in the volume of activity as well
as in the number of contracts commenced or completed during any quarter may
cause significant variations in operating results from quarter to quarter.
Furthermore, the Company has on occasionFurther, we have occasionally experienced a pattern in itsour results of operations
pursuant to which it incurswe

incur greater operating expenses during the start-up and early stages of
significant contracts. In addition, the termination of the SSA Contract and the absence of
revenues thereunder after March 31, 1997 significantly reduced the Company's
revenue base as comparedcontracts prior to previous quarters. No assurances can be given thatreceiving related revenues. Our quarterly results
will notmay fluctuate, causing a material adverse effect on the
Company'sour operating results and
financial condition.

See "Risk
Factors -- Variability of Quarterly Operating Results."

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity isFor the six months ended March 31, 2001, cash flow from operations. The
Company's cash flow fromprovided by operations was
($7.5)$13.3 million $18.5 million and $4.0as compared to cash used in operations of $3.9 million for the yearssix
months ended September 30, 1998, 1997 and 1996, respectively. TheMarch 31, 2000. Improvements in realizations on accounts receivable
collections, from an increase in accounts receivable of $6,884 in the first
quarter of 2000 to a decrease in accounts receivable of $8,129 in the first
quarter of 2001, have had a significant positive effect in the first six months
of fiscal 2001, partially offset by an increase in costs and estimated earnings
in excess of billings (i.e., unbilled receivables) and a decrease in billings in
excess of costs and estimated earnings (i.e., deferred revenue). The increase in
unbilled accounts receivable and the decrease in deferred revenues during the
six months ended March 31, 2001 were due to a number of new contract startups
and the impact of a number of contracts for which billings do not match costs
incurred in connection with such contracts. We believe that the unbilled
receivables will decrease during the remainder of fiscal 2001, resulting in a
positive effect on cash flow from operationsflow. Higher income after adjustment for depreciation
and amortization and changes in fiscal 1998working capital accounts has also favorably
impacted our operating cash flow.

For the six months ended March 31, 2001, cash used in investing activities
was $5.3 million as compared to fiscal 1997
is due$12.7 million for the six months ended
March 31, 2000. Cash used in investing activities for the six months ended
March 31, 2001 primarily to increased accounts receivable related to revenue growth.

Certainconsisted of expenditures for capitalized software
costs totaling $3.8 million and purchases of property and equipment of
$2.3 million. During the six months ended March 31, 2000, we generated cash from
sales of marketable securities, were soldsubstantially all of which consisted of
short-term municipal bonds totaling $10.7 million, and used $21.5 million in
cash for two acquisitions.

Cash provided by financing activities during the six months ended March 31,
2001 was $2.0 million and during the six months ended March 31, 2000 was
$1.5 million, which consisted primarily of sales of stock to employees through
our employee stock purchase plan and stock option plan during both periods.

Cash used in investing activities totaled $25.0 million during the year
ended September 30, 1998 generating $27.82000 as compared to $45.1 million of cash used in proceeds. These investments were sold to
provide general working capital, including necessary income tax payments, and to
pay the final S corporation distribution discussed below. The Company has no
material commitments for capital expenditures and, as a services company, does
not anticipate making any significant capital expenditures during fiscal year
1999.

During the three months ended December 31, 1997, the Company made final S
corporation distributions totaling $5.7 million. The distributions to
shareholders were based upon the fiscal 1997 income taxable to the S corporation
shareholders. The amount of the fiscal 1997 taxable income was determined during
the finalization of the Company's incomeinvesting
activities for the full fiscal year ended September 30, 1997, and the liability1999. The $25.0 million of cash used
in investing activities for the $5.7 million distribution was
recognized on theyear ended September 30, 1997 balance sheet.2000 consisted of
$53.3 million for acquisitions, net of cash acquired, $5.0 million for the
purchase of property and equipment (of which $1.6 million was for improvements
to the corporate headquarters building), and $2.8 million for capitalized
software development costs, offset by the sale of marketable securities totaling
$36.1 million. The Company also made S
corporation distributions$45.1 million of cash used in investing activities for the
year ended September 30, 1999 consisted of purchases of marketable securities
totaling $1.7$23.2 million, to former shareholders$8.0 million for the purchase of Spectrumour corporate
headquarters in Reston, Virginia, $11.2 million for acquisitions, net of cash
acquired, and Phoenix during fiscal 1998.$2.6 million for the purchase of property and equipment.

Cash flow fromused in financing activities was
$31.2totaled $4.5 million in fiscal 1997. In June 1997,during the Company received netyear ended
September 30, 2000 and consisted of $6.8 million of payments on borrowings of
companies which were acquired during the year, offset by the receipt of proceeds
of $53.8$2.3 million from the saleissuance of common stock through option exercises and
through purchases under our employee stock purchase plan. Cash provided by
financing activities totaled $59.3 million during the year ended September 30,
1999 and consisted primarily of $61.0 million of proceeds, net of offering
expenses, from our secondary offering of common stock that we completed in
its IPO. The Company made S corporation
distributions of $21.7 million, representing a portion of the estimated income
taxed or taxable to the S corporation shareholders through the date of its IPO.

The Company hasDecember 1998.

We had a $10.0 million revolving credit facility (the "CREDIT
FACILITY") with Crestar Bank in Virginia,a bank, which may be usedwas
available for borrowing and the issuance of letters of credit. Outstanding letters of credit totaled $0.4
million at September 30, 1998. The Credit Facility bears interest at a rate
equal to LIBOR plus an amount which ranges from 0.65% to 1.25% depending on the
Company's debt to equity ratio. The Credit Facility contains certain restrictive
covenants and financial ratio requirements, including a minimum net worth
requirement of $60 million. The Company hasWe had not used
the Credit Facilitycredit facility to finance itsour working capital

27
needs, and our management decided to allow the credit facility to expire at
September 30, 1998,March 31, 1999. We may in the Company had
$9.6 million available under the Credit Facility.

28
31

Management believesfuture incur indebtedness to finance acquisitions.

We believe that the Companywe will have sufficient resources to meet itsour currently
anticipated capital expenditure and working capital cash needs over the next
12twelve months.

Such cash needs may include start-up
costs associatedQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe that our exposure to market risk related to the effect of changes
in interest rates, foreign currency exchange rates, commodity prices and equity
prices with new contract awards, obtaining additional office space,
establishing new offices, investment in upgraded systems infrastructure and
acquisitions ofregard to instruments entered into for trading or for other businesses and technologies. Cash requirements beyondpurposes
is immaterial.

NEW ACCOUNTING PRONOUNCEMENT

In December 1999, the next 12 months depend on the Company's profitability, its ability to manage
working capital requirements, its rate of growth, the amounts ultimately spent
on business acquisitions, if any, and the leasing of new office space, if any.

YEAR 2000

The Company is awarestaff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements.
SAB 101 summarizes some of the staff's interpretations of application of
generally accepted accounting principles to revenue recognition, including
presentation in the consolidated financial statements. The staff provided
guidance due, in part, to the large number of revenue recognition issues that it
has encountered in registrant filings.

Under SAB 101, we will recognize revenue on many computer systemsof our performance-based
contracts as billings are rendered to customers, rather than as costs are
incurred. Upon adopting SAB 101, we will face asadjust our financial statements for the
millennium ("YEAR 2000") approaches. The Company is auditing its internal
software and hardware and is implementing corrective actions where necessary to
address Year 2000 problems. The Company is also currently reviewing the software
and hardware, and implementing corrective actions where necessary, of DMG,
Carrera, Spectrum and Phoenix, all of which the Company combined with during
1998. The Company will continue to assess the need for Year 2000 contingency
plans as its remediation efforts progress. The Company estimates that its
remediation efforts will be completed bysix months ended March 31, 1999. The Company does not
believe2001 to reflect the change in revenues and profit
resulting from the application of the new accounting principle. We are currently
evaluating the impact that the cost of its remediation efforts will be material or that these
effortsSAB 101 will have a material impact on its operations orour financial results.
However, there can be no assurance that those costs will not be greater than
anticipated, or that corrective actions undertaken will be completed before any
Year 2000 problems could occur.

The Company also provides assistance in assessing, evaluating, testingstatements and certifying government client systems affected by Year 2000 problems, as well as
quality assurance monitoring of Year 2000 compliance conversions performed for
clients by third parties. Although the Company has attemptedwe
intend to contract to
provide such services in a manner that will minimize its liability for system
failures, there can be no assurance that the Company would not become subject to
legal proceedings which, if resolved in a manner adverse to the Company, could
have a material adverse effect on its financial condition.

The Company relies to varying extents on information processing performed
by the governmental agencies and entities with which it contracts. The Company
has inquired where necessary of such agencies and entities of potential Year
2000 problems, and, based on responses to such inquiries, management believes
that the Company would be able to continue to perform on such contracts without
material negative financial impact. However, the Company cannot be certain that
Year 2000 related systems failuresadopt SAB 101 in the information systemsfourth quarter of clients will
not occur and, if such failures occur, that they will not interfere with the
Company's ability to properly manage a contracted project and result in a
material adverse effect on the Company's business, financial condition and
results of operations.

FORWARD LOOKING STATEMENTS

Statements that are not historical facts, including statements about the
Company's confidence and strategies and expectations about future contracts,
market opportunities, market demand and acceptance of the Company's products are
forward looking statements that involve risks and uncertainties. These
uncertainties include reliance on government clients; risks associated with
government contracting; risks involved in managing governmental projects;
legislative change and political developments; opposition from government
unions; challenges resulting from growth; adverse publicity; and legal, economic
and other risks detailed in this Prospectus.

29fiscal 2001.

28
32
BUSINESS

OVERVIEW

The Company isWe are a leading provider of program management, and consulting services and
systems solutions primarily to state and local government agencies throughout
the United States. Since itsour inception in 1975, the Company believes it haswe have been at the forefront of
innovation in meeting itsour mission of "Helping Government Serve the
People(TM).People-Registered Trademark-." MAXIMUS's services are designedWe use our expertise, experience and advanced
information technology to make government operations more efficient and
cost effectivecost-effective while improving the quality of the services provided to program
beneficiaries. The Company applies an entrepreneurial, private sector approach
utilizing advanced technologyWe currently have contracts with government agencies in projectsall
50 states, 49 of the 50 largest cities and 27 of the 30 largest counties. For
the year ended September 30, 2000, our five largest contracts were with
government agencies in almostTexas, California, New York, Maryland and New Jersey and
accounted for approximately 20.6% of our fiscal 2000 revenues. We have been
profitable every state inyear since we were founded. For the nationfiscal year ended
September 30, 2000, we had revenues of $399.2 million and in markets in several foreign countries.

MAXIMUS conducts itsnet income of
$30.5 million, and for the six months ended March 31, 2001, we had revenues of
$233.5 million and net income of $18.5 million.

We conduct our operations through twothree groups: theour Government Operations
Group, our Consulting Group and the Consultingour Systems Group. TheOur Government Operations
Group administers and manages state and local government health and human services programs includingon a
fully-outsourced basis. Examples of these programs include welfare-to-work and
job readiness, child care, child support enforcement, managed care enrollment
and disability services. TheOur Consulting Group provides program planning and
management, information technology consulting, strategic program evaluation,
program improvement, financial management, revenue maximization, fleet
management and other public sector-related consulting services to all government
agencies. In fiscal 1998, the Company significantly expanded its Consulting
Group by combining with four consulting firms, and it now estimates that it is
the largest provider of general consultingquality assurance services to state and local government agencies, in addition
to general management consulting services and specialized services such as
assisting state and local agencies in maximizing federal funding for their
programs. Our Systems Group provides state and local agencies with systems
design and implementation to improve the United States.efficiency and cost-effectiveness of
their program administration. We offer our own suite of proprietary software
products in addition to customized versions of popular applications such as
PeopleSoft.

We believe that we are well-positioned to benefit from the continued
increase in demand for new program management, consulting services and systems
solutions that has arisen in an environment characterized by changing regulation
and evolving technology. We believe that fiscal pressures will compel state
governments to continue to rationalize program operations and upgrade existing
technology to operate more cost-efficient and productive programs. To achieve
these efficiencies, we believe that many government agencies will turn to
outside experts, including us, for help.

MARKET OPPORTUNITIES

The Company believesOVERVIEW

We believe that providing program management, and consulting services and
systems solutions to government agencies represents acontinues to represent significant
market opportunity.
Federal,opportunities. The federal, state and local government agencies in the
United States to which we market our services spend more than $250 billion
annually on the health and human services programs to which
the Company markets its services, including Medicaid, Children's
Health Insurance, Food Stamps, Temporary
Assistance to Needy Families, Child Support Enforcement, Supplemental Security
Income, GeneralTemporary Assistance Child Careto Needy Families, and Child Welfare. The state operated
programs alone cost an estimated $21.0various other programs.
Based on currently available data published by the federal government, we
estimate that states spend over $23 billion annually to administer. This
figure does not include administrativeadminister these
programs, of which we estimate only a small portion was outsourced to private
service providers, including us. We believe that state and local government
agencies will increasingly rely on private service providers to administer their
programs and will also increasingly engage consultants as they seek

to reduce costs for Medicare and Title II
Disability Insurance, which are administered without state assistance.improve the delivery of services. The following chart sets forth currently available data from U.S. government
publicationstable
describes the market for programs served by the Company:our services:

ESTIMATED NUMBER ESTIMATED NUMBERANNUAL
OF ANNUALADMINISTRATIVE
STATE-OPERATED PROGRAM BENEFICIARIES ADMINISTRATIVE
STATE OPERATED PROGRAM SERVED EXPENDITURES
- ---------------------- -------------------- ----------------

Medicaid......................................... 36.1Medicaid.................................................... 40.6 million $ 6.76.9 billion
Food Stamps...................................... 26.9Stamps................................................. 19.8 million 3.84.0 billion
Child Support Enforcement................................... 11.9 million 3.6 billion
Supplemental Social Security Income......................... 6.6 million 2.5 billion
Temporary Assistance to Needy Families........... 12.6Families...................... 7.2 million 2.3 billion
Children's Health Insurance................................. 3.3 million 0.4 billion
Child Support Enforcement........................ 11.5Certain Other Social Services............................... 6.8 million 3.13.5 billion
Supplemental Security Income..................... 6.6--------------- -------------
Total....................................................... 96.2 million 2.0 billion
General Assistance/Social Services/Other......... 10.0 million 2.1 billion
------------- -------------
103.7 million $21.0$23.2 billion

30
33LEGISLATIVE INITIATIVES

In the last several years, there has been a surgesignificant increase in
legislation and initiatives to reform federal, state and local welfare and health and human
services programs. Oneprograms, including the Welfare Reform Act of 1996, the Balanced Budget
Act of 1997, Government Accounting Standards Board Statement No. 34 and the
Health Insurance Portability and Accountability Act of 1996.

WELFARE REFORM ACT OF 1996. The Welfare Reform Act was one of the most
significant of thesethe legislative reforms was
the Welfare Reform Act, whichand restructured the benefits available
to welfare recipients, eliminated unconditional welfare entitlement and, most
importantly, restructured the funding mechanisms that existrelationships between federal and state
governments. Under the Welfare Reform Act, states receive block grant funding
from the federal government and aremay no longer able to seek reimbursement in the form of
matching federal government funds for expenditures in excess of block grants.
Accordingly, states bear the financial risk for the operation of their welfare
programs.

A number of stateAll states and many local governments are taking action to respond to changes being
initiated as a result of
welfare reform. Some of these actions include enlisting the advice of
specialized management consultants on ways to more efficiently and effectively
administer their health and human serviceservices programs and by
outsourcingin many cases outsource
the management of such programs completely. As a result, MAXIMUS, for
example, haswe have been awarded
performance-based contracts to manage health care enrollment services contracts
for government agencies in Michigan, Texas,California, New York, Texas, Massachusetts, Michigan,
New Jersey, Iowa, Kansas, Colorado and California. MAXIMUS hasVermont. We have also been retained by
numerous states and municipalities to provide welfare reform related consulting
services.

A more recent initiative atFurther, as an increasing number of individuals are enrolled in managed care
plans, a need has arisen to provide a mechanism by which disputes between
patients and their managed healthcare plan can be resolved. We operate the
federal level isnation's largest system for the resolution of disputes among health plans,
subscribers and providers through independent external review. We are the sole
national contractor to the Federal Health Care Financing Administration for
external appeals in the Medicare Managed Care Program and have rapidly expanded
our services into 15 state governments.

BALANCED BUDGET ACT OF 1997. The Balanced Budget Act of
1997 (the "BALANCED BUDGET ACT"), which established, among
other programs, the State Children's Health Insurance Program (the "CHILDREN'S HEALTH INSURANCE
PROGRAM").Program. This program
provides federal matching funds to enable states to expand health care to
targeted uninsured, low-income children. Overchildren over a five-year period. Under the
next
fiveBalanced Budget Act, the federal government made $39.7 billion available over
ten years $20.3 billion will be made available to states with federally-approved plans to expand state Medicaid
programs, initiate new insurance programs or combine approaches.programs. In June 1998, the
Clinton
administrationfederal government also mandated sweeping protections to Medicare beneficiaries,
including increased access to health plans by persons with pre-existing
illnesses, added protections for women and non-English speaking beneficiaries
and increased availability of

30
specialists. Given the breadth and depth of the
Company'sour expertise, it believes it is well positioned to capitalizewe have capitalized
upon these new opportunities to assistby assisting states in planning, implementing and
maintaining the increased enrollment and outreach that will be required by these new federal
initiatives.

GOVERNMENTAL ACCOUNTING COMPLIANCE. Another emerging market created by
changes in legislation or government policy is helping states and municipal
governments comply with Governmental Accounting Standards Board Statement
No. 34 adopted in 1999. GASB 34 requires government entities to properly value
and account for their capital assets and infrastructure. Compliance with these
new rules is being phased in over a five-year period beginning in 2001. Our
Consulting Group is well-positioned to assist states and municipal governments
in complying with GASB 34 as it has the requisite experience to perform all the
services necessary to ensure compliance. We have already entered into 120
contracts valued at approximately $4.5 million to perform these services.

HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996. The Company believesHealth
Insurance Portability and Accountability Act requires health care programs,
including Medicaid, Medicare and most government-funded health care programs, to
comply with new requirements governing billing and payment policies, exchange of
eligibility and enrollment information, referral and authorization processes for
medical services and ensuring patient privacy. Accordingly, each state will have
to evaluate and update its Medicaid Management Information Systems, a process we
are well-positioned to perform.

MARKET OUTLOOK

We believe that thesethe legislative changes described above, when combined with
political pressures and the financial constraints that inevitably result, will
accelerate the rate at which state and local government agencies seek new
solutions to reduce costs and improve the effectiveness of health and human
services programs. The Company believesWe believe that government agencies will continue to turn to
companies such as MAXIMUSlike ours to reduce costs and improve the
effectiveness of health and human services programs. The Company believesachieve these ends. We believe that itwe administer
government programs more effectively administersthan government programsagencies themselves due to
itsour ability to:

(i)
accept contracts where compensation is based on performance; (ii)- attract and compensate experienced, high-level management personnel;

(iii)- rapidly procure and utilizeuse advanced technology;

(iv)- vary the number of personnel on a project to match fluctuating work loads;

(v)- increase productivity by providing employees with financial incentives and
performance awards and more readilyby terminating non-productive employees;

(vi)- provide employees with ongoing training and career development assistance;
and

(vii)- maintain a professionalmodern and efficient work environment that is more conducive to
employee productivity.

The Company believesWe believe that state and local governments will continue to seek itsour
services despite the effect of economic cycles on government budgets.
Historically, in times

31
34 of both budget surpluses and deficits, state and local
governments have relied on the private sector to deliver services to itstheir
citizens. In recent years, as governments at all levels have experienced budget
surpluses, new programs, including the Children's Health Insurance Program, have
been initiated to assist even more sectors of society, (such as the Children's
Health Insurance Program), increasing the population
of beneficiaries of the
Company'sour services. In more austere times, the population enrolled
in existing government health and welfare programs expands, requiring
governments to spend more to administer these programs, butwhile facing increased
pressure to do so cost-effectively. As a result,Because our contracts are typically volume
based, our business has continued to expand, even in depressed economic cycles, the Company's
business has continued to expand.

The Company is recognized as a principal partner of state and local
governments for program management and consulting. With more than 100 offices
located throughout the nation, the Company has the local presence and
decentralized organization to promote relationships with the executive and
legislative branches of state and local governments. With more than 2,800
employees nationwide, the Company has more specialized resources than most
state, city or county government agencies.

STRENGTHS AND DIFFERENTIATIONS

The Company believescycles.

COMPETITIVE ADVANTAGES

We believe that it haswe have been a pioneer in offering state and local
government agencies a compelling private sector alternative to internal
administration of government health and human services programs. The Company has also successfully
increased the breadth of its service offerings to meet such demand from
government agencies. The following business strengths and differentiating
characteristicscompetitive advantages
position MAXIMUSus to capitalize on the significant market opportunities presented by
changes in the changing environment of health and human services
program regulation:

Single Market Focus. The Company believesways government provides services.

