BRIDGING THE GAP:

Transforming Knowledge into Action through

Gaming and Simulation

Proceedings of the 35th Conference of the

International Simulation and Gaming Association,

Munich, 2004

Edited by Thomas Eberle, Willy Christian Kriz, Matthias Puschert & Fabian Glötzner

BRIDGING THE GAP: Transforming Knowledge into Action through Gaming and Simulation

Proceedings of the 35th Conference of the International Simulation and Gaming Association, Munich, 2004

Edited by Thomas Eberle, Willy Christian Kriz, Matthias Puschert & Fabian Glötzner

Design and Layout: Adrian Döge

Copyright and Publisher: SAGSAGA – Swiss Austrian German Simulation And Gaming Association; (Gesellschaft für Planspiele in Deutschland Öster-reich und in der Schweiz e.V.); Munich, Germany; www.sagsaga.org

ISBN: 3-00-013989-3

No parts of this work may be reproduced or transmitted in any form or by any means, electron-ic or mechanical, including photocopying, recording, or any information storage and retrieval system, without written permission from the copyright owner.

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Simulation and gaming in public administration: how to teach financial and budgetary management

ANDREI E. VOLKOV, ALEXANDER A. KLIMOV, VYACHESLAV V. SHOPTENKO, MICHAEL J. TUGAEV & SVETLANA I. LYSOVA

1. IntroductionThe experience of successful usage of simulations in business education is not widely transferred to the Master of Public Administration (MPA) and similar programs to train managers in area of public administration. An is-sue of improvement of training process for acting and future representatives of public sector governance is not widely discussed. Among past attempts to develop and implement a simulation in this area only one example was iden-tified by authors - PABLUM: a public administration game (Heard, 1974).

Current programs in public administration in Russia are almost 100% based on lecture approach. Because of the administrative reform, that culminat-ed in major restructuring of Federal Government of Russian Federation in March 2004 the demand for qualified “managers” in public sector increases significantly.

After taking part as consultants in the initiative carried out by World Bank in collaboration with Ministry of Finance of Russian Federation called “Region-al Fiscal Technical Assistance Project” started in 1999 in one of pilot Russian region, authors came to a strong belief, that an effective teaching tool should be developed to enhance public finance reform and provide competent man-agers for Russian regional governments. Successful experience of localizing and utilizing BankExec International – a banking management simulation (Haley, 2002) with acting middle-level executives of Central Bank of Russia as well as a number of other simulations implemented at different Russian universities was also an argument to start this project in early summer 2003. The project of simulation development is still in progress as the simulation is being updated periodically. Still the first experience of implementing this simulation was discussed on annual conference of Association for Business Simulation and Experiential Learning (ABSEL) in 2004 (Volkov, Klimov, Tugaev, Lysova & Shoptenko, 2004) and received very positive feedback and interest of conference participants.

2. Brief overview of the simulationThe Regional public finance management simulation (Figure 1) is based on general principles of public finance management on a regional level with regard to federal states (countries) such as USA, Germany and Russia, where

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regions (states or lands) have significant powers and own budget. The model mainly reflects the structure of the budgetary system in the Russian Federa-tion; still there are many instruments and options that don’t exist in Rus-sian budgetary practice as they were adopted from international experience. The simulation is based on a complex computer model that processes teams’ decisions, calculates results, and makes evaluation using a specific set of pa-rameters.

The simulation is aimed to develop skills and techniques that relate to:

• Managing budgetary revenues, tax administering, regional economy regulation and stimulation;

• Managing current budgetary expenditures (operating budgets) and cap-ital investments (capital budgets);

• Determining sources of budget deficit coverage and managing regional debt;

• Managing regional assets (specifically, state property) in collection of non-tax revenues;

• Developing inter-budgetary relations and regulations on the regional level.

Figure 1: Aspects of public finance management on regional level

Teams of participants are responsible for public finance management of vir-tual regions and act as leaders of Regional administrations’ financial depart-ments (Figure 2). Initially all regions are in equal financial and economic conditions. As a result of implementation of teams’ strategies financial and economic conditions of regions can vary significantly. Along with short-term operating decisions teams have to carefully consider long-term strategies of capital investments into public infrastructures development. Such policies

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can help reach the higher values of target indicators that reflect teams’ per-formance. Teams act considering the changing economic situation and fed-eral norms and standards that are being set by game organizers by means of different economic scenarios and rules.

Teams compete with each other for:

• attraction of external investments into regional economy;• attraction of labor recourses;• regional markets of goods and services for businesses operating in re-

gions.

The winner is determined based on specific set of indicators that reflect con-ditions of regional economy, budgetary sector, budget and debt, amount of rendered public services (services provided at the cost of budget). There are almost 150 indicators calculated by the computer model that reflect the main aspect of managing a regional tax base and public finance. Weighting factors used for determining the value of the final complex performance in-dex (FCPI) are under control of game organizers and depend on goals of the training session. The winner is determined based on the FCPI that evaluates the quality of public finance management.

