ENVISIONING

THE FUTURE OF
PENNSYLVANIA
TREASURY

ENVISIONING
THE FUTURE OF
PENNSYLVANIA
TREASURY

With remembrance of Catherine Baker Knoll

PLEASE NOTE: SUPPORTING DOCUMENTS AND APPENDICES, AS WELL AS FUTURE VERSIONS OF

E-TREASURY PENNSYLVANIA AND ACCOMPLISHMENTS, CAN BE FOUND AT WWW.PATREASURY.ORG

1.0

LETTER FROM THE TREASURER

06

2.0

EXECUTIVE SUMMARY

10

3.0

REALIZING TREASURYS VISION

3.1 SAFEGUARDING PUBLIC FUNDS

20

3.2 MODERNIZING THE BUSINESS OF TREASURY

34

3.3 REDESIGNING INFORMATION TECHNOLOGY

48

3.4 OPTIMIZING SAVINGS AND REVENUES

56

3.5 SETTING STANDARDS FOR FINANCIAL SERVICES

62

3.6 TAPPING THE POTENTIAL OF TREASURYS EMPLOYEES

68

ROBIN L.
WIESSMANN

Dear fellow Pennsylvanians:

It is my great pleasure to present to you Envisioning the Future of Pennsylvania Treasury (or e-Treasury
Pennsylvania), a strategic plan that will provide a vision for the people and programs of the Pennsylvania
Treasury Department now and into the future.
All Pennsylvanians are stakeholders in the Treasury Department. When I was sworn in as State Treasurer in
April 2007, I promised that I would direct my energies toward moving Treasurys operations forward. My term,
which ends in January 2009, freed me from some of the pressures that inevitably attend the election of a
Treasurer. I embraced the unique opportunity and obligation to take a good, hard look at Treasurys operations
and ask how the Department could be more effective.
Consequently, I launched a comprehensive review of the Department around the concept of governance and
best practices: finding ways to renew our commitment to accountability and transparency, continually evolving
as an organization, and developing concrete internal decision-making processes, procedures, and policies so
that the future operations of the office are conducted properly and soundly.
In addition to being the clearinghouse for Commonwealth funds, Treasury serves as the processing hub of
the government through interfacing with virtually all state agencies. Todays complex and rapidly changing
operational and financial environment requires that the Department be responsive and prepared to deal with
evolving requirements by providing strategic planning, greater depth of professional expertise, and the necessary information technology critical components that are currently under-emphasized and under-funded.
If Treasury is not equipped to modernize, the Departments operations will be significantly jeopardized and
the effects will be felt across the Commonwealth.

LETTER FROM THE TREASURER

The strategic plan I am releasing today is the first version of what I hope will be a blueprint for continually
adapting to todays complex environment. It is an ambitious, forward-looking plan that seeks to ensure that
the Pennsylvania Treasury Department is continuously evolving, employing best business practices and
making the changes necessary to increase the effectiveness, efficiency, and economy of the Departments
operations for the benefit of all its stakeholders.
Treasury has already begun to implement many of the plans recommendations. Within the document,
I have suggested that the Department engage in strategic planning every two years and establish goal
timelines, annual reviews, and public reporting requirements. The recent turmoil in the financial markets
and revelations of corporate dysfunction underscore the importance of strategic planning, public reporting,
and good governance areas in which Treasury should be a leader.
Organizations that have a vision and clear governance principles can navigate turbulence, nimbly adapt to
current and future challenges, and effectively serve their stakeholders. As an entity accountable to the publics
trust, Treasury must embrace such principles if it is to become an optimally efficient and effective organization.
Sincerely,

Robin L. Wiessmann
State Treasurer

LETTER FROM THE TREASURER

INTRODUCTION

IN ESSENCE, E-TREASURY OFFERS:

An ideal Treasury Department performs many roles

simultaneously, effectively, and with transparency.

A route to becoming a mission-based Department.

