Budgeting and Financial Management Competencies - Essential Skills For MPA Students

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1 Essential Skills for Financial Management: Are MPA Students Acquiring the Necessary Competencies? Author(s): Gloria A. Grizzle Source: Public Administration Review, Vol. 45, No. 6 (Nov. - Dec., 1985), pp Published by: Blackwell Publishing on behalf of the American Society for Public Administration Stable URL: Accessed: 02/09/ :52 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Blackwell Publishing and American Society for Public Administration are collaborating with JSTOR to digitize, preserve and extend access to Public Administration Review.

2 840 PUBLIC ADMINISTRATION REVIEW Essential Skills for Financial Management: Are MPA Students Acquiring the Necessary Competencies? Gloria A. Grizzle, Florida State University Recent surveys indicate that professional managers rank financial skills high among critical management skills. For example, some 2,000 local government managers judged budgeting/finance skills to be the most important management skill by a 2-to-1 margin.' Again, a survey of 588 graduates of 12 MPA programs also found that graduates judged budgeting and finance course work to be the most relevant in their curriculum.2 As McCaffery concluded in a previous analysis of public budgeting courses, "it would seem that a fiscal crisis of some magnitude has existed long enough that all future public managers ought to be introduced to budgeting."3 The purpose of this paper is to report on the extent to which MPA programs currently teach essential financial management skills in the course work required of all MPA candidates. It does not examine the curriculum of that minority of MPA students who elect to specialize in financial management. We first consider the total amount of course work that MPA candidates generally complete and then compare the content of this course work to those skills that practitioners believe are essential. Given the importance of financial management skills and the requirement by the National Association of Schools of Public Affairs and Administration that these skills be included in the MPA curriculum, how much course work does the typical MPA student get? A recent survey of MPA programs4 indicates that, while 98 percent offer at least one course in financial management, 19 percent do so on an elective instead of a required basis. Of the remaining 79 percent which require students to take such course work to obtain the degree, 61 percent require one course, 14 percent require two, and 4 percent require three or more courses. The typical MPA candidate, then, completes a single course in financial management.5 Jerry McCaffery and Richard E. Zody helped compile the syllabi collection analyzed in this paper. Their help is much appreciated. Most MPA programs require that students complete a single course in the budgeting and financial management area. This course typically gives significant coverage to about a third of the financial management skills that practitioners surveyed deemed essential. Analytic skills, such as cost-revenue analysis, financial condition evaluation, and cost-benefit analysis, are seldom covered in these required courses. Also, most courses do not include significant coverage of governmental accounting or computerizedfinancial modeling. Surveys Identifying Essential Financial Management Skills To what extent does the course work currently required cover the financial skills deemed important for public administrators? A few years ago, Golembiewski characterized the budgeting and financial management core course as often being presented "as 'the politics of budgeting' or sometimes as a macro-overview of fiscal and monetary policy." He goes on to say that "both emphases have their place in a core course," but "80 to 90 percent of the emphases ought to be directed at the complex interaction of techniques and theory at multiple levels of application."6 Two more recent studies have identified financial management skills that practitioners believe are essential. The first study (hereafter referred to as the MacManus survey) analyzed the responses of 60 chief budget officers surveyed in the Houston Standard Gloria A. Grizzle, associate professor of public administration at Florida State University, teaches and does research in public financial management. She has previously held positions in the budget offices of the State of North Carolina and Dade County, Florida.

