Board Meeting Report - May 6, 2021

Virginia Tech Services, Inc.

Board Meeting Report

May 6, 2021

Virginia Tech Services, Inc., a company founded
on the principle of teamwork and the desire to be

a leader in the college store industry.

TABLE OF

CONTENTS

1. APPROVAL OF MINUTES Page 2

December 10, 2020 Board Meeting Page 3

2. ELECTION OF OFFICERS/SELECTION OF NEW MEMBERS Page 8

Board of Directors Current Roster Page 9
Officer Selection and New Members Page 12

3. AUDIT INFORMATION Page 14

A. Brown Edwards & Company LLP Engagement Letter Page 15
B. Virginia Tech Services, Inc. General Controls Review Page 27
C. Internal Audit - Miscellaneous Income Audit Fiscal Year 2022 Page 29

4. MANAGEMENT REPORT Page 31

A. Financial Summary for the Twelve Months Ending June 30, 2021 Page 32
B. Projected Budget for the Twelve Months Ending June 30, 2022 Page 36
C. Coca-Cola Negotiations Update Page 40
D. Follett Higher Education Group (Follett) Guarantee Negotiations Page 42
E. University Bookstore Roof Replacement Update Page 44
F. Paycheck Protection Program (PPP) Page 53
G. Uses of Virginia Tech Services, Inc. Surplus Funds Page 55
H. Surplus Check to Virginia Tech Foundation, Inc. Page 57
I. Virginia Tech Services, Inc. Conflict of Interest Policy Page 59
J. Virginia Tech Services, Inc. Whistleblower Policy Page 63

5. OLD BUSINESS/NEW BUSINESS Page 65

Discussion Page 66

APPROVAL OF MINUTES 

APPROVAL OF MINUTES

Virginia Tech Services, Inc.
Board Meeting Minutes

December 10, 2020

VIRGINIA TECH SERVICES, INC.
Board of Directors
December 10, 2020

The Board of Directors of Virginia Tech Services, Inc. (VTS) met at 3 p.m. on December
10, 2020, via Zoom. Directors attending were Tim Baird, Sheila Carter-Tod, John Dooley,
Mike Ellerbrock, Ron Fricker, Jr., Ann-Marie Knoblauch, Dwayne Pinkney, and Sarah
Stein. Also attending were: Jeff Earley, Vice Provost for Academic Resource
Management (representing Provost Cyril Clark) and Dave Wilson, Executive Director of
Virginia Tech Services, Inc.

Dr. Knoblauch, chair, called the meeting to order at 3:00 pm and welcomed members of
the board. Chairman Knoblauch welcomed Mr. Wilson to his first meeting of the VTS
board as Executive Director.

Approval of the Agenda:

Dr. Knoblauch mentioned that the board had received the proposed agenda for the
meeting and invited additions to the agenda. The agenda was approved as proposed.

Approval of the Minutes:

Dr. Knoblauch declared a quorum and requested a motion for the approval of the minutes
from the May 6, 2020, board meeting. Dr. Carter-Tod moved approval of the minutes
with Dr. Fricker seconding the motion. The minutes were approved without dissent.

Audit Committee Report:

Dr. Stein, Chair of the Audit Committee, reviewed the written report of audit activities since
the last Board meeting. The Audit Committee met on September 21, 2020, via Zoom with
representatives from Brown Edwards to review and approve the audited financial
statements for the period ending June 30, 2020. The external auditors issued an
unmodified opinion on the financial statements. The external auditors identified one
significant deficiency and two control deficiencies. The deficiencies are related to issues
arising in the prior year’s audit. While there was improvement in the year-end
reconciliation, a significant deficiency continues to exist due to several audit adjustments.
The first control deficiency relates to the small office staff resulting from the outsourcing
arrangement. This creates a lack of segregation of duties and compensating controls.
The auditors recommend that the Corporation continue to evaluate opportunities to
enhance controls when feasible. Another control deficiency involves the fixed asset
records. Management determined that accumulated depreciation was understated by
approximately $67,000. The Corporation cleaned up accounts and outsourced the fixed
asset depreciation schedule to improve the accounting in this area. The auditors
presented the governance letter, which detailed misstatements that were corrected during
the audit. Three uncorrected misstatements were also listed in the governance letter.

These were determined to be immaterial, individually and in the aggregate, to the financial
statements.

The Audit Committee also received from Internal Audit an overview of the 2020 status
reports, including the review of Follett commissions. No findings resulted. Mrs. Bolling
reported that the FY 2021 audit plan will involve a general controls review and a
miscellaneous income audit. The Audit Committee approved the FY2021 plan as
proposed.

The Audit Committee met in Executive Session respectfully with the Auditors and then
Management before adjourning.

Retirement Plan Audit:

Mr. Wilson reviewed the information regarding the audit of the Corporation’s retirement
plan for calendar year 2019. The audit was performed by the external auditors Brown
Edwards & Company, LLP. A total of 235 persons are participants or beneficiaries of
the plan as of December 31, 2019, although not all of the persons had yet earned the
right to receive benefits. Total income for CY19 into the retirement plan was $2.479
million and total expenses (primarily paid benefits to participants and beneficiaries) were
$2.167 million. The ending balance of the total assets of the plan on December 31,
2019, was $15.978 million which was a net increase of $311,609.

Management Report:

Mr. Wilson reviewed the financial activity for the fiscal year through November 30, 2020.
Total projected income through the first five months was $1.113 million. Total projected
expenses were $844,142 leaving a net profit of $269,290. As compared to FY20, the net
profit is $1.04 million less. Looking ahead to the rest of the fiscal year, Mr. Wilson projects
that the Corporation should end the year with net income of $549,542. In light of the
extreme challenges presented by the COVID-19 pandemic, the board acknowledged that
financial position of the Corporation is very positive.

As part of his management report, Mr. Wilson included the following updates and
information:

Follett Higher Education Group, Inc. Contract Update: The impacts on the related
to COVID-19 have been significant. The contractual minimum guarantee has been
waived for the current fiscal year and the proposed renovation of the Dietrick
Convenience Store has been delayed. VTSI entered into an agreement with
Follett to provide payroll assistance to 15 legacy employees who were facing
furlough. Progress has been made on a couple important relationship initiatives
including an agreement among Follett, VTSI, University Advancement, and the VT
Alumni Association to provide an assortment of custom, on-demand alumni
merchandise. The agreement allows Follett access to alumni email addresses for
marketing purposes. Additionally, Follett has agreed to distribute textbook

scholarship gift cards totaling $20,000 in the current academic year to students
with financial need. Follett has agreed to double the amount in FY22.

VTSI Legacy Employee Payroll Assistance: Due to the COVID pandemic, Follett
had to consider reduction in workforce strategies. Fifteen former employees of
VTSI, who had transferred employee status to Follett with the new management
agreement, may have faced furlough, which they wouldn’t have if they had
remained as VTSI employees. VTSI committed up to $150,000 to support the
fifteen legacy employees through July 31, 2020. Total resource commitment was
$118,738.

Follett and VTSI Textbook Scholarship Update: As part of the master agreement
with Follett, Follett agreed to provide $20,000 worth of textbook scholarship gift
cards to students each academic year. The gifts cards will be evenly distributed
($10,000) per Fall and Spring semesters. Because the program wasn’t
implemented in Academic Year 2019-20, Follett will double the amount to $40,000
in Academic Year 2021-22.

Follett Commission Analysis: Due to the COVID-19 related business disruption,
commissions from retail operations have been significantly reduced in FY21 as
compared to the same period in FY20. Total commissions received for the first
four months of the fiscal year were $704,211. The same period in FY20, the
commissions totaled $1,241,553.

Coca-Cola Contract and Commission Analysis: An overview of the continuing
negotiations with Coca-Cola regarding commission revenues was provided. Due
to COVID-19, Coca-Cola has taken the following position:

• It is due a credit from FY20 of $67,123.29 because of campus
closure.

• Sponsorship Fees from Summer and Fall 2020 have been prorated
to $41,136.99. No sponsorship fees will be paid until Spring
semester 2021 at a negotiated rate.

Management is working closely with the university which is also negotiating with
Coca-Cola regarding its contract and commissions with Coca-Cola. The university
has engaged an external consultant (JSB Partners) to assist with the negotiations.
Through October VTSI had received $43,798 in commissions from Coca-Cola.
This compares to $85,118 for the same period in FY20.

Caldwell & Gregory Contract and Commission Analysis: The board received an
update on the status of the performance of the Caldwell and Gregory contract
which is the vendor for on-campus laundry operations. In June, 2020, VTSI and
Caldwell & Gregory agreed to terms extending the contract through August 1,
2020. The terms included the replacement of equipment with high efficiency
washers and dryers, the additional of new technologies to support laundry
operations, $50,000 allowance for future technical improvements, $50,000
allowance for the installation of new network drops. The new equipment was

operations at the beginning of the new academic year. COVID-19 has had an
impact on operations, but Caldwell & Gregory resumed advance payments in
November, 2020. Commissions received through November 2020 totaled
$112,863, as compared to $347,797 for the same period in FY20.