Figure 2: Structure of the simulation

As it is displayed on Figure 3 the simulated region is represented by:

• diversified by industries economy and territories;• budgetary sector (budget industries);• complex of state regional property;• 10 municipalities - 4 urban municipalities and 6 rural municipalities

mainly specialized on agriculture;• all main groups of population.

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Teams make their decisions based on almost 40 reports reflecting condition of economic and social sectors, regional budget and debt, regional state prop-erty, municipal finance and so forth. Teams’ decisions are put into approxi-mately 20 special decision-making forms. According to the game schedule these forms are passed to instructors and entered into the computer pro-gram. From special instructor’s reports, game organizers can monitor teams’ decisions and alter limits for teams’ decision values, as well as, change indi-vidual game rules. These activities help to keep track of what’s happening in the game and control the game process.

Figure 3: Structure of the simulated region

One game period is equal to one quarter of a year. One game cycle is equal to four game periods or one fiscal (financial) year. During one fiscal year teams perform budget execution for the current fiscal year and budget preparation for the next fiscal year. Budget preparation for the next fiscal year is per-formed in the last two quarters (two periods) of the preceding (current) year (Figure 4). Teams’ decisions become regional budget law.

Typical short and intensive simulation-based training session lasts for four - five days (Figure 5). Usually, during first part of the first day teams get ac-quainted with the instruments of the simulation and the game process and ask any questions about the model and various game procedures. During the general tutorial that follows the trial period of the game, teams analyze how the computer model responses to their decisions; then the first real period of the game starts. In the next three days teams are involved in intensive decision-making and evening discussions of different public finance manage-ment issues. During one day teams make decision for two fiscal years. The length of the training session usually allows teams time to prepare and exe-cute 6 to 8 regional budgets and that means to make 24 to 32 decisions. The

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last day is dedicated to analysis of activities teams performed in the course of game. Teams analyze experience they gained in the past four days and make presentation about their strategies and activities to the panel of judges. The structure of the simulation-based training session can be easily adjusted.

Figure 4: Structure of the game period

Figure 5: Structure of typical simulation-based training session

3. Overview of simulation development processSimulation was based on quite comprehensive consulting experience of de-velopers in the scope of activities related to public finance and public admin-istration. The game development was separated into several stages (Figure 6) that, for authors’ opinion, should be the same for development of any simulation. At present time public finance management simulation is on 6th

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stage and subject of periodical updates and modification. Four previous of-ferings were considered as tests and helped to rework the game model and emphasize aspects that initially were not incorporated into simulation. For instance, on the first implementations of the simulation the game was over-loaded with details and too close to Russian realities. From the other hand it was quite boring, because of large number of monotonous operations re-lated to budget execution phases. In the next offerings these defects were eliminated – reports were simplified and a number of integrated managerial reports were introduced. Also instruments that didn’t exist in Russian prac-tice were added and what is more important, there were many more reasons for competition between regions that led to drastic increase in teams’ perfor-mance and learning effect.

Figure 6: Stages in simulation game development process

Figure 7 displays general outputs of the project. Hardware requirements and software complex of the simulation, structure of project team involved in development of the simulation and participants that were involved in test-ing simulation sessions. At present state of the simulation, 5 people should be involved in organization of simulation session for 20 - 40 participants (2 consultants and game leaders, 2 computer operators and 1 programmer).

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Figure 7: Overview of main outputs of simulation development project

4. ConclusionOne of evident conclusion is that the learning process is much more effec-tive with the public finance management simulation and working in a team helps participants to practice not only methods of analysis and decision-making in the public finance sector but also the teamwork itself as well as other important social and managerial skill.

As another step in the development of the game model it would be reason-able to study specifics of other country’s budgetary system and modify the model as needed for those countries. Any federal country, such as Argentina, Brazil and Mexico as well as economies in transition with federal adminis-trative structure can fit these requirements. Definitely, more updates to the game model will be done soon.

ReferencesHeard, E. L. (1974). Introduction to PABLUM: a public administration game. Simulations, Games

and Experiential Learning Techniques, 1, 85-92.

Volkov, A. E., Klimov, A. A., Tugaev, M. J., Lysova, S. I. & Shoptenko, V. V. (2004). Teaching public finance management through simulation. Developments in Business Simulation & Expe-riential Exercises, 31, 221-228.

Haley, C. W. (2002). BankExec International: Decision Manual. Washington D.C.: American Bankers Association.

AuthorsDR. VOLKOV, Andrei E. Vice-rector Academy of National Economy under the Government of the Russian Fed-eration, Moscow, Russia Email: A.volkov@ane.ru

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DR. KLIMOV, Alexander A. Head, Chair of Economics and Finance Togliatti Academy of Management, Togliatti, Russia Email: Klimov@taom.ru

SHOPTENKO, Vyacheslav V. Deputy Head, Office of Corporate Training Programs Academy of National Economy under the Government of the Russian Fed-eration, Moscow, Russia Email: Scorpio@anx.ru

DR. TUGAEV, Michael J. Head, Chair of Accounting Togliatti Academy of Management, Togliatti, Russia Email: Michael@taom.ru

DR. LYSOVA, Svetlana I. Head, Chair of Management Togliatti Academy of Management, Togliatti, Russia Email: Lysova@taom.ru

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