3 ESSENTIAL SKILLS FOR FINANCIAL MANAGEMENT Metropolitan Statistical Area. More than half of these budget officers regarded 10 of the 26 skills listed on the questionnaire as essential. These skills are listed in Table 1.7 The National Task Force on Curriculum Reform, created by the Section on Budgeting and Financial Management of the American Society for Public Administration, also explored practitioner preferences. In this second study, a working group of this task force, headed by Robert Berne of New York University, compiled the preferences of budget directors in nine major U.S. cities, six state and local government managers, and four professors of financial management. A majority of these task force respondents believed that of the 29 topics included in the survey, 22 listed in Table 1 should definitely be required of all MPA students.8 While the Berne survey categorized skills somewhat differently from those used in the MacManus survey, there is a substantial overlap in skills that both groups of respondents believed important. A majority of both groups believed that students should be competent in budget preparation (both operating and capital), revenue forecasting, cost-benefit analysis, and accounting. Extent to Which MPA Programs Cover the Essential Skills To compare the content of existing required course work with the preferences of the budget officers and managers surveyed, we analyzed required course syllabi for 63 MPA programs.9 Depth of coverage for each skill was rated as falling into one of four categories.' If over half the course was devoted to a single skill, coverage for that skill was rated as dominant. If the skill was a major topic in the course outline and at least one week was devoted to the skill, its coverage was rated as being significant. If the skill was included in the course outline but not listed as a major heading or was allotted less than a week's time, it was rated as having been mentioned. Finally, if the topic was not mentioned, its coverage was rated as absent. Table 2 shows the percentage of the 63 programs that cover each of the skills that a majority of the Berne survey respondents believed should definitely be required of all MPA students. These topics are listed in order of the percentage of respondents who deemed the skill essential. We can see that Golembiewski's characterization of the content of core budgeting courses persists to some extent today. The core course is much more likely to cover the public finance perspectives of taxation than the administrative and management perspectives of taxation. Most courses also continue to cover the political and organizational aspects of budgeting and budgeting approaches, such as PPB and ZBB. Assuming that course offerings perfectly reflected practitioner opinion of the competencies that students ought to acquire, we would expect no difference between the percentage of programs covering a skill and the percentage of people who believe that the skill is Skill TABLE 1 Core Skills in Public Financial Management That a Majority of Survey Respondents Deemed Essential Cost-benefit analysis Budgeting processes (political and organizational aspects) Budget preparation (operating, capital, cash, etc.) Budget analysis (justification, performance indicators, etc.) Budgeting approaches (PPB, ZBB) Financial condition evaluation Oral communication Cost-effectiveness analysis Cost-revenue analysis Taxation (administrative or managerial perspective) Governmental financial accounting and reporting Cash management Expenditure forecasting Revenue forecasting Capital investment analysis, budget formation Taxation (public finance perspective) Debt management Fiscal impact analysis Personnel budgeting Present value concepts Liaison with elected, governing officials Auditing Intergovernmental finance User charges Financial information systems Computerized financial modeling Cost accounting Percent of Respondents Deeming Skill Essential Berne MacManus Survey Survey Indicates that the skill was not included as an item in the survey. 841 essential. The small size of the Berne respondent group means that this group may not perfectly represent the general practitioner population. Based on the group's composition, however, we believe their preferences are sufficiently representative of the practitioner population to use their judgments as a crude index of the skill's importance. Comparing skill coverage to the percentage of people who deemed the skill essential, one can see that analytic skills are underrepresented in the cur- riculum. The greatest underrepresentation is for costbenefit analysis, cost-effectiveness analysis, fiscal impact analysis, present value concepts, cost-revenue analysis, and financial condition. Focusing upon the skills areas that both the MacManus and Berne surveys identified as important,