Visualizing that ideal is one thing. Realizing it is

quite another.
The strategic plan that follows, referred to as
e-Treasury, is designed to help make Treasury
operate more effectively, efficiently, and economically. It also serves as a blueprint for tackling the
challenge of continuous improvement by, first,
recognizing the permanence of change and, second, being willing to embrace it with selectivity and
purpose. Most importantly, e-Treasury promotes
good governanceoffering specific recommendations to improve the Departments decision-making
and policy implementation process.

A governance structure that protects the Commonwealths funds.

A culture that puts stakeholders first.
A managerial structure that continually evolves
with modern business practices and that embraces a culture of adaptation.

KEY FOCUS AREAS, STRATEGIES,

AND ACTION ITEMS
e-Treasury is organized around six key focus areas,
which serve as a concrete plan for action. Each focus
area contains strategies that will help the Department
work towards its ideal performance. The focus areas
and a sampling of major strategies are:
Safeguarding Public Funds

As the expression e-Treasury suggests, the Department will be progressive in both outlook and performance and one that persistently and purposefully
modernizes its business practices.

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EXECUTIVE SUMMARY

Create a governance structure for internal

management decision-making processes.

Strengthen pre-auditing and auditing practices, including pre-audit of the legislative and
judicial branches.
Prohibit political contributions from service
providers.
Seek outside, neutral, qualified investment advice through independent investment advisors
and an advisory council.
Modernizing the Business of Treasury
Continually assess the Departments organizational structure and employ biannual strategic
planning.
Continually develop, maintain, and enforce
financial asset management policies consistent
with institutional investing standards, and in
accordance with an ever-evolving investment
environment.
Develop a centralized information system, including a Web-based payment tracking portal.

Redesigning Information Technology

Establish an I.T. strategic vision and organizational template.
Create a comprehensive I.T. security framework.
Integrate key Department business functions
within network databases and applications.
Optimizing Savings and Revenue
Examine core functions to reduce operating
redundancies and streamline processes.
Evaluate all elements of asset management,
including asset allocation strategies, cash flow,
and fee structures.
Setting Standards for Financial Services
Manage all forms of payment transactions
and evolving requirements of agencies and
business partners.
Leverage Department relationships, share
knowledge, and tap external expertise.

EXECUTIVE SUMMARY

13

 Strengthen the Departments commitment to

diversity.

money. While simplistic, those few words go straight

to the heart of the Departments paramount duty: to
safeguard the Commonwealths financial assets
throughout the receipt, investment, and disbursement process. Most notably, the Department invests
close to $20 billion and serves as custodian of more
than $100 billion of public funds.

The focus areas and strategies were developed

by examining the Departments mission, values,
vision, and roles. Each strategy contains action items,
or specific steps Treasury must take to execute the
proposed strategies.

However, the Treasury Department also serves

Pennsylvanians in other personal and visible ways
designed to help all Pennsylvanians achieve financial success. Among the Departments consumer
programs are:

With focus areas, strategies, and action items in

place, e-Treasury is a true strategic plana map
that outlines the direction, priorities, and necessary
changes that will make Treasury an ideal organization
in the future.

Unclaimed Property, which reunites individuals

with forgotten bank accounts, unused gift certificates, unclaimed insurance benefits and other
valuable assets.

Tapping the Potential of Treasurys Employees

Develop a comprehensive workforce development program.
Develop a comprehensive recruiting program.

WHAT TREASURY DOES

Ask any Pennsylvanian what the Treasury Department does and, chances are, the answer will be:
Well, since its called Treasury, the Department
must be responsible for keeping track of the states

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EXECUTIVE SUMMARY

The nowU 529 College Savings Program, which

helps families save for college.
Better Choice, which offers hard-working Pennsylvanians an alternative to predatory payday loans.