Canteen Contract and Commission Analysis: The board received an update on
the status of the performance of the Canteen contract which is the vendor for on-
campus snacks. There have been no modifications to the contract with
Canteen. Commissions received through November 2020 totaled $18,761 as
compared to $45,191for the same period in FY20.

Capital Projects—University Bookstore Roof Replacement: The roof of
University Bookstore has begun to leak. Since the building is on campus, VT
Facilities has been engaged to determine the best solution(s) for remediation. It
has been determined that the best remediation option is to replace the roof at a
potential cost of between $575,000--$650,000. Management continues to work
with VT Facilities to explore ways to reduce the cost and to move forward with
the project. Dr. Pinkney volunteered to follow-up with VT Facilities to learn more
about the cost of the project.

Uses of VTSI Surplus Funds: VTS continues to provide support for university
programs from surplus funds generated through its business activities. The total
value of contributions since 1968 is $48.41 million. The current cash balance in
the surplus account is $884,243.

Investment Savings: As of November 18, 2020, VTSI had a balance of $5.203
million in its investment account held by the Virginia Tech Foundation. VTSI
projects to transfer $1 million to the Virginia Tech Foundation for its annual
surplus fund distribution.

There being no further business to come before the Board of Directors, the meeting
adjourned at 4:45 pm.

Respectfully submitted,

John E. Dooley
Secretary-Treasurer

ELECTION OF OFFICERS
SELECTION OF NEW MEMBERS

ELECTION OF OFFICERS
SELECTION OF NEW MEMBERS

Board of Directors
Current Roster

BOARD OF DIRECTORS
VIRGINIA TECH SERVICES, INC.

Current List 04/06/2021
Faculty Members May Serve Two Consecutive Terms

Dr. Ann-Marie Knoblauch, Chair Dr. Patti J. Fisher
School of Visual Arts Apparel, Housing, and Resource Management
351D Henderson Hall (0103) 209 Wallace Hall (0410)
195 Alumni Mall 295 West Campus Drive
[email protected] [email protected]
Phone: (540) 231-8415 Phone: (540) 231-7218
First Term: 2017-2020 First Term: 2016-2019
Second Term: 2020-2023 Second Term: 2019-2022

Dr. Sheila Carter-Tod, Vice Chair Dr. Ronald D. Fricker, Jr.
English Department of Statistics
443 Shanks Hall (0112) 406A Hutcheson Hall (0439)
181 Turner St. NW 250 Drillfield Drive
[email protected] [email protected]
Phone: (540) 231-8448 Phone: (540) 231-7754
First Term: 2018-2021 First Term: 2017-2020
Second Term: 2020-2023
Dr. Timothy Baird
Geography Dr. Dwayne L. Pinkney
127 Major Williams Hall (0115) Senior Vice President and Chief Business Officer
220 Stanger Street 210 Burruss Hall (0153)
[email protected] 800 Drillfield Drive
Phone: (540) 231-5116 [email protected]
First Term: 2018-2021 Phone: (540) 231-7912
Ex Officio Member
Dr. Michael Ellerbrock
Agricultural and Applied Economics Dr. Frank X. Shushok
250 Drillfield Drive Vice President for Student Affairs
218 Hutcheson Hall (0401) 112 Burruss Hall (0250)
[email protected] 800 Drillfield Drive
Phone: (540) 231-7722 [email protected]
First Term: 2020-2023 Phone: (540) 231-6272
Ex Officio Member
Dr. Cyril R. Clarke
Executive Vice President and Provost Dr. Sarah E. Stein
Burruss Hall, Suite 210 (0132) Accounting and Information Systems
800 Drillfield Drive 3007 Pamplin Hall (0101)
[email protected] 880 West Campus Drive
Phone: (540) 231-6122 [email protected]
Ex Officio Member Phone: (540) 231-5881
First Term: 2016-2019
Dr. John E. Dooley, Secretary-Treasurer Second Term: 2019-2022
CEO Virginia Tech Foundation, Inc.
902 Prices Fork Road Suite 4000 (0142) Ms. Maria Avagyan
[email protected] Student Member
Phone: (540) 231-5751 2 Pilgrim Lane
Ex Officio Member Medfield, MA 02052
[email protected]
Phone: (804) 334-2693
One Term: 2020-2021

ATTENDING MEETINGS

Mr. David P. Wilson
Executive Director

Virginia Tech Services, Inc.
Volume Two Bookstore (0407)
801 University City Blvd., Suite 22

[email protected]
Phone: (540) 231-9810, ext. 201

COMMITTEES
VIRGINIA TECH SERVICES, INC.

2020-2023

EXECUTIVE COMMITTEE AUDIT COMMITTEE

Dr. Ann-Marie Knoblauch, Chair Dr. Sarah E. Stein
School of Visual Arts Accounting and Information Systems
351D Henderson Hall (0103) 3007 Pamplin Hall (0101)
195 Alumni Mall 880 West Campus Drive
[email protected] [email protected]
Phone: (540) 231-8415 Phone: (540) 231-5881

Dr. Sheila Carter-Tod, Vice Chair Dr. John E. Dooley, Secretary-Treasurer
English Chief Executive Officer
443 Shanks Hall (0112) Virginia Tech Foundation, Inc.
181 Turner St. NW 902 Prices Fork Road Suite 400 (0142)
[email protected] Blacksburg, VA 24061
Phone: (540) 231-8448 [email protected]
Phone: (540) 231-5751
Dr. John E. Dooley, Secretary-Treasurer
Chief Executive Officer
Virginia Tech Foundation, Inc.
902 Prices Fork Road Suite 400 (0142)
Blacksburg, VA 24061
[email protected]
Phone: (540) 231-5751

ELECTION OF OFFICERS
SELECTION OF NEW MEMBERS

Officer Election Form
and

New Member Listing

Election of Officers and New Members

At present the terms of three Board Members will end in May 2021.

The Board Members with terms ending in May 2021 are:

• Dr. Carter-Tod - First term 2018-2021. Dr. Carter-Tod is unavailable to serve a second term.
• Dr. Timothy Baird - First term 2018-2021. Dr. Baird is eligible for a second term.
• Ms. Maria Avagyan - Has served two one-year terms, 2019-2020 and 2020-2021.

Dr. Carter-Tod is also serving as Vice Chair. This means that due to her unavailability, a new Vice Chair
will need to be elected.

The nominating Committee is nominating the following:

Members:

Name Length of Term

1.
2.
3. (Student)

Officers: Name Length of Term
Position
1. Vice Chair

AUDIT INFORMATION 

AUDIT INFORMATION

Brown Edwards & Company LLP
Engagement Letter

April 20, 2021

To the Board of Directors and
Management of

Virginia Tech Services, Inc.
115 Kent Street
Blacksburg, Virginia 24061

Dear Board of Directors and Management:

We are pleased to confirm our understanding of the services we are to provide for Virginia Tech Services,
Inc. (“Services”) for the year ended June 30, 2021.

We will audit the financial statements of Services, which comprise the statement of financial position as
of June 30, 2021, and the related statements of activities and cash flows for the year then ended, and the
related notes to the financial statements.

Audit Objective

The objective of our audit is the expression of an opinion about whether your financial statements are
fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America and will include tests of your accounting records and other procedures we consider necessary
to enable us to express such an opinion. We will issue a written report upon completion of our audit of
Services’ financial statements. Our report will be addressed to the Board of Directors of Services. We
cannot provide assurance that an unmodified opinion will be expressed. Circumstances may arise in which
it is necessary for us to modify our opinion or add an emphasis-of-matter or other-matter paragraph. If
our opinion is other than unmodified, we will discuss the reasons with you in advance. If, for any reason,
we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline
to express an opinion or withdraw from this engagement.

Audit Procedures

Our procedures will include tests of documentary evidence supporting the transactions recorded in the
accounts and, as deemed necessary, tests of the physical existence of inventories, and direct confirmation
of receivables and certain assets and liabilities by correspondence with selected individuals, funding
sources, creditors, and financial institutions. We will also request written representations from Services’
attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the
conclusion of our audit, we will require certain written representations from you about the financial
statements and related matters.

Your Success is Our Focus

319 McClanahan Street, S.W. • Roanoke, Virginia 24014-7705 • 540-345-0936 • Fax: 540-342-6181 • www.BEcpas.com

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 2

Audit Procedures (Continued)

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; therefore, our audit will involve judgment about the number of transactions to be
examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements. We will plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations
of laws or governmental regulations that are attributable to Services or to acts by management or
employees acting on behalf of Services.