SINGLE MARKET FOCUS. We believe that it iswe are the largest company dedicated
exclusively to providing program management, and consulting services to
government health and human services agencies, as well as the largest provider
of general management consulting servicessystems solutions
primarily to state and local government agencies. The Company hasWe have accumulated a detailed
knowledge base and understanding of the regulation and operation of health and human servicesgovernment
programs that allows itus to apply proven methodologies, skills and solutions to
new projects in a cost-effective and timely fashion. The Company believesWe believe that the size, depth
and broad rangebreadth of its health and human servicesour government program expertise and related areas of government
program management differentiate itus from both small firms and non-profit
organizations with limited resources and skill sets as well as from large
consulting firms that serve multiple industries but lack the focus necessary to
understand the complex nature of serving government agencies.

Expanded Consulting Group. During fiscal 1998, the Company significantly
expanded its Consulting group by acquiring four consulting companies: Spectrum,
DMG, Carrera and Phoenix. These combinations increased the number of the
Company's professional consultants from approximately 125 to over 600 and the
Company believes it has the largest management consulting practice dedicated to
serving state and local government in the U.S. The Company believes that the
expansion of its consulting practice provides it with significant competitive
advantages including: (i) a more predictable source of revenues with operating
margins similar to the Consulting Group; (ii) a significant source of
experienced consultants with an established knowledge base, re-useable
methodologies and valuable relationships with members of the executive and
legislative branches of state and local governments; (iii) a broader suite of
consulting services that are increasingly demanded by state and local government
seeking a single-source provider

32
35

of program management and consulting services including cost accounting; human
resources consulting; executive recruiting; fleet management; Year 2000 planing
and management; software and systems integration; strategic planning, evaluation
and implementation for government; electronic commerce and "smart card"
technologies; and (iv) a broader client base that facilitates cross-selling
opportunities between the Consulting Group and Government Operations Group.

Proven Track Record.PROVEN TRACK RECORD. Since 1975, MAXIMUS haswe have successfully and profitably
applied its
entrepreneurialour private sector approach to assisting state and local government
health and human
services agencies. Over the last five years, the Company hasWe have successfully completed approximately 500hundreds of large-scale program
management and consulting services projects for state and local health and human servicesgovernment agencies
serving millions of beneficiaries in nearly every state. The Company believesstate and we currently have
more than 3,000 clients. We believe that the successful execution of these
projects has earned the Company aenhanced our reputation for providing efficient and cost-effective
services to government agencies while improving the quality of services provided
to program beneficiaries. The Company'sOur reputation has contributed significantly to itsour
ability to compete successfully for new contracts.

Additionally, the Company's combinations with Spectrum, DMG, Carrera
and Phoenix provide it with extended service capabilities and an additional base
of established clients that the Company believes will further enhance its
reputation as a leading provider of high-quality management and consulting
services to stateABILITY TO RESPOND TO RFPS. State and local government agencies.

Wide Rangeagencies award
contracts to third party providers through a lengthy and complicated bidding and
proposal process. We have significant experience in assembling the large amounts
of Services. Many of the Company's clients require their
vendorsinformation required to provide a broad array of service offerings, which many of the
Company's competitors cannot provide. Engagements often require creative
solutions that must be drawn from diverse areas of expertise. The Company's
expertisesubmit detailed proposals in response to RFPs in a
wide rangetimely manner. In addition, the expertise and experience of servicesour managers and
employees enables itus to better pursue new business
opportunitiesaccurately estimate project costs and productivity
levels. As a result, our proposals allow us to meet RFP requirements and to offer itself asearn
a single-source providerprofit. Coupled with a reluctance on the part of program
management, consulting and information technology servicesgovernment agencies to state and local
government agencies.

Proprietary Case Management Software Program. The Companyaward
contracts to unproven companies, we believe that our ability to respond to RFPs
has contributed significantly to our success.

PROPRIETARY PROGRAM MANAGEMENT SOLUTION. We have developed a proprietary
automated case management software program called the MAXSTAR Human Services
Application Builder ("MAXSTAR").Builder. The MAXSTAR is a software platform that
allows the Company to reduceprogram tracks program participants, interfaces
with government databases and monitors cases of program participants. MAXSTAR
reduces our project implementation time and cost.cost because it is easily scalable
and customizable and facilitates our project management capability by enabling
us to organize and manage large amounts of information necessary to operate
programs effectively. Because government agencies are often required to manage
vast amounts of data and large numbers of cases without access to advanced
technology and experienced professionals, the Company believeswe believe that MAXSTAR, together with
the Company'sour experienced information technology professionals, is a key element of itsour
success.

Experienced TeamWIDE RANGE OF SERVICES. Many of Professionals. The Company hasour clients require their vendors to
provide a broad array of service offerings, which many of our competitors cannot
provide. Engagements often require creative solutions that must be drawn from
diverse areas of expertise. Our experience in a wide range of services enables
us to better pursue new business opportunities and positions us to be a leading
e-government consulting and implementation force, as well as a single-source
provider of program management, consulting services and systems solutions to
state and local government agencies. Our broad client base facilitates
cross-selling opportunities among our Government Operations, Consulting

and Systems Groups. Additionally, our acquisitions have provided us with
expanded service capabilities and an additional base of established clients.

MARKET LEADING CONSULTING CAPABILITIES. We believe we have the largest
management consulting practice dedicated to serving state and local governments
in the United States. We believe that our Consulting Group provides us with
significant competitive advantages including:

- a significant pool of experienced consultants with an established
knowledge base and valuable relationships with members of the executive
and legislative branches of state and local governments;

- methodologies that can be easily replicated and customized; and

- a more predictable source of revenues due to recurring revenue streams
from our renewable contracts.

In addition, we offer a broad suite of services that are increasingly sought
by state and local governments seeking a single-source provider of program
management and consulting services including cost accounting; human resources
consulting; executive recruiting; and planning, evaluation and implementation
for large government systems.

EXPERIENCED TEAM OF PROFESSIONALS. We have assembled an
experienceda management team of
former government executives, state agency officials, information technology
specialists and other professionals, with
backgroundsmost of whom have more than seven years of
experience in the public health and human services industry. The Company'sOur employees understand the
problems and challenges faced in the marketing, assessment and delivery of
government agency services. Furthermore, sinceFurther, as state and local government
administrators are subject to changing legislative and political mandates, the Company haswe
have developed strong relationships with experienced political consultants who
inform and advise the Companyus with respect to strategic marketing opportunities and
legislative initiatives.

33
36

GROWTH STRATEGY

The Company'sOur goal is to be the leading provider of program management, and
consulting
services and systems solutions to state and local government health and human services programs. The
Company'sagencies. Our
strategy to achieve this goal includes the following:

Capitalize on Trends Toward Outsourcing Government Functions. The Company
believes that it is well-positioned to benefit from the continued increase in
demand for new program management and consulting services that have arisen in an
environment characterized by changing regulation and evolving technology. The
Company believes that fiscal pressures will compel state governments to continue
to rationalize program operations and upgrade existing technology to operate
more cost-efficient and productive programs. To achieve these efficiencies, the
Company believes that many government agencies will turn to outside experts,
such as the Company, for help.

Aggressively Pursue New Business Opportunities. The Company believesAGGRESSIVELY PURSUE NEW BUSINESS OPPORTUNITIES. We believe that, throughout
its 23-yearour 25-year history, it haswe have been a leader in developing innovative solutions to
meet the evolving needs of state and local health and human services agencies.
The Company plansWe plan to expand itsour revenue base by:

(i)- marketing new and innovative program management solutions to the Company'sour extensive client base;

(ii)- expanding the Company'sour client base by marketing the
Company'sour experience, and established
methodologies and systems;

(iii)- investing in the early identification of government bid opportunities;opportunities,
including retaining outside marketing consultants, hiring dedicated
in-house personnel and (iv)using available RFP tracking databases; and

- submitting competitive bids that leverage the Company'sour proven solutions forfrom past
projects.

Continue to Add a Range of Complementary Consulting Services. The Company
intendsCONTINUE TO DEVELOP COMPLEMENTARY SERVICES. We intend to continue
to broaden itsbroadening our range of consulting services in order to respond to the evolving needs of
itsour clients and to provide additional cross-selling opportunities. The Company intendsWe intend to
continue to acquire or internally develop innovative consulting practices, technologies,
and methodologies that are required by government entities in order to
effectively deliver public services. Pursue Strategic Acquisitions. GivenFor example, we have developed a system
that interfaces with insurance company databases to intercept payments to
claimants who are delinquent on child support obligations. We have also
developed a consulting practice focused on the highly fragmented structurerequirements of the governmentHealth
Insurance Portability and

Accountability Act. This practice provides high level information systems
services and consulting marketplace,designed to bring state Medicaid programs into compliance under the
Company believes that it
will continue to successfully identify and pursue attractive acquisition
opportunities. Acquisitions can provide the Company with a rapid, cost-effective
method to broaden its services, increase the number of professional consultants,
broaden its client base, cross sell additional services, establish or expand its
presence geographically, or obtain additional skill sets. The recent
combinations with Spectrum, DMG, Carrera and Phoenix have increased the
Company's client base by over 2,000 and added 500 new consultants.

Recruit Highly Skilled Professionals. The CompanyAct.

RECRUIT HIGHLY SKILLED PROFESSIONALS. We continually strivesstrive to recruit top government
management and information technology professionals with the experience, skills
and innovation necessary to design and implement solutions to the complex
problems presentedfaced by resource-constrained government program agencies. The CompanyWe also seeksseek
to attract middle-level consultants with a proven track record in the health and humangovernment
services field and a network of political contacts to leverage the Company'sour existing
management infrastructure, client relationships and areas of expertise. SERVICES

The Company'sWe
believe we can continue to attract and retain experienced government personnel
by leveraging our reputation as a premier government services are designedconsultant and our
single market focus.

PURSUE STRATEGIC ACQUISITIONS. While most of our revenue growth has been
internally generated, we intend to makecontinue to selectively identify and pursue
attractive acquisition opportunities, including pursuing acquisitions that may
be larger than those we have made in the operationspast. Acquisitions can provide us with
a rapid, cost-effective method to broaden our services, increase the number of
government
healthour professional consultants, expand our client base, cross-sell additional
services, enhance our technical capabilities, establish or expand our presence
geographically and human services programs more efficient and cost effective while
improving the quality of the services that such government agencies provide to
program beneficiaries. The Company organizes its operations into two groups: (i)
theobtain additional skill sets.

GOVERNMENT OPERATIONS GROUP

Our Government Operations Group, 34
37

specializingwhich generated approximately 55% of our
total revenues in the management of government health and human services
operations; and (ii) the Consulting Group, which offers consulting services to
every state, county and local government agency, including health and human
services, law enforcement, parks and recreation, taxation, housing, motor
vehicles, labor, education and legislatures.

GOVERNMENT OPERATIONS GROUP

The Company's Government Operations Group is comprised of four divisions
specializingour most recent fiscal year, specializes in the administration
and management of government health and human services programs.

Child Support Division. The Company provides a full range of child support
enforcement ("CSE") services, including: (i) outreach to and interview of
parents of children entitled to child support; (ii) establishing paternity and
obtaining, enforcing, reviewing and modifying child support orders; and (iii)
payment processing. The Company operates statewide client service units, updates
case arrearage and demographic data for new CSE automated systems and provides
training to CSE workers. The Company believes that it has one of the largest CSE
staffs in the private sector with over 500 professionals. The Company has been
performing these services since 1976, which the Company believes is longer than
any other private sector firm in the United States. The Company is currently
engaged in the management of CSE programs in several states providing full child
support services and specialized services for over 600,000 cases. For example,
in June 1998, the Company was awarded a five-year, $29 million, full-service CSE
program management follow-on contract in Nashville, Tennessee.

Managed Care Enrollment Division. The Company providesHEALTH MANAGEMENT SERVICES DIVISION. We provide a variety of project
management services for Medicaid programs with a particular emphasis on
large-scale managed care enrollment projects. In these projects, the Company
provideswe provide:

- recipient outreach, education and enrollment services;

- an automated information system customized for the particular state;

- data collection and reporting;

collaborative efforts with community-based organizations and advocacy groups in
conducting outreach and education activities;- design and development ofservices for program materials; and

- health plan encounter data analysis and reporting; and care
coordination for Early and Periodic Screening, Diagnosis and Treatment services.
The Companyreporting.

We currently providesprovide managed care enrollment contract services to more
Medicaid recipients than any other public or private sector entity in the
country, operating projects for the states of California, New York, Texas,
Michigan, Colorado, Vermont, Massachusetts, New Jersey, Colorado and Georgia. In recent
months, the Company has begun toVermont. We also administer
programs for uninsured and underinsured children as part of the Children's
Health Insurance Program in various states, including Michigan, Massachusetts,
Vermont, New Jersey, Kansas, and Kansas.

Welfare Reform Division. The Company managesIowa. We operate the nation's largest system for the
resolution of disputes among health plans, subscribers and providers through
independent external review. We are the sole national contractor to the Federal
Health Care Financing Administration for external appeals in the Medicare
Managed Care Program and have rapidly expanded our offerings into state
government, currently providing external review services to 15 states.

CHILD SUPPORT DIVISION. We operate full-service and specialized-service
child support projects on behalf of state and local governments. Projects span a
broad range of services, including outreach to participants, intake of cases,
establishing paternity, obtaining child support orders, collecting child
support, operating customer service call centers, locating services and
obtaining court order modifications. We believe that we have one of the largest
Child Support Enforcement staffs in the private sector with over 1,000
professionals. We have been performing some of these services since

1976, which we believe is longer than any other private sector firm in the
United States. We are currently engaged in the management of Child Support
Enforcement programs in ten states, providing full child support services and
specialized services for over one million cases. Our Customer Service
operations, including four stand-alone call centers, currently handle
approximately three million telephone calls from customers per year.

WORKFORCE SERVICES DIVISION. We manage welfare-to-work programs by
providing a wide range of services, including eligibility determination, emergency assistance, job referral
and placement, transition services such as child care and transportation,
community work training services, job readiness preparation, case management
services and selected educational and training services. The Company'sOur typical
welfare-to-work contract involves thean engagement
of the Company for a period of three to five years.
The Company has served over
250,000During the 2000 fiscal year, we placed nearly 17,500 welfare recipients in numerous states, and has achieved aninto
jobs. On average, employment placement rate in excess ofwe have placed over 80%. For example, the Company currently
manages a welfare reform program in Milwaukee County, Wisconsin under a
three-year, $24 million contract. In 1998, the Company was awarded a contract to
provide employment services in San Diego, California serving 13,000

35
38

participants and valued at more than $6 million annually. Additionally, the
Company has recently been awarded performance-based, welfare-to-work contracts
in Texas, Illinois, Delaware, Virginia, Maryland and Pennsylvania totaling over
$10 million. The Company provides statewide child care services in Connecticut
and was also recently awarded a contract to provide child care services
statewide in Hawaii. As an outgrowth of the Company's welfare reform services,recipients that are
referred to us for job placement. Additionally, we have two contracts that
represent the Company has developed MAXSTAFF, an independent employment agency that
leveragessignificant privatization of government functions under which we
both administer the Company's referralprogram and placement infrastructures by helping
employers find qualified employees or temporary staff from the large pool of
human resources the Company manages.

Federal Services Division. The Company providesmake applicant eligibility determinations.

FEDERAL SERVICES DIVISION. We provide a host of large-scale, nationwide
management services geared toward case management, innovative
return-to-work strategies, program management and staffing support services.
Areas of specialization includeemerging market areas including disability
services, vocational rehabilitation, youth and elderly services, substance
abuse/mental health services and justice administration.administration support services. In
1995, the
Companywe became the first company to operate a national case management and
monitoring program for disability beneficiaries when itwe contracted with the
Social Security Administration to provide referral and monitoring services to beneficiaries with drug or
alcohol disabilities. In 1999, we were awarded the first Social Security
Administration contract to provide employability planning and support services
to disabled youth in order to assist them in entering the workforce. In 2000,
the Commonwealth of Massachusetts awarded us a contract to enroll senior
citizens who receive Medicare and Medicaid benefits in managed care services.
Under this first of its kind federal/state partnership between the program, the Company
successfully referred approximately 140,000 disabled beneficiaries into
treatment as a first step to re-entering the work force. The Company intends to
leverage this experience by pursuing other large scale program management
contracts with other agencies of the federal government, including the
Department of JusticeHealth Care
Financing Administration and the DepartmentCommonwealth of Veterans Affairs.

CONSULTING GROUP

The Company's Consulting Group is comprised of the following eight
divisions: the Information Technology Solutions Division, the Systems Planning
and Integration Division, the International Division, the Human Services
Division, Phoenix Consulting Group, the Spectrum Consulting Division, the
Carrera Consulting Group and DMG-MAXIMUS.

Information Technology Division. The Company provides computer systems
management and business process re-engineering services to state, county and
other local governments. The Company provides services associated with project
management, including assessing current and future business needs, defining user
requirements, designing automated systems, developing requestsMassachusetts, we are
responsible for proposals,
and providing evaluation assistance, contract negotiations and quality assurance
monitoring services. Since 1991, the Company has provided information technology
systems and design services for projects in more than 40 states in the nation.
The Company also specializes in providing management services to agencies
administering criminal justice programs. In November 1997, Company was selected
by the State of Connecticut to provide project management and system integration
services for the criminal justice information system Offender Based Tracking
System for the Connecticut Office of Policy and Management. This $5.5 million
contract will run through September 2001. The Company also provides
re-engineering services to government authorities such as the County of Los
Angeles. The Company is assisting the County (Board of Supervisors,
Auditor-Controller, Office of the Assessor, Registrar-Recorder/ County Clerk,
and the Treasurer and Tax Collector) in the development of the County's Property
Tax System Business Process Re-engineering Project. In addition,program protocol and the Companyoperation of the
pilot program.

CONSULTING GROUP

Our Consulting Group, which generated approximately 30% of our total
revenues in our most recent fiscal year, provides assistance in assessing, evaluating, testing and certifying government
systems for Year 2000 compliance. The Company is currently providing Year 2000
project managementprogram planning and quality
assurance services to state and local government agencies, in addition to
general management consulting services and specialized services such as
assisting state and local agencies in maximizing federal funding for their
programs.

MANAGEMENT SERVICES DIVISION. Our Management Services Division provides a
broad array of consulting services to state and local governments. These
services include accounting, activity-based costing, cost of service and user
fee studies; executive recruitment; airport expansion financial feasibility
studies and retail planning and management; capital asset management; public
works, fleet management; and utilities management. Through this division, we
provide consulting services to over 3,000 clients each year, many of which have
been clients for 20 years or more. We believe that this extensive client base
creates opportunities for us to successfully cross-market our services.

REVENUE SERVICES DIVISION. Our Revenue Services Division seeks out
additional federal funding and provides benefits program planning and
implementation services for state and local government agencies. Our federal
funding maximization projects are generally carried out on a contingency fee
basis determined as a percentage of funds recovered from the Departmentfederal government.
Our revenue maximization projects have resulted in the recovery of Informationmore than
$1.1 billion of federal funds on behalf of 24 states. We have also provided
welfare planning and implementation projects and have been engaged by the
Commonwealth of Pennsylvania to provide detailed analysis and assistance to
ensure that the state child welfare and juvenile justice claims programs comply
with applicable federal

requirements. We also assist several states in facilitating claims for
additional services through the Temporary Assistance to Needy Families program.

HUMAN SERVICES TECHNOLOGY DIVISION. Our Human Services Technology for the State of Connecticut.

36
39

Systems Planning Division. The Company believes that its Systems Planning
Division
is a leading provider ofprovides strategic information management, procurement and contracting, systems
quality assurance and systems implementation services to the rapidly expanding state health and
human services and child support
enforcement agency market. Using anservice agencies. Our experienced team of skilled project managers and
information technology professionals the Company has in multiple projects
across numerous states, assisted clients in the planning,
design, procurement and implementation of information systems totaling nearly $1 billion. These
complex, high-profile systems -- which have ranged from $5 million to over $100
million and from 200 to 2,000 users -- serve asin multiple
projects across numerous states. We also supervise the mission critical
infrastructure for over $30 billion in annual health and human services
expenditures. The division also supports the card technologies practice of the
Company's Phoenix Consulting Division focusing on its application to electronic
benefits transfer and driver's license applications.work performed by
contractors who sell these systems. The potential market for the division's
services has continued to expand in recent years. Welfare reform
is forcing dramatic changes in eligibility systems for welfare programs. The
number of work force development programs sponsored by the Department of Labor
are also increasing. Significant changes to the systems supporting Medicaid,
often the single largest budget item of state government budgets, will be
required by the shifts from fee-for-service programs coupled with federally
mandated competition for Medicaid Management Information Systems operations
support. Given the Company'sour successful track
record, core competencies and national market presence, the Company believeswe believe that it is well positionedwe are
well-positioned to take advantage of the increased nationwide emphasis inby state
governmentgovernments on welfare eligibility systems, managed care,Medicaid Management Information
Systems, child services, family courtwelfare services and child support enforcement.enforcement services.
Additionally, the Company believeswe believe that synergies between the Company's Consulting andour Government Operations GroupsGroup,
Consulting Group and other
strategic hires willSystems Group uniquely position the Companyus to take advantage of the new
market opportunities created by the recently enacted changes to managed care and
the Child Health Insurance Program.