EXECUTIVE SUMMARY

15

 PA INVEST, which offers the investment of

Commonwealth payments in a family of highly
rated investment pools designed specifically for
local government and nonprofit groups.
Pennsylvanias Contracts e-Library, which provides
an unprecedented level of accessibility to public
information by offering an online centralized source
of comprehensive information about Pennsylvania
government goods and services contracts.
Keystone HELP, which provides low-interest loans
to help homeowners reduce their energy costs.
The Departments reach also extends to the many
state boards on which the Treasurer serves. For
example, as the chairperson of the Board of Finance
and Revenue, the Treasurer participates in selecting
the banks where state funds are deposited and setting
the interest rates paid on them. The Treasurer also
serves on boards that oversee state pension funds
and has a voice in how these funds are managed
and invested. Other board-related activities allow
the Treasurer to help provide Pennsylvania schools
with tax-exempt financing for modernization, make
grants to distressed communities, and finance the
purchase of rental housing for residents in need.

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EXECUTIVE SUMMARY

Since 1776, each State Treasurer has added to the

Departments historical record of work performed
effectively on behalf of the Commonwealths citizens. However, each new Treasurer must ask,
How do I make the Departments operations better
(more relevant, accountable, transparent, and costeffective) to adapt to the challenges of a continually
changing marketplace?

BECOMING A MISSION-BASED
DEPARTMENT
The Pennsylvania Treasurys daily functions are
guided by a series of principles that reflect the
Departments mission, values, and ultimately, its
vision of the ideal Treasury.
TREASURYS MISSION
Treasurys mission is to provide effective stewardship
over the financial assets obtained by and entrusted
to the Commonwealth.

TREASURYS VALUES

TREASURYS VISION

To achieve this mission, Treasury adheres to four

central values:

The Pennsylvania Treasury Department strives to

lead the way in which treasuries do business.

Integrity: Upholding the highest standards of

integrity when handling the Commonwealths
financial assets, putting the publics interest first,
and rejecting all self-interest and self-dealing.

The way to achieve that vision is by becoming a

mission-centric Department focused on embracing
the five key roles of:

Accountability: Recognizing that the Department

is accountable to the public for providing timely,
courteous, and quality service.

A trusted, expert financial guardian that minimizes

risks and seeks superior, risk-adjusted investment
returns.

Transparency: Conducting all activities with openness and transparency, and enabling stakeholders
to understand operations and actions.

A business that rapidly embraces evolving technologies and readily implements best practices
found in peer organizations.

Dedication: Demonstrating a superlative work ethic

in daily operations while embracing workforce
diversity and encouraging employee input.

A service provider that responds to customer

requests on a timely basis at the lowest possible
cost.
The standard setter for the Commonwealths financial operations and procedures.
A workplace in which employees skills evolve
with the business environment and are valued,
respected, and dedicated.

EXECUTIVE SUMMARY

17

THE E-TREASURY
PLANNING PROCESS
e-Treasury commenced as a study to examine the
Departments business processes and operations.
It is important to understand that e-Treasury is not,
nor does it purport to be, a comprehensive scientific study of the Treasury Department. Rather, it is
designed to serve as a tool for modernizing operations
and good governance. Treasury is focused on improving its decision-making process to incorporate diverse
viewpoints, foster accountability and greater transparency in operations, and create stronge safeguards
against fraud, abuse, and corruption.
Guided by the Departments vision, Treasury began
by identifying all Pennsylvanians as key stakeholders
in the Department, because Treasury operations and
services impact constituencies, individuals, and groups
across Pennsylvania on a daily basis. Treasurys senior
staff identified the long-term needs of the Department, how to become a more dynamic organization,
and what it would take to change the way treasuries
do business. Then, the e-Treasury study incorporated
research on the operations of other state treasuries