Because of the inherent limitations of an audit, combined with the inherent limitations of internal control,
and because we will not perform a detailed examination of all transactions, there is a risk that material
misstatements may exist and not be detected by us, even though the audit is properly planned and
performed in accordance with U.S. generally accepted auditing standards. In addition, an audit is not
designed to detect immaterial misstatements or violations of laws or governmental regulations that do not
have a direct and material effect on the financial statements. However, we will inform the appropriate
level of management of any material errors, any fraudulent financial reporting, or misappropriation of
assets that comes to our attention. We will also inform the appropriate level of management of any
violations of laws or governmental regulations that come to our attention, unless clearly inconsequential.
Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later
periods for which we are not engaged as auditors.

Our audit will include obtaining an understanding of Services and its environment, including internal
control, sufficient to assess the risks of material misstatement of the financial statements and to design
the nature, timing, and extent of further audit procedures. An audit is not designed to provide assurance
on internal control or to identify deficiencies in internal control. Accordingly, we will express no such
opinion. However, during the audit, we will communicate to you and those charged with governance
internal control related matters that are required to be communicated under professional standards.

We may, from time to time and depending on the circumstances, use third-party service providers in
serving your account. This would include our tax preparation software and, if needed, services provided
by other firms through our membership in the BDO Alliance USA. The BDO Alliance USA is among the
industry’s largest associations of accounting and professional service firms. We may share confidential
information about you with these service providers, but remain committed to maintaining the
confidentiality and security of your information. Accordingly, we maintain internal policies, procedures,
and safeguards to protect the confidentiality of your personal information. In addition, we will secure
confidentiality agreements with all service providers to maintain the confidentiality of your information
and we will take reasonable precautions to determine that they have appropriate procedures in place to
prevent the unauthorized release of your confidential information to others. In the event that we are unable
to secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to the
sharing of your confidential information with the third-party service provider. Furthermore, we will
remain responsible for the work provided by any such third-party service providers.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 3

Other Services

We will assist in the preparation of the financial statements of Services in conformity with U.S. generally
accepted accounting principles based on information provided by you. We will also prepare Services’
federal informational returns in accordance with our separately issued tax engagement letter. We also
periodically assist Services’ management with fixed asset reporting.

We will perform the services in accordance with applicable professional standards including the Statement
on Standards for Tax Services issued by the American Institute of Certified Public Accountants. The other
services are limited to the financial statement preparation, as previously defined, certain fixed asset
services provided, and tax services as communicated in a separate tax engagement letter. We, in our sole
professional judgment, reserve the right to refuse to perform any procedure or take any action that could
be construed as assuming management responsibilities. We will advise management with regard to certain
matters, but management must make all decisions with regard to those matters.

Management Responsibilities

You are responsible for designing, implementing, and maintaining internal controls relevant to the
preparation and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error, including monitoring ongoing activities; for the selection and application of
accounting principles; and for the preparation and fair presentation of the financial statements in
conformity with U.S. generally accepted accounting principles. You are also responsible for making all
financial records and related information available to us and for the accuracy and completeness of that
information. You are also responsible for providing us with (1) access to all information of which you are
aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional
information that we may request for the purpose of the audit, and (3) unrestricted access to persons within
the organization from whom we determine it necessary to obtain audit evidence.

Your responsibilities include adjusting the financial statements to correct material misstatements and
confirming to us in the management representation letter that the effects of any uncorrected misstatements
aggregated by us during the current engagement and pertaining to the latest period presented are
immaterial, both individually and in the aggregate, to the financial statements taken as a whole.

You are responsible for the design and implementation of programs and controls to prevent and detect
fraud, and for informing us about all known or suspected fraud affecting Services involving
(1) management, (2) employees who have significant roles in internal control, and (3) others where the
fraud could have a material effect on the financial statements. Your responsibilities include informing us
of your knowledge of any allegations of fraud or suspected fraud affecting Services received in
communications from employees, former employees, grantors, regulators, or others. In addition, you are
responsible for identifying and ensuring Services complies with applicable laws and regulations.

You agree to assume all management responsibilities for financial statement preparation services, tax
services, and any other nonattest services; oversee the services by designating an individual, preferably
from senior management, with suitable skill, knowledge, or experience; evaluate the adequacy and results
of the services; and accept responsibility for them.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 4

COVID-19

Notwithstanding the unprecedented circumstances resulting from the COVID-19 outbreak, we continue
to have a professional obligation to gather sufficient appropriate audit evidence in support of your
[consolidated] financial statements. Travel restrictions, actual or suspected infections, work from home
requirements, changes – such as work force reductions - made to accommodate the current business
environments, or other similar matters may result in delays in your employees’ ability to provide us the
necessary audit evidence on a timely basis or at all. Similarly, such matters may impact our own ability
to collect or appropriately assess necessary audit evidence on a timely basis or at all.

Should such events occur, you and Brown Edwards will make good faith efforts to complete alternative
procedures to gather and assess necessary audit evidence. Such procedures might include, but not be
limited to, our respective employees working from home, transferring more audit information via
electronic modes (preferably through our secure exchange portal), and meeting virtually rather than
in-person. As to audit evidence transferred via electronic modes, you are responsible to ensure that such
evidence is authentic, complete, and accurate for the purposes it is meant to serve. Brown Edwards will
perform, as it deems necessary, incremental procedures to validate the authenticity, completeness, and
accuracy of such audit evidence.

Expected Form and Content of the Auditor’s Report

In particular, impacts from the COVID-19 outbreak may result in our inability to properly complete the
engagement or require us to include such an explanatory or emphasis paragraph in our auditor’s report.

Availability of Records and Personnel

Should impacts from the COVID-19 outbreak impede the ability to provide full cooperation and access,
you will instead work with us in good faith to make alternative arrangements to accomplish the objectives
of our audit.

Engagement Administration, Fees, and Other

We understand that your employees will prepare all cash, accounts receivable, and other confirmations
we request and will locate any documents selected by us for testing.

Christopher Banta is the engagement partner and is responsible for supervising the engagement and
signing the report or authorizing another individual to sign it. We expect to begin our audit at a mutually
agreeable time. We expect to begin our services upon our initiation of planning procedures and will
conclude upon delivery of reports and other communications required by professional standards.

Our fees are based on the degree of responsibility involved and the skill required. You will also be billed
for travel and other out-of-pocket expenses. Our fee, excluding out-of-pocket expenses, for the year
ending June 30, 2021 will not exceed $36,000 and $6,300 for the financial statement audit and tax
preparation services, respectively.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 5

Engagement Administration, Fees, and Other (Continued)

It is our understanding that (1) the overall condition of the financial and accounting records is excellent
(requires few or no adjusting journal entries); (2) we will receive full support from your personnel
necessary for the preparation of all items discussed or as outlined in our client assistance list, to be
provided; and (3) the preparation of items in our client assistance list will be completed prior to our arrival
to begin fieldwork, if applicable. If for some reason your personnel are unable to provide the contemplated
assistance, or should we encounter unexpected circumstances that will require spending more time than
presently anticipated, we will bring this to your attention and discuss the additional cost during the normal
billing process. A change in the scope of our services (e.g., due to changes to regulations or professional
standards, and as applicable to you, loss of key personnel, financial and/or accounting irregularities,
unexpected and material litigation, acquisitions, etc.) may also require additional time and, therefore, add
to the cost of the engagement.

We assure you that we will make every attempt to hold our time to a minimum, commensurate with the
work involved. Other services, such as research or consultation, would be an additional cost.

Interim billings will be submitted as work progresses and as expenses are incurred, and are payable upon
presentation of our invoices. A service charge of one and one-half percent (1-1/2%) per month will be
added to accounts receivable balances remaining unpaid 30 days after the original invoice date.

In accordance with firm policy, work may be suspended if your account becomes significantly overdue
and will not be resumed until your account is paid in full. If we elect to terminate our services for
nonpayment, you will be obligated to compensate us for all time expended and to reimburse us for all
out-of-pocket expenditures through the date of termination. In addition, if our work is suspended or
terminated, you agree that we will not be responsible for your failure to meet governmental and other
deadlines, for any penalties or interest that may be assessed against you resulting from your failure to
meet such deadlines, and for any other damages (including but not limited to consequential, indirect, lost
profits, or punitive damages) incurred as a result of the suspension or termination of our services.

In the event that Brown Edwards is required to respond to a subpoena, court order, or any other legal
process for the production of documents and/or testimony relative to information we obtained and/or
prepared during the course of this engagement, you agree to compensate Brown Edwards at our standard
hourly rates for the time we expend in connection with such response, and to reimburse Brown Edwards
for all of our out-of-pocket expenses incurred in that regard.

Professional standards require that we perform certain additional procedures, on current and previous
years’ engagements, whenever a partner or professional employee leaves the firm and is subsequently
employed by or associated with a client in a key position. Accordingly, you agree to compensate us for
any additional costs incurred as a result of your employment of any of our partners or professional
employees. In addition, to ensure that Brown Edwards’ independence is not impaired under the AICPA
Code of Professional Conduct, you agree to inform the engagement partner before entering into any
substantive employment discussions with any of our personnel.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 6

Engagement Administration, Fees, and Other (Continued)

You acknowledge that we devote a substantial amount of time and resources to the hiring, retention, and
training of employees engaged in the provision of services to our clients. Accordingly, we ask that you
agree to the following. In the event that any of our employees accepts a position of employment with the
Services, or any of its related parties at any time while we are performing services for you or within one
year thereafter, you agree to compensate us in the form of a placement fee equal to 35% of the employee’s
annual compensation in effect on the date employment was contracted. This fee will be payable when the
employee accepts such a position. If you need a permanent employee and would like assistance in locating
this type of individual, we can provide personnel search assistance to help you locate and hire a qualified
professional.

