   |
|
||||
| |
|
|
|
|
|
A Distance-Learning Approach to Borrower Training Gregory D. Hanson The author is an associate professor in the Department of Agricultural Economics, Pennsylvania State University Satellite up-link instruction from Penn State and on-site leadership by county agents contributed to successful financial management training for borrowers of the Consolidated Farm Services Agency Credit Division. The distance-learning approach promoted the consistency of the instruction for approximately 260 farm family members. The training included pretesting to determine the level of expertise at the outset, and quizzes to determine comprehension of core materials. Videos that treated the financial management problems of ongoing farmers motivated each workshop session. The distance-learning methods utilized are well suited for multi-state cooperative efforts in borrower training. Key words: borrower training, distance learning, extension finance. The Farmers Home Administration, now the Credit Division of the Consolidated Farm Service Agency (the Agency) is estimated to have experienced nearly $8 billion of loan losses during the farm financial crisis of the 1980s (Hanson, Parandvash, and Ryan). While other major agricultural lenders had charged off as much as 90% of their loan losses by 1989, the trend in Agency charge-offs was increasing throughout the late 1980s. Cognizant of the continuing problems with debt repayment by Agency borrowers, the Food, Agriculture, Conservation, and Trade Act of 1990 required the Agency to provide educational training in financial and farm management concepts to certain guaranteed and direct farm loan applicants and borrowers. The purpose of the mandated training was described as follows:
The rules and regulations for the program were not finalized until February 28, 1994, at which time the training provisions became effective. The Agency program presents a unique educational opportunity for cooperative extension and other vendors of financial and production management training for farmers. The primary objective of this study is to acquaint agricultural finance specialists with an innovative, distance-learning approach to borrower training. An additional objective is to provide information on workshop format, materials development, budget issues, and cooperative opportunities that may prove useful in the planning of future borrower training educational programs. Program Requirements and Role of the Vendor <top> The publication of the regulations in the Federal Register indicated the Agency would be minimally involved with the actual training process. The State Director, or designee, was instructed to solicit applications for vendor status from state Departments of Agriculture, cooperative extension, community colleges, and other organizations or companies that might have an interest in providing the borrower training. Vendor applications were to include 12 items, among them: a sample of course materials, qualifications of instructors, proposed training sites, quality-control methods, and a description of special accommodations for farmers with learning disabilities or for whom English is not their primary language. The State Director is permitted to fully approve a vendor application from cooperative extension. All other applications are forwarded to Washington, DC, for final approval. This indicates Agency recognition of the capability of cooperative extension to provide quality training to farmers, and may suggest an implicit expectation that cooperative extension would participate in the training. Borrowers are selected by the county committee with oversight over the Agency's loan transactions. Borrowers must select one of the approved vendors, and agree to specific dates for training. Tuition fees are paid directly by the borrower to the vendor. The Agency has agreed to finance the training costs for the borrower by adding tuition costs to operating loan amounts. The process places the burden of logistics, fee collection, and certification of successful completion of the training on the vendor. According to the "Rules and Regulations" published in the Federal Register (p. 69197), the vendor must grade each borrower-participant as follows: Score
Training must be satisfactorily completed by the borrower within two years after notification of the requirement to be trained. A one-year extension to the agreement can be given if the training was not completed due to circumstances beyond the borrower's control, such as poor health. The Penn State Approach <top> Cooperative extension in Pennsylvania viewed the Agency clientele group as a vital constituency that tends to be financially vulnerable, often with a combination of high debt loads and marginal cash flows. Agency borrowers often are viewed as having less adequate management skills than typical commercial farmers who successfully service loans with Farm Credit or banks. Agency borrowers also are viewed as less frequent participants in cooperative extension programs than the typical commercial farmer. The continuing nature of the mandated training for new borrowers ensured that investments in development of training materials and methods, by finance specialists at Penn State and by county extension agents, would have a multi-year payback. Thus, the opportunity to provide borrower training as an approved vendor was viewed as a unique, long-term, outreach effort to a relatively extension-isolated, and needful, clientele group. In preparation for the initiation of borrower training, pilot financial management workshops were held at four Agency locations in Pennsylvania during 1992. Workshop methods were adopted for the pilot training. It was determined that financial concepts would be better retained if borrowers are required to actively solve problems and complete exercises during training sessions. Some of the findings from the pilot workshops are listed below:
It became apparent that the logistics of having one specialist travel to numerous sites to lead multi-day workshops was infeasible, due to other ongoing extension obligations of specialists. Given Agency estimates that as many as 400 Pennsylvania borrowers may require annual training, a distance-learning approach consisting of a satellite up-link from the Penn State campus with down-links at as many as 30 county offices was adopted as the method for future training. The advantages include providing live training simultaneously at all sites delivered by one or two specialists and reduced travel costs for the university-based specialists involved. The satellite teaching format essentially requires each site to stay on the same schedule, ensuring consistent, comprehensive coverage of the material. Major disadvantages of the distance-learning approach include the fixed cost of satellite time (approximately $500 per hour), and the perception that watching a presenter on a television screen would be less dynamic than having an in-person presentation. An in-service training session was held to prepare site leaders for their workshop responsibilities approximately 40 days prior to the first workshop date. Workshop tuition was set at $290, of which $90 was allocated for meal expense. Structure of the Workshops <top> The Federal Register ("Rules and Regulations," p. 69198) provided an ambitious required curriculum for financial training:
Selection of dates and length of workshop sessions, to accomplish the above agenda, presented difficulties. From April through November, farmers concentrate on field work. Dairy farmers, who predominate in Pennsylvania, typically have lengthy chore responsibilities, both morning and afternoon. In order to minimally achieve the required teaching goals, six days of workshops were developed with a 10:00 a.m. to 3:00 p.m. schedule, breaking 30 minutes for a catered lunch provided by the site leader. Instruction in the core financial statements and their analyses was scheduled for December 1994, prior to the heavy extension workload that traditionally begins in early January. The remaining two workshops were scheduled for late March 1995, to coincide with the end of the heavy winter extension season in Pennsylvania. The workshop agenda was organized as follows, where the asterisk (*) denotes the presentations via satellite up-link:
A three- to five-minute video of an extension specialist discussing financial management issues with an Agency borrower began each 10:15 session. Panel participants consisted of an Agency lender or official, a non-Agency lender, and the specialist. The panel session was divided into an internal discussion of the topic(s) for the day and a question-and-answer period to accommodate borrower questions that were called "live," or faxed to the studio. Financial Management Materials and Overview of the Workshops <top> In-service participants judged the preliminary set of materials too difficult for the typical Agency borrower. The exposition of accrual accounting methods, treatment of the concept of liquidity, and workshop exercises were both too lengthy and detailed. The instructional materials were not adequately consistent with the new Agency financial records system that became available in October of 1994. The feedback from an Agency lender who participated in the in-service was that workshop exercises needed to be explicitly linked to the new Agency record-keeping system in order to make workshop activities more tangible to borrowers. The term "accrual-adjusted" was substituted for "accrual accounting." The revised materials pointed out to borrowers that one definition of accrual refers to "natural increase." Without taking into account the natural increase that occurs in crop and livestock production, measures of farm income are not accurate. The relationship between liquidity and positive cash flows was utilized to illustrate the importance of the ability to pay bills as due. A new set of homeworks was developed based on the Agency's new record-keeping format. The six days of training were allocated as follows:
The Learning Experience <top> Quizzes were developed to test participants' comprehension of the basic financial concepts. At the beginning of day 1, a general pretest was given to the borrowers (Table 1). Thereafter, separate quizzes on the balance sheet, income statement, cash flow budget, and financial ratio analysis were given at the end of the respective session on each topic (Tables 2 and 3 provide examples). A multiple-choice quiz format permitted efficient grading by the site leaders. Multiple-choice tests also provide a teaching instrument—in that farmers were able to learn from the quiz exercise itself. For example, question 1 of Table 1 points out the difference between ending inventories and changes in inventory levels, causing farmers to explicitly recognize this key distinction and its impact on the income statement. A farmer who determined that debt-to-assets did not address cash flow would then recognize from question 3 that the current ratio must be related to cash flow issues. The results of the quizzes indicated that a substantial amount of learning occurred in the workshops. The average scores for the quizzes were as follows: pretest of basic knowledge at the start of the workshops, 51%; balance sheet, 75.5%; income statement, 82.2%; cash flow budget, 90%; and financial ratio analysis, 84.3%. Sites that gave the pretest to assess participant knowledge of finance at the start of the workshops, and then gave the same quiz following four days of workshops on financial statements and financial analysis, recorded an increase in average quiz scores from 56.9% to 85.4%. An evaluation form to assess the financial management training was provided by the Agency. Evaluation results for 195 participants are shown in Table 4. The evaluations were favorable, with 66_87% of the participants viewing the subject matter coverage, materials suitability, course level, course length, and outside work as sufficient or appropriate (questions 2_6). The right-hand column of Table 4, recording unsatisfactory reviews by the participants, ranged from 0_6%. It is interesting to note that some of the highest evaluations were obtained by county agents who had not specialized in farm management, providing another indication that the materials content was suitable. Comments from both site leaders and farmers identified the most and least successful aspects of the course. The workshop elements deemed most successful were:
Table 1. Workshop Exercise: Basic Knowledge of Finance Questions Answer
Table 2. Workshop Exercise: Balance Sheet Quiz Questions Answer
Table 3. Workshop Exercise: Cash Flow Budget QuizQuestions Answer
Table 4. Evaluation of the Financial Management Training (N = 195 respondents)
Note: Responses are percentages that may not add to 100 due to rounding. An example of the most difficult of the workshop exercises was called "Farmer Madison." The participant was given beginning and ending balance sheets listing only the items subject to inventory adjustment: receivables, payables, feed and grain inventories, and livestock inventories. An income statement, completed except for the accrual adjustments to income, also was provided. The farmer was instructed to record the inventory items in schedules J and M of the Agency record book, complete the change in inventory computation from the beginning to the end of the year, and then to complete the accrual adjusted income statement. The participants found net farm income increased from $8,600 prior to adjustments, to $30,225 after inclusion of accrual adjustments. Site leaders and farmers identified the following as the least successful aspects of the workshops:
Implications for Future Borrower Training <top> The borrower training workshops demonstrated the effectiveness of distance-learning technology for financial management training of farmers. The use of a satellite up-link enabled the training to be live at multiple sites while increasing the efficiency of use of instructor time. While the program was specifically directed to 18 sites in Pennsylvania, unsolicited telephone call-in questions were received from farmers in the Midwest and South, suggesting the potential for multi-state cooperative efforts in the future. Integrated Linking Efforts <top> Cooperative extension in a number of states did not develop a major borrower training program in 1994. In some states, the primary reason was inadequate annual numbers of farmers requiring training, in relation to program development costs. Vocational agricultural college programs took the lead on borrower training in other states. The 1994 registration of 160 farm operators in Pennsylvania, about three-fourths of whom brought spouses or partners, was not adequate to fully cover the cost of the time involved by specialists and agents in developing and presenting materials. Since farmers have two years to comply, it appears that the majority of eligible Agency borrowers decided to postpone training until the second year, and thus delay the $290 expense of registration. The Penn State 1995_96 financial training program for Agency borrowers will be integrated with cooperative extension in Maryland and Delaware. Multi-state cooperative efforts in borrower training can be cost-effective, particularly in a distance-learning framework, where small numbers of borrowers exist. Satellite transmission time is a fixed cost that does not increase, whether the down-link is to one or 100 sites. Sharing of materials development and satellite transmission charges could help to limit tuition costs for the farmers. This is especially true for states with fewer than 200 Agency borrowers requiring annual training. Coordination of larger efforts also could facilitate quality control and result in farmers receiving more comprehensive training than is the case with individual state training programs. An interesting issue to consider is the extent to which ongoing agricultural finance education conducted by extension can be utilized to satisfy Agency requirements for the mandated borrower training. (The substitution of brief general finance training for the comprehensive approach indicated in the Federal Record could result in a less than satisfactory educational outcome for farmers—to the extent that the core subject areas, including accrual accounting adjustments, are not adequately treated in the instruction.) Multi-state cooperation could be particularly advantageous where production tends to occur with a dominant enterprise, such as dairy production in the Northeast or wheat and cattle production in the Plains states. Involvement of Agency Staff <top> Up to two Agency loan officers were permitted to participate in the Penn State workshops at each site, free of charge. Agency staff recruited from nonagricultural, nonfinance backgrounds can also benefit from the borrower training. The new accrual-adjusted record keeping approach initially was met with resistance by some Agency staff who did not fully grasp the critical significance of accrual adjustments to income. Tuition Amount <top> Meals for up to two people for six days were included as part of the $290 tuition fee for the Pennsylvania training sessions. County agents were unanimous that catered meals were necessary both to motivate the farmers and to minimize time and organizational difficulties associated with the noon meal. Agents who provided only sandwiches at their workshops received numerous food complaints on evaluation forms. Another approved vendor in Pennsylvania, a private agriculturally-focused college, charged $480 for financial management training. In spite of widespread publication by the Agency of this alternative program, which was designed to provide a more individualized training for farmers in only one area of Pennsylvania, no farmers chose to participate in the private college's course. The Agency indicated that the higher tuition cost was an obstacle to farmer acceptance. Tuition costs in some other states ranged to more than $800. Once training commenced, farmers voiced few complaints about the $290 tuition fee for the Penn State program. (After a number of farmers indicated they did not have the tuition fee by the registration deadline of November 15, 1994, arrangements were made for farmers to delay payment until March 31, 1995.) Budget Outcome and Administration of Finances for the Training <top> The Short Courses office of the College of Agricultural Sciences, Penn State, agreed to handle all bookkeeping and bank transactions for the course. Given current stringent auditing of