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EXECUTIVE SUMMARY

and gathered information from Treasury directors and

employees. Finally, a commission comprised of 16
experts, in areas pertaining to Treasurys operations
from the financial sector, government, academia, and
business, was formed to provide objective justification
and guidance for the e-Treasury recommendations.
THE FUTURE OF E-TREASURY
As a strategic plan, e-Treasury bridges the gap
between the Department as it currently exists and
the Department as it can become.
The journey will, of necessity, occur in stages.
Considerable progress is already being made and
will continue throughout the time remaining in the
present administration. Further advances will be left
to succeeding treasurers. Successive treasurers can
refer to e-Treasury not only as a guide for improving
the Department, but also as a template for creating
and communicating additional priorities and directions
as government, business, and technologies evolve.
As the Department works to become more transparent
and to keep pace with ever-changing operations and

the financial environment, e-Treasury will be updated

on an annual basis by future administrations and will live
within the public domain. Ongoing updates, progress
reports, timelines, and future versions of e-Treasury
will also be available online at www.patreasury.org.
In addition, www.patreasury.org contains support documents and appendices that provide more information about e-Treasurys six key focus areas.
e-Treasury will remain a permanent, but dynamic,
initiative within the Department. The long-term goals
and focus areas embedded into the following pages
of this report will continue to serve as a blueprint for
continuous evolution as an organization and good
governance a commitment to sound decisionmaking processes, accountability, and transparency.
The concept of good governance must remain a
guiding principle if Treasury is to successfully fulfill
its mission of providing effective stewardship over the
Commonwealths funds now and in the future. By
being connected to all agencies and trusted with
billions of dollars in state funds, the way in which Treasury conducts its operations impacts all Pennsylvanians.

EXECUTIVE SUMMARY

19

SAFEGUARDING
PUBLIC FUNDS

EFFECTIVE STEWARDSHIP
AND PROTECTION OF THE
COMMONWEALTHS ASSETS IS
TREASURYS PRIMARY MISSION.

Embedded within the Constitution of the Commonwealth, the Pennsylvania Treasury Departments
primary responsibility is to safeguard taxpayer funds
and to make certain those dollars are managed and
invested with the utmost integrity and prudence. To
fulfill this duty most effectively, Treasury must adhere
to control measures that will ensure the quality of
its performance despite how money passes through
its hands (e.g., receipts, investments, or payments).
Receipts must be deposited in strong financial institutions. Taxpayer dollars must be invested in a way
that meets the stringent goals of safety and liquidity. Credit quality and risks must be considered an
essential element of the investment strategy. Through
a robust pre-audit function that allows for a thorough
investigation of intended transactions, payments
must be correct and made only for lawful purposes.
Achieving a superior level of quality will require
Treasury to maintain superior governance and management practices, and the strategies and action
items below will guide Treasury as it integrates these
practices into its everyday business.*

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REALIZING TREASURYS VISION

INTERNAL GOVERNANCE
Create, update, and maintain a comprehensive internal governance structure to formalize decision-making
processes, policies, and procedures that are critical
for Treasurys internal management.
An internal governance structure establishes a
framework on how the Department is managed
and simul-taneously creates transparency, allowing
stakeholders to see how the Department conducts
its operations. ( 01 )
ACTION ITEMS
Establish and maintain a governance structure for
the Department that consolidates and improves
existing procedures for how Treasury works, with
a focus on three main elements: tranparency in
operations, ethics and promoting a culture of
high business standards, and accountability in
decision-making by employees and management.
Require an annual review of the structure and
revise as necessary as part of a comprehensive
assessment of Treasurys performance.

*Please refer to e-Treasury report supporting documents at www.patreasury.org

Develop and implement a principles-based code

of conduct for financial services providers and
business partners that will complement existing
rules when engaged in transactions with Treasurys
funds or business.
A principles-based code will ensure the quality and
transparency of business relationships and prohibit
self-dealing. ( 02 )
Revise rules and devise a principles-based code
of conduct for Treasury employees, not only to
address Commonwealth and Treasury-specific
issues but also to incorporate private-sector best
practices.
Ensure appropriate political contribution relationships between financial service providers, other
service providers, legislators, state officeholders,
and the office of Treasurer, which should be
enacted through legislation. Pending such legislation, Treasury should adopt a comprehensive policy
that applies to all service providers. The policy
should include provisions that service providers
may not: (1) contribute to the campaign of a sitting