International Division. The Company provides health care consulting and
systems services to assist foreign government agencies and health care
organizations responsible for the delivery of treatment services to large
populations. The Company automates and restructures clinical information systems
for large outpatient providers, hospital information systems, managed care
information systems, beneficiary management systems and treatment network
management systems for managing large networks of health treatment facilities.
In addition, the Company consults with foreign government agencies in developing
health care policy reforms, treatment quality improvements and productivity
enhancements. The Company's health care systems software, developed in
ORACLE(R), is a platform-independent and multi-language software package. The
Company has developed an Arabic language version of this software for use in the
Middle East. Currently, the division is engaged in two major automation projects
in Egypt, installing a health care information system in three hospitals in
Cairo and a national health care system database in hospitals and clinics
throughout the country to allow the Egyptian Health Insurance Organization to
better manage its facilities. Additionally, in Argentina, the Company is
providing organizational and management services to the health plan of an
employee union with almost 500,000 members, and conducted a demonstration
project in support of Health District autonomy for the Ugandan Ministry of
Health to improve the effectiveness of its contracting process in selected pilot
Health Districts.

Human Services Division. The Company's Human Services Division provides
program planning and implementation, revenue maximization and evaluation
consulting assistance to human services, health and education agencies in state,
local and federal

37
40

government. The Company has completed comprehensive welfare reform planning and
implementation projects for the District of Columbia and the State of Nevada,
and has been engaged by the District of Columbia to provide planning and
implementation assistance for a new Child Health Insurance Program. Revenue
maximization projects, which involve increasing federal financial participation
in state health and human services programs and are generally carried out on a
contingency fee basis, have been completed or are on-going in more than twenty
states. The states have received more than $350 million in additional federal
revenue as a result of the Company's efforts and expect current projects to
yield another $300 million in new federal revenue. The Company also is
frequently engaged to conduct evaluations of government programs and
demonstrations. Program evaluation contracts are often multi-year research
projects involving the collection of extensive data using automated data merges
as well as surveys and case record reviews. Since 1994, the Company has
completed scores of welfare reform, revenue maximization and program evaluation
projects for numerous states and localities.

Electronic Commerce and Cardareas.

INFRASTRUCTURE TECHNOLOGIES DIVISION. Our Infrastructure Technologies Consulting Services (Phoenix
Consulting Division). The Company's Phoenix Consulting Division provides
health, transportation, education, banking and human service clients with expert
assistance in planning, implementing and evaluating Electronic Funds Transfer
("EFT"), Electronic Benefits Transfer ("EBT"), Electronic Payment Systems
("EPS"), smart card, biometric recognition system and related technologies.
Responding to pressures to provide more time-and cost-efficient services,
public-sector entities are increasingly following the general trend of moving
from paper-based to electronics-based systems. In addition to its cost
efficiencies, electronic commerce ("EC") technologies can provide more accurate
record keeping, minimize paper transactions and offer greater security against
fraud and theft. For instance, recognizing the advantages of EBT systems, which
permit a recipient to transfer his or her public-assistance benefits directly
from a government account to the product or service vendor, the federal
government has mandated that all states must convert to EBT issuance under the
Food Stamp Program by October 2002. In over thirty states, Phoenix has assisted
clients in making the conversion to electronic commerce. Currently, it is
helping the state of New Jersey implement a program to facilitate 24-hour
electronic access to a suite of government services using smart card technology.
In other states, including Texas and California, Phoenix is providing expert
assistance to implement EBT for WIC benefits. Phoenix has become a recognized
expert in its field, having delivered lectures at influential card-technology
conferences such as CardTech/SecurTech NACHA, conducted training seminars for
entities such as the U.S. Office of Management and Budget, the U.S. Joint
Financial Management Improvement Program, American Banking Association and Food
Marketing Institute, and having been a primary consultant to Vice President
Gore's Federal EBT Task Force.

Automation Consulting Services (Spectrum Consulting Division). The
Company's Spectrum Consulting
Division provides management consulting services that focus on assisting large
public sector organizations in solving complex business problems related to automation. Spectrumautomation of
financial services. This division has engagements in all areas
of government, including the legislative, executive
and judicial branches, and
hasbranches. We also have extensive knowledge of the fiscal structure
of states through itsour experience with state auditors, comptrollers and
treasurers as well as a significant understanding of the programmatic areas of state government through
close contact with many types of state agencies. The Company providesAs part of our consulting engagement, we
provide a variety of information technology services, including Year 2000 quality assurance and project planning
and management; quality assurance monitoring and assessment for child welfare,
and healthcare and financial management systems; strategic planning; and advanced
technolo-

38
41

gies.technologies.

SYSTEMS GROUP

Our newly-created Systems Group, which generated approximately 15% of our
total revenues in our most recent fiscal year, contains our technology solutions
and proprietary software programs formerly included in our Consulting Group. The
Company also plansgroup provides state and local agencies with systems design and implementation
to provide clientsimprove the efficiency and cost-effectiveness of their program
administration.

ERP SOLUTIONS DIVISION. The ERP Solutions Division consultants work almost
exclusively with a comprehensive set of
quality assurancegovernment and Year 2000 consulting services that are jointly developed
by the Spectrumeducational entities to implement
PeopleSoft-Registered Trademark- and SystemsMicrosoft-Registered Trademark- Great
Plains Business Solutions Enterprise Resource Planning, and Integration divisions.

Carrera Consulting Group (a Division of MAXIMUS). The Carrera Consulting
Group's missionor ERP, Software
Solutions. Our goal is to deliver cost-efficient technology-based business
solutions, including customer information systems/utility billing; financial
systems; human resources management systems; procurement systems; and student
administration systems. ERP Solutions is a PeopleSoft consulting alliance
partner and one of the only certified PeopleSoft Application Systems Providers.

ASSET SOLUTIONS DIVISION. The Asset Solutions Division offers a suite of
asset management solutions that manage and maintain physical assets, including
fleet, fuel, facility, space and fixed assets. Asset Solutions provides
web-enabled solutions to government.
Servicesover 300 customers including government agencies,
public utilities, mass transits, K-12 education systems and universities. All
Asset Solutions systems integrate with major ERP solutions and promote
accountability and cost management. Recent achievements include new contracts
with The City of New York, the City of Chicago and the Southeastern Pennsylvania
Transit Authority.

JUSTICE SOLUTIONS DIVISION. The Justice Solutions Division implements and
supports software programs designed to increase the efficiency of state court
systems. Our products include case

management, docketing, scheduling and report generating software used in all
stages of the judicial process. We market and sell a jury management software
program that creates jury lists, generates notices and monitors attendance and
payments. We also offer a records management software solution to automate
record keeping functions and county recorders' offices. We currently support
over 5,000 users at over 150 sites in Ohio, Florida, Michigan, Arkansas,
Indiana, Massachusetts, California and New York.

The Justice Solutions Division also develops and implements information
technology strategic planning, year 2000 impact
assessmentsystems solutions for state criminal justice systems. We work with
law enforcement agencies, courts and remediation, customcorrections agencies to develop systems
that integrate and facilitate access to criminal justice information and
records. We are currently responsible for the management of the Connecticut
offender-based tracking system that tracks offender location, classification and
status information.

PUBLIC SYSTEMS DIVISION. The Public Systems Division provides systems
development, forintegration and implementation services to public-sector health and
human services agencies. This division develops modern, web-based solutions for
government agencies providing public services that enable the use of the
Internet to lower the cost of maintaining and supporting large application
systems. We are also involved in the development of web portals designed to
facilitate access to program information on the Internet. The division is
currently offering these services through a series of projects in Utah for
Medicaid Managed Care and in Delaware to a variety of agencies providing social
services.

INTELLIGENT TECHNOLOGIES DIVISION. Our Intelligent Technologies Division
provides health, transportation, education, banking and human services clients
with expert assistance in developing, planning and implementing smart card
technology, biometric recognition systems, and enterprise resource planning ("ERP") systems
implementation. As a PeopleSoft Global Alliance Partner, the Carrera Consulting
Group is one of the leading implementators of human resource and financial
systems for state and local government. Prior to its combination with the
Company, Carrera had implemented over thirty such systems for various government
clients including the cities of Escondido, Los Angeles, Santa Monica, Des
Moines, Akron, Eugene, Seattle and Denver; the counties of Solano, Tuolumne and
King County Washington; and various organizations within the States of
California, Georgia and New York. The Carrera Consulting Group has also provided
implementation management, conversion, development projects. The Carrera
Consulting Group offers clients a highly skilled consulting staff with focused
expertise in helping public sector entities implement large-scale information
systems.

DMG-MAXIMUS. The Company's DMG-MAXIMUS division provides a broad array ofe-government consulting services
such asand related technologies. Responding to pressures to provide services more
efficiently, public-sector entities are increasingly moving from paper-based to
electronics-based systems. In addition to cost accounting, wageefficiencies, e-government
technologies provide more accurate record keeping and compensation evaluation,
executive recruitmentoffer greater security
against fraud and fleet management. A particular expertisetheft. Recognizing the potential efficiencies of smart card
technology, the United States General Services Administration awarded a ten-year
contract to five companies, including us, to implement this division is assistingtechnology in
federal government entities with controlling their overhead and
program specific costs. DMG-MAXIMUS conducts comprehensive reviews and audits of
client operations at the department- or division-level to identify unusually
costly units of service or departments not meeting community needs. Theagencies. This division also helpsassists health, education and
banking clients prepare rationalized cost accounting of their services,
through preparing either (i) cost allocation plans, which allocates overhead
costs of centrally-provided services among the departments by the level of use
of such services; (ii) indirect cost rate proposals, which allocate
inter-departmental administrative costs among the specific department programsin planning, implementing and activities; (iii)evaluating electronic funds
transfer, electronic benefits transfer and electronic payment systems. These
systems allow recipients to transfer benefits from government accounts to
product or other such cost plans. DMG-MAXIMUS further assists
local and state governments in determining the appropriate fee charges for
government services by calculating the total costs of such fee-based services.
DMG-MAXIMUS does not typically engage in the large scale projects undertaken by
other of the Consulting Group's divisions. Its focus has been on discrete,
specialized consulting engagements, which it currently has with over 2,000
clients throughout the United States. The Company views this expansive network
of contacts as an opportunity to cross-sell its broad array of services by
leveraging customer satisfaction in smaller engagements into potentially larger
scale consulting projects.service vendors.

BACKLOG

The Company's backlogBacklog represents an estimate of the remaining future revenues from
existing signed contracts and revenues from contracts that have been awarded but
not yet signed. Using the best available information, the
Company estimates backlog on a quarterly basis with respect to all executed
contracts. TheOur backlog estimate includes revenues expected under the
current terms of executed contracts, revenues from contracts in which the scope
and duration of the services required are not definite but estimable and does
not assume any contract renewals or extensions.

Changes in the backlog calculation result from quarter to quarter result from: (i)
additionadditions for future revenues
from the execution of new contracts or extension or renewal of existing
39
42

contracts; (ii) reductioncontracts, reductions from fulfilling contracts, during the most recent
quarter; (iii) reductionreductions from the early
termination of contracts;contracts, and (iv) adjustments to estimates of previously included
contracts.

At September 30, 1998Estimates of future revenues from awarded or signed contracts are
necessarily inexact and 1997, the Company'sreceipt and timing of these revenues are subject to
various contingencies, many of which are outside of our control. We believe that
period-to-period backlog for services was
approximately $276 millioncomparisons are difficult and $217 million, respectively.do not necessarily
accurately reflect future revenues we may receive. The actual timing of revenue
receipts, if any, on projects included in backlog could change because, among
other reasons, the scheduling of a project

could be postponed, a contract could be modified or canceled, or initial
estimates regarding a contract's revenues could prove to be wrong.

AS OF SEPTEMBER 30, 2000
------------------------------
SIGNED UNSIGNED TOTAL
-------- -------- --------
(IN MILLIONS)

Government Operations Group................ $268.3 $18.4 $286.7
Consulting Group........................... 135.2 14.1 149.3
Systems Group.............................. 31.8 -- 31.8
------ ----- ------

Total.................................. $435.3 $32.5 $467.8
====== ===== ======

MARKETING AND SALES

The Company'sOur Government Operations Group, obtainsConsulting Group and Systems Group obtain
program management, consulting services and systems solutions contracts fromfor
state and local authoritiesagencies by responding to RFPs. Whenever
possible, prior to the issuanceOur Government Affairs unit,
consisting of an RFP, senior executiveseight employees and approximately 40 marketing consultants located
in the Government
Operations Group workregional offices, develops and maintains relationships with senior government
representatives, such aselected officials and political appointees, including a state's
governor, members of the governor's staff and the heads of state health and
human services agencies to encourage them to outsource certain healthgovernment services. We
also developed and human
services functions. To identify opportunitiesimplemented a sophisticated RFP tracking system that provides
us with real-time information about the status of existing RFPs and our actions
to workdate with government officials
at early stages andrespect to optimize the government's receptivity to the Company's
proposal to provide program management services, the Company establishes and
maintains relationships with elected officials, political appointees and
government employees. The Company engagesthose RFPs.

Our marketing consultants including
lobbyists to establish and maintain relationships with these client
representatives. The Company's consultants and lobbyists provide introductions to government personnel and
provide information to the Companyus regarding the status of legislative initiatives and
executive decision-making. Following the issuance of an RFP, the Government Operations Group
participateswe participate in
formal discussions, if any, between the contracting government agency and the
group of potential service providers seeking to modify the RFP and prepare the
proposal. Upon the award of a government operations contract, the Company'sour
representatives thenmay help us negotiate the contract with representatives of the
government authority until an agreement is reached.

The Consulting Group generatesWe generate leads for consulting contracts by tracking bid notices, employing lobbyists,marketing
consultants, maintaining relationships with government personnel, communicating
directly with current and prospective clients and, increasingly, through
referrals and cross-selling initiatives from other
divisions of theour Consulting Group. The Consulting Group participatesWe
participate in professional associations of government administrators and
industry seminars featuring presentations by the Company personnel.our executives and employees.
Senior executives from the
Consulting Group develop leads through on-site presentations to
decision-makers. In many cases, consulting contracts, like program management contracts, are
obtained after responding to a formal RFP. The Consulting Group's efforts in
generating a lead prior to the RFP can facilitate the Company's insight in
responding to a particular RFP. A portion of the Consulting Group'sour new consulting business ariseshas resulted from
prior client engagements in which case the Company may bewe were the sole source of services. The Companyservice provider. We also
expectsintend to leverage the client relationships of firms it acquireswe acquire by cross-selling itsour
existing services.
Furthermore, clients frequently expand the scope of engagements during delivery
to include follow-on complementary activities.

COMPETITION

The market for providing program management and consulting services to state
and local health and human services agencies, as well as to public sector
clients generally, is competitive and subject to rapid change. The Company'sOur Government
Operations Group competes for program management contracts with the government
services divisions of large organizations such as Lockheed Martin Corporation,
Electronic Data Systems, Inc. and Accenture; specialized service providers such
as Benova, Inc., Policy Studies Incorporated, Affiliated Computer
Services, Inc. and America Works, Inc.; and local non-profit organizations such
as 40
43

the United Way, and Goodwill Industries government services divisions of large
companies such as Lockheed Martin Corporation and Electronic Data Systems, Inc.,
managed care enrollment companies such as Benova, and specialized service
providers such as Andersen Consulting, America Works, Inc., and Policy Studies
Incorporated. The Company'sCatholic Charities. Our Consulting
Group competes with the consulting divisions of the "Big 5" accounting firms as well asfirms;
and small, specialized consulting firms. Our Systems Group competes with a large
number of competitors including Unisys, KPMG, Accenture, Litton PRC (a Northrop
Grumman Company), Peregrine Systems, Inc. and Electronic Data Systems, Inc and many smaller consulting firms. The Company anticipatesInc.

We anticipate that it willwe may face increased competition in the future as new
companies enter the market, but that itsour experience, reputation, industry focus
and broad range of services provide significant competitive advantages which the Company expectswe
expect will enable itus to compete effectively in itsour markets.

GOVERNMENT REGULATION

The market for the Company's services exists under a United States federal
regulatory framework of social programs that are largely implemented at the
state or local level. The following summarizes this framework:

Welfare Program. Under Title IV-A of the federal Social Security Act, the
federal government provides financial assistance to underprivileged families
under several programs commonly known as "Welfare," which have included the Aid
to Families with Dependent Children Program ("AFDC") and the Job Opportunities
and Basic Skills Training Program ("JOBS"). Under the AFDC program, cash welfare
payments were provided to needy children deprived of parental support and to
certain others in the household of the child. State governments are required to
define "need," set their own benefit levels, establish (within federal
limitations) income and resource limits and administer the program or supervise
its administration. Beginning in October 1990, the federal government required
each state to implement a JOBS program, which is designed to help needy families
with children to avoid long-term Welfare dependency by providing education,
training, job placement and other supportive services, including child care.

Under the Welfare Reform Act, AFDC and JOBS have been combined into a
single program, known as "Temporary Assistance to Needy Families" or "TANF."
Under TANF, the federal government makes "block grants" of funds to the states,
to be administered at the state level in programs that include certain mandatory
work, education and job-related activities, including job training and job
search for the purposes of: (i) providing needy families with time-limited
assistance in order to end their dependency on government benefits and achieve
self-sufficiency; (ii) preventing and reducing out-of-wedlock pregnancies,
especially teenage pregnancies; and (iii) encouraging the formation and
maintenance of two-parent families. While the federal act provides general
requirements, states must determine how these requirements will be met.

General Assistance/General Relief Programs. There are also General
Assistance or General Relief programs that are administered by the states. These
welfare programs are not federally reimbursed and generally serve persons not
eligible for other federal programs. By their nature, they are very restrictive
in terms of eligibility requirements since states must pay 100% of both the
benefit and administrative costs. The eligibility requirements for these
programs vary by state and sometimes by county within the state. Forty two
states currently have General Assistance programs in operations. Thirty three of
the states operate the program in only a portion of the state.

Food Stamp Program. The Food Stamp Program is a federally funded program
that is administered by the states. The purpose of the program is to increase
the food purchasing power of eligible low-income households to a point that they
can buy a nutritionally adequate, low-cost diet. The program subsidizes food
purchases through the

41
44

issuance of food stamps or through issuance of electronic cards. Food stamp
program benefits are entirely paid for by the federal government and food stamp
program administrative costs are shared 50/50 with the states, except that
states with low error rates may have up to 60% of their administrative costs
reimbursed. Eligibility for TANF or SSI also ensures eligibility for food
stamps.

Supplemental Social Security Income. Titles XVI of the federal Social
Security Act provide for the administration and distribution of financial
assistance to disabled individuals whose impairments make them unemployable.
There has been political pressure on the Social Security Administration (the
"SSA") and the states to review the caseload of Title XVI beneficiaries to
ensure that each individual's disability still exists and that the extent of
such disability remains sufficient to preclude employment. In addition, the SSA
has been under pressure to increase and improve vocational rehabilitation
efforts focused on returning disabled beneficiaries to work and
self-sufficiency.

Child Support Enforcement. The federal Child Support Enforcement ("CSE")
program, authorized under Title IV-D of the Social Security Act, was established
in 1975 in response to the increasing failure of many parents to provide
financial support to their children. The purpose of the CSE program is to help
strengthen families and reduce Welfare dependency by placing the responsibility
for supporting children on the parents rather than on the government. State
governments are generally required to locate absent parents, establish paternity
if necessary, obtain judicial support orders and collect the support payments
required by those orders. Child Support Enforcement has been the subject of
close scrutiny in recent years and is an area of health and human services where
government has sought significant private sector involvement including full
service program management efforts.

The Child Support Enforcement Amendments of 1984 mandated that state CSE
information systems, in order to receive matching federal funding, must meet
certain federal functional requirements covering case initiation, case
management, database linkage, financial management, enforcement, security,
privacy and reporting. The Family Support Act of 1988, effective October 1992,
mandated enhanced functional requirements for state CSE systems, including the
implementation of automated systems able to interface electronically with other
state systems such as Welfare, driver and vehicle registration and Medicaid
systems.

Medicaid, Medicare and the Children's Health Insurance Program. Medicaid
and Medicare were implemented under Title XIX and XVIII of the Social Security
Act. Medicaid is a federal-state matching entitlement program that provides
reimbursement for the cost of medical care to low-income individuals who are
aged, blind, disabled or TANF beneficiaries, and to certain pregnant women and
children. Within broad federal guidelines, each state designs and administers
its own program. Eligibility and claims processing systems are automated by each
state to handle this program, which is typically the largest line item in a
state budget. Federal assistance is also available on a waiver basis for managed
care enrollment for Medicaid recipients and similar populations. Medicare is a
federal entitlement program providing reimbursement of a portion of the cost of
medical care provided to the elderly. The Child Health Insurance Program is a
recently enacted $20 billion program to provide health care for children whose
family income is near the poverty level.

42
45

HUMAN RESOURCESEMPLOYEES

As of November 19, 1998, the CompanyMay 31, 2001, we had more than 2,8004,737 employees, consisting of 2,0673,383 employees in
the Government Operations Group, 685708 employees in the Consulting Group, 441
employees in the Systems Group and 126205 corporate administrative employees. The Company'sOur
success depends in large part on attracting, retaining and motivating talented,
innovative and experienced professionals at all levels. In connection with its
hiring efforts, the Company employs a full-time human resources coordinator,
retains several executive search firms and relies on personal and business
contacts to recruit senior levelNone of our employees for senior management positions in
the Government Operations Group and Consulting Group and for senior
administrative positions. When the Company's Government Operations Group is
awarded a contractcovered by a state or local government, the Company is often undercollective bargaining agreement. We consider our relations with our
employees to be good.