In the interest of facilitating our services to your organization, we may communicate by facsimile
transmission, send data over the Internet, or allow access to data through third-party vendors’ secured
portals or clouds. Electronic data that is confidential to your organization may be transmitted or stored
using these methods. We may use third-party service providers to store or transmit this data, such as
providers of tax return preparation software. In using these data communication and storage methods, our
firm employs measures designed to maintain data security. We use reasonable efforts to keep such
communications and data access secure in accordance with our obligations under applicable laws and
professional standards. We also require all of our third-party vendors to do the same.

You recognize and accept that we have no control over the unauthorized interception or breach of any
communications or data once it has been sent or has been subject to unauthorized access, notwithstanding
all reasonable security measures employed by us or our third-party vendors. You consent to our use of
these electronic devices and applications and submission of confidential client information to third-party
service providers during this engagement.

If any dispute arises among the parties hereto, the parties agree to first try in good faith to settle the dispute
by mediation administered by the McCammon Group under its applicable rules for resolving professional
related services disputes before resorting to litigation. The parties agree that mediation will take place
within 60 days from the date notice is first given from one party to the other as to the existence of a dispute
and the demand to mediate. Should the parties be unable to agree upon a mediator, said mediator will be
selected by the McCammon Group. Cost of any mediation proceeding shall be shared equally by all parties.
The submission of any dispute to mediation or arbitration shall not be deemed to waive, and shall not be
deemed to toll, any applicable statute of limitations.

Disputes arising between the accountant and the client over fees should be settled between the parties. If
not settled, the client and the accountant agree to submission for resolution by arbitration in accordance
with the applicable arbitration rules of the McCammon Group, and such arbitration shall be binding and
final. Should the parties be unable to agree upon an arbitrator, said arbitrator will be selected by the
McCammon Group. The accountant and the client acknowledge that in agreeing to arbitration, each forfeit
the right to have the dispute settled in a court of law.

Should any litigation be instituted by either party to this agreement, both parties agree to submit to the
jurisdiction of the Roanoke Virginia Circuit Court for any disputes arising under this contract.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 7

Engagement Administration, Fees, and Other (Continued)

Any claim by you for damages arising from Brown Edwards’ performance of its services under this
agreement shall be commenced within one year from when you knew, or should have known, of Brown
Edwards’ breach of the standard of care, but in no event shall such claim be brought more than three years
after the date of delivery of the completed report.

In providing our services, we are required by law and our professional standards to maintain our
independence from the organization. We take this mandate very seriously and thus guard against
impermissible relationships, which may impair the very independence, which you and the users of our
report require. As such, you should not place upon us special confidence that in the performance of our
services we will act solely to your interest. Therefore, you acknowledge and agree we are not in a
fiduciary relationship with you and we have no fiduciary responsibilities to you in the performance of our
services described herein.

Because of the importance of management’s written or verbal representations to an effective audit, you
agree to release and indemnify Brown, Edwards & Company, L.L.P. and its personnel from any liability
and costs relating to our services under this letter attributable to any knowing misrepresentations by
management.

You represent and warrant to us that you do not “participate in the Cannabis market”, which for the
purposes of this Engagement Letter is defined as: a) selling, producing, transporting, storing, destroying,
or otherwise possessing Cannabis (in any form and for any duration), regardless of whether such activity
is permitted under State law; or b) directly or knowingly providing services, products, or finished goods
to any person or entity that pursuant to a license under state law or otherwise sells, produces, transports,
stores, destroys, or possesses for related purposes Cannabis. As used in this Engagement Letter, the term
“Cannabis” refers to the Schedule I substance as listed under the federal Controlled Substances Act (and
any derivative therefrom) and commonly referred to as “cannabis”, “marijuana”, “marihuana”, or similar
names. (OR if Company is in a state where Cannabis is legal: As used in this Engagement Letter, the term
“Cannabis” has the same meaning as provided by statute in the State of Virginia, and incorporates
references to cannabis, marijuana, marihuana, or similar terminology.)

Should we learn of any information from any source (public or non-public) that your company participates
in the Cannabis market, regardless of whether such activity is permitted under State law, we reserve the
right to terminate this agreement (“Special Termination”) immediately without recourse or liability for
any loss which may be suffered by your company as a result of such termination. Upon termination of
this agreement, our engagement with your company shall be deemed complete, and we shall have no
further obligation to deliver any items not previously provided, whether in final or draft form. We shall
bill and your company shall be obligated to pay for any outstanding amounts due (including reasonable
out-of-pocket costs) for services rendered under the terms of this Engagement Letter up to the date of
termination as shall be provided for in a final invoice, and such fees and costs shall become immediately
due and payable. (The following sentences are to be added for private companies only (1), do not include
in PCAOB client letters) Your company shall also defend, indemnify, and hold harmless Brown Edwards
against any claims by third parties for loss, claims, damages, and liabilities related to termination under
this Special Termination provision. This termination provision shall have no effect on any service or
deliverable which may be covered under the terms of a separately executed engagement letter.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 8

Engagement Administration, Fees, and Other (Continued)

We shall have the right to provide our workpaper files, which include documentation about your
organization, to other accounting firms who we may consult with or contract certain services from without
your prior consent. These parties are required to abide by the terms of this agreement and comply with
our policies in maintaining the confidentiality and security of information that we provide to them.

If circumstances occur related to the condition of your records, the availability of sufficient, appropriate
audit evidence, or the existence of a significant risk of material misstatement of the financial statements
caused by error, fraudulent financial reporting, or misappropriation of assets, which in our professional
judgment prevents us from completing the audit or forming an opinion on the financial statements, we
retain the right to take any course of action permitted by professional standards, including declining to
express an opinion or issue a report, or withdrawing from the engagement.

Neither of us shall be in breach of our responsibilities under this engagement letter nor shall either of us
incur any liability to the other as a result of Brown Edwards or the Company being unable to comply with
our respective obligations as a result of a Force Majeure Event.

“Force Majeure Event” means any circumstance not within the reasonable control of the affected party,
which prevents or limits the affected party in meeting its obligations under this engagement letter,
including, any fire, explosion, accident, flood, drought or catastrophe of nature, pandemic, epidemic, other
outbreak of disease, or a material increase in the severity of the same, war, riot, act of terrorism or civil
unrest, act of nature or of public enemy, and/or act, order or mandate of any federal, state, or local
governmental body or figure, which could not have been avoided by the reasonable care of the affected
party.

The occurrence of a Force Majeure Event shall extend the term of delivery of the services by the number
of days the event persists. In the event such event persists for more than 30 calendar days, each of us will
be entitled to terminate this agreement with immediate effect and without incurring any liability towards
the other, except for those rights and liabilities that accrued prior to the date of termination, provided a
written termination notice is sent.

The COVID-19 outbreak has caused unprecedented circumstances including travel restrictions, actual or
suspected infections, work from home requirements, changes – such as workforce reductions – made to
accommodate the current business environments, or other related matters that may result in delays in your
employees’ ability to provide us with the information we need on a timely basis, or at all, to perform the
services outlined in this agreement. You acknowledge we will not incur any liability to your Company as
a result of COVID-19 related issues.

Board of Directors and Management
Virginia Tech Services, Inc.
April 20, 2021
Page 9

***************

We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the
significant terms of our engagement. If you have any questions, please let us know. If you agree with the
terms of our engagement as described in this letter, please sign the enclosed copy and return it to us.

Sincerely,

BROWN, EDWARDS & COMPANY, L.L.P.

Christopher Banta, Engagement Partner

CAB:lcl
Attachment

RESPONSE:
This letter correctly sets forth the understanding of Virginia Tech Services, Inc.

Management signature:

Title:

Date:

Note: Services’ independent auditors are required to be engaged by those appropriately charged with governance.
The signature above is confirmation of and represents 1) evidence by those charged with governance of the
agreement with the terms of the engagement as set forth herein, 2) management’s acknowledgement of its
responsibilities as set forth herein, and 3) that Services has a reasonable process in place to ensure these
representations are completely understood by all parties. Services, not Brown Edwards, is responsible for ensuring
all appropriate parties have read this engagement letter, understand their respective responsibilities, and accept
those responsibilities.

Exhibit 1 to Engagement Letter

This attachment is intended to communicate certain matters related to the planned scope and conduct of
our audit of the financial statements described in the accompanying engagement agreement.

