In Washington, MIT debuts financial training program for government credit professionals

Last month, 50 credit professionals from 11 federal agencies spent two days in a free crash course on the principles of corporate finance with three MIT Sloan experts.

With $20 trillion in assets and insured obligations, including $3 trillion in outstanding loans, the U.S. government could be considered the world’s largest financial institution. Yet the credit program managers, chief financial officers, and budget directors in agencies like the Department of Agriculture and the Small Business Administration must run credit programs without the resources, star talent, and financial training available to the country’s major banks.

“In general, people take public policy jobs because they’re idealistic and they want to be in the public service,” said MIT Sloan finance professor and MIT Golub Center for Finance and Policy director Deborah Lucas. “But the kind of training they get prior to taking those jobs doesn’t mesh with the fact that once they get there they may end up managing hundreds of billions of dollars of credit.”

“Mission and Metrics,” the two-day program from the center, was designed to close that gap. Attendees worked with Lucas; Doug Criscitello, executive director of the center; and Charles Tansey, a former senior federal credit program manager and recent collaborator with the center. The event took place July 11 and 12 in Washington and was hosted by the IBM Center for the Business of Government. The program was supported by a gift to MIT by Mary and Warren Naphtal.

“Our aim is to get government staff to be focused on mission—what they’re trying to accomplish as an organization along with the tools being used to get there—and metrics: how they measure whether those tools are effective,” Criscitello said.

Instructors urged participants to focus on program designs that contribute to their agency's mission and make good use of taxpayer money. The training also focused on using the latest analytical tools for cost and benefit assessment and management, as well as risk management. It examined the Government Performance and Results Act Modernization Act of 2010, the Digital Accountability and Transparency Act of 2014, and the Obama Administration’s Accountable Government Initiative as models of efforts to improve agency performance and accountability.

The course also covered an important distinction in valuation between the government and the private sector. To determine budgetary costs, government credit programs use a statutorily specified cost accounting approach that omits the cost of risk borne by taxpayers. The alternative of fair value accounting—used broadly outside Washington—provides a more comprehensive measure of the cost of credit. Increasingly, policymakers are requesting information on fair value costs, Lucas said.

Lucas and Criscitello said the response from program attendees was very positive and similar future trainings are being planned, including at least one working with a specific agency.

“The hope is in the long run the people who we reach will be instrumental in the design of future [federal credit] programs and that they’ll take some of the ideas and insights they get from the class and apply them in a way that makes those programs more responsive to the needs of the recipients and more cost-effective for taxpayers,” Lucas said.