PROPERTIES

We own a tight timetable to hire project leaders60,000 square foot office building in Reston, Virginia and case management personnel to meet
the needs of the new project. To meet such needs, the Company engages intensive
short-term hiring efforts at the project's location.

The Company's hiring focus is to identify candidates who are well suited by
background and temperament to serve the Company's government clients. The
Company's Government Operations employees are largely drawn from government
employment positions, while the Consulting Group employees are largely selected
from other consulting organizations and government agencies.

The Company offers employees an internal training program designed to
enhance professional skills and knowledge. Offered twice a year, the three-day
program includes human resources topics such as cultural sensitivity, sexual
harassment and wrongful termination; marketing, proposal writing and public
relations; project administration topics such as contract negotiations, project
management, deliverable preparation and client management; and technology
updates. In addition, the Company offers partial tuition reimbursement for
employees pursuing relevant degree programs and fully reimburses employees for
relevant training seminars and short courses.

The Company promotes loyalty and continuity of its employees by offering
packages of base and incentive compensation and benefits that it believes are
significantly more attractive than those offered by governments or other
government consulting firms in general. In addition, to attract and retain
employees, the Company has established several employee benefit plans, including
401(k) savings and retirement plans, its 1997 Equity Incentive Plan and its 1997
Employee Stock Purchase Plan.

DESCRIPTION OF PROPERTY

The Company is headquartered in McLean, Virginia, in a 21,000
square foot office building which it owns. The Company leases office spacein McLean, Virginia. We lease 170 offices totaling
approximately 988,000 square feet for other management and administrative
functions in connection with the performance of its contracts in various states and foreign countries. On October 1, 1998, the
Company conducted operations from 114 leased office facilities totaling
approximately 576,000 square feet.our contracts. The lease terms
vary from month-to-month to five-year leases and are generally at market rates.

The Company is currently
seeking additional space to house its new headquarters and to support its
expanding operations and believesLEGAL PROCEEDINGS

In January 2000, the New York City Human Resources Administration submitted
two contracts that it willhad awarded to us for the performance of welfare-to-work
services to the Comptroller of New York City to be ableregistered. Under New York
law, the contracts must be registered in order for us to secure such space, as
needed,receive payment.
However, the Comptroller refused to register the contracts alleging
improprieties in the future.

43procurement process and in our conduct. The New York
Supreme Court, Appellate Division--First Department ordered the Comptroller to
register the contracts in October 2000 after finding no wrongdoing in our
conduct. Nevertheless, this matter continues to be the subject of investigations
being conducted by certain government agencies. The District Attorney's Office
of New York County and the United States Attorney's Office for the Southern
District of New York, in response to requests made by the Comptroller, are
investigating the facts underlying this matter. These offices reviewed some of
our documents and interviewed some of our employees in 2000 and 2001. We believe
that our actions were lawful and appropriate and, although there can be no
assurance of a favorable outcome, we do not believe that this matter will have a
material adverse effect on our financial condition or results of operations.

We are also involved in various other legal proceedings in the ordinary
course of our business. In our opinion, these proceedings involve amounts that
would not have a material effect on our financial position or results of
operations if such proceedings were resolved unfavorably.

39
46
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Company'sOur executive officers and directors and their respective ages and positions
are as follows:

NAME AGE POSITION
- ---- -------- ------------------------------------------

David V. Mastran(a).................. 55Mastran.......................... 58 President, Chief Executive Officer and
Director

Raymond B. Ruddy(a).................. 55Ruddy.......................... 57 Chairman of the Board of Directors, Vice
President of the Company

Russell A. Beliveau....................... 53 President of Investor Relations and
Director

Richard L. Bradley........................ 52 President of Systems Group

Lynn P. Davenport......................... 53 President of Consulting Group Treasurer and Director

RussellDavid R. Francis.......................... 39 General Counsel and Secretary

Thomas A. Beliveau.................. 51Grissen......................... 42 Chief Operating Officer and Director

David A. Hogan............................ 52 President of Business Development and
Director
Margaret Carrera..................... 44 President of Carrera ConsultingGovernment Operations Group
Vice-Chairwoman of the Board and Director
Ilene R. Baylinson................... 42 President of Federal Services Division
John F. Boyer........................ 51 President of Managed Care Enrollment
Division
David M. Casey....................... 40 President of Information Technology
Division
George C. Casey...................... 54 President of Spectrum Consulting Division
Louis E. Chappuie.................... 60 President of DMG-MAXIMUS and Director
Lynn P. Davenport.................... 51 President of Human Services Division and
Director
Gary L. Glickman..................... 45 President of Phoenix Consulting Division
David A. Hogan....................... 50 President of Child Support Division
John P. Lau, Sr...................... 55 President of International Division
Holly A. Payne....................... 45 President of Welfare Reform Division
Susan D. Pepin....................... 44 President of Systems Planning Division and
Director
Robert J. Muzzio..................... 64 Executive Vice President and Director

F. Arthur Nerret..................... 51Nerret.......................... 54 Vice President, Finance, and Chief Financial
Officer Robert E. Taggart, Jr................ 52 Vice President and Chief Operating Officer
of DMG-MAXIMUSTreasurer

Jesse Brown(b)....................... 54Brown............................... 57 Director

Peter B. Pond(b)..................... 54Pond............................. 56 Director

James R. Thompson, Jr..................... 65 Director

- ------------------------------

(a) Member of the Compensation Committee.

(b) Member of the Audit Committee.

DavidDAVID V. MastranMASTRAN has served as our President, and Chief Executive Officer and a
director since he founded the CompanyMAXIMUS in 1975. Dr. Mastran received his Sc.D. in
Operations Research from George Washington University in 1973, his M.S. in
Industrial Engineering from Stanford University in 1966 and his B.S. from the
United States Military Academy at West Point in 1965.

RaymondRAYMOND B. RuddyRUDDY has served as theour Chairman of our Board of Directors from
1985 to the board of directors since
1985present and was President of the Company's Consulting Group since 1986.from 1986 to 2000.
From 1969 until he joined 44
47

the Company,us, Mr. Ruddy served in various capacities with Touche
Ross & Co., including Associate National Director of Consulting from 1982 until
1984 and Director of Management Consulting (Boston, Massachusetts office) from
1978 until 1983. Mr. Ruddy received his M.B.A. from the Wharton School of
Business of the University of Pennsylvania and his B.S. in Economics from Holy
Cross College.

RussellRUSSELL A. BeliveauBELIVEAU has served as theour President of the Company's Business
Development DivisionInvestor Relations since
September 1998.1998 and served as President of Government Affairs from
September 1998 until October 2000. Prior to that, he served as President of the
Government Operations Group since 1995.from 1995 to 1998. Mr. Beliveau has more than
20 years'years of experience in the Healthhealth and Human Services Industryhuman services industry during which he
has worked in both government and private sector positions at the senior
executive level. Mr. Beliveau's past positions include Vice President of
Operations at Foundation Health Corporation of Sacramento, California from 1988
through 1994 and Deputy Associate Commissioner (Medicaid) for the Massachusetts
Department of Public Welfare from 1983 until 1988. Mr. Beliveau received his
M.B.A. in Business Administration and Management Information Systems from Boston
College in 1980 and his B.A. in Psychology from Bridgewater State College in
1974.

Margaret CarreraRICHARD L. BRADLEY has served as President of the Company's Carrera
Consultingour newly formed Systems Group
division, Vice-Chairwoman of the board and a director since the
acquisition of Carrera by the Company in August 1998.October 2000. Prior to joining us, Mr. Bradley was a Vice President and
General Manager for TRW

(and BDM International prior to its acquisition by TRW) and was responsible for
public sector operations. Before that, he served in various management roles at
Unisys in the health and human services and other public sector areas.
Mr. Bradley has over 25 years of professional information technology experience.
Over that time, she had
served as President of Carrera since its foundingMr. Bradley has managed multiple large public and commercial
information technology organizations. Mr. Bradley received B.A. degrees in
1991. Ms. Carrera has
twenty years of experience in management information systems. Prior toPolitical Science and Education from Western Washington State University and
completed the founding of Carrera, she served as West Region Director of Information Systems
consultingcoursework for the Public Sector with Ernst & Young LLP and Vice PresidentState of Bank Card Processing for Bank of America. She has also held positionsWashington Fellowship M.P.A. Program
at Cambridge Systems Group and Pacific Telephone. Ms. Carrera received her M.B.A.
in Finance from San Francisco State University in 1980 and her B.A. in
Mathematics and Chemistry from United States International University in 1975.

Ilene R. BaylinsonWestern Washington University.

LYNN P. DAVENPORT has served as the President of the Company's Federal
Services Division (formerly, the Disability Services Division)MAXIMUS Consulting
Group since 1995 and as
Chief Operating Officer from 1991 to 1995. She has more than 17 years of
experience in health and human services program administration. After obtaining
her B.A. from John Hopkins University in 1978, Ms. Baylinson worked in a variety
of positions for Koba Associates, Inc. of Washington, D.C., including Senior
Vice President for Corporate Management, Marketing and Operations from 1989
until her departure and Corporate Vice President/Director, Law and Justice
Division from 1985 through 1991.

John F. Boyer has served asOctober 2000. Before that he was President of the Company's Managed Care
Enrollment Division since October 1998, after serving in various capacities for
that division since Fall of 1997. Prior to that, he served as Vice President for
Strategic Planning and Contract Administration of the Company since 1995. Dr.
Boyer has more than 20 years' experience in health care delivery in both
clinical and administrative settings. Prior to joining the Company, Dr. Boyer
served as Director of Health Services Financing Policy in The Office of The
Assistant Secretary of Defense (Health Affairs) at the Pentagon from 1989 until
1995. Dr. Boyer received his Ph.D. in Public Administration and Public Policy
Analysis from The American University in 1989, his M.S. in Management from The
Naval Postgraduate School in 1981, his M.S. in Nursing from New York Medical
College in 1973 and his B.S. from Illinois State University in 1969.

David M. Casey has served as the President of the Information Technology
Division of the Company since 1997 and has been with the Company since 1994. Mr.
Casey has 17 years of professional experience in management information systems.
Prior to joining

45
48

the Company, Mr. Casey served as a Government and Education Account Executive
for Wang Laboratories, Inc. from 1987 until 1994 and served as a Sales
Consultant at Wang Laboratories, Inc. from 1986 to 1987. Mr. Casey has also held
positions at Motorola, Inc. and Polaroid Corporation. Mr. Casey holds a B.S. in
General Engineering and Computer Science from Northeastern University.

George C. Casey has served as President of the Spectrum Consulting Division
since the Company's acquisition of the Spectrum in March 1998. Prior to that, he
had served as President of the Spectrum since October 1986. Before joining
Spectrum in 1986, Mr. Casey worked as a Partner for KMG Main Hurdman, an
international public accounting firm that subsequently merged with KPMG Peat
Marwick. Mr. Casey has extensive experience in project planning and management,
procurement and contract negotiations, and quality assurance reviews and
realignment. Mr. Casey earned a B.S./B.A. degree from Northwestern University in
1966.

Louis E. Chappuie has served as President of DMG-MAXIMUS and a director of
the Company since the acquisition of DMG by the Company in May 1998. Prior to
that time he served as President and Chairman of the Board of DMG from 1992 and
1997, respectively. Prior to assuming the presidency of DMG, he was Executive
Vice President of DMG's Western Practice Area in Sacramento, California for 12
years. His additional experience includes Arthur Young & Company and Foreign
Service Officer, U.S. State Department. Mr. Chappuie received his B.A. and M.A.
from the University of Minnesota in 1960 and 1961, respectively, and has
completed course work for a Ph.D. in Economics.

Lynn P. Davenport has served as the President of the Company's Human Services
Division since he joined the Companyus in 1991. He has over thirteen25 years of health and human
services experience in the areas of administration, productivity improvement,
management consulting, revenue maximization and management information systems.
Prior to joining the Company,us, Mr. Davenport was employed by Deloitte & Touche, and its
predecessor, Touche Ross & Co., in Boston, Massachusetts, where he became a
partner in 1987. Mr. Davenport received his M.P.A. in Public Administration from
New York University in 1971 and his B.A. in Political Science and Economics from
Hartwick College in 1969.

Gary L. GlickmanDAVID R. FRANCIS has served as our General Counsel and Secretary since
August 1998. He has over 14 years experience as a practicing attorney. Before
joining us, he was Of Counsel at the law firm Howrey & Simon and, prior to that,
Senior Counsel at Teledyne, Inc. Mr. Francis received his J.D. from Harvard Law
School in 1986 and his B.A. in Philosophy from Johns Hopkins University in 1983.

THOMAS A. GRISSEN has served as our Chief Operating Officer since
October 2000. Before that, he served as President of the Phoenix Consulting DivisionGovernment Operations
Group since the acquisition of Phoenix by the Companyhe joined us in August 1998.March 1999. Prior to that, time he had served as the General
Manager and Vice President of Phoenix since its founding in 1990.TRW from January 1998. Mr. Glickman entered consulting in 1980Grissen was President
of BDM International from April 1997 until joining TRW. Before starting at BDM
International, Mr. Grissen was a principal and has served in a varietymanaging director of positions
advising public and private clients on electronic banking and related
technologies. During this time, he was employed with several firms, including
Deloitte & Touche and Laventhal & Howarth. Prior to entering consulting,Unisys for
16 years. Mr. Glickman held positions in the Office of the Secretary in the U.S. Department of
the Treasury and Controller's Office of New York City. Mr. GlickmanGrissen received his Executive M.B.A. in Economics from New YorkMichigan State
University in 1978 and his B.A. in American
StudiesBusiness from Brandeis University in 1975.

DavidCentral Michigan University.

DAVID A. HoganHOGAN has served as the President of the Government Operations
Group since October 2000. Before that he was the President of the Child Support
Enforcement Division since 1994 and served as a Vice President of the division
from 1993 until 1994. Prior to joining the Company,us, Mr. Hogan spent 23 years working in
numerous positions for the Washington State Department of Social and Health
Services, including five years as the State's Child Support Director. Mr. Hogan
also served one year as the President of the National Child Support Directors
Association. Mr. Hogan received his J.D. from the University of Puget Sound in
1976 and his B.A. from Western Washington University in 1970.

46
49

John P. Lau, Sr.F. ARTHUR NERRET has served as the President of the Company's International
Division since 1993 and served as President of the Company's Advanced Systems
Division from 1989 until 1993. From 1961 until 1988, Mr. Lau worked in a variety
of government and private health care systems organizations in technical,
managerial and executive positions. Most recently, Mr. Lau was a Vice President
of Modern Psychiatric Systems in Rockville, Maryland in 1988 and 1989 and served
from 1968 through 1988 as Consultant to the President of Creative SocioMedics
Corporation. Mr. Lau received his M.S. in Physics from Fairleigh Dickinson
University in 1968 and his B.S. in Physics from St. Peter's College, Jersey
City, New Jersey in 1965.

Holly A. Payne has served in various executive capacities at the Company
since 1987 and as President of the Welfare Reform Division of the Company since
1995. Ms. Payne has over 21 years of human services programs experience. From
1983 until she joined the Company, Ms. Payne was a Program Manager at Electronic
Data Systems Corporation in Bethesda, Maryland and from 1978 until 1983 she
worked in several capacities for the Departments of Social Services in Prince
William and Fairfax Counties in Virginia. Ms. Payne received her M.S.W. from
West Virginia University in 1978 and her B.S. in Family Services from Northern
Illinois University in 1975.

Susan D. Pepin has served as the President of the Company's Systems
Planning Division since 1994 and has been with the Company since 1988. She has
over 17 years' experience in technical management and consulting with a focus on
health and human services management information systems. Before joining the
Company, Ms. Pepin served as Director of eligibility systems for the
Massachusetts Department of Public Welfare from 1984 until 1987 and a Project
Leader for Wang Laboratories, Inc. from 1979 until 1984. Ms. Pepin received her
B.S. in Home Economics with a concentration in Consumer Studies and a minor in
Business from the University of New Hampshire in 1976.

Robert J. Muzzio has served in various positions with the Company since
1979, including Executive Vice President since 1987, and has more than 30 years
of experience as a health care administrator, health systems researcher, and
personnel and manpower analyst. Prior to joining the Company, Mr. Muzzio held
many public and private sector positions in the health care industry, including
Life Support Coordinator for the Morrison Knudsen Saudi Arabia Consortium in
1978 and 1979 and Director of the Personnel Policies Division of the Office of
the Surgeon General, Department of the Army, from 1976 until 1978. Mr. Muzzio
received his M.A. in Health Care Administration from Baylor University in 1967
and his B.A. in Public Health from San Jose State College in 1956.

F. Arthur Nerret has served asour Chief Financial Officer of the Company since 1994 and
serves as Trustee of the Company'sour 401(k) Plan. He is a CPA and has over 2425 years of
accounting experience as a C.P.A.financial management experience. From 1981 until he joined the Company,us, Mr. Nerret held a
variety of positions at Frank E. Basil, Inc. in Washington, D.C., including Vice
President, Finance from 1991 to 1994 and Director of Finance from 1989 until
1991. Mr. Nerret received his B.S. in Accounting from the University of Maryland
in 1970.

Robert E. Taggart, Jr.JESSE BROWN has served as Vice-President and Chief Operating
Officerone of DMG-MAXIMUS since the acquisition of DMG by the Company in May 1998.
Prior to that time, he served as the National Director of Fleet Management
Consulting for six years and Vice President of DMG for four years. Additionally,
he was the director of Fleet Consulting for Ernst & Young LLP. Mr. Taggart has
more than 18 years of consulting and fleet management experience. Mr. Taggart
received his M.C.R.P. in Urban and Regional

47
50

Planning from the University of California at Berkeley in 1974 and his B.A. in
Economics from Lawrence University in 1968.

Jesse Brown has served as a director of the Companyour directors since his election by
the board in
September 1997. Mr. Brown who is currently President of Brown & Associates, Inc., an
international consulting company, and served as Secretary of Veteran Affairs
under the Clinton Administration from 1993 until 1997, and as Executive Director
of the Washington office of Disabled American Veterans from 1989 to 1993.
Mr. Brown also serves as a director of PEC Solutions, Inc. and of Roy F. Weston,
Inc. Mr. Brown is an honors graduate of Chicago City College and also attended
Roosevelt University of Chicago and Catholic University in Washington, D.C.

Peter41

PETER B. PondPOND has served as a directorone of the Companyour directors since his election by
the Board in
December 1997. Mr. Pond is a founder of ALTA Equity Partners LLC, a venture
capital firm, and has been a General Partner of the firm since June 2000. Prior
to that, Mr. Pond was a Principal and Managing Director in the Investment
Banking Department at Donaldson, Lufkin & Jenrette Securities Corporation in
Chicago and iswas head of that company's Midwest Investment Banking Group.
Mr. Pond holds a B.S. in Economics from Williams College and an M.B.A. in
Finance from the University of Chicago. He is also a director of Navigant
Consulting, Inc.

JAMES R. THOMPSON, JR. has served as one of our directors since his election
in 2001. Governor Thompson currently serves as Chairman of the Chicago office of
the law firm of Winston & Strawn since January 1993. He joined the firm in
January 1991 as Chairman of the Executive Committee after serving four terms as
Governor of the State of Illinois from 1977 until January 1991. Prior to his
terms as Governor, he served as U.S. Attorney for the Northern District of
Illinois from 1971 to 1975. Governor Thompson has served as the Chief of the
Department of Law Enforcement and Public Protection in the Office of the
Attorney General of Illinois, as an Associate Professor at Northwestern
University School of Law, and as an Assistant State's Attorney of Cook County.
He is a former Chairman of the President's Intelligence Oversight Board.
Governor Thompson is currently a member of the boards of directors of Jefferson
Smurfit Group, Navigant Consulting, Inc., Prime Retail, Inc., The MetzlerJapan Society
(New York), Metal Management, Inc., Prime Group Inc.Realty Trust, FMC Corporation,
the Chicago Board of Trade and Hollinger International. He serves on the Board
of the Museum of Contemporary Art, the Lyric Opera and the Illinois Math and
Science Academy Foundation. Governor Thompson attended the University of
Illinois and Washington University, and he received his J.D. from Northwestern
University in 1959.

SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stockour common stock as of November 19, 1998,May 31, 2001, and as adjusted to reflect the
sale of the shares offered hereby, by each Selling Shareholder. The Company
believesselling shareholder. We believe that
each person named below has sole voting and investment power with respect to all
shares of Common Stockcommon stock shown as beneficially owned by such holder, subject to
community property laws where applicable, except as noted in the footnotes
relating to such person.holder. Unless otherwise indicated, the address of each of the
Selling Shareholdersselling shareholders is care of the CompanyMAXIMUS at the Company'sour principal executive office.

