Annual Financial Report 2024 2025

Virginia Tech Financial Report 2024-2025

Accrued Compensated Absences Certain salaried employees’ attendance and leave regulations make provisions for the granting of a specified number of days of leave with pay each year. The amount reflects leave that is attributable to past service, accumulates, and is more likely than not to be used or paid, as well as for leave that has been used but not yet paid. Certain leave types, including parental, military, and jury duty leave, are recognized only once the leave begins. Liabilities are measured based on the employee’s pay rate as of the finan cial statement date and include additional compensation amounts that are directly and incrementally tied to leave payments. For governmental fund statements, expenditures are recognized only to the extent they are expected to be liquidated with current finan cial resources. The applicable share of employer-related taxes payable on the eventual termination payments is also included. The university’s liability and expense for the amount of leave earned by employees, but not taken, as of June 30, 2025 is recorded in the Statement of Net Position and is included in the various functional categories of operating expenses in the Statement of Revenues, Expenses, and Changes in Net Position . Unearned Revenues Unearned revenue represents revenue collected but not earned as of June 30, 2025, primarily composed of revenue for grants and contracts, prepaid athletic ticket sales, and prepaid student tuition and fees. Summer Session I tuition and fees received during the fiscal year are considered earned at the end of the refund period, approximately June 15th of each year. Tuition and fees received before year end for Summer Session II are unearned and recognized as revenue in the next fiscal year. Summer Session III is twelve weeks long and spans across fiscal years 2025 and 2026. The tuition and fees received for Summer Session III are considered half earned by June 30th, and half unearned and recognized as revenue in the next fiscal year. See Note 9 for a detailed list of unearned revenue amounts. Funds Held in Custody for Others Funds held in custody for others represents funds held by the university on behalf of others as a result of agency relationships with various groups and organizations. Noncurrent Liabilities Noncurrent liabilities include: (1) the principal amounts of revenue bonds payable, notes payable, and finance purchase obligations with maturities greater than one year; (2) long-term lease obligations; (3) pension plan liabilities; (4) OPEB liabilities; and (5) estimated amounts for accrued compensated absences and other liabilities that will not be paid within the next fiscal year. Net Position The university’s net position is classified as follows: Net investment in capital assets – Net investment in capital assets represents the university’s total investment in capital assets, net of accumulated depreciation and outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets. Restricted component of net position, expendable – The expendable category of the restricted component of net position includes resources for which the university is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Restricted component of net position, nonexpendable – The nonexpendable category of the restricted component of net position is comprised of endowment and similar type funds where donors or other external sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested to produce present and future income to be expended or added to principal. Unrestricted component of net position – Unrestricted net position represents resources derived from student tuition and fees, state appropriations, recoveries of facilities and administrative (indirect) costs, and sales and services of educational de partments and auxiliary enterprises. These resources are used for transactions relating to educational departments and general operations of the university and may be used at the discretion of the university’s board of visitors to meet current expenses for any lawful purpose. When an expense is incurred that can be paid using either restricted or unrestricted resources, the university’s policy is to apply the expense towards restricted resources before unrestricted resources. Public-Private and Public-Public Partnerships A public-private partnership (PPP) is an arrangement in which the university con tracts with an operator to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as a building or other capital asset, for a period of time. The university’s PPP arrangements include the operation of the Athletic Performance Center dining facilities, athletic concessions, and the university bookstore.

Income Taxes The university is considered an agency of the Commonwealth of Virginia and, as such, is exempt from federal income tax under Section 115(a) of the Internal Revenue Code. Classifications of Revenues and Expenses The university has classified its revenues as either operating or non-operating revenues according to the following criteria: Operating revenues – Operating revenues include activities that have the charac teristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowance; (2) sales and services of auxiliary enterprises, net of scholarship allowance; (3) most federal, state, local and nongovernmental grants and contracts and federal appropriations; and (4) interest on institutional student loans. Non-operating revenues – Non-operating revenues are revenues received for which goods and services are not provided. State appropriations, gifts, and other revenue sources that are defined as non-operating revenues by GASB Statement 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting , and GASB Statement 34, Basic Financial Statements-and Management’s Discussion and Analysis—for State and Local Governments are included in this category. Operating and non-operating expenses – Non-operating expenses include interest on debt related to the purchase of capital assets, and losses on disposal of capital assets. All other expenses are classified as operating expenses. Scholarship Allowance Student tuition and fees, certain auxiliary revenues, and student financial assistance expenses are reported net of scholarship allowance in the Statement of Revenues, Ex penses, and Changes in Net Position . Scholarship allowance is the difference between the stated charge for goods and services provided by the university and the amount paid by students and third parties making payments on the students’ behalf. In April 2023, NACUBO issued AR 2023-01 Public Institutions: Reporting Financial Aid as a Discount to supersede AR 2000-05. The updated reporting framework standardizes the treatment of institutional scholarships, grants, and other financial aid as a reduction of tuition and fee revenue (contra-revenue) rather than as an expense. The new guidance also refines the methodologies used to estimate tuition discounts, thereby improving alignment with financial aid disbursements and enhancing consistency and transparency across public institutions. This change supports more accurate reporting of net tuition revenue and financial aid activity in the university’s financial statements. The university adopted NACUBO AR 2023-01 in fiscal year 2025 with an implementation date of July 1, 2024. As a result, student tuition and fees (net of scholarship allowances) decreased due to an increase in the related allowance. Meanwhile, revenue from auxiliary enterprises (net of scholarship allowances) increased because the related allowance decreased, and student aid expenses decreased as well. This change in estimate provides a more accurate representation of institutional aid for financial reporting and has no impact on operating results or the change in net position for prior years. For the fiscal year ended June 30, 2025, the scholarship allowance for student tuition and fee revenue and auxiliary enterprise revenue totaled $219,280,000 and $34,194,000, respectively. Implementation of GASB Statement 101 In June 2022, GASB issued Statement 101, Compensated Absences . This statement establishes a unified approach for recognizing and measuring liabilities related to compensated absences such as vacation and sick leave. Under this statement, a liability is recognized for leave that is attributable to past service, accumulates, and is more likely than not to be used or paid, as well as for leave that has been used but not yet paid. Certain leave types, including parental, military, and jury duty leave, are recognized only once the leave begins. Liabilities are measured based on the employee’s pay rate as of the financial statement date and include additional compensation amounts that are directly and incrementally tied to leave payments. The statement also simplifies disclosure requirements by allowing the reporting of net changes in compensated absences liabilities and removing the requirement to disclose which funds were used to settle them. This guidance is effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. The university adopted GASB Statement 101 in fiscal year 2025 with an implementation date of July 1, 2024 and fiscal year ending June 30, 2024 has been restated as follows (all dollars in thousands) : Net position June 30, 2024 $ 2,972,030 Accrued compensated absences (4,199) Adjusted net position June 30, 2024 $ 2,967,831

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