Communication

Effective two-way communication between our audit team and those charged with governance (herein
referred to as “you” or “your”) is important to understanding matters related to the audit and in developing
a constructive working relationship.

We will discuss with you your oversight of the effectiveness of internal control and any areas where you
request additional procedures to be undertaken. We expect that you will timely communicate with us any
matters you consider relevant to the audit. Such matters might include information that may significantly
affect the nature, timing, and extent of audit procedures, your suspicion or detection of fraud, or any
concerns you may have about the integrity or competence of your senior management.

We will timely communicate to you any fraud involving senior management and other fraud that causes
a material misstatement of the financial statements, illegal acts that come to our attention (unless they are
clearly inconsequential), and disagreements with management and other serious difficulties encountered
in performing the audit. We will also communicate to you (and to management) any significant
deficiencies or material weaknesses in internal control that become known to us during the course of the
audit. Other matters arising from the audit that are, in our professional judgment, significant and relevant
to you in your oversight of the financial reporting process will be communicated to you in writing after
the audit.

Independence

Our independence policies and procedures are designed to provide reasonable assurance that our firm and
its personnel comply with applicable professional independence standards. Our policies address financial
interests, business and family relationships, and non-audit services that may be thought to bear on
independence. We are not aware of any circumstances that have impaired our independence with respect
to our engagement as described in the accompanying engagement agreement.

The Audit Planning Process

Our audit approach places a strong emphasis on obtaining an understanding of how your business
functions. This enables us to identify key audit components and tailor our procedures to the unique aspects
of your business. The development of a specific audit plan will begin by meeting with you (and with
management) to obtain an understanding of business objectives, strategies, risks, and performance.

We will obtain an understanding of internal control to assess the impact of internal control on determining
the nature, timing, and extent of audit procedures, and we will establish an overall materiality limit for
audit purposes. We will conduct formal discussions among engagement team members to consider how
and where your financial statements might be susceptible to material misstatement due to fraud or error.

The Audit Planning Process (Continued)

We will use this knowledge and understanding, together with other factors, to first assess the risk that
errors or fraud might cause a material misstatement at the financial statement level. The assessment of
the risks of material misstatement at the financial statement level provides us with parameters within
which to design the audit procedures for specific account balances and classes of transactions. Our risk
assessment process at the account-balance or class-of-transactions level consists of:

 An assessment of inherent risk (the susceptibility of an assertion relating to an
account balance or class of transactions to a material misstatement, assuming there
are no related controls); and

 An evaluation of the design effectiveness of internal control over financial reporting
and our assessment of control risk (the risk that a material misstatement could occur
in an assertion and not be prevented or detected on a timely basis by the Company’s
internal control).

We will then determine the nature, timing, and extent of test of controls and substantive procedures
necessary given the risks identified and the controls as we understand them.

An audit is not designed to provide assurance on internal control or to identify significant deficiencies or
material weaknesses. Our review and understanding of Services’ internal control is not undertaken for
the purpose of expressing an opinion on the effectiveness of internal control. Management is responsible
for designing and maintaining an effective internal control environment.

The Concept of Materiality in Planning and Executing the Audit

In planning the audit, the materiality limit is viewed as the maximum aggregate amount of pretax
misstatements, which, if detected and not corrected, would not cause us to modify our opinion on the
financial statements. The materiality limit is an allowance not only for misstatements that will be detected
and not corrected but also for misstatements that may not be detected by the audit. Our assessment of
materiality throughout the audit will be based on both quantitative and qualitative considerations. Because
of the interaction of quantitative and qualitative considerations, misstatements of a relatively small
amount could have a material effect on the current financial statements as well as financial statements of
future periods. At the end of the audit, we will inform you of all individual unrecorded misstatements
aggregated by us in connection with our evaluation of our audit test results.

AUDIT INFORMATION 

Virginia Tech Services, Inc.  
General Controls Review 

Fiscal Year 2020‐2021 

RELATED CORPORATIONS OF VIRGINIA TECH

CORPORATE INTERNAL AUDIT
2000 KRAFT DRIVE, SUITE 1125 (0456)

BLACKSBURG, VIRGINIA 24061
(540) 231-8711

MEMORANDUM

DATE: March 2, 2021

TO: Dave Wilson

FROM: Karen Bolling, Director of Internal Audit

SUBJECT: VTS General Controls Review

In accordance with the fiscal year 2021 Corporate Internal Audit Plan, approved by Virginia
Tech Services’ (VTS’) Audit Committee, Corporate Internal Audit performed a general controls
review of VTS.

Our procedures included reviewing the Policies and Procedures Manual for Virginia Tech
Services, Inc., reviewing control questionnaires completed by VTS personnel, and having
discussions with VTS personnel.

While performing testing procedures we noted that the manual referred to former employees that
had recently retired from the corporation, as well as former positions that were eliminated as part
of the corporate reorganization. Changes to the manual were made by appropriate personnel to
reflect the current practice of the corporation.

While reviewing the control questionnaires completed by VTS employees, and discussing the
questionnaires with the employees, we noted there were no policies and procedures regarding the
petty cash fund maintained by VTS. VTS personnel immediately developed procedures
regarding petty cash and updated the manual to reflect these new procedures.

Please let me know if you have any questions. We commend management and would like to
acknowledge the assistance and cooperation extended by VTS personnel during this project.

c: John Dooley
Sarah Stein
Robin Meade
Brown Edwards

AUDIT INFORMATION

Internal Audit
Miscellaneous Income Audit

Fiscal Year 2021-2022

Spring Board Meeting

May 6, 2021

Internal Audit Information Sheet

Information Provided by Karen Bolling

Good morning. I would like to begin the VTS Miscellaneous Income Audit approved as part of the FY
2021 VTS Audit Plan. I will be conducting the opening conference through email. Below are the
objectives and information regarding the Miscellaneous Income Audit. I am including the objectives of
the audit, the total hours allotted for the audit, the expected timeline for completion, and the time
period to be audited.

Miscellaneous Income Audit

• Preliminary Audit Objectives
o To obtain the documentation necessary to understand VTS’ miscellaneous income
process;
o To evaluate the adequacy of VTS’ documented policies and procedures for the
miscellaneous income process; and
o To evaluate VTS’ processing of miscellaneous income transactions, including
identification of miscellaneous income sources; recording of miscellaneous income
transactions; and ensuring that vendors are complying with all contract requirements
regarding minimum payments, payment dates, and commission payments.

• Audit Period
o July 1, 2019, to the date of audit

• Audit Budget – 150 Hours – expected completion May 2021

MANAGEMENT REPORT 

MANAGEMENT REPORT

Financial Summary
for the Twelve Months
Ending June 30, 2021

Actual Actual Actual Actual Actual
Jul-20 Aug-20 Sep-20 Oct-20 Nov-20

Ordinary Income/Expense 15,299 23,636 30,637 39,417 26,278
Expense: 2,901 2,928 3,808 4,890 3,260
500-001 · Personnel Expenses 1,721 1,727 2,316 2,917 1,944
500-000 · Salaried & Classified Expense
510-000 · Retirement Contributions - - - - -
520-000 · FICA Expense 147 147 670 145 153
530-000 · State Unempl. Insurance Expense 116 116 722 116 116
540-000 · Life Insurance Expense (1,716) 3,411 4,864 3,665 4,264
550-000 · Disability Insurance Expense - - - - -
560-000 · Health Insurance Expense - - - - -
570-000 · Workman's Compensation
580-000 · Leave Balance Expense 18,468 31,965 43,017 51,150 36,015

Total 500-001 · Personnel Expenses

600-001 · Other Expenses
600-000 · Utilities Expense
610-000 · Repairs & Maintenance Expense 5,364 5,764 6,521 4,439 7,154
620-000 · Depreciation Expense 6,693 10,533 3,621 4,823 2,528
630-000 · Vehicle Expense 15,521 15,521 15,430 15,377 15,377
640-000 · Rent Expense
650-000 · Telephone Expense 123 - - - -
660-000 · Insurance Expense 74,038 74,038 74,038 73,104 74,133
670-000 · Taxes & Licenses 5,225 5,226 5,228 23,067 (11,059)
680-000 · Supplies Expense 37,560
690-000 · Dues & Subscriptions - - - -
700-000 · Advertising Expense 145 - - 939 -
720-000 · Education 338 98 171 69 432
740-000 · Cash Long/ Short 2,529 69 69 191 1,061
750-000 · Credit Card Discount Fee - - - - -
760-000 · Miscellaneous Expense - - - - -
- - - - -
760-970 · Wells Fargo Service Fee - - - - -
· Coupon 7,065 5,438 867 366 272
305 445 454 462 441
780-000 · Travel & Entertainment Expense - - - - -
782-000 · Corp Food & Entertainment - - - - -
- - - - -
· Freight In - - - - -
· Freight Out - - - - -
810-000 · Royalty - - - - -
810-000 · Postage Expense - 63 - 110
820-000 · Professional Fees Expense 2,003 35,753 23,728 8
830-000 · Interest - - - 10,804 3
840-000 · Late Payment - - - -
- - 754 - -
850-000 · Hokie Stone Expense - 1,269
156,909 152,948 130,881 59
Total 600-001 · Other Expenses 91,721
175,377 184,913 173,898 133,708
Total Expense 127,736
(175,377) (184,913) (173,898) 184,858
Net Ordinary Income (127,736)
(184,858)