SHARES OWNED PRIOR SHARES OWNED AFTER
TO THE OFFERING(A) THE OFFERING(A)
--------------------------------------------- SHARES ---------------------
SELLING SHAREHOLDERS:------------------------
NUMBER PERCENT OFFERED(B) NUMBER PERCENT
--------- -------- ---------- --------- --------

SELLING SHAREHOLDERS:
David V. Mastran.......... 8,121,305(c) 44.55% 768,828 6,819,492(c) 33.71%
Donna M. Mastran.......... 4,878,533(d) 26.76 12,000 4,097,705(d) 20.26A. Mastran.............................. 6,770,013(c) 31.3% 1,302,351 5,467,662(c) 24.2%
Raymond B. Ruddy.......... 3,242,772(e) 17.79 520,985 2,721,787(e) 13.46
Margaret Carrera.......... 1,137,420 6.24 225,000 912,420 4.51
John Parker............... 420,000 2.30 125,000 295,000 1.46
George C. Casey........... 420,000 2.30 100,000 320,000 1.58D. Ruddy.............................. 2,681,787(d) 12.4 868,234 1,813,553(d) 8.0
Lynn P. Davenport......... 276,354(f) 1.51 68,378 207,976(f) 1.02Davenport............................. 217,875(e) 1.0 108,937 108,938(i) *
Susan D. Pepin............ 231,033 1.26 57,420 173,613Pepin................................ 178,594(f) * 89,297 89,297(j) *
Russell A. Beliveau....... 202,821(g) 1.11 47,381 155,440(g)Beliveau........................... 156,308(g) * Eugene I. Costa........... 117,03978,154 78,154(g) *
29,259 87,780Thomas A. Grissen............................. 106,055(h) * Gary L. Glickman.......... 117,039 * 29,259 87,780 *
Ilene R. Baylinson........ 41,367 * 5,921 35,446 *
Holly A. Payne............ 29,696(h) * 2,343 25,978(h) *
Michael Truby............. 29,696(i) * 1,375 25,978(i) *
Kevin Dorney.............. 23,710 * 2,468 21,242 *
Margaret W. Melhem........ 14,610 * 3,652 10,958 *
Penny H. Tisdale.......... 2,927 * 731 2,19653,027 53,028(k) *

48
51

- ------------------------------

* LessPercentage is less than 1%. of all outstanding shares of our common stock.

(a) Applicable percentage of ownership prior to this offering is based upon
18,225,46821,605,669 shares of Common Stock outstanding.common stock outstanding, which includes 95,362 shares
of common stock issuable upon exercise of vested stock options to be
exercised prior to this offering by Mr. Davenport, 16,303; Ms. Pepin,
29,537; and Mr. Grissen, 49,522. For ownership after completion of this
offering, applicable percentage ownership is based on 20,225,46822,605,669 shares of
Common Stockcommon stock outstanding, which includes 95,362 shares of common stock which
will have been exercised prior to this offering by Mr. Davenport, 16,303;
Ms. Pepin, 29,537; and Mr. Grissen, 49,522, and assumes no exercise of the
Underwriters' over-allotmentunderwriters' overallotment option. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission, and
includes shares with respect to which the person has voting and investment
power with respect to the
shares shown as beneficially owned. Numberpower. The number of shares of Common Stockcommon stock deemed beneficially owned by any
person includes outstanding shares of Common Stockcommon stock held by such person and
any shares of Common Stockcommon stock issuable upon exercise of stock options held by
such person exercisable within 60 days. Each of thedays following Selling Shareholders beneficially own fully
exercisable options to purchase that number of shares set forth after his
or her respective name: Mr. Beliveau, 13,294; Mr. Davenport, 111,592; Mr.
Dorney, 13,835; Mrs. Mastran, 3,973; Mr. Muzzio, 3,973; Ms. Payne, 8,530;
Ms. Pepin, 111,353; and Mr. Truby, 6,291. All directors and executive
officers as a group are deemed to beneficially own an aggregate of 307,792
shares of Common Stock issuable upon the exercise of options which will be
fully exercisable within 60 days.May 31, 2001.

(b) If the over-allotmentoverallotment option is exercised in full, each of the following
Selling ShareholdersDr. Mastran and Mr. Ruddy
will sell that numberan aggregate of 525,000 additional shares of Common
Stock set forth after his or her respective name equal to an aggregate ofcommon stock.
Dr. Mastran will sell 315,000 additional shares of Common Stock:and Mr. Ruddy will sell
210,000 additional shares.

(c) Includes the holdings of (i)(1) Dr. Mastran's spouse, Mrs. Mastran,
consisting of
89,12962,129 shares and 3,9737,694 shares issuable upon exercise of stock options
exercisable within the 60-day period60 days following November 13,
1998May 31, 2001, (2) Dr. Mastran's father,
consisting of 1,800 shares, and (ii)(3) Mr. Ruddy, consisting of 3,242,7722,681,787
shares prior to the offering and 1,813,553 shares after the offering, and
who is obligated by written agreement to vote such shares in a manner
consistent with instructions received from Dr. Mastran until September 30,
2001. Dr. Mastran does not however, have dispositive power over Mr. Ruddy's shares.

(d) Includes 4,785,431 shares held by Mrs. Mastran's spouse, Dr. Mastran.

(e) Includes 1,020,000998,047 shares held by trusts for the benefit of Mr. Ruddy's family
members.

(f)(e) Includes (1) 123,991 shares issuable upon exercise of stock options
exercisable within 60 days following May 31, 2001 and (2) 1,250 shares held
by Mr. Davenport's son.

(f) Includes 118,834 shares issuable upon exercise of stock options exercisable
within 60 days following May 31, 2001. Ms. Pepin is the Deputy Consulting
Group President.

(g) Includes 189,527(1) 18,006 shares held inissuable upon exercise of stock options
exercisable within 60 days following May 31, 2001 and (2) the holdings of a
trust of which Mr. Beliveau and his spouse are the primary beneficiaries.beneficiaries,
consisting of 137,146 shares prior to the offering and 59,570 shares after
the offering.

(h) Includes the holdings of Ms. Payne's spouse, Mr. Truby, consisting of
5,550 shares and 6,291102,550 shares issuable upon exercise of stock options exercisable
within the 60-days period60 days following November 19, 1998.May 31, 2001.

(i) Includes the holdings of Mr. Truby's spouse, Ms. Payne, consisting of
9,375 shares and 8,530(1) 107,688 shares issuable upon exercise of stock options
exercisable within 60 days following May 31, 2001 and (2) 1,250 shares held
by Mr. Davenport's son.

(j) Includes 89,297 shares issuable upon exercise of stock options exercisable
within 60 days following May 31, 2001.

(k) Includes 53,028 shares issuable upon exercise of stock options exercisable
within 60 days following May 31, 2001.

Dr. Mastran and Mr. Ruddy have agreed, if any or all of the 60-days period following November 19, 1998.

49other selling
shareholders decides not to participate in this offering, to sell such number of
shares of common stock so that the total number of shares sold by the selling
shareholders will equal 2,500,000. Dr. Mastran and Mr. Ruddy have also granted
the underwriters an option to purchase up to an additional 525,000 shares to
cover overallotments.

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns &
Co. Inc., Legg Mason Wood Walker, Incorporated, Adams, Harkness & Hill, Inc and
BB&T Capital Markets, A division of Scott & Stringfellow, Inc. are acting as
representatives of the underwriters named below. Subject to the terms and
conditions containeddescribed in an underwritinga purchase agreement dated , 1998,among us, the selling shareholders
and the underwriters, named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc.we and Legg Mason Wood Walker, Incorporated,the selling shareholders have agreed to sell to the
underwriters, and the underwriters severally and not jointly have agreed to
purchase from the
Companyus and the selling stockholdersshareholders, the number of shares set forthlisted
opposite their names below.

NUMBER OF
UNDERWRITERS:UNDERWRITER SHARES

Donaldson, Lufkin---------

Merrill Lynch, Pierce, Fenner & Jenrette Securities Corporation.......
Lehman Brothers Inc.......................................Smith
Incorporated......................................
Bear, Stearns & Co. Inc.....................................
Legg Mason Wood Walker, Incorporated......................Incorporated........................
Adams, Harkness & Hill, Inc.................................
BB&T Capital Markets, A division of Scott & Stringfellow,
Inc.......................................................
---------
Total..................................................... 4,000,000Total............................................ 3,500,000
=========

The underwritingSubject to the terms and conditions in the purchase agreement, the
underwriters have agreed to purchase all the shares of our common stock being
sold pursuant to the purchase agreement if any of these shares of our common
stock are purchased. If an underwriter defaults, the purchase agreement provides
that the obligationspurchase commitments of the severalnondefaulting underwriters may be increased
or the purchase agreement may be terminated.

We and the selling shareholders have agreed to purchase and accept deliveryindemnify the underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to make in respect of
those liabilities.

The underwriters are offering the shares included in this
offering areof our common stock, subject to
prior sale, when, as and if issued to and accepted by them, subject to approval
of certain legal matters by their counsel, and
to certain other conditions. The underwriters are obligated to purchase and
accept delivery of allincluding the shares (other than those covered by the
over-allotment option described below) if they purchase any of the shares.

The underwriters propose to initially offer somevalidity of the shares, directlyand
other conditions contained in the purchase agreement, such as the receipt by the
underwriters of officers' certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.

COMMISSIONS AND DISCOUNTS

The representatives have advised us and the selling shareholders that the
underwriters propose initially to offer the shares of our common stock to the
public at the public offering price set forth on the cover page of this prospectus and some of the shares to certain
dealers at the public offeringthat price less a concession not in excess of $ per share.
The underwriters may allow, and suchthe dealers may re-allow,reallow, a concessiondiscount not in
excess of $ per share on sales to certain other dealers. After the initial offering, of the shares to
the public, the representatives may change the public
offering price, concession and such
concessions.discount may be changed.

The following table shows the public offering price, underwriting feesdiscount
to be paid by us and the selling shareholders to the underwriters byand the
Companyproceeds, before expenses, to us and the selling

stockholders in connection with this
offering. These amounts are shown assuming both44

shareholders. This information assumes either no exercise andor full exercise by
the underwriters of the underwriters' option to purchase additional shares of common stock.their overallotment options.

PAID BY
PAID BY THE COMPANY SELLING SHAREHOLDERS
--------------------------- ---------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISEPER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------

Per share.............Public offering price...................... $ $ $
Underwriting discount...................... $ Total................. $ $
Proceeds, before expenses, to MAXIMUS...... $ $ $
Proceeds to the selling shareholders....... $ $ $

The Company will payexpenses of this offering, not including the offering expenses,underwriting discount, are
estimated to be $500,000.

50
53

The Companyat $1,000,000 and certainare payable by us.

OVERALLOTMENT OPTION

Two selling stockholdersshareholders, David V. Mastran and Raymond B. Ruddy, have
granted an option to the underwriters an option, exercisable for 30 days from the date of the
underwriting agreement, to purchase up to 600,000an aggregate of 525,000
additional shares of our common stock at the public offering price less the
underwriting fees.discount. The underwriters may exercise suchthis option for 30 days
from the date of this prospectus solely to cover over-allotments, if any made in connection with
this offering. To the extent thatoverallotments. If the
underwriters exercise suchthis option, each underwriter will becomebe obligated, subject
to certain conditions contained in the purchase agreement, to purchase a number of
additional shares approximatelyof our common stock proportionate to suchthat underwriter's
initial purchase commitment.

The Company andamount reflected in the above table.

NO SALES OF SIMILAR SECURITIES

We, the selling stockholders have agreed to indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make in respect of any of those liabilities.

The Company, each of the selling stockholdersshareholders and theour executive officers and directors of the Company will have
agreed, that,subject to some limited exceptions, not to sell or transfer any shares
of our common stock for a period of 90 days fromafter the date of this prospectus they will not, without first
obtaining the prior written consent of Donaldson, Lufkin & Jenrette: (1)Merrill Lynch. Specifically, we, the selling
shareholders and these other individuals have agreed not to directly or
indirectly:

- offer, pledge, sell or contract to sell any shares of our common stock;

- sell any option or contract to purchase any shares of our common stock;

- purchase any option or contract to sell any shares of our common stock;

- grant any option, right or warrant to purchase or otherwise transfer or disposefor the sale of directly or indirectly, any shares of our
common stockstock;

- lend or otherwise dispose of or transfer any securities
convertible into or exercisable or exchangeable forshares of our common stock;
or

(2)- enter into any swap or other arrangementagreement that transfers, allin whole or a portion ofin
part, the economic consequences associated with theof ownership of any common stock (regardless of whether
any of the transactions described in clause (1)such swap or (2)transaction is to be settled by the delivery of common stock,shares or such
other securities, in cash or otherwise). In addition, during such period, the Company has agreed nototherwise.

This lock-up provision applies to
file any registration statement with respect to, and each of its executive
officers, directors and certain stockholders of the Company (including the
selling stockholders) has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of our common stock or anyand to
securities convertible into, or exchangeable or exercisable for, or exchangeable forrepayable
with, shares of our common stock. It also applies to shares of our common stock
withoutowned now or acquired later by the prior written consent of Donaldson, Lufkin & Jenrette.

The representatives have performed certain investment banking and advisory
services forperson executing the Company from time to timeagreement or for which
they have received
customary fees and expenses. The representatives may, from timethe person executing the agreement later acquires the power of disposition.

ELECTRONIC DISTRIBUTION

Merrill Lynch will be facilitating Internet distribution for this offering
to time, engage
in transactions with and perform servicescertain of its Internet subscription customers. Merrill Lynch intends to
allocate a limited number of shares for sale to its online brokerage customers.
An electronic prospectus is available on the Company in the ordinary course
of their business.Internet website maintained by
Merrill Lynch. Other than the prospectus in electronic format, the United States, no action has been taken byinformation
on the Company,Merrill Lynch website is not a part of this prospectus.

LISTING ON THE NEW YORK STOCK EXCHANGE

The shares of our common stock are listed on the selling stockholders orNew York Stock Exchange
under the underwriters that would permit a public offeringsymbol "MMS."

PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

Until the distribution of the shares of our common stock included in this offering in any jurisdiction
where action for that purpose is required. The shares included in this offering
may not be offered or sold, directly or indirectly, nor may this prospectus or
any other offering material or advertisement in connection with the offer and
sale of any such shares be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with the applicablecompleted, rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering
of the Securities and Exchange Commission may limit underwriters and selling
group members from bidding for and purchasing our common stock andstock. However, the
distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in this offering in any jurisdiction where that
would not be permitted or legal.

In connection with this offering, certain underwritersrepresentatives may engage in transactions that stabilize maintain or otherwise affect the price of the
common stock. Specifically,stock, such as bids or purchases to peg, fix or maintain that price.

In connection with the offering, the underwriters may overallot thismake short sales of
our common stock. Short sales involve the sale by the underwriters at the time
of the offering creatingof a greater number of shares than they are required to purchase
in the offering. Covered short sales are sales made in an amount not greater
than the overallotment option. The underwriters may close out any covered short
position by either exercising their overallotment option or purchasing shares in
the open market. In determining the source of shares to close out the covered
short position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the public
offering price at which they may purchase the shares through the overallotment
option.

Naked short sales are sales in excess of the overallotment option. The
underwriters must close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the shares in the open market after pricing that could adversely affect
investors who purchase in the offering.

Similar to other purchase transactions, the purchases by the underwriters to
cover syndicate short position. In addition,positions may have the 51
54effect of raising or maintaining
the market price of the common stock or preventing or retarding a decline in the
market price of the common stock. As a result, the price of our common stock may
be higher than it would otherwise be in the absence of these transactions.

The representatives may also impose a penalty bid on underwriters may bid for and
selling group members. This means that if the representatives purchase shares of
our common stock in the open market to cover syndicatereduce an underwriter's short positionsposition or
to stabilize the purchase of such shares, they may reclaim the amount of the
selling commission from the underwriters and selling group members who sold
those shares. The imposition of a penalty bid may also affect the price of the
shares of our common stock in that it discourages resales of those shares.

Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. These activities may stabilize or maintain the market priceIn addition, neither we nor any
of the common
stock above independent market levels. The underwriters are not required tomake any representation that the representatives will engage
in these activities and may end any oftransactions or that these activities at any time.

Peter B. Pond, a director of the Company, is a principal of Donaldson,
Lufkin & Jenrette. Donaldson, Lufkin & Jenrette from time to time provides and
in the past has provided investment banking services to the Company and is
serving as the lead managing underwriter in this offering. Pursuant to the
Company's Director Stock Option Plan, the Company granted Mr. Pond options to
purchase 5,000 and 15,000 shares of common stock, respectively, at an exercise
price per share equal to the fair market value of the common stock on the
trading day immediately preceding each such grant date, which grant dates were
the date of his initial election to the board of directors of the Company in
1997 and his re-election at the Company's annual meeting of shareholders in
February 1998. Each of these option grants vests and becomes exercisable for the
purchase of 5,000 shares on the grant date and each anniversary thereafter. In
addition, on August 18, 1998, the Company granted to Mr. Pond options to
purchase 150 shares of common stock at an exercise price per share of $23.88 in
consideration for consultant services provided to the Company. These options
were granted pursuant to the Company's Equity Incentive Plan and were fully
exercisable on the date of grant.transactions, once commenced, will not be
discontinued without notice.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for the Companyus by Palmer & Dodge LLP, Boston, Massachusetts. Certain legal matters
in connection with this offering will be passed upon for the underwriters by
WinstonSidley Austin Brown & Strawn, Chicago, Illinois. Lynnette C. Fallon,Wood LLP, New York, New York. Mr. Kerry Tomasevich, a
partner of Palmer & Dodge LLP, is an Assistant Secretary of the Company.MAXIMUS.

EXPERTS

TheOur consolidated financial statements of the Company at September 30, 19972000 and 19981999 and for
each of the three years in the period ended September 30, 19982000 appearing in this
prospectus and the Registration Statementregistration statement on Form S-3 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein which, as to the years 1997 and 1996,
is based in part on the report of Grant Thornton LLP, independent auditors.herein. The financial statements referred to above are
included in reliance on such reports given upon the authority of such firmsfirm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company isWe are subject to the informational requirements of the Securities Exchange
Act of 1934, and, in accordance therewith, filesfile periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
Reports, proxy and information statements filed pursuant to Sections 14(a) and
14(c) of the Exchange Act and other information filed with the Commission can be
inspected and copied at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Information regarding the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-800-SEC-0330. In addition, the Company iswe are required to file electronic versions of
such

52
55 material with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a
world wide web
sitewebsite at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Copies of certain information filed by the Companywe file with the Commission
are also available on the Company's web siteour website at http://www.maxinc.com.www.maximus.com. The Company's web site iscontents of our
website are not part of this prospectus. MAXIMUSOur common stock is listed on the New
York Stock Exchange. ReportsYou can inspect reports and other information concerning the Company can be inspectedus
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission (File No. 1-12997),
pursuant to the Exchange Act, are incorporated herein by reference:

(a) The Company'sOur Annual Report on Form 10-K for the fiscal year ended September 30,
1998,2000, filed with the Commission on November 23,
1998.December 27, 2000.

(b) Our Quarterly Report on Form 10-Q for the quarter ended December 31,
2000, filed with the Commission on February 14, 2001.

(d) Our Current Report on Form 8-K, filed with the Commission on
February 7, 2001.

(e) The description of theour common stock of the Company contained in the Company's Registration Statementour registration
statement on Form 8-A, filed on May 15, 1997, including any amendment or reports
filed for the purpose of updating suchthat description.

All documents filed by the Companywe file pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this prospectus and prior to the
termination of this offering of the securities offered hereby shall be deemed

incorporated by reference into this prospectus and to be a part hereof from the
date of filing suchwe file those documents. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded, for purposes of this prospectus, to the extent that a
statement contained hereinin this prospectus (or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein)
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.

The CompanyWe will provide, without charge, to each person to whom a copy of this
prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the documents which are incorporated hereininto this prospectus by
reference, except for certain exhibits to such documents. Requests should be
directed to the Company, 1356 Beverly Road, McLean, Virginia 22101, attention: F. Arthur Nerret; telephone:Nerret, Vice President, Finance and Chief Financial
Officer, 11419 Sunset Hills Road, Reston, Virginia 20190, telephone
(703) 734-4200.

53251-8500.

MAXIMUS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE

Report of Ernst & Young LLP, Independent Auditors' Reports...............................Auditors........... F-2

Consolidated Balance Sheets as of September 30, 19971999 and
1998...................................................... F-42000 and March 31, 2001 (unaudited)....................... F-3

Consolidated Statements of Income for the years ended
September 30, 1996, 19971998, 1999 and 1998......................... F-52000 and the six months ended
March 31, 2000 and 2001 (unaudited)....................... F-4

Consolidated Statements of Changes in Redeemable Common
Stock and Shareholders' Equity
for the years ended September 30, 1996, 19971998, 1999 and 1998......................... F-62000 and
the six months ended March 31, 2001 (unaudited)........... F-5

Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 19971998, 1999 and 1998......................... F-72000 and the six months ended
March 31, 2000 and 2001 (unaudited)....................... F-6

Notes to Consolidated Financial Statements.................. F-8F-7

F-1
57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Board of Directors
MAXIMUS, Inc.

We have audited the accompanying consolidated balance sheets of
MAXIMUS, Inc. as of September 30, 19971999 and 1998,2000, and the related consolidated
statements of income, changes in redeemable common stock and shareholders' equity, and cash flows for each
of the three years in the period ended September 30, 1998.2000. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We did not audit the financial statements of David M. Griffith &
Associates, Ltd., a wholly-owned subsidiary, which statements reflect total
assets of $15.5 million as of December 31, 1997 and total revenues of $32.6
million and $39.4 million for the years ended December 31, 1996 and 1997. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to data included for David M. Griffith &
Associates, Ltd. is based solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted auditing
standards.in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
MAXIMUS, Inc. at September 30, 19971999 and 1998,2000, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended September 30, 1998,2000, in conformity with accounting principles generally
accepted accounting principles.in the United States.