Treasurer or announced Treasurer candidate; (2)

be selected or expand a relationship with Treasury
if the Treasurer had business dealings or received
political contributions from the provider within two
years prior to taking office; and (3) have business
dealings with a former Treasurer for two years
following the Treasurers term of office, while
simultaneously providing services for Treasury.
This policy should apply to all legislators and state
office holders.
Publish an annual report on the Departments
operations, accomplishments, finances, and
investment activities. The report will increase
transparency by capturing the previous years
activity and describing goals, challenges and
projected outcomes for the upcoming year. It will
be available online for the public, state agencies,
business partners, and other stakeholders.

SAFEGUARDING PUBLIC FUNDS

23

01

AN INTERNAL GOVERNANCE
STRUCTURE WILL ESTABLISH
A MANAGERIAL FRAMEWORK
AND CREATE TRANSPARENCY SO
STAKEHOLDERS CAN SEE HOW
THE DEPARTMENT FUNCTIONS.
POLITICAL CONTRIBUTIONS AND
DISCLOSURE
Implement a principles and rule-based policy to
prohibit influence on Treasury Department decisions
as a result of political contributions.
Service providers should be hired on the basis of their
ability to provide the best possible services available
in the marketplace, which means disclosing political
contributions and revealing potential conflicts of
interest to ensure transparency in the hiring process.
Effective stewardship must preclude conflicts of
interest and self-dealing. ( 03 )
ACTION ITEMS
Seek enactment of legislation that restricts political
contributions from financial service providers who
have or seek non-bid contracts from the Treasurer.
Pending such legislation, Treasury should adopt
the restriction as a comprehensive policy similar to
that placed on brokers, dealers or municipal securities dealers by the Municipal Securities Rulemaking Board (MSRB). Treasury would limit the
eligibility of financial service providers who contribute or whose employees contribute to any

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REALIZING TREASURYS VISION

political candidate in Pennsylvania or to any political committee as defined by the Pennsylvania

Election Code in violation of the limits.
Establish strict monitoring of financial service
providers to ensure compliance of political contribution reporting requirements. Prior to engagement by Treasury, each prospective provider of
financial services shall provide a copy of any
report of political contributions by the provider filed
with the Secretary of the Commonwealth pursuant
to Section 1641 of the Pennsylvania Election Code,
25 P.S. 3260 (a) (relating to contributions of
businesses awarded no-bid contracts). The prospective provider shall also provide a report of
all contributions made by it, its principals, and its
employees to any political candidate, political
committee, or any independent expenditure made
as defined by the Pennsylvania Election Code.
Upon engagement, the provider shall provide the
same reports annually.

Require greater disclosure from providers. Prior to

hiring, and at least annually thereafter, require
each prospective service provider to disclose
political contributions made during the preceding
12 months (those made by the provider, the
providers firm, or by a political committee
associated with the provider). The disclosure must
specify political contributions made to candidates
for elective office in Pennsylvania and to any
political committee established for the support of
such a candidate, as well as contributions made
for the transition and inaugural expenses of an
elected official.

EXTERNAL INVESTMENT ADVICE

Obtain outside experts to provide opinions and
neutral, qualified investment advice on how to best
manage the states funds. Utilize the experts by
incorporating them into the investment manager
selection and monitoring processes to ensure that
the Treasurys investments are based on collaborative
consensus, and quantitative and qualitative factors.

ACTION ITEMS
Retain one or more independent financial advisor(s)
to provide expert investment advice and to help
Treasury avoid conflicts of interest. The nature of
this position requires that an advisor be held to the
highest standards of compliance, governance,
and ethics. Above all, an independent advisor
must be free of conflicts of interest pertaining to:
Financial obligations, revenue sharing, or other
financial arrangements with investment managers.
Soft dollar arrangements.
Political contributions to public office holders
in Pennsylvania (see p. 24).
Directed brokerage.
Create a voluntary Investment Advisory Council
comprised of qualified financial experts outside of
Treasury to provide the Department with augmented
expertise in the areas of financial assets administration and investing, as well as to offer outside
expert financial advice. Establish criteria for ap
pointments, lengths of terms, and other operating
procedures.