Other Income/Expense 3,215 3,357 13,508 13,100 10,618
Other Income 5,833 5,833 5,833 5,833 5,833
950-920 Other Income - Soft Drink Vending 112,863 31,667
950-921 Other Income - Snack Vending Canteen 1,482 - - - (152)
950-922 Other Income - Laundry Vending (126) (137) (106)
950-923 Other Income - CRC Vending Kwik Kafe - 800 400 - 400
950-951 Other Income - ATM Space 300 1,478 621 - 24
950-953 Other Income - Miscellaneous - - - 950 -
950-954 Other Income - Hokie Stone - - - - -
950-955 Other Income - Bad Debt Recovery - - - - -
960-000 Interest Income - Checking Acct. 10,693 6,178 3,337 1,613 (42)
961-000 Interest Income - Investments 170,886 345,346 101,229 86,749 80,081
970-000 Commissions - Follett - 183 21,865 - 12,554
972-000 Other Income - Reimbursements 8,333 8,333 8,333 8,333 8,333
974-000 Execution Payment - Follett
313,605 371,382 154,989 116,472 149,317
Total Other Income
138,228 186,469 (18,909) (68,386) 21,581
Net Income

Actual Actual Actual Projected Projected Projected Projected Actual/Projected
Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 July '20 - June '21

26,809 26,278 26,278 26,278 39,417 26,278 27,174 333,779
3,260 3,260 3,260 3,260 4,890 3,260 3,366 42,343
1,995 1,957 1,997 1,957 3,015 2,010 2,079 25,635

- 26 10 70 6 4 4 120
153 153 153 152 142 95 98 2,208
116 116 116 116 271 181 187 2,289
4,932 3,547 4,078 3,547 4,778 3,185 3,185 41,740
- - - - 67 44 44
- - - - 104 69 69 155
242
37,265 35,337 35,892 35,380 52,690 35,126 36,206
448,511
6,301 6,590 8,608 6,688 3,350 4,338 4,279
3,942 2,005 8,736 3,353 5,349 5,349 5,349 69,396
15,377 15,377 15,377 15,377 15,362 15,338 15,338 62,281
184,772
720 20 253 - 308 308 308 2,040
74,133 74,133 73,452 69,273 73,808 73,808 73,808 881,765
) 5,687 5,679 3,179 4,178 4,177 4,500 4,500 59,587
37,560
- - - - - - - 3,369
- 839 - - 482 482 482 3,245
366 225 194 449 449 449 5,749
121 249 36 5 345 345 345
- - - 389 - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
194 831 322 - 1,000 1,000 1,000 18,911
432 268 288 556 300 300 300 4,286
- - - 291 - - - -
- 12 - - - - - 12
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - 51 51 51 412
2 6 70 7,306 7,306 7,306 103,935
3 378 4,034 5,311 - - - -
- - - - - - -
- - - - - - - 8,977
826 4,590 - 1,050
429 1,446,297

108,102 111,198 114,914 106,541 112,287 113,574 113,515 1,894,808

145,367 146,535 150,806 141,921 164,977 148,700 149,721 (1,894,808)

) (145,367) (146,535) (150,806) (141,921) (164,977) (148,700) (149,721)

7,086 8,981 10,791 14,420 11,000 9,000 225,000 330,076
5,833 5,833 69,996
5,833 5,833 5,833 5,833 5,833 31,666 31,666 366,196
-
31,667 31,667 31,667 31,667 31,666 - 5,200 346
400 500 9,600
) (152) (146) (169) (148) - 500 - 5,064
- - 2,340
400 400 400 800 400 - -
- 3,000 -
- - 1,141 - 500 3,000 64,491 -
93,864 5,837 35,271
- - - 1,390 - 5,837 8,333 1,341,223
8,333 74,326
----- 349,860 99,996
158,433
----- 200,139 2,334,434
9,733
) 3,673 3,529 1,506 (4,216) 3,000 439,626

59,657 128,623 49,317 60,018 100,962

11,407 5,979 4,827 - 5,837

8,333 8,333 8,333 8,333 8,333

127,904 193,199 113,646 118,097 167,531

(17,463) 46,664 (37,160) (23,824) 2,554

Projected Actual Comparison
July '20 - June '21 July '19 - June '20
(192,100)
Ordinary Income/Expense 333,779 525,879 (22,922)
Expense: 42,343 65,265 (17,031)
500-001 · Personnel Expenses 25,635 42,666
500-000 · Salaried & Classified Expense 29
510-000 · Retirement Contributions 120 91 418
520-000 · FICA Expense 2,208 1,790 121
530-000 · State Unempl. Insurance Expense 2,289 2,168 (133,194)
540-000 · Life Insurance Expense 41,740 174,934 155
550-000 · Disability Insurance Expense 10,037
560-000 · Health Insurance Expense 155 -
570-000 · Workman's Compensation 242 (9,795) (354,487)
580-000 · Leave Balance Expense
448,511 802,998 (43,122)
Total 500-001 · Personnel Expenses 2,620
69,396 112,518 1,356
600-001 · Other Expenses 62,281 59,661 (596)
600-000 · Utilities Expense 184,772 183,416 8,244
610-000 · Repairs & Maintenance Expense 2,040 2,636 (9,973)
620-000 · Depreciation Expense 881,765 873,521 (2,084)
630-000 · Vehicle Expense 59,587 69,560
640-000 · Rent Expense 37,560 39,644 (48,384)
650-000 · Telephone Expense 3,369 51,753 (2,422)
660-000 · Insurance Expense 3,245 5,667 1,867
670-000 · Taxes & Licenses 5,749 3,882 (2,447)
680-000 · Supplies Expense 2,447
690-000 · Dues & Subscriptions - 0
700-000 · Advertising Expense - - 0
720-000 · Education - - (506)
740-000 · Cash Long/ Short - 506 (124,836)
750-000 · Credit Card Discount Fee 18,911 143,747 (1,335)
760-000 · Miscellaneous Expense 4,286 5,621 0
- - (819)
760-970 · Wells Fargo Service Fee 12 831 (1,550)
· Coupon - 1,550 0
- - 0
780-000 · Travel & Entertainment Expense - - 0
782-000 · Corp Food & Entertainment - - (76)
412 488 26,260
· Freight In 103,935 77,675 0
· Freight Out - - 0
810-000 · Royalty - - 8,977
810-000 · Postage Expense 8,977 -
820-000 · Professional Fees Expense (188,826)
830-000 · Interest 1,446,297 1,635,123
840-000 · Late Payment (543,313)
1,894,808 2,438,121
850-000 · Hokie Stone Expense 543,313
(1,894,808) (2,438,121)
Total 600-001 · Other Expenses (192,718)
(32,854)
Total Expense
(4)
Net Ordinary Income (638)
(5,200)
Other Income/Expense 330,076 522,794 (42,292)
Other Income 69,996 102,850 1,581
950-920 Other Income - Soft Drink Vending 366,196 366,200 (3,660)
950-921 Other Income - Snack Vending Canteen (668)
950-922 Other Income - Laundry Vending 346 984 (94,349)
950-923 Other Income - CRC Vending Kwik Kafe 9,600 14,800 (1,479,907)
950-951 Other Income - ATM Space 5,064 47,356 13,011
950-953 Other Income - Miscellaneous 2,340
950-954 Other Income - Hokie Stone 759 0
950-955 Other Income - Bad Debt Recovery - 3,660
960-000 Interest Income - Checking Acct. - (1,837,698)
961-000 Interest Income - Investments 35,271 668
970-000 Commissions - Follett 1,341,223 129,620 (1,294,385)
972-000 Other Income - Reimbursements 74,326 2,821,130
974-000 Execution Payment - Follett 99,996 61,315
99,996
Total Other Income 2,334,434
4,172,132
Net Income 439,626
1,734,011

Financial Comparison
Fiscal Year 2020-2021 vs Fiscal Year 2019-2020

Significant Variance Explanations

500-000 Salaried & Classified Expense Projected Actual Comparison
· Retirement of Previous Executive Director & Assistant Director. July '20 - June '21 July '19 - June '20 (192,100)
· Reduction in staff size to four (4) positions starting July 2020.
333,779 525,879
510-000 Retirement Contributions
· Retirement of Previous Executive Director & Assistant Director. 42,343 65,265 (22,922)
· Reduction in staff size to four (4) positions starting July 2020.
25,635 42,666 (17,031)
520-000 FICA Expense
· Retirement of Previous Executive Director & Assistant Director. 41,740 174,934 (133,194)
· Reduction in staff size to four (4) positions starting July 2020.
69,396 112,518 (43,122)
560-000 Health Insurance Expense 59,587 69,560 (9,973)
· Yearly Brown Edwards entry to adjust prepaid insurance to the correct balance at 6/30/2020. 3,369 51,753 (48,384)
The size of the adjustment for this time period is larger than usual due to the transition of 18,911
Virginia Tech Services, Inc. from a large number of employees down to our current level. 103,935 143,747 (124,836)
330,076
600-000 Utilities Expense 77,675 26,260
· Reduction in usage due to shortened or limited hours of retail operations.
522,794 (192,718)
650-000 Telephone Expense
· After transition, services were cancelled and/or switched to Follett (examples: Fax and Data Plans). 69,996 102,850 (32,854)
9,600 14,800 (5,200)
670-000 Taxes & Licenses 5,064 47,356 (42,292)
· A one-time payment in FY '20 to the IRS for pre-transition late filing of 2017 W-2s that occurred 35,271 129,620 (94,349)
in 2018. 1,341,223 2,821,130 (1,479,907)

760-000 Miscellaneous Expense
· Primarily a one-time expense for a program to provide payroll assistance to Follett for
Virginia Tech Services, Inc. Legacy Employees to prevent furloughs during COVID shutdown.