/s/ ERNST & YOUNG LLP

Washington, DCMcLean, Virginia
November 13, 1998

F-2
58

REPORT OF GRANT THORNTON LLP, INDEPENDENT AUDITORS

Board of Directors
David M. Griffith & Associates, Ltd.

We have audited the balance sheet of David M. Griffith & Associates, Ltd.
(an Illinois corporation) as of December 31, 1997, and the related statements of
earnings, stockholders' equity, and cash flows for the years ended December 31,
1996 and 1997 (not presented herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of David M. Griffith &
Associates, Ltd. as of December 31, 1997, and the results of its operations and
its cash flows for the years ended December 31, 1996 and 1997, in conformity
with generally accepted accounting principles.

/s/ GRANT THORNTON LLP

Chicago, Illinois
March 18, 1998,16, 2000, except for
Note L13 as to which the
date is as of March 23, 1998.

F-3May 15, 2001

F-2
59
MAXIMUS, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

AS OF SEPTEMBER 30,
---------------------
1997 1998------------------- MARCH 31,
1999 2000 2001
-------- -------- -----------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................equivalents................................. $ 11,00061,647 $ 19,40036,975 $ 46,994
Marketable securities................................. 40,869 13,577securities..................................... 37,235 1,359 1,350
Accounts receivable, net.............................. 46,531 72,345net.................................. 75,865 102,500 94,371
Costs and estimated earnings in excess of billings (Note
5)........................................... 5,605 5,924...................................................... 16,150 27,264 37,057
Prepaid expenses and other current assets............. 1,435 1,166assets................. 2,711 6,344 6,505
Deferred income taxes..................................... 2,997 -- --
-------- -------- --------
Total current assets............................... 105,440 112,412assets........................................ 196,605 174,442 186,277
Property and equipment at cost:
Land.................................................. 662 662
BuildingLand...................................................... 2,643 2,462 2,462
Buildings and improvements............................. 1,721 1,721improvements................................ 7,921 9,484 10,608
Office furniture and equipment........................ 4,902 6,421equipment............................ 10,429 14,264 15,352
Leasehold improvements................................ 188 214improvements.................................... 253 848 897
-------- -------- 7,473 9,018--------
21,246 27,058 29,319
Less: Accumulated depreciation and amortization....... (3,578) (4,504)amortization............. (6,524) (8,754) (10,020)
-------- -------- --------
Total property and equipment, net.................. 3,895 4,514net........................... 14,722 18,304 19,299
Software development costs.................................. -- 7,883 11,629
Less: Accumulated amortization.............................. -- (703) (963)
-------- -------- --------
Total software development costs, net....................... -- 7,180 10,666
Deferred income taxes (Note 9)........................ 1,241 1,434.............................. 363 1,402 1,384
Intangible assets, net...................................... 8,254 52,586 49,815
Other assets.......................................... 921 2,183assets................................................ 3,092 2,989 2,833
-------- -------- --------
Total assets....................................... $111,497 $120,543assets................................................ $223,036 $256,903 $270,274
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................................payable.......................................... $ 3,91410,265 $ 9,72412,565 $ 11,976
Accrued compensation and benefits..................... 10,132 14,446benefits......................... 16,119 17,747 16,152
Billings in excess of costs and estimated earnings (Note
5)........................................... 12,277 10,316...................................................... 16,942 15,648 10,710
Notes payable......................................... 1,596payable............................................. -- 209 284
Income taxes payable.................................. 3,932 3
Deferred income taxes................................. 2,452 901
S corporation distribution payable (Note 10).......... 5,748payable...................................... 2,266 -- --
Other current liabilities................................. 541 461 432
-------- -------- --------
Total current liabilities.......................... 40,051 35,390liabilities................................... 46,133 46,630 39,554
Long-term debt.......................................... -- 454
Deferred compensation, less current portion............. 3,533 --debt.............................................. 578 555 71
Other liabilities........................................... 846 785 582
-------- -------- --------
Total liabilities.................................. 43,584 35,844liabilities........................................... 47,557 47,970 40,207
Commitments and contingencies (Notes 7 and 11)
Shareholders' equity (Note 10):
Common stock, no par value; 30,000,00060,000,000 shares authorized;
15,991,68020,986,322, 21,125,844 and 18,225,39021,233,805 shares issued and
outstanding at September 30, 19971999 and 1998,2000 and March 31,
2001, at stated amount...................................... 66,708 66,535amount, respectively.................... 130,518 133,082 135,680
Accumulated other comprehensive income (loss)............. (280) (26) (13)
Retained earnings..................................... 1,205 18,164earnings......................................... 45,241 75,877 94,400
-------- -------- --------
Total shareholders' equity......................... 67,913 84,699equity.................................. 175,479 208,933 230,067
-------- -------- --------
Total liabilities and shareholders' equity......... $111,497 $120,543equity.................. $223,036 $256,903 $270,274
======== ======== ========

See notes to financial statements.
F-4SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3
60
MAXIMUS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEARSSIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, -------------------------------
1996 1997MARCH 31,
------------------------------ -------------------------
1998 1999 2000 2000 2001
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Revenues......................................... $135,673 $167,324 $233,473
Revenues................................. $244,114 $319,540 $399,164 $183,184 $233,521
Cost of revenues................................. 101,539 121,968 172,900revenues......................... 181,403 224,912 272,620 126,334 159,300
-------- -------- -------- -------- --------
Gross profit..................................... 34,134 45,356 60,573profit............................. 62,711 94,628 126,544 56,850 74,221
Selling, general and administrative
expenses..... 20,238 25,323 33,783
Stock option compensation, merger,expenses............................... 34,909 50,626 67,947 30,707 40,260
Merger, deferred compensation and ESOP
expense.................. 1,556 7,372expense................................ 3,671 480 225 -- --
Amortization of goodwill and other
acquisition-related intangibles........ -- 260 3,212 645 2,751
Legal settlement expense................. -- -- 3,650 -- --
-------- -------- -------- -------- --------
Income from operations........................... 12,340 12,661 23,119operations................... 24,131 43,262 51,510 25,498 31,210
Interest and other income (expense).............. (17) 777 1,775income................ 1,823 3,604 3,045 2,149 454
-------- -------- -------- -------- --------
Income before income taxes....................... 12,323 13,438 24,894taxes............... 25,954 46,866 54,555 27,647 31,664
Provision for income taxes....................... 530 4,104taxes............... 10,440 19,240 24,087 11,421 13,141
-------- -------- -------- -------- --------
Net income.......................................income............................... $ 11,79315,514 $ 9,33427,626 $ 14,45430,468 $ 16,226 $ 18,523
======== ======== ======== ======== ========

Earnings per share:
Basic..........................................Basic.................................. $ 0.940.86 $ 0.691.35 $ 0.841.45 $ 0.77 $ 0.87
======== ======== ======== Diluted........................................======== ========
Diluted................................ $ 0.940.85 $ 0.671.32 $ 0.821.42 $ 0.76 $ 0.85
======== ======== ======== ======== ========
Weighted average shares outstanding:
Basic.......................................... 12,573 13,508 17,237Basic.................................. 17,937 20,537 21,055 21,019 21,179
======== ======== ======== Diluted........................................ 12,573 13,893 17,596======== ========
Diluted................................ 18,296 20,891 21,424 21,427 21,804
======== ======== ======== ======== ========

See notes to financial statements.
F-5SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4
61
MAXIMUS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE COMMON STOCK
AND SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998

(DOLLARS IN THOUSANDS)

SHAREHOLDERS' EQUITY
REDEEMABLE --------------------ACCUMULATED
OTHER
COMMON COMMONCOMPREHENSIVE RETAINED
STOCK STOCKINCOME (LOSS) EARNINGS
-------- ------------- --------

Balance at September 30, 1995.....................1997............................... $ 21,35966,783 $ -- $(4,201)$ 2,258
Purchase of common stock from employee.................... (454) -- --
Net income................................................ -- -- 15,514
Tax benefit due to option exercise........................ -- -- 173
Adjustment for DMG results previously reported............ -- -- 156
Increase resulting from immaterial poolings............... 137 -- 3,843
Issuance of redeemable common stock to employees.................................... 229 -- --
Net income...................................... -- -- 11,793
Adjustment to redemption value of redeemable
common stock................................. 10,095 -- (10,095)
S Corporation distributions..................... -- -- (2,175)
-------- ------- -------
Balance at September 30, 1996..................... 31,683 -- (4,678)
Purchase of redeemable common stock from
employee..................................... (1,422)employees..................... 144 -- --
Issuance of common stock in exchange for debt............. 150 -- --
Reclassification of CSI accumulated earnings.............. 1,863 -- (1,863)
S corporation distributions............................... -- -- (1,917)
-------- ----- -------
Balance at September 30, 1998............................... 68,623 -- 18,164
Issuance of common stock to employees...........employees..................... 871 -- 778 --
Compensation charge for stock options........... -- 5,874 --
Net income......................................income................................................ -- -- 9,33427,626
Tax benefit due to option exercise........................ -- -- 321
Adjustment to redemption value of redeemable
common stock................................. 25 (25)
Adjustment to retained earnings upon initial
public offering.............................. (9,083) 9,083
Reclass of redeemable common stock upon initial
public offering.............................. (30,286) 15,335 14,951for CSI results previously reported............ -- -- (114)
Net proceeds from sale of common stock in initial public offering......................follow-on
offering................................................ 61,024 -- 53,804--
Unrealized losses on marketable securities................ -- (280) --
S Corporation distributions.....................corporation distributions............................... -- -- (27,460)(756)
-------- ------------ -------
Balance at September 30, 1997..................... -- 66,708 1,205
Purchase1999............................... 130,518 (280) 45,241
Issuance of common stock from employee..........to employees..................... 2,264 -- (454) --
Net income......................................income................................................ -- -- 14,45430,468
Tax benefit due to option exercise..............exercise........................ -- -- 173
Adjustment for Griffith results previously
reported.....................................168
Issuance of common stock in acquisition................... 300 -- --
156
Increase resulting from immaterial poolings.....Unrealized losses on marketable securities, net of
reclassification adjustment for losses included in net
income (Note 2)......................................... -- 137 3,843254 --
-------- ----- -------
Balance at September 30, 2000............................... 133,082 (26) 75,877
Issuance of common stock to employees........... -- 144 --
S Corporation distributions.....................employees (unaudited)......... 2,598 -- --
(1,667)Net income (unaudited).................................... -- -- 18,523
Unrealized gains on marketable securities (unaudited)..... -- 13 --
-------- ------------ -------
Balance at September 30, 1998.....................March 31, 2001(unaudited)........................ $135,680 $ -- $66,535 $18,164(13) $94,400
======== ============ =======

See notes to financial statements.
F-6SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
62
MAXIMUS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

YEARSSIX MONTHS
YEAR ENDED SEPTEMBER 30, -----------------------------
1996 1997ENDED MARCH 31,
------------------------------ -------------------------
1998 1999 2000 2000 2001
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $11,793income............................................. $ 9,334 $14,45415,514 $ 27,626 $ 30,468 $ 16,226 $18,523
Adjustments to reconcile net income to net cash (used
in) provided by (used in) operating activities:
Depreciation...................................... 801 1,027 995
Amortization......................................Depreciation......................................... 1,078 1,567 2,379 1,362 1,266
Amortization......................................... 1,401 1,117 3,914 645 3,011
Deferred income taxes................................ (2,475) (2,807) 1,917 18 (177)
Other................................................ 173 131 168 -- -- 1,401
Stock option compensation expense................. -- 5,874 --
Other............................................. 4 (157) 173
Changes in assets and liabilities:
Accounts receivable, net.......................... (9,470) (10,592) (19,931)net............................. (22,922) (2,065) (17,063) (6,884) 8,129
Costs and estimated earnings in excess of billings........................................ (2,173) (2,656) (319)billings... (326) (5,504) (9,115) (2,520) (9,792)
Prepaid expenses and other current assets......... (203) (794) 380assets............ 373 (460) (1,141) 318 (83)
Other assets...................................... (101) (231) (44)assets......................................... (43) 1,062 192 853 (441)
Accounts payable.................................. 282 2,791 4,593payable..................................... 4,845 (535) 1,466 (2,713) (589)
Accrued compensation and benefits................. 884 3,497 (1,093)benefits.................... 338 528 (445) (3,338) (1,595)
Billings in excess of costs and estimated earnings........................................ 1,995 6,770 (1,811)earnings... (1,309) 5,201 (3,599) (5,084) (4,939)
Income taxes payable.............................. (81) 3,914payable................................. (3,877) Deferred income taxes............................. 280 (319) (2,475)
-------2,073 (4,413) (2,941) --
Other liabilities.................................... -- -- 68 139 (28)
-------- -------- -------- -------- -------
Net cash (used in) provided by (used in) operating activities.... 4,011 18,458 (7,554)
-------activities...... (7,230) 27,934 4,796 (3,919) 13,285
-------- -------- -------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of contracts................................real estate................................ -- (8,000) -- -- --
Acquisition of businesses, net of cash acquired........ -- (11,243) (53,322) (21,514) --
Purchase price adjustments, net........................ -- -- -- -- 20
Purchase of contracts.................................. (2,436) -- -- -- --
Increase in cash resulting from immaterial poolings..........................................poolings.... 1,002 -- -- 1,002-- --
Purchase of property and equipment................... (783) (1,207) (1,006)
(Purchase) saleequipment..................... (1,160) (2,589) (5,004) (1,564) (2,261)
Proceeds from collections on notes receivable.......... -- -- -- 81 714
Capitalization of software development costs........... -- -- (2,772) (387) (3,746)
Sale (purchase) of marketable securities............. (1,000) (39,862) 27,819
-------securities............... 27,822 (23,229) 36,134 10,710 21
-------- -------- -------- -------- -------
Net cash provided by (used in) provided by investing activities.... (1,783) (41,069) 25,379
-------activities...... 25,228 (45,061) (24,964) (12,674) (5,252)
-------- -------- -------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial publicstock offering, net of expenses..........................................expenses.......... -- 53,80461,024 -- -- --
S Corporation distributions.......................... (2,175) (21,712) (7,415)
Redeemable common stock purchased.................... (899) (1,234)corporation distributions............................ (7,665) (756) -- -- --
Common stock issued.................................. 229 4issued.................................... 144 Net proceeds from (payments on) borrowings........... 364 362 (2,621)
-------871 2,264 1,495 2,598
Payments on borrowings................................. (2,547) (1,799) (6,768) (38) (612)
-------- -------- -------- -------- -------
Net cash (used in) provided by financing activities.... (2,481) 31,224 (9,892)
-------activities...... (10,068) 59,340 (4,504) 1,457 1,986
-------- -------- -------- -------- -------
Cash flow adjustment for change in accounting period of
Griffith.............................................DMG and CSI............................................ 467 31 -- -- 467
---------
-------- -------- -------- -------- -------
Net increase (decrease) increase in cash and cash equivalents... (253) 8,613 8,400equivalents..... 8,397 42,244 (24,672) (15,136) 10,019
Cash and cash equivalents, beginning of year........... 2,640 2,387 11,000
-------period........... 11,006 19,403 61,647 61,647 36,975
-------- -------- -------- -------- -------
Cash and cash equivalents, end of year.................period................. $ 2,38719,403 $ 11,000 $19,400
=======61,647 $ 36,975 $ 46,511 $46,994
======== ======== ======== ======== =======

See notes to financial statements.
F-7SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-6
63
MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. DESCRIPTION OF BUSINESS

MAXIMUS, Inc. (the "Company") provides a wide range of program management, and consulting
services and systems solutions primarily to federal, state and local government health and human
services agencies.agencies
throughout the United States. The Company conducts its operations through two groups.three
groups: the Government Operations Group, Consulting Group and Systems Group. The
Government Operations Group administers and manages state and local government
health and human
services programs includingon a fully out-sourced basis. Examples of these programs include
welfare-to-work and job readiness, child support enforcement, child care,
managed care enrollment and disability services. The Consulting Services Group provides
health and human services planning, information
technology consulting, strategic program evaluation, program improvement,
communications planning and assistancequality assurance services to state and local governmentsgovernment
agencies in identifyingaddition to general management consulting services and collecting previously unclaimedspecialized
services such as assisting state and local agencies in maximizing federal
welfare revenues.funding for their programs. The Systems Group provides state and local agencies
with systems design and implementation to improve the efficiency and
cost-effectiveness of their program administration. The Systems Group also
offers a suite of proprietary software products in addition to customized
versions of applications such as PeopleSoft.

The Company operates predominantly in the United States. Revenues from
foreign-based projects were less than 10% of total revenues for the years ended
September 30, 1996, 19971998, 1999 and 1998.2000.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a description of the Company's more significant accounting
policies.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of wholly-owned
subsidiaries. All material intercompany items have been eliminated.eliminated in
consolidation.

RECLASSIFICATIONS

Certain reclassifications have been made to prior period amounts to conform
to current year presentation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes, in particular, estimates used in the earnings recognition
process. Actual results could differ from those estimates.

RESTATEMENT OF PRIOR YEARS'UNAUDITED INTERIM FINANCIAL INFORMATION

The financial statements as of March 31, 2001 and for the six months ended
March 31, 2000 and 2001 are unaudited and have been prepared on the same basis
as the audited financial statements included herein. In the opinion of
management, the unaudited financial statements include all adjustments,
consisting only of normally recurring accruals, necessary to present fairly the
periods indicated. Results of operations for the interim period ended March 31,
2001 are not necessarily indicative of the results for the full fiscal year.

F-7

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company's 1996 and 1997 financial statements have been restated to
reflect the combination with David M. Griffith, Ltd. ("Griffith") in May 1998 in
a transaction accounted for using the pooling of interests method of accounting.
See Note 3.(CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS

The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.

REVENUE RECOGNITION

The Company generates revenue under various arrangements, generally
long-termincluding
contracts under which revenues are based on a fixed price, costs incurred plus a
negotiated fee a fixed price or various("cost-plus"), performance-based criteria.criteria and time and materials
reimbursement. Revenues for cost-plus contracts, are recorded

F-8
64
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

as costs are incurred and includeincluding a pro rata amount of
the negotiated fee.fee, are recorded as costs are incurred. Revenues on long-termfrom fixed
price, performance-based and performance-basedtime and materials reimbursement contracts,
including a portion of estimated profit, are recognized as costs are incurred.
The timing of billing to clients varies based on individual contracts and often
differs from the period of revenue recognition. These differences are included
in costs and estimated earnings in excess of billings and billings in excess of
costs and estimated earnings.

Management reviews the financial status of itscosts incurred, the revenues recognized and billings
from government contracts quarterly and adjusts recognized revenues to reflect
current expectations on realization of costs and estimated earnings in excess of
billings. Provisions for estimated losses on incomplete contracts are provided
in full in the period in which such losses become known. The Company has various
fixed price and performance-based contracts that may generate profit in excess
of the Company's expectations. The Company recognizes additional revenue and
profit in these situations after management concludes that substantially all of
the contractual risks have been eliminated, which generally is at task or
contract completion.

The Company also licenses software under non-cancelable license agreements.
License fee revenues are recognized when a non-cancelable license agreement is
in force, the product has been shipped, the license fee is fixed or
determinable, and collection is probable. If the fee is not fixed or
determinable, revenue is recognized as payments become due from the customer. In
addition, when software license contracts contain post-contract customer support
as part of a multiple element arrangement, revenue is recognized based upon the
vendor-specific objective evidence of the fair value of each element.
Maintenance and support revenues are recognized ratably over the term of the
related agreements, which in most cases is one year. Revenues from software
related consulting services under time and material contracts and for training
are recognized as services are performed. Revenues from other software related
contract services are generally recognized under the percentage-of-completion
method.

MARKETABLE SECURITIES

Marketable securities are classified as available-for-sale and are recorded
at fair market value with unrealized gains and losses, net of taxes, and
reported as a separate component of shareholders' equity, if material.equity. Realized gains and
losses and declines in market value judged to be other than temporary are
included in investment income. Interest and dividends are also included in
investment income. For the year ended September 30, 1999, unrealized losses on
marketable securities were $280. For the year ended September 30, 2000,
unrealized losses on marketable securities were $8 and reclassification
adjustments for losses included in net income were $262. For the six months
ended March 31, 2001, unrealized

F-8

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
gains on marketable securities were $13. There arewere no material unrealized gains
or losses on marketable securities at September 30, 1997 and 1998. Marketable securities
consist primarily of short-term municipal and commercial bonds.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and depreciated using both the
straight-line and accelerated methods based on estimated useful lives of 32not to
exceed 39.5 years for the Company's buildingbuildings and between three and ten years
for office furniture and equipment. Leasehold improvements are amortized over
the lesser of their useful life or the remaining term of the lease.

INTANGIBLE ASSETS

The excess of the cost over the fair value of net assets of purchased
businesses is recorded as intangible assets and is amortized using the
straight-line method over periods ranging from two to fifteen years. The
carrying values of intangible assets, as well as other long-lived assets, are
reviewed for impairment if changes in the facts and circumstances indicate
potential impairment of their carrying value. The principle factor used by the
Company in identifying potential impairment is profitability of the acquired
business. Any impairment would be recognized when the expected future operating
cash flows from such intangible assets is less than their carrying value.