4 842 PUBLIC ADMINISTRATION REVIEW TABLE 2 MPA Program Coverage of Financial Management Skills Compared with Skills Which Survey Respondents Deemed Essential Respondents Percentage of Programs Covering Skill, Deeming Skill by Depth of Coverage Essential Difference Dominant Significant Mentioned Total (Col. 5- (Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) Col. 4) Skill (%) (%) (%) (%) (%) (%) Cost-benefit analysis Budgeting processes (political and organizational aspects Budget preparation (operating, capital, cash, etc.) Budget analysis (justification, performance indicators, etc.) Budgeting approaches (PBB, ZBB, etc.) 6'/ Financial condition evaluation Cost-effectiveness analysis Cost-revenue analysis Taxation (administrative or managerial perspective) Governmental financial accounting and reporting Expenditure forecasting Revenue forecasting Capital investment analysis Taxation (public finance perspective) Debt management Fiscal impact analysis Present value concepts Intergovernmental finance User charges Financial information systems Computerized financial modeling Cost accounting one sees that most programs do cover the budgeting area. However, while most programs cover general budget preparation in their syllabi, less than a third even mention expenditure or revenue forecasting skills or cost-benefit analysis. Accounting, in contrast to budgeting, receives uneven treatment across programs. In seven of the 63 programs (11 percent), accounting actually dominates the required financial management curriculum. Two of these seven programs require a single course in public financial management, with over half the course devoted to accounting. The other five programs require separate accounting courses. One of these programs requires three accounting courses, only one of which is publicsector oriented. Fourteen other programs spend at least a week on governmental accounting (and in a majority of these cases no more than a week). Twenty-five percent of the programs mention accounting in their syllabi but spend less than a week on it, and 42 percent of the programs do not even mention accounting in their syllabi. Also surprising is the near absence of computerized financial modeling as a topic. Only 5 percent of the syllabi even mention the topic, of which only 3 percent devote as much as a week's time to it. And only two course syllabi indicate that the student has an opportunity to obtain hands-on experience with financial modeling. Given the popularity of electronic spreadsheets, the software that such organizations as the Government Finance Officers Association and the International City Management Association are developing specifically for public financial management, and the ease with which microcomputer exercises on such topics as forecasting, accounting, and costbenefit analysis can be introduced into the curriculum, one might expect to see a rapid movement in this direction in the next few years. Programs vary substantially in the number of financial management skills covered in the required curriculum. Of the top 15 skills listed in Table 2, the number of skills allotted at least one week's time averages 4.9 per program. Table 3 shows how the 63 programs are distributed in terms of the number of these 15 skills to which they allot significant coverage. Fifteen of the 63 programs cover three or fewer skills. One of these programs covers only accounting. Another covers only accounting and financial condition evaluation. The remaining courses that cover only two or three

5 ESSENTIAL SKILLS FOR FINANCIAL MANAGEMENT 843 skills emphasize budgeting and taxation from the public finance perspective. Three of these programs cover taxation plus one of the four budgeting topics (processes, preparation, analysis, or approaches). Two more programs spend at least a week on taxation and each of two of the four budgeting topics. Four programs cover only two budgeting topics, and two more give significant coverage only to three budgeting topics. The remaining two programs covering three or fewer topics spend at least a week on intergovernmental finance and cost-benefit analysis, and one additional topic-budgeting in one case and taxation with a public finance perspective in the other. Only seven programs cover more than half the top 15 skills. At the high end of the distribution is a program which requires all graduates to take four financial management courses that in combination spend at least one week on 11 of the 15 skills. Two other programs that require two courses over 10 of the 15 skills. One program which requires a single course gives significant coverage to nine skills, followed by three other singlecourse programs that cover eight skills. In summary, the required financial management courses on the average give at least a week's coverage to only a third of the financial management skills deemed most important. McCaffery's characterization of the situation in 1980 continues to hold today: "To some extent there seems to be a mismatch between what employers want and what NASPAA schools produce."!" Can the Curriculum Satisfy Practitioner Needs? Academic and fiscal constraints make it difficult to expand the financial management curriculum, either by adding another required course or by allocating more of the existing core time to financial managementopics. If the typical required financial management curriculum is to remain limited to a single quarter- or semester-long course, how can a wider range of the most important financial management skills be covered? A perusal of the syllabi suggests two avenues for making room for significant coverage of more of the important financial management skills. One is to retain but spend less time on the budgeting and taxation topics that are deemed important. A second is to delete some topics now being covered but not deemed essential by a majority of the survey respondents. Among these would be budgeting theory and a miscellany of