college business transactions, shifting the financial administration to an arms-length unit of the college was advisable. The budget for the financial training workshops is provided in Table 5. The total income of $46,880 less total expenses of $44,483.21 resulted in a net income of $2,396.79 to provide a residual fund for initial expenses in the second year of the training. The budgeted amounts do not reflect the full costs of time allocated by extension specialists and agents to the development and preparation for the training. Also, personnel costs for the production of video materials (including interviews with farmers) and for the expenses associated with studio broadcasts of the live instruction were not charged. It is anticipated that overhead costs will be more fully covered in 1995_96, as enrollments are projected to increase due to the two-year enrollment deadline for farmers selected for training in early 1994. Break-even tuition to cover the cash outlays of $36,513.61 (excluding payment of services to extension specialists and agents, which can be viewed as overhead expense), was $228 per registrant. Note that the $8,766 payment for satellite transmission time (Table 5) represented a 20% share of total expenses. The cash-basis break-even tuition decreases to $173.42 per registrant after exclusion of satellite transmission costs and the overhead charge for time by specialists and agents. Rising charges for satellite time may lead to future substitution of pre-taped video cassettes in place of some live satellite broadcasts. Logistics and Technology-Related Issues with Distance-Learning Techniques <top> While satellite transmission technology offers a "live," on-line dimension to instruction at numerous sites, the technology also poses organizational and technological challenges. A number of sites reported that the satellite transmissions were occasionally interrupted and/or transmission image and sound quality were not uniform. The satellite transmissions were not always received on the same channel, requiring agents to make sure that they had changed channels when required. Verification of the channel coordinates and notification as to what format would precede instruction periods required additional management input to the site leaders. Future use of CD-ROM technology may facilitate distance-learning workshops; however, at this time, insufficient experience with this medium did not permit its usage in the Pennsylvania workshops. Length of the Financial Management Training <top> Agency officials in Washington indicated that approximately 40 hours of training was recommended for the financial management module. The Penn State experience indicates that 40 hours of training would effectively accommodate the subject matter materials and permit additional work with the farmers' own "numbers." Grading the Participants <top> Some county agents were initially sensitive about the grading process (refer to earlier quotation from the Federal Register on scoring of borrower-participant), recognizing that a grade of 3 would cause the farmer to become (temporarily) ineligible for future loan transactions with the Agency. In practice, a grade of 2 permits the agent to shift training responsibilities back to the Agency. Approximately 83% of the participants in the Pennsylvania workshops received a grade of 1, 14% a grade of 2, and 3% a grade of 3. In some cases, extension agents will offer additional assistance, as requested by the Agency, to further improve the financial management capabilities of those farmers receiving the middle grade of 2. No plans were made to continue to work with the farmers receiving the failing grade, since it is assumed that the farmer is not receptive or will not make a good-faith effort with financial training. Table 5. Budget for the Farmers Home Administration (CFSA) Finance Borrower Training, 1994_95
College Credit <top> Several farmers requested college credit for the course, and that issue is currently being analyzed with the potential of credit through Continuing Education or through the Department of Agricultural Economics and Rural Sociology at Penn State. Expanding Training to Non-Agency Borrowers <top> The Agency indicated a preference for the training to attract borrowers from other agricultural lenders. Voluntary attendance by farmers would provide further validation for Agency borrowers of the importance of financial management in agriculture. Follow-up Efforts to Increase the Longevity of the Training <top> A three-month hiatus was built into the schedule to permit farmers to prepare financial statements at the beginning of 1995, for use in the workshop sessions in March. The Agency is concerned that farmers will not put into practice the principles of the course. Site leaders are encouraged to reconvene the borrowers at a later date to provide a "booster shot" that will further instill improved financial management techniques. Concluding Comments <top> Based on responses to the Agency-provided evaluation survey form, the vast majority of farmers who enrolled in the Penn State workshops in 1994 expressed the view that the training was helpful and that the subject matter treated was suitable. Distance-learning technology with satellite transmissions from a university campus to county extension offices or local facilities with down-link capability may make multi-state coordination more successful than was typical in the past. The farm financial management challenges are large for the Agency's clientele of generally small to mid-size farmers with substantial debt. The primary beneficiaries of more efficient and effective training will be the individual farmer and the health of the local agricultural economy, which will indirectly promote the long-term success of cooperative extension. The Consolidated Farm Service Agency's unique borrower training program provides an opportunity to cooperate across state borders in the preparation and presentation of materials for financial management workshops. References <top>
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
AEM Home 
Site Map
Contact Us Cornell
© 2002
Cornell University |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