SAFEGUARDING PUBLIC FUNDS

25

02

A PRINCIPLES-BASED CODE
WILL ENSURE THE QUALITY AND
TRANSPARENCY OF BUSINESS
RELATIONSHIPS AND PROHIBIT
SELF-DEALING.

04

INVESTMENT OVERSIGHT
AND PROCESS IMPROVEMENT
MEASURES WILL FURTHER
PROTECT TREASURYS
FUNDS AND HELP PREVENT
MISMANAGEMENT.

03

PROVIDERS MUST NOT MAKE

POLITICAL CONTRIBUTIONS
AND MUST SHARE POTENTIAL
CONFLICTS OF INTEREST TO
ENSURE OBJECTIVITY AND
TRANSPARENCY IN THE
HIRING PROCESS.

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REALIZING TREASURYS VISION

SAFEGUARDING PUBLIC FUNDS

27

MANAGING INVESTMENTS
Rigorously oversee and effectively manage investment activities by establishing and maintaining clear
and prudent goals and policies that encourage
reasonable risk management and ensure investment transparency.
Rigorous investment oversight and process improvement measures will further protect Treasurys funds
and help prevent, deter, or detect mismanagement
by Treasurys staff and providers. ( 04 )
ACTION ITEMS
Develop a bottom-up approach to implementing a
comprehensive monitoring and reporting framework to match internal and external risks to
policies, procedures, controls, reports, and
employee evaluations. Higher risks should be
reported more frequently to senior staff; appropriate
personnel should address lower risks periodically
with summary reporting to senior management.
The risk profile of Treasury should be looked at
comprehensively and realigned due to changing
statutory and executive policies.

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REALIZING TREASURYS VISION

Conduct performance audits of asset management

within Treasury, particularly investments, focusing
on compliance with Treasurys strategies and
policies, understanding of the actual investment
approach of managers, and comparisons with
practices in organizations similar or comparable
to Treasury.

allow Treasury to better determine the suitable

placement of monies into the various investment
pools that Treasury maintains. Those funds and
accounts that have frequent deposits and withdrawals should be placed in a pool with a more
stable net asset value. This will ensure that a
Commonwealth fund or account does not have a
recognized loss due to market volatility in conjunction with short transaction times between deposits
and withdrawals. This should even occur if such
fund or account has a steady core level of money.
In such instances, Treasury should evaluate the
division of funds between various investment pools.

Develop, implement, and continually improve

formal asset allocation procedures. This item
requires establishing comprehensive and
continuing efforts to monitor and improve
Treasurys cash forecasting capabilities, and
enhancing communication with other Commonwealth Departments to ensure that investment
assets match Treasurys current and expected
liabilities. These new procedures must reflect a
policy that is flexible enough to accommodate the
dynamic needs of Treasury while also addressing
safety, liquidity, and return.

Develop, implement, and continually improve

policies, procedures, and tools to monitor cash
flows/liabilities, monitor and address investment
manager performance, and monitor risks. Draw on
other Treasury and best-in-class resources to
extend capabilities.