820-000 Professional Fees Expense
· Audit expense increase due to increased scope as a result of the transition of
Virginia Tech Services, Inc.'s organizational model.

950-920 Other Income - Soft Drink Vending
· Decline in vending sales due to COVID-19 impacts.
· Current renegotiation of Coke Contract with both the University and Virginia Tech Services, Inc.
This impacts payments of Sponsorship Fees, Annual Incentive Fee, and Minimum Guarantee.
Resolution is not expected until May 31, 2021 at the earliest.

950-921 Other Income - Snack Vending Canteen
· Decline in vending sales due to COVID-19 impacts.

950-951 Other Income - ATM Space
· Freedom First Federal Credit Union declined to renew their lease.

950-953 Other Income - Miscellaneous
· Credits from closing pre-transition vendor accounts.

961-000 Interest Income - Investments
· Performance of the investment markets.

970-000 Commissions - Follett
· Impact of COVID-19 on retail operations.
· Lack of a Minimum Guarantee for Fiscal Year 2020-2021.

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MANAGEMENT REPORT 

Projected Budget 
for the Twelve Months 
Ending  June 30, 2022 

Projected Projected Projected Projected Projected
Jul-21 Aug-21 Sep-21 Oct-21 Nov-21

Ordinary Income/Expense 27,592 27,592 27,592 41,387 27,592
Expense: 3,415 3,415 3,415 5,122 3,415
500-001 · Personnel Expenses 2,111 2,111 2,111 3,166 2,111
500-000 · Salaried & Classified Expense
510-000 · Retirement Contributions 8 8 8 12 8
520-000 · FICA Expense 83 83 83 124 83
530-000 · State Unempl. Insurance Expense 72 72 72 108 72
540-000 · Life Insurance Expense 40 40 40 61 40
550-000 · Long-Term Disability Insurance Expense 3,343 3,343 3,343 5,014 3,343
· Short-Term Disability Insurance Expense 51 51 51 76 51
560-000 · Health Insurance Expense 69 69 69 104 69
570-000 · Workman's Compensation
580-000 · Leave Balance Expense 36,784 36,784 36,784 55,174 36,784

Total 500-001 · Personnel Expenses

600-001 · Other Expenses
600-000 · Utilities Expense
610-000 · Repairs & Maintenance Expense 5,364 5,764 6,521 4,439 7,154
620-000 · Depreciation Expense 6,693 10,533 3,621 4,823 2,528
630-000 · Vehicle Expense 16,484 16,484 16,364 16,364 16,364
640-000 · Rent Expense
650-000 · Telephone Expense 123 - - - -
660-000 · Insurance Expense 73,808 73,808 73,808 73,808 73,808
670-000 · Taxes & Licenses 4,500 4,500 4,500 4,500 4,500
680-000 · Supplies Expense 37,560
690-000 · Dues & Subscriptions - - - -
700-000 · Advertising Expense 145 - - 939 -
720-000 · Education 338 98 171 69 432
740-000 · Cash Long/ Short 2,529 69 69 191 1,061
750-000 · Credit Card Discount Fee - - - - -
760-000 · Miscellaneous Expense - - - - -
- - - - -
760-970 · Wells Fargo Service Fee - - - - -
· Coupon 1,000 1,000 867 366 272
305 445 454 462 441
780-000 · Travel & Entertainment Expense - - - - -
782-000 · Corp Food & Entertainment - - - - -
- - - - -
· Freight In - - - - -
· Freight Out - - - - -
810-000 · Royalty - - - - -
810-000 · Postage Expense - 63 - 110
820-000 · Professional Fees Expense 2,003 35,753 23,728 8
830-000 · Interest - - - 10,804 3
840-000 · Late Payment - - - -
- - 754 - -
850-000 · Hokie Stone Expense - 1,269
150,852 148,517 130,857 59
Total 600-001 · Other Expenses 107,942
187,636 185,301 167,642 116,832
Total Expense 144,726
(187,636) (185,301) (167,642) 172,006
Net Ordinary Income (144,726)
(172,006)

Other Income/Expense 3,536 3,692 14,859 14,411 11,680
Other Income 6,416 6,416 6,416 6,416 6,416
950-920 Other Income - Soft Drink Vending 112,863 31,667 31,667 31,666 31,667
950-921 Other Income - Snack Vending Canteen 1,482 (126) (137) (106) (152)
950-922 Other Income - Laundry Vending
950-923 Other Income - CRC Vending Kwik Kafe - 800 400 - 400
950-951 Other Income - ATM Space 300 1,478 621 - 24
950-953 Other Income - Miscellaneous - - 950 -
950-954 Other Income - Hokie Stone - - - - -
950-955 Other Income - Bad Debt Recovery - - - - -
960-000 Interest Income - Checking Acct. 10,693 - 3,337 1,613 (42)
961-000 Interest Income - Investments 205,063 6,178 121,475 104,099 96,097
970-000 Commissions - Follett - 414,415 21,865 - 12,554
972-000 Other Income - Reimbursements 8,333 183 8,333 8,333 8,333
974-000 Execution Payment - Follett 8,333
348,687 208,836 167,382 166,978
Total Other Income 473,037
161,051 41,194 (4,625) 22,252
Net Income 287,736

Projected Projected Projected Projected Projected Projected Projected Projected
Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 July '21 - June '22

27,592 27,592 27,592 27,592 41,387 27,592 27,592 358,694
3,415 3,415 3,415 3,415 5,122 3,415 3,415 44,394
2,111 2,111 2,111 2,111 3,166 2,111 2,111 27,442

8 8 8 8 12 8 8 104
83 83 83 83 124 83 83 1,078
72 72 72 72 108 72 72
40 40 40 40 61 40 40 936
3,343 3,343 3,343 3,343 5,014 3,343 3,343 522
51 51 51 51 76 51 51 43,458
69 69 69 69 104 69 69 662
898
36,784 36,784 36,784 36,784 55,174 36,784 36,784
478,188
6,301 6,590 8,608 6,688 3,350 4,338 4,279
3,942 2,005 8,736 3,353 5,349 5,349 5,349 69,396
15,943 15,943 15,903 15,903 15,903 15,903 15,373 62,281
192,935
720 20 253 - 308 308 308 2,040
73,808 73,808 73,808 73,808 73,808 73,808 73,808 885,696
4,500 4,500 4,500 4,500 4,500 4,500 4,500 54,000
37,560
- - - - - - - 3,369
- 839 - - 482 482 482 3,245
366 225 194 449 449 449 5,749
121 249 36 5 345 345 345
- - - 389 - - - -
- - - - - - - -
- - - - - - - -
- - - - - - -
194 831 322 - 1,000 1,000 1,000 8,408
432 268 288 556 300 300 300 4,286
- - - 291 - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - 51 51 51 412
2 6 70 7,306 7,306 7,306 103,935
3 378 4,034 5,311 - - - -
- - - - - - -
- - - - - - - 8,977
826 4,590 - 1,050
429 1,442,289

107,156 110,248 117,117 111,924 113,151 114,139 113,550 1,920,477

143,940 147,032 153,901 148,708 168,325 150,923 150,334 (1,920,477)

) (143,940) (147,032) (153,901) (148,708) (168,325) (150,923) (150,334)

7,795 9,879 11,870 15,862 12,100 9,900 225,000 340,583
6,416 6,416 76,996
6,416 6,416 6,416 6,416 6,416 31,666 31,666 461,196
-
31,667 31,667 31,667 31,667 31,666 - 5,200 346
400 500 9,600
) (152) (146) (169) (148) - 500 - 5,064
- - 2,340
400 400 400 800 400 - -
- 3,000 -
- - 1,141 - 500 3,000 -
112,637 467,922 35,271
- - - 1,390 - 5,837 5,837 2,000,000
8,333 8,333 80,163
----- 99,996
178,689 753,875
----- 3,111,555
27,766 603,540
) 3,673 3,529 1,506 (4,216) 3,000 1,191,078

