agricultural economics 1 evaluating the effectiveness of farm financial management training in a...

Agricultural Economics 1

Evaluating the Effectiveness of Farm Financial Management

Training in a Difficult Environment

Richard L. Trimble, Rick Costin, Rush Midkiff Jennifer Rogers, Suzy Martin, and Steve Isaacs

University of Kentucky, Department of Agricultural Economics

National Farm Management ConferenceJune 11-14, 2007


The Farm Service Agency (FSA)

Borrower Training ProgramMandated by Congress in 1994All FSA borrowers must take financial

management training, unless exemptedParticipant’s performance must be

graded Training in Kentucky is expensiveResult was/is a large group of

“unhappy participants”


General Characteristics of Borrower Participants

FSA is lender of “last resort”Two general types of participants:

Older management challenged farmers looking to retire and escape

Young farmers with no experience, little knowledge, and great aspirations

All unhappy with training requirement


Training Workshops and Materials

Developed Specifically forFSA Borrowers

Two day workshops covering basic Farm Financial Management

Topics included: Goals & Goal Setting Decision Making and Risk Management Record Keeping Enterprise Budgeting Balance Sheet preparation and use Income Statement preparation and use Financial Analysis (ATA)

Included Home Work Assignments


Financial ManagementBaseline Survey Questionnaire

First thing done at every workshop

Purpose was to help instructors get acquainted with participants and their abilities

Type and size of operationsLevel of knowledge of financial managementCurrent record keeping practices Fewer than 40% used any kind of record keepingOnly 31% of participants reported filling out an IRS

Schedule F form


FSA Workshop Exit Evaluation

(How Did We Do?)Generally quite complimentary

Good HandoutsGreat Overheads

Most important things learned:Record KeepingGoal Setting

Least important things learned:Enterprise BudgetingBalance Sheet


Most Gratifying Responseto Exit Survey

Question: Would you recommend this workshop to another farmer?

Ninety-Seven percent ofrespondents indicated they would recommend the workshop to another farmer!


FSA Workshop Follow-Up Survey

Between Feb. 1995 and Mar. 2006, 78 FSA Workshops were conducted

Involving 969 farms & 1,488 participants

Two Page Questionnaire mailed to all 969 farms July 2006

Postcard and telephone encouragement


FSA Workshop Follow-Up Survey The Results

235 useable responses were receivedDetermined that we had 823 farms that

should have respondedResponse rate of 29%We were quite happy with this

response rate from the clientele group


General Characteristics of Respondents

Responses from all years: (2005 – 23%, 2004 – 4%, 1995 – 6%)

Mostly small farms: (33% = 100-250ac, 7% = > 1,000ac)

Enterprises quite representative of KY: (Beef–70%, Tobacco–50%, Corn-33%, Beans-26%, Wheat-20%, Dairy-14%, Hogs-4%, Poultry-4%, F&V-4%)


Major Objectivesof Follow-Up Survey

Determine if participants learned, retained and used any of concepts taught

Discover which concepts were most readily adopted and which were not

Ascertain any problems with concepts taught

Establish a value of the training workshop to participants


Major Concepts Evaluated

Goals & Goal Setting

Record Keeping

Enterprise Budgeting

Balance Sheet preparation and use

Income Statement preparation and use


Goals and Goal Setting

Baseline Survey indicated some folks used goals, but quite informally!

In Follow-Up Survey, 85% of respondents indicated they made goals and goal setting a part of their farm business management

15% indicated that they did not use goals or goal setting


Record Keeping

Baseline Survey found 40% used some type of record keeping, again informally

In Follow-Up Survey, 97% of respondents indicated they used record keeping as part of their farm business management (record books-65%, computer-28%, consultant-9%)

3% did not use record keepingHas record keeping improved financial

decision making? Yes – 87%, No – 13%


Enterprise Budget

Baseline Survey found 51% budget annually

Follow-Up Survey found that 36% had used Enterprise Budget to reduce or eliminate an enterprise (64% had not)

Follow-Up Survey found that 28% had used Enterprise Budget to expand or start a new enterprise (72% had not)

In Total, 64 % had used enterprise budget


The Balance Sheet

Baseline Survey found 38% prepared a Balance Sheet annually

Follow-Up Survey found 84% better able to prepare a Balance Sheet (16% Did Not)

Follow-Up Survey found 70% used Balance Sheet to measure financial progress (30% Did Not)


The Accrual Adjusted Income Statement

Baseline Survey found 68% prepared an Income Statement annually (This may be an indicator of the level of participant knowledge of financial statements?)

Follow-Up Survey found 48% used workshop training to prepare an Income Statement (52% Did Not)

Follow-Up Survey found 71% used Income Statement to determine profitability of farm business (29% Did Not)


Change in Farm Profitability Resulting from Workshop

Follow-Up Survey found 57% of students thought workshop training improved farm profitability (43% Did Not)

Improvement ranged from 2% to 75%, with an average of 18% improvement

Follow-Up Survey found 75% thought that workshop training improved management skills enough to cover workshop costs (25% Did Not)


Increase in Annual Farm Income Resulting from Workshop

Participation Range of Increase Percent of

Respondents

More than $2,500 18%

$1,001 - $2,500 18%

$501 - $1,000 19%

0 - $500 9%

No Change 36%


Farm Business Profitability Relative to Use of Management

Tools Taught Percent Increasing

Profitability

Tool or Concept

With Mgt Tool W/O Mgt Tool

Goals 54% 3%

Record Keeping

56% 1%

Enterprise Bud:

To Start or Inc

24% 38%

To Red./Quit 29% 36%

Balance Sheet 54% 3%

Income Stmt. 35% 21%


Management Tools & Concepts Effectiveness

Goals, Record Keeping, and Balance Sheets were effective

Income Statement was not as effective, but worthwhile

Enterprise Budgeting was a Total Failure and in need of Revamping or Removal from the Workshop Curriculum


Summary and Conclusions

FSA Borrower Workshops have been successful

The Follow-Up Survey indicated training had lasting value after up to 12 years

Majority of workshop participants were able to increase both farm income and profitability

87% of Follow-Up Survey Respondents indicated they would recommend it to other farmers


Parting Thoughts

Educators working with larger farmers that are amongst the “brightest and best in the industry” should remember, FSA Borrowers are from the other end of the spectrum

The marginal value of these educational efforts may be greater than with the other, more traditional groups


Any Questions about Kentucky’s FSA Borrower

Workshop Training Program?

agricultural economics 1 evaluating the effectiveness of farm financial management training in a...

Documents

training requirement

fsa workshops

fsa workshop followup

fsa borrowers

clientele group slide

older management

training workshops

risk management record