topics such as risk management, pensions, purchasing, short-term asset management, and collective bargaining. Not everyone would agree that these topics are less important than some of those that ranked highest in Berne's survey, and we do not suggest that programs should not differ in what they choose to emphasize. However, programs as a whole do seem to be out of step with practitioner preferences elicited in the MacManus and Berne surveys. If future MPA graduates are to compete successfully with MBA graduates for public financial management positions, NASPAA programs must TABLE 3 Frequency Distribution of Number of Financial Management Skillsa That MPA Programs Cover Number of Skills Number of Programs Percentage of Covered (N = 63) Programs anumber of the 15 highest rated skills in the Berne survey to which each program allotted significant coverage in its required financial management curriculum. teach those analytic skills that practitioners deem essential. Accordingly, the National Task Force on Curriculum Reform has recommended that all MPA programs devote at least 60 hours of class time to public financial managementopics. All MPA students would be required to cover material on governmental financial accounting and reporting, budgeting, revenues, analytical and managerial techniques for financial management, and making and financing investment decisions. 2 Program emphases are at least in the short run limited by the disciplines in which the instructors are based and the competencies they bring to their jobs. It is true that everyone cannot be an expert in every financial management skill which is deemed important. Most of the financial management skills being neglected, however, are not esoteric subjects which require long years of study to master. It does not seem too much of a burden to ask the political scientist teaching budgeting to learn the basics of governmental accounting or the economist teaching taxation to learn about budget preparation. Also, given the widespread use of personal computers, basic competence in computerized financial modeling is not an unreasonable expectation. Both instructors and practitioners should commit themselves to designing financial management curricula that provide the analytic skills that MPA students need. What seems most lacking is an appreciation among instructors of the skills that practitioners deem essential coupled with an appreciation among practitioners of their responsibility to share with MPA programs, on a continual basis, their opinions about the financial management skills that MPA students need to acquire. Given a commitment by both parties to work together, there can, in only a few years and even without increased resources, be a substantial change in the mix of skills that MPA students acquire.

6 844 PUBLIC ADMINISTRATION REVIEW Notes 1. Richard J. Stillman II, "Local Public Management in Transition: A Report on the Current Status of the Profession," in Municipal Year Book 1982 (Washington, D.C.: ICMA, 1982), p Nicholas Henry, "The Relevance Question," in Guthrie S. Birkhead and James D. Carroll, eds., Education for Public Service 1979 (Syracuse: Maxwell School of Citizenship and Public Affairs, Syracuse University, 1979), p Jerry McCaffery, "Analyzing the Pedagogic Deficit in Budgeting," in Thomas D. Lynch and Jack Rabin, eds., Handbook on Budgeting and Financial Management (New York: Dekker, 1983), p The 226 programs listed in the 1982 and 1984 directories of the National Association of Schools of Public Affairs and Administration were sent mail questionnaires. Of this group, 181, or 80 percent, responded. Reported in Gloria A. Grizzle, "Budgeting and Financial Management Curriculum Patterns: A Survey of N.A.S.P.A.A. Masters Degree Programs," in Working Papers on Graduate Curriculum in Budgeting and Financial Management (National Task Force on Curriculum Reform, Section on Budgeting and Financial Management, American Society for Public Administration, 1985), pp Ibid., p Robert T. Golembiewski, "The Near-Future of Graduate Public Administration Programs in the U.S.: Some Program Minima, Their Common Violation, and Some Priority Palliatives," Southern Review of Public Administration, vol. 3 (December 1979), p Susan A. MacManus, "Budgetary Skills Needs of Different Types of Local Governments: A Market Survey" (paper presented at the American Society for Public Administration annual meeting, 1984), p Robert Berne, "Core Skills and Skills Concentrations," in Working Papers, op. cit., pp Of the 125 MPA programs identified as requiring at least one budgeting or financial management course, 63 provided a total of 87 syllabi for these courses that were sufficiently detailed to permit classifying the extent to which each course covered each of the skills deemed essential. 10. This classification is similar to that used previously in Ronald M. Joseph, Cases in Public Sector Financial Management (Curriculum Development Project, Public Management Program, School of Management, Boston University, 1981); Jerry McCaffery, "Analyzing the Pedagogic Deficit," p McCaffery, "Analyzing the Pedagogic Deficit," p Graduate Curriculum in Budgeting and Financial Management -Recommendations for Reform (Final Report of the National Task Force on Curriculum Reform, sponsored by the Section on Budgeting and Financial Management of the American Society for Public Administration, 1985), pp. 3-5.