71,588 154,347 59,180 72,022 121,154

11,407 5,979 4,827 5,837 5,837

8,333 8,333 8,333 8,333 8,333

141,127 220,404 125,172 137,963 189,407

(2,813) 73,371 (28,730) (10,745) 21,081

Budget Projected Comparison
July '21 - June '22 July '20 - June '21
24,915
Ordinary Income/Expense 358,694 333,779 2,051
Expense: 44,394 42,343 1,807
500-001 · Personnel Expenses 27,442 25,635
500-000 · Salaried & Classified Expense (16)
510-000 · Retirement Contributions 104 120 (1,130)
520-000 · FICA Expense 1,078 2,208 (1,353)
530-000 · State Unempl. Insurance Expense 2,289
540-000 · Life Insurance Expense 936 522
550-000 · Long-Term Disability Insurance Expense 522 - 1,718
· Short-Term Disability Insurance Expense 43,458 41,740
560-000 · Health Insurance Expense 662 507
570-000 · Workman's Compensation 898 155 656
580-000 · Leave Balance Expense 242
478,188 29,677
Total 500-001 · Personnel Expenses 448,511
69,396 0
600-001 · Other Expenses 62,281 69,396 0
600-000 · Utilities Expense 192,935 62,281 8,163
610-000 · Repairs & Maintenance Expense 2,040 184,772 0
620-000 · Depreciation Expense 885,696 2,040 3,931
630-000 · Vehicle Expense 54,000 881,765 (5,587)
640-000 · Rent Expense 37,560 59,587 0
650-000 · Telephone Expense 3,369 37,560 0
660-000 · Insurance Expense 3,245 3,369 0
670-000 · Taxes & Licenses 5,749 3,245 0
680-000 · Supplies Expense 5,749 0
690-000 · Dues & Subscriptions - 0
700-000 · Advertising Expense - - 0
720-000 · Education - - 0
740-000 · Cash Long/ Short - - (10,503)
750-000 · Credit Card Discount Fee 8,408 - 0
760-000 · Miscellaneous Expense 4,286 18,911 0
- 4,286 (12)
760-970 · Wells Fargo Service Fee - - 0
· Coupon - 12 0
- - 0
780-000 · Travel & Entertainment Expense - - 0
782-000 · Corp Food & Entertainment - - 0
412 - 0
· Freight In 103,935 412 0
· Freight Out - 103,935 0
810-000 · Royalty - - 0
810-000 · Postage Expense 8,977 -
820-000 · Professional Fees Expense 8,977 (4,008)
830-000 · Interest 1,442,289
840-000 · Late Payment 1,446,297 25,669
1,920,477
850-000 · Hokie Stone Expense 1,894,808 (25,669)
(1,920,477)
Total 600-001 · Other Expenses (1,894,808) 10,507
7,000
Total Expense 95,000

Net Ordinary Income 0
0
Other Income/Expense 340,583 330,076 0
Other Income 76,996 69,996 0
950-920 Other Income - Soft Drink Vending 461,196 366,196 0
950-921 Other Income - Snack Vending Canteen 0
950-922 Other Income - Laundry Vending 346 346 0
950-923 Other Income - CRC Vending Kwik Kafe 9,600 9,600 658,777
950-951 Other Income - ATM Space 5,064 5,064 5,837
950-953 Other Income - Miscellaneous 2,340 2,340 0
950-954 Other Income - Hokie Stone
950-955 Other Income - Bad Debt Recovery - - 777,121
960-000 Interest Income - Checking Acct. - -
961-000 Interest Income - Investments 35,271 35,271 751,452
970-000 Commissions - Follett 2,000,000 1,341,223
972-000 Other Income - Reimbursements 80,163 74,326
974-000 Execution Payment - Follett 99,996 99,996

Total Other Income 3,111,555 2,334,434

Net Income 1,191,078 439,626

Financial Comparison
Fiscal Year 2021-2022 vs Fiscal Year 2020-2021

Significant Variance Explanations

500-000 Salaried & Classified Expense Budget Projected Comparison
· Employee Pay Raises. July '21 - June '22 July '20 - June '21 24,915

358,694 333,779

540-000 Life Insurance Expense 1,078 2,208 (1,130)
· New Administrator with lower rates.

560-000 Health Insurance Expense 43,458 41,740 1,718
· Increased Health Insurance Premiums.

620-000 Depreciation Expense 192,935 184,772 8,163
· Projected increase due to University Bookstore Roof Replacement Project.

650-000 Telephone Expense 54,000 59,587 (5,587)
· VTSI performed an indepth review and was able to reduce the telephone expense.

760-000 Miscellaneous Expense 8,408 18,911 (10,503)
· The FY '21 one-time expense to provide Follett with payroll assistance, for Virginia Tech Services, Inc.
Legacy Employees to prevent furloughs during COVID shutdown, is not in effect this year.

950-920 Other Income - Soft Drink Vending 340,583 330,076 10,507
· Projecting an increase in vending sales.
· This amount could possibly change depending on the final result of ongoing Coke negotiations.

If we return to full payment of Sponsorship Fees it could add an additional $165,000.00.

950-921 Other Income - Snack Vending Canteen 76,996 69,996 7,000
· Projecting an increase in vending sales. 461,196 366,196 95,000
2,000,000 1,341,223 658,777
950-922 Other Income - Laundry Vending
· Based on the projection that dorms will be at full capacity and will be open for the entire year.

970-000 Commissions - Follett
· Negotiations with Follett, to determine the amount of the Minimum Guarantee, have concluded.

MANAGEMENT REPORT

Coca-Cola Negotiations Update

Virginia Tech Services, Inc.
Coca-Cola Sponsorship Fees, Annual Incentive Fee,

and Minimum Guarantee Negotiations
Board Meeting Thursday May 6, 2021

The University and Virginia Tech Services, Inc. are currently in active negotiations with
Coca-Cola concerning the impact of COVID on our contracts. This could impact the
payments that will be received from Coke in Fiscal Year 2021-2022.
Currently, the position being taken by the University and Virginia Tech Services, Inc. is
that for this time period we expect full payment of our Sponsorship Fees as well as our
Incentive Fee. Virginia Tech Services, Inc. Sponsorship Fees total $350,000.00 and our
Incentive Fee is $40,000.00. However, this is still a point of negotiation and we have
budgeted an amount of $225,000.00. If the negotiations resolve in our favor, the
projected budget for FY ‘22 could see an increase of $165,000.00.

Page 41

MANAGEMENT REPORT 

Folle  Higher Educa on Group 
Minimum Guarantee 
Nego a ons Update 

Virginia Tech Services, Inc.
Follett Higher Education Group
Minimum Guarantee Negotiations
Board Meeting Thursday May 6, 2021
Virginia Tech Services, Inc. has completed negotiations with Follett Higher
Education Group concerning the impact of COVID-19 on our Minimum Guaranteed
Commission for Fiscal Year 2021-2022.
The Minimum Guaranteed Commission for Fiscal Year 2021-2022 will be
$2,000,000.00. This amount has been factored into our budget calculations.

Page 43

MANAGEMENT REPORT

University Bookstore
Roof Replacement Update

University Bookstore Roof Project Update
04/07/2021

The project to replace the roof has been approved and is advancing. After discussion with the Executive
Committee and Dr. Pinkney a meeting was held with Chris Kiwis, Vice President for Campus Planning,
Infrastructure, and Facilities, and his team on 02/11/21. The following projections for the project were
presented to Virginia Tech Services, Inc. at this meeting:

Design $59,800 ($24,720 design, $7,200 bid, $23,040 quality assurance office,
$4,840 post survey)

Construction $320,000 (excludes any possible deck repairs if necessary)

Contingency 20% $64,000

Management fee 12.31% $54,631

UBO fee $3,500

Total Conceptual Budget $501,931 (excludes any possible decking repairs)

On March 11, 2021, I signed the project approval form for the Design phase of the project. I am
including a copy of this form. I submitted the form to Matt Giambra, Project Manager, on March 11,
2021 and the university is currently working on the design phase. A more detailed timeline for the
project will not be known until after the design phase is complete.

w

VIRGINIA TECH

Estimate Date: 3/11/21

University Bookstore Roof Replacement

Work Order #21-481809

Dave,

This is the estimate is for the University Bookstore Roof Replacement.

Scope of Work: Provide design, bid assistance, construction assistance and quality assurance services for

the roof replacement of the university bookstore.

Design Costs $59,800.00
Administration Fee @ 12.31% $ 7,361.38
Total Project Cost: $67,161.38

This estimate is good for 30 days.

If you would like to proceed with this work, please sign and return this proposal confirming you are in
agreement with the scope of work and pricing as stated above.

If you have any questions, please give me a call at 1-0412.

11viJ-JI£tk�

Matt Giambra
Project Manager