Kovens Center struggles with mounting debt

Photo by FIU courtesy of Creative Commons.

Madison Fantozzi/News Director

What exactly is the Kovens Conference Center? It’s a six-figure deficit to the University.

The over 57,000 square foot center that sits south of Biscayne Bay Campus has reached a $379,426 negative fund balance as of June 30, 2013, according to the Office of Internal Audit.

While the center has a long history of financial trouble, over $138,000 of the debt was incurred in the last two fiscal years alone under the management of the Chaplin School of Hospitality and Tourism Management.

Simone Champagnie, the executive director of the Institute for Hospitality and Tourism Education Research who oversees the center’s operations, said a timetable for closing out the deficit is yet to be determined but she is hoping it’s “as quickly as possible.”

Champagnie noted that the center was in a deficit when the hospitality school assumed operations in 2008. And while she could not disclose a figure, the center was in fact in a $213,000 deficit in 2007-2008, according to a finance report provided by Kenneth Jessel, senior vice president and chief financial officer.

Kovens was able to gain half of its assets back the following year, but has since struggled to make profit.

The center generates almost a million dollars in revenue each year from fees charged for conference services offered to both the University and the general public. Fees are established by the center’s management — a structure that has changed in response to the audit.

The center sustained operating losses for fiscal year 2011-2012 totaling $27,839 and fiscal year 2012-2013 totaling $111,023. According to Champagnie, the center revised its fee structure during the audit to cover its operating costs.

“We have a pricing model in place that incorporates variable costs, expenses of actually running events and a shared fee that we have to pay as an auxiliary to the University,” Champagnie said.

The center pays seven percent to the University on every expense it incurs.

When asked why the center’s previous fee structure did not incorporate operating costs, Champagnie said to an extent, it did.

However, the audit claims that the center’s previous methodology was based solely on the conference rate of surrounding hotels and conference centers.

“The operating cost of the center was never factored into the methodology; therefore, the center could not cover its cost of operations,” the audit said.

The new fee structure is based on a total number of conference attendees divided by the budgeted operating cost. This figure calculates a per head breakeven point.

Under the new fee structure, a large meeting room is $70-$75 per person. This includes breakfast, audio and visual use, an afternoon break and dining room use with cocktails.

Kovens management was concerned that the new fee structure would price it out of the market, so a discount was negotiated: employees and student organizations can use the large meeting room for $65 per person.

The Office of Auxiliary and Enterprise Development is continuing work to eliminate the center’s operating deficit and negative fund balance.

“They’re working right at this moment on the business plan,” Champagnie said. “With the numbers we have provided them, with our new pricing structure, with the audit report and with our sales plan, they will be able to provide us, with continued growth, how long it will take to remove the deficit.”

She said some sort of conclusion should be reached by the end of January.

Brandon Wise contributed to this report.

– madison.fantozzi@fiusm.com