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Fiscal Woes Hit Cal Poly Foundation : Education: Nonprofit auxiliary probably cannot meet a $5.6-million loan due in seven years, accounting firm says. Off-campus bookstore has been a losing venture.


POMONA — A report commissioned by the Cal Poly Pomona Foundation has found extensive financial problems at the university's nonprofit auxiliary, saying it probably cannot meet a major loan due in seven years unless it refinances and eliminates money-losing ventures.

That might include shutting down an off-campus bookstore that opened eight months ago with little market research or planning and is now more than $166,000 in debt, a figure that widens each month, according to foundation officials and minutes of foundation board meetings.

The foundation raises money for the university, administers grants and operates the university's cafeteria and bookstores, as well as student apartments known as University Village, which it built in the late 1980s with more than $8 million in long-term loans. It is the payments due on those loans that set off warning bells about the foundation's finances.

Foundation leaders declined to release the report, but in a recent interview, campus President Bob H. Suzuki and top officials talked about some of the findings.

The report, completed in May by the Los Angeles office of accounting firm Deloitte and Touche, found that the foundation lacks the money to meet a $5.6-million balloon payment for student housing due in 2000 and needs to look into changing a host of many of its financial dealings to regain fiscal health.

The study of foundation finances was commissioned after an earlier report warned in March of dire financial straits. In that report, Ray Knight, the foundation's former controller, said the foundation could not meet an earlier balloon payment of $2.5 million due in early 1995.

"The ability of the foundation to make (the 1995 balloon payment) and handle other cash requirements is in doubt," that report stated.

Knight declined to discuss his report.

The Deloitte and Touche report confirms that the foundation is in trouble.

But Suzuki said the new report is less alarmist than Knight's. It concluded that, although the foundation faces trouble meeting its $5.6-million payment, it has enough money to make the $2.5-million payment in two years. But Patrick Lattore, the foundation's new executive director, conceded that will mean "seriously going into our reserves."

In addition to holding annual fund-raising drives for Cal Poly Pomona and running various student service facilities, the foundation operates a conference center called Kellogg West.

Lattore said the foundation expects to post a surplus of several hundred thousand dollars for fiscal 1992-93, which ended June 30.

According to reports contained in board minutes, many of the foundation operations are posting deficits or barely breaking even, including Kellogg West, the off-campus bookstore called Campus Books, University Village and a snack bar called Sound Stage. But others, such as the on-campus bookstore, are doing well.

The foundation has laid off or lost up to 10 of 200 positions and might have to impose more layoffs this fall, said Lattore, who hopes to present cost-cutting recommendations to the board in September.

Meanwhile, he is talking to financial institutions about refinancing the University Village loans, which were obtained under a complex financing agreement through the Student Loan Marketing Assn., also known as Sallie Mae, a private corporation set up by the federal government two decades ago. The 20-year, amortized loan was constructed to be paid off over 10 years with two large balloon payments.

The money to make the balloon payments was slated to come from revenues generated by University Village, which consists of about 400 apartments in two complexes located near campus. Students pay rent to the foundation, which manages the facilities. Once the loan is paid off, IRS regulations require that the foundation transfer title of the apartments to Cal Poly.

Several former and current board members who did not want their names used complained that imprudent management decisions in the past two years have squandered foundation revenues and made financial problems worse.

They cite the off-campus bookstore that opened Jan. 4 in a small shopping center near Cal Poly Pomona with little market research into whether the venture would ever turn a profit. The store competes directly with the university's on-campus bookstore and sells textbooks, bestsellers, school supplies and memorabilia such as T-shirts emblazoned with the logos of Cal Poly and nearby Mt. San Antonio College.

It was intended to attract the public as well as serve students from Cal Poly and Mt. SAC. But foundation officials admit that the store has not attracted the business they had hoped.

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