National farm business Management Conference

Fargo, ND

June 13 – 17, 2010

Kenneth L. Balliet, Sr. Educator

Multicounty Extension Director

Copyright © 2010 The Pennsylvania State University

 

Long Term Impact of the Farm Financial Analysis Training Curriculum on FSA Borrowers in Pennsylvania

Background

• Financial management training an explicit mandate of the 1990 farm bill

• Past studies looked at:– Need for training – Described a typical FSA borrower and measured immediate

gains in knowledge

• Since 1993 extension educators in Pa have been using FFAT curriculum in a variety of delivery modes

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Farm Financial Analysis Training(FFAT)Curriculum

– Provides relevant instruction in the development and use of three core financial statements, using benchmarks and ratios and fixing broken finances

– Incorporates exercises that result in the determination of “own-farm” liquidity, profitability, solvency, and efficiency

– Features a pre/post test, and chapter tests for effective program evaluation 3

Chapters

1. Balance Sheet

2. Income Statement

3. Cash Flow Statement

4. Understanding ratios

5. Fixing broken finances

The workbook

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• Pre and post workshop comprehensive test• 5 Chapter Quizzes• Own-farm homework assignments• Class participation and discussion• Guest speakers • Workshop evaluation form

Other features

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• State-wide extension programs– varies by FSA office– more difficult due to loss of educators– technology being used

• Correspondence by producer– mail request to Dr. Hansen for curriculum– mail completed workbook back for grading– receive pass/fail grade from PSU 6

Delivery

• Identify and measure long term impacts of FFAT as it relates to:– Perceived gains in knowledge– Changes in management behavior– Changes in assets and profitability– Changes in attitude regarding farm finance and

lending7

Goals of the FFAT study

• 233 pre-tested surveys sent to FFAT attendees 2001 – 2006

• Pa only• Two follow-ups• 69 respondents

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The survey

• Over half are less than 40 years old– 68% of dairy farmers

• 57% had a HS diploma• 36% had an 8th grade education• 49% had less than 10 years experience in

farming• 77% male, 23% female

About Respondents

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Financial Tool

Poor Good to Excellent

1 2 3 4 5

Using a Balance Sheet Before 25% 27% 34% 9% 4%

After 3% 3% 20% 62% 12%

Using Income Statements Before 24% 26% 32% 18% 0%

After 5% 6% 20% 59% 9%

Fixing Broken Finances Before 16% 34% 34% 13% 3%

After 9% 8% 32% 43% 8%

Using Cash Flow Budgets Before 22% 31% 29% 16% 1%

After 4% 13% 25% 49% 9%

Using Finance Ratios Before 48% 36% 12% 3% 0%

After 15% 12% 41% 26% 5%

Table 4. Percent Respondents (%) Perceived Level of Knowledge by Tool

Increase in perceived knowledge

Number of Changes in Likert Scale

Financial Tool (ranked) 0 1 2 3 4 5Total

Changes

Balance Sheet 13 22 24 7 0 0 91

Income Statement 15 26 17 6 0 0 78

Cash Flow Budget 23 23 17 4 0 0 67

Financial Ratios 21 15 22 7 0 0 80

Fixing Broken Finances 27 22 12 3 0 0 52

Table 3. Number of Respondents by Number of Levels Increased on Likert Scale by Financial Tool

Increase in perceived knowledge

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80% Indicate a gain of at least one step in the Likert Scale

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84% Rated their level of knowledge as “good to excellent” after FFAT

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74% are likely to

make manage-

ment changes

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54% Discuss their finances more capably

15

64% Report a gain in farm profit as a result

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0 10 20 30 40 50 60 70 80 90 100

0

2

4

6

8

10

12

14

16

18

20

FSA Farm Financial Analysis Training 2001 - 2007

Balance Sheets, n=72

Income Statements, n=72

Cash Flow, n=51

Score

Nu

mb

er o

f S

tud

ents

FFAT Chapter test results (Balliet)

FFAT Pre/Post test comparison (Balliet)

0 10 20 30 40 50 60 70 80 90 1000

5

10

15

20

25

FSA Farm Financial Analysis Training 2001 - 2007

Post-test, n=76

Pre-test, n=77

Score

Nu

mb

er

of

Stu

de

nts

Summary

Farm financial training is demonstrated to provide new and at-risk producers with effective educational materials that will significantly increase: their knowledge about financial statements, their use of financial management tools, farm profit and net worth, and improve their comfort and attitudes when dealing with agricultural lenders.

Long-Term Impact of the Farm Financial Analysis Training Curriculum on FSA Borrowers in PA, Balliet, K.L., Douglass, M. B., Hanson, G. D. Journal of Extension, February 2010, Vol 48, Number 1 Art 1FEA6

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Contact

Dr. Greg Hanson, Professor of Agricultural EconomicsEmail address: gdh3@psu.edu Telephone: 1-814-865-6362Fax: 1-814-865-3746Office address: 201C Armsby BuildingUniversity Park, PA  16802

Kenneth Balliet. CED, Sr. Extension Educator

Email address: klb26@psu.edu Telephone: (570) 837-4252Penn State Cooperative ExtensionMiddleburg, PA  17842

Mark Douglass, Extension Educator

Email address: mbd10@psu.edu Telephone: (814) 849-7361 Penn State Cooperative ExtensionBrookville, PA  17842

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Thank You!

This Publication is available in alternative media on request.

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employment without regard to personal characteristics not related to

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Action Director, The Pennsylvania State University, 328 Boucke Building,

University Park, PA  16802-5901, Tel 814-865-4700/V, 814-863-1150/TTY

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Appendix A

Appendix B