INCOME TAXES

Deferred tax assetsliabilities and liabilitiesassets are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted rates expected to be in effect during the year in which the differences
reverse.

Prior to its initial public offering, the Company and its shareholders
elected to be treated as an S Corporation under the Internal Revenue Code. Under
the provisions of the tax code, the Company's shareholders included their pro
rata share of the Company's income in their personal income tax returns.
Accordingly, the Company was not subject to federal and most state income taxes
during the periods prior to the initial public offering. The completion of the
Company's initial public offering during June 1997 resulted in the termination
of the Company's S Corporation status for income tax purposes. In connection
therewith, the Company recorded a deferred tax charge against income of $2,566
for the

F-9
65
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

cumulative differences between the financial reporting and income tax basis of
certain assets and liabilities at June 12, 1997.

The Company merged with two companies during 1998 and one company during
1999 that had elected to be treated as S Corporations.corporations. The mergermergers resulted in
the termination of the S Corporationcorporation status for those companies and a deferred
tax charge against income of $325 in 1998 and $1,109 in 1999 for cumulative
differences between the financial statement and tax basis of assets and
liabilities.

ACCOUNTING STANDARDS NOT ADOPTED

In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" which established standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. This statement is effective for fiscal
years beginning after December 15, 1997.

In June 1997, the FASB issued Statement No. 131, "Disclosure about Segments
of an Enterprise and Related Information" which established standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments. The financial information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. This statement is effective for financial statements for periods
beginning after December 15, 1997.

The Company does not expect the impact of adopting these new accounting
standards to be significant.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company considers the recorded value of its financial assets and
liabilities, which consist primarily of cash and cash equivalents, marketable
securities, accounts receivable and accounts payable, to approximate the fair
value of the respective assets and liabilities at September 30, 19971999 and 1998.2000.

3. BUSINESS COMBINATIONS

On March 16, 1998, the Company issued 840,000 shares of its common stock in
exchange for all of the common stock of Spectrum Consulting Group, Inc. and an
affiliated company ("Spectrum"). This merger was accounted for as an immaterial
pooling of interests and accordingly, the Company's financial statements,
including earnings per share, were not restated for periods prior to January 1,
1998.

F-10F-9
66
MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. BUSINESS COMBINATIONS (CONTINUED)
On May 12, 1998, the Company issued 1,166,179 shares of its common stock in
exchange for all of the outstanding common stock of David M. Griffith, and
Associates, Ltd.
("Griffith"DMG"). This merger was accounted for as a pooling of interests and
accordingly, the Company's financial statements, including earnings per share
have been restated for
all periods presented to include the financial position and results of operations of Griffith. Griffith's operations for the years ended December 31,
1996 and 1997 were combined with the Company's operations for the fiscal years
ended September 30, 1996 andDMG from October 1, 1997. This resulted in inclusion of Griffith
operating results for the three months ended December 31, 1997 in the Company's
operating results for both fiscal 1997 and 1998. Griffith's revenues and net
income for the three months ended December 31, 1997 were $11,450 and $(156),
respectively.

On August 31, 1998, the Company issued 1,137,420 shares of its common stock
in exchange for all of the outstanding common stock of Carrera Consulting Group
("Carrera"). This merger was accounted for as an immaterial pooling of interests
and accordingly, the Company's financial statements, including earnings per
share, were not restated for periods prior to July 1, 1998.

On August 31, 1998, the Company issued 254,545 shares of its common stock in
exchange for all of the outstanding common stock of Phoenix Planning &
Evaluation, Ltd. ("Phoenix"). This merger was accounted for as an immaterial
pooling of interests and accordingly, the Company's financial statements,
including earnings per share, were not restated for periods prior to July 1,
1998.

On February 26, 1999, the Company issued 700,210 shares of its common stock
in exchange for all of the outstanding common stock of Control Software, Inc.
("Control Software"). This merger was accounted for as a pooling of interests
and accordingly, the Company's financial statements, including earnings per
share, include the results of operations of Control Software from October 1,
1997. Control Software's operations for the year ended December 31, 1998 were
combined with the Company's operations for the fiscal year ended September 30,
1998. This resulted in inclusion of Control Software's operating results for the
three months ended December 31, 1998 in the Company's operating results for both
fiscal 1998 and 1999. Control Software's revenues and net income for the three
months ended December 31, 1998 were $2,170 and $114, respectively.

On March 31, 1999, the Company acquired all of the outstanding shares of
capital stock of Norman Roberts & Associates, Inc. for $1,930. In conjunction
with the purchase, the Company recorded intangible assets of $1,930.

On June 1, 1999, the Company acquired all of the outstanding shares of
capital stock of Unison Consulting Group, Inc. for $7,589. In conjunction with
the purchase, the Company recorded intangible assets of $5,494.

On September 30, 1999, the Company acquired all of the outstanding shares of
capital stock of Network Design Group, Inc. d/b/a The Center for Health Dispute
Resolution ("CHDR") for $2,070. Pursuant to the Purchase Agreement, the purchase
price was subject to an upward adjustment for each month for which CHDR secured
the renewal or extension of a certain contract, up to a maximum of an additional
$1,200. In August 2000, and again in February 2001, the contract was extended by
six months, and an additional $200 was paid for each extension, increasing the
intangible assets by $400. In conjunction with the purchase, the Company
recorded intangible assets of $1,228.

On October 20, 1999, the Company acquired all of the outstanding shares of
capital stock of Public Systems, Inc. for $5,000. In conjunction with the
purchase, the Company recorded intangible assets of $4,540.

On March 20, 2000, the Company acquired all of the outstanding shares of
capital stock of Crawford Consulting, Inc. for $16,750. In conjunction with the
purchase, the Company recorded intangible assets of $11,887.

F-10

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. BUSINESS COMBINATIONS (CONTINUED)
On March 31, 2000, the Company acquired substantially all of the government
services division of 3-G International, Inc. for $7,000, plus an earn-out amount
of $1,126 paid by the Company in May 2001 as a result of the achievement of
certain objectives. In conjunction with the purchase, the Company recorded
intangible assets of $7,054, excluding the May 2001 earn-out payment.

On April 12, 2000, CSI-MAXIMUS, Inc., a wholly owned subsidiary of the
Company, acquired substantially all of the assets of Asset Works, Inc. for
$8,613. In conjunction with the purchase, the Company recorded intangible assets
of $8,674.

On April 14, 2000, the Company acquired all of the outstanding shares of
capital stock of Valuation Resource Management, Inc. for $4,500. In conjunction
with the purchase, the Company recorded intangible assets of $3,585.

On April 29, 2000, the Company acquired substantially all of the assets of
Technology Management Resources, Inc. for $9,674. In conjunction with the
purchase, the Company recorded intangible assets of $10,036.

On July 19, 2000, the Company acquired all of the outstanding membership
interests of Strategic Partners International, LLC for $1,800. In conjunction
with the purchase, the Company recorded intangible assets of $1,609.

Intangible assets are amortized using the straight-line method over periods
ranging from two to fifteen years. The accumulated amortization related to
intangible assets at September 30, 1999 and 2000 and March 31, 2001 was $260,
$3,472 and $6,223, respectively.

Unaudited pro forma results of operations information for the Company as if
the companies acquired by the purchase method were acquired at the beginning of
the periods being reported are as follows:

YEAR ENDED SEPTEMBER 30,
------------------------
1999 2000
--------- ---------

Revenue................................................ $377,251 $422,676
Net income............................................. $ 26,672 $ 29,291
Earnings per share (diluted)........................... $ 1.28 $ 1.37
All of the companies involvedacquired in the mergersbusiness combinations described above
are involved primarily in providing software and/or consulting services for
state and local governments. The merged companies accounted for as immaterial
poolings contributed $16,854 to the Company's revenues for the year ended
September 30, 1998.

A reconciliation of the Company's revenues and net income, as previously
reported, to the restated results that give effect to the Griffith combination
for the fiscal years ended September 30, 1996 and 1997 follow:

YEARS ENDED
SEPTEMBER 30,
----------------------
1996 1997

Revenues as previously reported................. $103,113 $127,947
Griffith revenues............................... 32,560 39,377
-------- --------
Combined revenues............................... $135,673 $167,324
======== ========
Net income as previously reported............... $ 11,619 $ 8,589
Griffith net income............................. 174 745
-------- --------
Combined net income............................. $ 11,793 $ 9,334
======== ========
F-11
67
MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

4. EARNINGS PER SHARE

The following table sets forth the computationcomponents of basic and diluted earnings
per share:

YEARSSIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, ----------------------------
1996 1997MARCH 31,
------------------------------ -------------------
1998 1999 2000 2000 2001
-------- -------- -------- -------- --------

Numerator:
Net income............................ $11,793 $9,334 $14,454income................................... $15,514 $27,626 $30,468 $16,226 $18,523
======= ======= ======= ======= =======
Denominator:
Weighted average shares outstanding... 12,573 13,508 17,237outstanding.......... 17,937 20,537 21,055 21,019 21,179
Effect of dilutive securities:
Employee stock options................ -- 385options....................... 359 354 369 408 625
------- ------------- ------- ------- -------
Denominator for dilutivediluted earnings per share.................................... 12,573 13,893 17,596share..... 18,296 20,891 21,424 21,427 21,804
======= ============= ======= ======= =======

5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Uncompleted contracts consist of the following components:

BALANCE SHEET CAPTION
----------------------------------------------
COSTS AND ESTIMATED BILLINGS IN
EXCESS OFESTIMATED EARNINGS IN EXCESS OF COSTS AND
IN EXCESS OF BILLINGS ESTIMATED BILLINGS EARNINGS
--------------------- -------------------

September 30, 1997:1999:
Costs and estimated earnings..... $136,008 $119,765
Billings......................... 130,403 132,042earnings.............................. $255,572 $326,729
Billings.................................................. 239,422 343,671
-------- --------
Total................................................. $ 5,60516,150 $ 12,27716,942
======== ========

September 30, 1998:2000:
Costs and estimated earnings..... $193,022 $192,219
Billings......................... 187,098 202,535earnings.............................. $518,291 $471,044
Billings.................................................. 491,027 486,692
-------- --------
Total................................................. $ 5,92427,264 $ 10,31615,648
======== ========

Costs and estimated earnings in excess of billings relate primarily to
performance-based contracts whichthat provide for billings based on attainment of
results specified in the contract and differences between actual and provisional
billing rates on cost-based contracts.

6. CREDIT FACILITIES

The Company hashad a $10 million revolving line of credit with a bank. Borrowings under this line bear interest at LIBOR plus an amount which ranges
from 0.65% to 1.25% depending on the Company's debt to equity ratio. The
Company had no borrowings under the Credit Facility at September 30, 1998. Under the
terms of the line, the Company is required to maintain at all times: (i) an
excess of current assets to current liabilities of not

F-12
68
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

less than 1.5 to 1, (ii) net worth of $60 million, and (iii) a ratio of total
liabilities to net worth of not more than 1.5 to 1. There were no outstanding
borrowingsnever borrowed under the line of credit facility at September 30, 1997 and 1998. Themanagement allowed the line of credit expiresto
expire on March 31, 1999.

At September 30, 1997 and 1998, the
Company had letters of credit outstanding amounting to $508 and $401,
respectively.

Certain companies that merged intowere acquired by the Company during 1998, 1999, and
2000 had various arrangements for short and long-term borrowings. These credit
arrangements generally were repaid following the related mergeracquisitions and do not
significantly affect the Company's financial statements.

F-12

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

7. LEASES

The Company leases office space under various operating leases, the majority
of which contain clauses permitting cancellation upon certain conditions. The
terms of these leases provide for certain minimum payments as well as increases
in lease payments based upon the operating cost of the facility and the consumer
price index. Rent expense for the years ended September 30, 1996, 19971998, 1999, and 19982000
was $3,321, $5,296$7,074, $11,084, and $6,947,$15,208 respectively.

Minimum future payments under these leases are as follows:

YEARS ENDED SEPTEMBER 30,

1999........................................... $ 8,863
2000........................................... 5,517
2001........................................... 3,969
2002........................................... 2,872
2003........................................... 1,938
Thereafter..................................... 997Year ended September 30,

2001........................................................ $12,497
2002........................................................ 8,946
2003........................................................ 5,325
2004........................................................ 2,953
2005........................................................ 717
Thereafter.................................................. --
-------
$24,156$30,438
=======

8. EMPLOYEE BENEFIT PLANS AND DEFERRED COMPENSATION

The Company has 401(k) plans and other defined contribution plans for the
benefit of all employees who meet certain eligibility requirements. The plans
provide for Company match, specified Company contributions, and/or discretionary
Company contributions. During the years ended September 30, 1996, 19971998, 1999 and 1998,2000,
the Company contributed $650, $774$1,387, $2,923 and $1,342$3,287 to the plans, respectively.

Prior to its merger with the Company, GriffithDMG had an employee stock ownership
plan covering substantially all of its employees. During 1996, 1997
and 1998, amountsthe amount
charged to operations for the plan were $643, $897, and $394,
respectively.was $394.

Prior to its merger with the Company, GriffithDMG had deferred compensation
arrangements with certain officers and employees and had granted stock
appreciation rights to certain current and retired officers and employees. The
stock appreciation rights provided for full vesting and current settlement at
the time of the merger. During 1996,

F-13
69
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998, (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1997 and 1998, amountsthe amount charged to operations under
these arrangements were $461,
$216 andwas $972, including a non-recurringone-time income statement charge of
$942 in 1998 as a result of the merger.

9. INCOME TAXES

The Company's provision for income taxes is as follows:

YEARSYEAR ENDED SEPTEMBER 30,
----------------------------
1996 1997------------------------------
1998 1999 2000
-------- -------- --------

Current provision:
Federal............................... $ -- $ 3,722Federal........................................ $10,676 State................................. 250 701$18,740 $17,278
State.......................................... 1,894 3,307 4,174
Deferred tax expense (benefit)............. 280 (319) expense................... (2,130) ------(2,807) 2,635
------- ------- $ 530 $ 4,104-------
$10,440 ======$19,240 $24,087
======= ======= =======

F-13

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

9. INCOME TAXES (CONTINUED)
The provision for income taxes resulted in effective tax rates that varied
from the federal statutory income tax rate as follows:

YEARSYEAR ENDED SEPTEMBER 30,
----------------------------
1996 1997------------------------------
1998 1999 2000
-------- -------- --------

Expected federal income tax provision...... $4,195provision....................... $ 4,569 $ 8,7139,074 $16,043 $19,094
Effect of income taxed directly to S Corporation shareholders................. (4,027) (3,893) (297)corporation
shareholders.............................................. (658) (480) --
State income taxes......................... 250 607taxes.......................................... 1,245 2,343 3,047
Effect of nondeductible legal settlement expense............ -- -- 1,278
Effect of termination of S Corporation
status...................................corporation status............... 325 1,109 -- 2,566 325
Effect of nondeductible merger costs....... -- --costs........................ 531 Other...................................... 112 25582 79
Other....................................................... (77) ------143 589
------- ------- $ 530 $ 4,104-------
$10,440 ======$19,240 $24,087
======= ======= =======

F-14
70
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The significant items comprising the Company's deferred tax assets and
liabilities as of September 30, 19971999 and 19982000 are as follows:

AS OF SEPTEMBER 30,
----------------
1997 1998----------------------
1999 2000
-------- --------

Deferred tax assets -- current:assets-current:
Liabilities for costs deductible in future periods........ $ 425 $ 8101,779 $2,870
Billings in excess of costs and estimated earnings........ 4,699 4,1265,844 5,273
------- ------
Total deferred tax assets -- current........................ 5,124 4,936assets-current........................... 7,623 8,143
Deferred tax liabilities -- current:liabilities-current:
Cash versus accrual accounting............................ 5,334 2,9151,247 869
Costs and estimated earnings andin excess of billings....... 2,242 2,512billings........ 3,076 6,813
Other..................................................... -- 410303 461
------- ------
Total deferred tax liabilities -- current................... 7,576 5,837liabilities-current...................... 4,626 8,143
------- ------
Net deferred tax (liability)asset-current.............................. $ 2,997 $ -- current..................... $(2,452) $ (901)
======= ======
Deferred tax assets (liabilities) -- non-current:-non-current:
Stock option compensation................................. 2,055 1,874
Deferred compensation..................................... 1,388 --$ 1,905 $1,958
Cash versus accrual accounting............................ (2,202) (795)(1,733) (436)
Other..................................................... -- 355191 (120)
------- ------
Net deferred tax asset -- non-current.......................asset-non-current.......................... $ 1,241 $1,434363 $1,402
======= ======

Cash paid for income taxes during the years ended September 30, 1996, 19971998, 1999
and 19982000 was $313, $274$16,507, $20,002 and $16,507,$23,748 respectively.

10. SHAREHOLDERS' EQUITY

INITIALFOLLOW-ON PUBLIC OFFERING

The Company completed an initiala second public offering (the "IPO""follow-on offering") of
common stock during June 1997.December 1998. Of the 6,037,5004,200,000 shares of common stock sold
in the IPO,
2,360,000follow-on offering,

F-14

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

10. SHAREHOLDERS' EQUITY (CONTINUED)
2,200,000 shares were sold by selling shareholders and 3,677,5002,000,000 shares were
sold by MAXIMUS, Inc.the Company, generating $53,804$61,024 in proceeds to the Company, net of
offering expenses.

S CORPORATION DISTRIBUTIONS

During fiscal year 1997, the Company made cash distributions to its S
Corporation Shareholders prior to the IPO totaling $1,212. In connection with
the IPO, the Company made an additional distribution of $20,500 to its S
Corporation Shareholders and accrued an additional distribution at September 30,
1997 in the amount of $5,748, such aggregate amount representing the
undistributed earnings of the Company taxed or taxable to shareholders through
the date of the IPO.

F-15
71
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Consistent with their past practices, Spectrum, Phoenix, and PhoenixControl
Software paid S Corporation dividendscorporation distributions totaling $1,667$1,917 during 1998, and
Control Software paid S corporation distributions totaling $756 during 1999,
based upon pre-merger taxable income.

REDEEMABLE COMMON STOCK

Prior to the IPO, a shareholders' agreement obligated the Company to
purchase all shares offered for sale by the Company's shareholders at a formula
price based on the book value of the Company. In addition, shareholders were
obligated to sell and the Company was obligated to purchase at the formula price
all of the shares owned by the shareholders upon the shareholder's death,
disability or termination of employment. Griffith had agreements with certain of
its shareholders to repurchase its shares under certain circumstances at fair
value. The Company's obligation to purchase common shares from shareholders
terminated upon completion of the IPO. Accordingly, amounts classified
previously as redeemable common stock, including amounts related to Griffith,
were reclassified into shareholders' equity.

EMPLOYEE STOCK PURCHASE PLAN

During fiscal 1998, the Company implemented a plan whichthat permits employees to
purchase shares of the Company's common stock each quarter at 85% of the market
value on the last day of the quarter. The initial sale of shares under the plan
occurred subsequentduring fiscal 1998. During fiscal 1999 and 2000, respectively, the
Company issued approximately 13,100 and 66,900 shares of common stock pursuant
to September 30, 1998.this plan at an average price of $26.52 and $24.53 per share.

STOCK OPTION PLANS

The Company's Board of Directors established stock option plans during 1997
pursuant to which the Company may grant incentive and non-qualified stock
options to officers, employees and directors of the Company. Such plans also
provide for stock awards and direct purchases of the Company's common stock.

The vesting period and share price for awards are determined by the
Company's Board of DirectorDirectors at the date of grant. Options granted during 1997
include those which were fully vested on issuance and others whichgenerally vest over
periods from two to four years. TheAs of September 30, 2000, the Company's Board of
Directors hashad reserved 3.14.6 million shares of common stock for issuance under the
Company's stock option plans. At September 30, 1998, 2.02000, 1.3 million shares wereremained
available for grants under the Company's option plans.

In January 1997, the Company issued options to various employees to
purchase 403,975 shares of the Company's common stock at a formula price based
on book value. During 1997, the Company recorded a non-recurring charge against
income of $5,874 for the difference between the IPO price and the formula price
for all options outstanding. The Company recorded a deferred tax benefit
relating to the charge in the amount of $2,055.

In October 1995, the Financial Accounting Standards Board issuedUnder Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting and Disclosure for
Stock-Based Compensation," which provides for a fair value based methodology of
accounting for all stock option plans. Under SFAS 123,ACCOUNTING
AND DISCLOSURE FOR STOCK-BASED COMPENSATION, companies may account for stock
options under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees"

F-16
72
MAXIMUS, INC.
NOTESACCOUNTING FOR STOCK
ISSUED TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)EMPLOYEES (APB 25) and related Interpretations and provide pro forma
disclosure of net income, as if the fair value basedvalue-based method of accounting
defined in SFAS 123 had been applied. The Company has elected to follow APB 25
and related interpretations in accounting for its employee stock options and
provide pro forma fair value disclosure under SFAS 123.

Pro forma information regarding net income has been determined as if the
Company had accounted for its stock options under the fair value method of
SFAS 123. The fair value for these options was estimated at the date of grant
using a
minimal valuation method in 1997 and the Black-Scholes method in 1998 with the following assumptions --assumptions: volatility of 42%
for 1998, 56% for 1999, and 66% for 2000; risk free interest rate 6.5%
for 1997 andof 5.5% for
1998, 6.5% for 1999, and 5.7% for 2000; dividend yield 0%; and an expected life
of the option of 4 years.years in 1998 and 1999, and 4.4 years in 2000. The grant-date
fair value of options granted was $3.58 for 1997$9.61 in 1998, $14.45 in 1999, and $9.61 for 1998.$14.77 in
2000.

F-15

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

10. SHAREHOLDERS' EQUITY (CONTINUED)
For purposes of the pro forma disclosure, the estimated fair value of the
options is amortized to reflect such expense over the options' vesting period.
The effects of applying SFAS 123 for providing pro forma disclosures are not
likely to be representative of the effects on reported net income for future
years. For the years ended September 30, 19971998, 1999 and 1998,2000, pro forma net
income and pro forma net income per share resulting from the adjustment for
stock option compensation was as follows:

YEAR ENDED SEPTEMBER 30,
-----------------
1997------------------------------
1998 1999 2000
-------- -------- --------
Net income.................................. $9,334 $14,454
FASincome....................................... $15,514 $27,626 $30,468
SFAS 123 compensation expense................ (972)expense.................... (780) ------(1,958) (6,351)
------- ------- -------
Net income, as adjusted..................... $8,362 $13,674
======adjusted.......................... $14,734 $25,668 $24,117
======= ======= =======
Net income per share, as adjusted:
Basic..................................Basic.......................................... $ 0.620.82 $ 0.79
Diluted................................1.25 $ 0.601.15
Diluted........................................ $ 0.780.81 $ 1.23 $ 1.13

A summary of the Company's stock option activity for the years ended
September 30, 19971998, 1999 and 19982000 is as follows:

WEIGHTED-
AVERAGE
OPTIONS EXERCISE ACTIVITY DURING 1997: OPTIONS PRICE
--------- --------------

Granted.................................. 531,975 $ 5.05
Exercised................................ (3,025) 1.46
---------
Outstanding at September 30, 1997........1997.................... 528,950 $ 5.07
Granted..................................Activity during fiscal 1998:
Granted............................................ 626,989 24.06
Exercised................................Exercised.......................................... (36,300) 3.46
Canceled due to termination..............termination........................ (25,887) 25.05
--------- ------
Outstanding at September 30, 1998........1998.................... 1,093,752 15.33
Activity during fiscal 1999:
Granted............................................ 879,423 29.05
Exercised.......................................... (44,127) 10.26
Canceled due to termination........................ (110,807) 23.22
--------- ------
Outstanding at September 30, 1999.................... 1,818,241 21.79
Activity during fiscal 2000:
Granted............................................ 1,642,143 26.10
Exercised.......................................... (60,092) 10.69
Canceled due to termination........................ (181,064) 25.72
--------- ------
Outstanding at September 30, 2000.................... 3,219,228 $23.98
========= ======

F-17F-16
73
MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

10. SHAREHOLDERS' EQUITY (CONTINUED)
The ranges of exercise prices for outstanding options were as follows at
September 30, 1998:2000:

$ 0.01 - $ 1.46..................................... 369,1501.46............................................. 326,350
$12.31 - $16.00..................................... 251,338
$23.38$16.00............................................. 135,830
$20.43 - $31.56..................................... 473,264
---------
1,093,752
=========$36.63............................................. 2,757,048
----------
3,219,228
==========

The Company had 468,995approximately 1,080,000 options exercisable at
September 30, 19982000 at a weighted average exercise price of $5.54$18.53 per share.
Outstanding options have a weighted average remaining exercise period of
9.28.5 years at September 30, 1998.2000.

11. COMMITMENTS AND CONTINGENCIES

LITIGATION

On February 3, 1997, the Company was named as a third party defendant by
Network Six, Inc. ("Network Six") in a legal action brought by the State of
Hawaii against Network Six. Network Six alleges that the Company is liable to
Network Six on various grounds. The Company believes Network Six's claims are
without merit and intends to vigorously defend this action. The Company believes
this action will not have a material adverse effect on its financial condition
or results of operations and has not accrued for any loss related to this claim.

On November 28, 1997, an individual who was a former officer, director and
shareholder of the Company filed a complaint in the United States District Court
for the District of Massachusetts, alleging that, at the time he resigned from
the Company in 1996, thereby triggering the repurchase of his shares, the
Company and certain of its officers and directors had failed to disclose to him
material information to him relating to the potential value of the shares. He had
further allegesalleged that the Company and its officers and directors violated
Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and breached
various fiduciary duties owed to himhim. This matter was settled in September 2000
without admission of fault or liability on the part of the Company. The
Company's financial statements for fiscal year 2000 were appropriately adjusted
to reflect a one-time charge for this legal settlement.

In January 2000, the New York City Human Resources Administration submitted
two contracts that it had awarded to the Company for the performance of
welfare-to-work services to the Comptroller of New York City (the "Comptroller")
to be registered. Under New York law, the contracts must be registered in order
for the Company to receive payment. However, the Comptroller refused to register
the contracts, alleging improprieties in the procurement process and claims damages in excessthe
Company's conduct. The New York Supreme Court, Appellate Division--First
Department ordered the Comptroller to register the contracts in October 2000
after finding no wrongdoing in the Company's conduct. Nevertheless, this matter
continues to be the subject of $10
million.investigations being conducted by certain
government agencies. The District Attorney's Office of New York County and the
United States Attorney's Office for the Southern District of New York, in
response to requests made by the Comptroller, are investigating the facts
underlying this matter. These offices reviewed some of the Company's documents
and interviewed some of the Company's employees in 2000 and 2001. The Company
believes that its actions were lawful and appropriate and, although there can be
no assurance of a favorable outcome, the Company does not believe that this
actionmatter will have a material adverse effect on the Company's financial condition
or results of operations,
and it intends to vigorously defend this action.

In January 1997, a lawsuit was filed against a number of defendants,
including Griffith, by a purchaser of municipal bonds. Griffith had prepared two
reports rendering an opinion on the anticipated debt service coverage of the
revenue bonds for the first five years of operation of the sewer project by
Superstition Mountain Community Facilities District No. 1 (the "District"). The
District was unable to meet its debt service obligations and filed bankruptcy.
The purchaser of the Revenue Bonds, Allstate Insurance Company, has sued a
number of defendants, including Griffith, for damages of $32.1 million which is
the face value of the revenue bonds, plus interest. The District has also filed
a lawsuit against Griffith seeking damages. Griffith intends to vigorously
defend both of these actions. However, given the early stage of litigation,
legal counsel is unable to express an opinion concerning the ultimate resolution
of either case or Griffith's liability, if any, in connection therewith.

F-18
74
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)operations.

The Company also is involved in various other legal proceedings in the
ordinary course of its business. In the opinion of management, these proceedings
involve amounts that would not have a material effect on the financial position
or results of operations of the Company if such proceedings were disposed of
unfavorably.

DCAA AUDITSF-17

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
A substantial portion of payments to the Company from United States
Governmentgovernment agencies is subject to adjustments upon audit by the Defense Contract
Audit Agency.agency with
which the Company has contracted. Audits through 1993 have been completed with
no material adjustments. In the opinion of management, the audits of subsequent
years are not expected to have a material adverse effect on the Company's
financial position or results of operations.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with 1441 of its executives and other
employees that provide for aggregate base salaries of approximately $3.5 million$8,100 per
year. The termterms of the employment obligations are through 2000.end between 2001 and 2004.

12. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of accounts receivable and costs
and estimated earnings in excess of billings on uncompleted contracts. To date,
these financial instruments have been derived from contract revenues earned
primarily from federal, state and local government agencies located in the
United States.

At September 30, 1997 and 1998, $1,436 and $1,004, respectively,2000, $3,040 of the Company's accounts receivable were due
from the United States Government. Revenues under contracts with various
agencies of the United States Government were $61,317, $35,802$3,738 and $3,738$8,670 for the years
ended September 30, 1996, 19971998 and 1998,2000, respectively. Of these amounts, $56,530, $31,611$0 and $0$5,416
for the years ended September 30, 1996, 19971998 and 1998,2000, respectively, were revenues of
the government operationsGovernment Operations segment. As a resultA minimal amount of legislation that eliminated
certain Social Security Administration program benefits, a contract withthe Company's accounts
receivable were due from the United States Government that contributed substantially allat September 30, 1999 and
a minimal amount of the revenues of
the government operations group for 1996 and 1997revenue was terminated byderived from the United States Government. This contract concludedGovernment during
the second quarter of 1997.year ended September 30, 1999.

At September 30, 19971999 and 1998, $10,4822000, $12,640 and $9,706$16,542 of the Company's
accounts receivable were due from one state government. Revenues from contracts
with this state, principally by the government operationsGovernment Operations segment, were $26,189$30,934,
$49,131 and $30,934$48,899 for the years ended September 30, 19971998, 1999 and 1998.

F-19
75
MAXIMUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)2000,
respectively.

13. BUSINESS SEGMENTS

In October 2000, the Company completed a reorganization of its divisions in
order to better focus and manage the Company's existing and future technology
assets. Accordingly, prior periods have been reclassified to reflect current
period presentation of segment information.

The following table provides certain financial information for each business
segment:

1996 1997 1998 1999 2000
-------- -------- --------

Revenues:
Government Operations....... $ 77,211 $ 97,369Operations......................... $139,263 Consulting.................. 58,462 69,955 94,210$177,428 $221,177
Consulting.................................... 83,017 99,979 119,917
Systems....................................... 21,834 42,133 58,070
-------- -------- --------
$135,673 $167,324 $233,473Total..................................... $244,114 $319,540 $399,164
======== ======== ========

F-18

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. BUSINESS SEGMENTS (CONTINUED)

1998 1999 2000
-------- -------- --------

Gross profit:
Government Operations......................... $ 25,054 $ 34,983 $ 50,983
Consulting.................................... 31,014 41,604 49,982
Systems....................................... 6,643 18,041 25,579
-------- -------- --------
Total..................................... $ 62,711 $ 94,628 $126,544
======== ======== ========

Income from operations:
Government Operations....... $ 4,936 $ 6,164Operations......................... $ 10,642 Consulting.................. 7,404 6,497 12,544$ 16,816 $ 23,299
Consulting.................................... 10,766 19,084 22,299
Systems....................................... 2,723 7,362 5,912
-------- -------- --------
Total..................................... $ 12,34024,131 $ 12,66143,262 $ 23,18651,510
======== ======== ========

Identifiable assets:
Government Operations....... $ 19,369 $ 26,610Operations......................... $ 42,429 Consulting.................. 23,137 28,886 40,701
Corporate................... 6,214 56,001 37,413$ 42,152 $ 72,159
Consulting.................................... 31,489 51,258 60,981
Systems....................................... 5,958 14,076 65,458
Corporate..................................... 46,126 115,550 58,305
-------- -------- --------
$ 48,720 $111,497 $120,543Total..................................... $126,002 $223,036 $256,903
======== ======== ========

Capital expenditures:
Government Operations....... $ 4 $ 2Operations......................... $ -- Consulting.................. 508 790 545
Corporate................... 271 415$ -- $ 18
Consulting.................................... 699 1,108 1,444
Systems....................................... -- 1,307 3,640
Corporate..................................... 461 8,174 2,674
-------- -------- --------
Total..................................... $ 7831,160 $ 1,20710,589 $ 1,0067,776
======== ======== ========

Depreciation and amortization:
Government Operations....... $ 99 $ 204Operations......................... $ 1,518 Consulting.................. 521 643 792
Corporate................... 181 180$ 779 $ 547
Consulting.................................... 863 1,179 1,998
Systems....................................... 12 259 3,100
Corporate..................................... 86 467 648
-------- -------- --------
Total..................................... $ 8012,479 $ 1,0272,684 $ 2,3966,293
======== ======== ========

F-19

MAXIMUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. BUSINESS SEGMENTS (CONTINUED)

SIX MONTHS
ENDED MARCH 31,
-------------------
2000 2001
-------- --------

Revenues:
Government Operations................................... $105,210 $127,069
Consulting.............................................. 54,396 72,302
Systems................................................. 23,578 34,150
-------- --------
Total............................................... $183,184 $233,521
======== ========

Gross Profit:
Government Operations................................... $ 23,514 $ 27,340
Consulting.............................................. 22,182 31,731
Systems................................................. 11,154 15,150
-------- --------
Total............................................... $ 56,850 $ 74,221
======== ========

Income from operations:
Government Operations................................... $ 11,569 $ 12,234
Consulting.............................................. 9,905 16,069
Systems................................................. 4,024 2,907
-------- --------
Total............................................... $ 25,498 $ 31,210
======== ========

14. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S
REPORT--IMPACT OF NEW ACCOUNTING PRONOUNCEMENT

In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements ("SAB 101"). SAB 101 summarizes some of the staff's
interpretations of application of generally accepted accounting principles to
revenue recognition, including presentation in the consolidated financial
statements. The staff provided guidance due, in part, to the large number of
revenue recognition issues that it has encountered in registrant filings.

Under SAB 101, the Company will recognize revenue on many of its
performance-based contracts as billings are rendered to customers, rather than
as costs are incurred. Upon adopting SAB 101, the Company will adjust its
financial statements for the six months ended March 31, 2001 to reflect the
change in revenues and profit resulting from the application of the new
accounting principle. The Company is currently evaluating the impact that
SAB 101 will have on its financial statements and intends to adopt SAB 101 in
the fourth quarter of fiscal 2001.

F-20
76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

, 1998

[MAXIMUS LOGO]
4,000,0003,500,000 SHARES

OFMAXIMUS-REGISTERED TRADEMARK-
HELPING GOVERNMENT SERVE THE PEOPLE-REGISTERED TRADEMARK-

COMMON STOCK

-------------------------------------------

P R O S P E C T U S
-------------------------

DONALDSON, LUFKIN------------------

MERRILL LYNCH & JENRETTE

LEHMAN BROTHERSCO.

BEAR, STEARNS & CO. INC.

LEGG MASON WOOD WALKER

INCORPORATED

, 2001

- --------------------------------------------------------------------------------

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell those securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed such the date hereof.
- --------------------------------------------------------------------------------
77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Expenses to be paid by the Company in connection with thisthe offering of Common Stockthe shares of MAXIMUS common
stock registered under this Registration Statement will be borne by MAXIMUS and
are estimated as follows:

SEC registration fee........................................fee.................................... $ 36,84635,048

New York Stock Exchange listing fee.........................fee..................... $ 9,10014,750

NASD fees and expenses......................................expenses.................................. $ 13,75414,520

Blue Sky fees and expenses..................................expenses.............................. $ 5,000

Printing and engraving expenses............................. $100,000expenses......................... $ 150,000

Accounting fees and expenses................................ $100,000expenses............................ $ 250,000

Legal fees and expenses..................................... $150,000expenses................................. $ 325,000

Transfer Agent and Registrar fees...........................fees....................... $ 10,00015,000

Miscellaneous expenses......................................expenses.................................. $ 75,300
Total....................................................... $500,000190,682
----------

Total................................................... $1,000,000
==========

All of the above figures, except the SEC registration fee, the New York
Stock Exchange listing fee and the NASD fee, are estimates.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Amended and Restated Articles of Incorporation provide that
the Company's directors and officers shall be indemnified to the full extent
required or permitted by the Virginia Stock Corporation Act (the "VSCA"),
including the advance of expenses, and that other employees and agents shall be
indemnified to such extent as shall be authorized by the Board of Directors or
the Bylaws of the Company and as shall be permitted by law.

Sections 13.1-697 and 13.1-702 of the VSCA permit the Company to indemnify
an individual made party to a proceeding because he was a director, officer,
employee or agent of the Company against liability incurred in the proceeding if
(1) he conducted himself in good faith, (2) he believed, in the case of conduct
in his official capacity, that such conduct was in the Company's best interests,
or, in all other cases, that such conduct was at least not opposed to the
Company's best interests, and (3) he had no reasonable cause to believe, in the
case of a criminal proceeding, that his conduct was unlawful; provided, however,
no indemnification shall be permitted (1) in connection with a proceeding by or
in the right of the Company in which the individual is adjudged liable to the
Company, or (2) in connection with any other proceeding charging improper
personal benefit to such individual in which the individual is adjudged liable
on the basis that personal benefit was improperly received by such individual.
Under sections 13.1-698 and 13.1-702 of the VSCA, unless limited by its Articles
of Incorporation, the Company shall indemnify a director or officer who entirely
prevails in the defense of any proceeding to which he was a party because he is
or was a director or officer against reasonable expenses incurred.

The Company carries Directors' and Officers' insurance which covers its
directors and officers against certain liabilities they may incur when acting in
their capacity as directors or officers of the Company.

II-1

ITEM 16. EXHIBITS

See Exhibit Index immediately following the signature page.page hereof.

ITEM 17. UNDERTAKINGS

(a) The Companyundersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3)(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Companyregistrant pursuant to the foregoing
provisions referred to in Item 15 hereof, or
otherwise, the Companyregistrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Companyregistrant of expenses incurred or paid by a director, officer or
controlling person of the Companyregistrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Companyregistrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-2
79
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Citytown of McLean,Reston, Commonwealth of Virginia, on
November 20,
1998.

MAXIMUS, INC.

By: /s/ DAVID V. MASTRAN
--------------------------------------
David V. Mastran,
President

POWER OF ATTORNEY

We, the undersigned officers and directors of the Company, hereby severally
constitute and appoint David V. Mastran, F. Arthur Nerret, David Francis and
Lynnette C. Fallon, and each of them singly, our true and lawful attorneys, with
full power to them in any and all capacitates, to sign any amendments to this
Registration Statement on Form S-3 (including pre-and post-effective amendments
and registration statements filed pursuant to Rule 462(b) under the Securities
Act), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact may do or cause
to be done by virtue hereof.June 1, 2001.

MAXIMUS, INC.

By: /s/ F. ARTHUR NERRET
------------------------------------------
F. Arthur Nerret
CHIEF FINANCIAL OFFICER

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ DAVID V. MASTRAN* President, Chief Executive November 20, 1998
- ---------------------------------------------------June 1, 2001
------------------------------------------- Officer and Director
David V. Mastran (Principal Executive Officer)

/s/ RAYMOND B. RUDDY* Chairman of the Board of November 20, 1998
- ---------------------------------------------------June 1, 2001
------------------------------------------- Directors
Raymond B. Ruddy

/s/ F. ARTHUR NERRET Chief Financial Officer November 20, 1998
- ---------------------------------------------------June 1, 2001
------------------------------------------- (Principal Financial and
F. Arthur Nerret Accounting Officer)

/s/ RUSSELL A. BELIVEAU* Director November 20, 1998
- ---------------------------------------------------June 1, 2001
-------------------------------------------
Russell A. Beliveau

/s/ JESSE BROWN* Director November 20, 1998
- ---------------------------------------------------June 1, 2001
-------------------------------------------
Jesse Brown

* Director June 1, 2001
-------------------------------------------
Lynn P. Davenport

II-3
80

SIGNATURE TITLE DATE
--------- ----- ----

* Director June 1, 2001
-------------------------------------------
Thomas A. Grissen

* Director June 1, 2001
-------------------------------------------
Peter Pond

* Director June 1, 2001
-------------------------------------------
James R. Thompson

*By: /s/ MARGARET CARRERA Vice-Chairwoman of the Board November 20, 1998
- --------------------------------------------------- and Director
Margaret Carrera

/s/ LOUIS E. CHAPPUIE Director November 20, 1998
- ---------------------------------------------------
Louis E. Chappuie

/s/ LYNN P. DAVENPORT Director November 20, 1998
- ---------------------------------------------------
Lynn P. Davenport

/s/ ROBERT J. MUZZIO Director November 20, 1998
- ---------------------------------------------------
Robert J. Muzzio

/s/ SUSAN D. PEPIN Director November 20, 1998
- ---------------------------------------------------
Susan D. Pepin

/s/ PETER B. POND Director November 20, 1998
- ---------------------------------------------------
Peter B. PondF. ARTHUR NERRET
--------------------------------------
F. Arthur Nerret
ATTORNEY-IN-FACT

II-4

81EXHIBIT INDEX

EXHIBIT
NO.NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------

1 Form of Underwriting Agreement by and among the Company, the
Selling Shareholders and Donaldson, LufkinMerrill Lynch & Jenrette
Securities Corporation, Lehman BrothersCo., Bear, Stearns
& Co. Inc. and Legg Mason Wood Walker. Filed herewith.
4.1Walker, Incorporated.

4.1(1) Amended and Restated Articles of Incorporation of the
Company(1)
4.2Company, as amended.

4.2(2) Amended and Restated By-laws of the Company(1)
5Company.

5* Opinion of Palmer & Dodge LLP. Filed herewith.

23.1 Consent of Ernst & Young LLP, independent auditors. Filed
herewith.
23.2 Consent of Grant Thornton LLP, independent auditors. Filed
herewith.
23.3Independent Auditors.

23.2* Consent of Palmer & Dodge LLP. Included in Exhibit 5.

2424* Power of Attorney. Contained on the signature page hereto.

- ------------------------------------------------------

* Previously filed.

(1) Filed as an exhibit to the Company's Quarterly Report on FromForm 10-Q for the
quarter ended June 30, 2000 (File No. 1-12997) on August 14, 2000 and
incorporated herein by reference.

(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 (File No. 1-12997) on August 14, 1997, and
incorporated herein by reference.
II-5