Regularly conduct a systemic evaluation of all

Commonwealth funds and accounts in order to
determine the frequency of deposits and withdrawals from Treasury. A thorough evaluation will

Monitor and amend Pennsylvania Investment

Principles to evaluate Treasurys exposure to
strategic risk factors, and incorporate the principles
as guidelines for the broader investment decision-

making process. Strategic risk factors pertaining

to long-term investing include: corporate culture,
emerging macro-economic trends, environmental
growth potential, possible future loss of a license
to operate, global climate change, human capital,
stakeholder practices, strategic philanthropy, terrorism, and unquantifiable or undisclosed environmental liabilities.
Develop, implement, and continually improve risk
identification, measurement, and mitigation policies
and procedures, such as:
Liquidity Risk: Continually monitor and assess
liquidity needs and ensure that asset allocation
appropriately provides liquidity.
Concentration Risk: Limit the assets being
managed by a single firm or related providers to
a certain percentage of Treasurys total assets.
In addition to commonality of ownership or
management, limiting Treasurys concentration
exposure shall also include assessing fee sharing
and referral fees as part of the determination of
related providers.

SAFEGUARDING PUBLIC FUNDS

29

05

RESEARCH SHOWS ORGANIZATIONS WITH WELL-DEVELOPED

CORPORATE GOVERNANCE
STANDARDS PRODUCE QUALITY
RESULTS.
Organization Risk: Limit the assets being
managed by a single firm or related providers to
a certain percentage of the providers overall
business.
Portfolio Risk: Conduct cash-flow analyses to
determine portfolio composition; use stresstesting and simulation models to assess portfolio risk.
Portfolio Discipline: React proactively and
quickly to Treasury needs by establishing and
monitoring portfolio and sector benchmarks,
implementing and enforcing sector ranges,
and establishing triggers for rebalancing based
on risk measures.
Nonstandard Risks: Monitor and address
Headline Risk (a negative news story that
causes a significant change in the value of an
investment), Talent Risk (lack of senior management succession planning and problems
retaining staff), Business Risk (e.g., continuity
of operations planning, diversity of clients and
businesses), and Single Improbable Event Risk
(e.g. terrorism, natural disaster).

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REALIZING TREASURYS VISION

Create procedures to consistently and uniformly

address financial services provider screening,
selection, hiring, monitoring, and termination.
Develop a watch list and score cards to evaluate
providers.
Conduct a thorough review of, and update,
Treasurys proxy voting policy as needed to
promote and instill good corporate governance
practices. Implement procedures to ensure that
Treasurys shares are voted appropriately.
Identify regulatory benchmarking standards and
best practices. Adopt non-mandatory private
sector and regulatory benchmarking standards
that represent best practices.

EXTERNAL (CORPORATE)
GOVERNANCE
Require all service providers to operate within a
reasonable, responsible code of governance that
fosters ethical behavior, transparency, and the
interests of all stakeholders.

Research shows that organizations with well-developed

corporate governance standards produce quality
results and perform exceptionally well. ( 05 )

Committee and Investment Advisory Council

(see p. 64).

AUDITING
ACTION ITEMS
Conduct comprehensive, ongoing compliance
oversight programs for all service providers,
including information and software service
providers, financial service providers, banks,
auditors, and record keepers.
Strengthen criteria and adopt principles-based
requirements for selecting, monitoring, and
replacing financial service providers. Initiate regular
meetings with providers, conduct research and
ongoing evaluations, perform periodic reviews,
and if warranted, conduct investigations to ensure
consistent, quality performance.
Identify and monitor potential conflicts of interest
among financial services providers, who under
existing law are already prohibited from sharing
business interests with the Treasurer and staff.
In addition to meeting with the Treasurer, financial
services providers will meet with the Investment

Develop and maintain pre-payment auditing practices

to ensure that Treasury makes accurate payments on
a timely basis and responds efficiently to automation
trends in payment processing. Preserve Treasurys
responsibility to make independent decisions about the
lawfulness and propriety of disbursement requests.
ACTION ITEMS
Expand the Departments pre-audit program to
ensure that Treasury provides appropriate fiscal
oversight over not only the executive branch, but
also the legislative and judicial branches. A preaudit of all requests should be made to ensure
that all requisitions are legally sufficient regardless
of whether the requisitions are submitted by a nonexecutive branch entity. Requisitions that are
legally insufficient should be returned to their
source for correction and revision. Treasury should
ensure that all payments are lawful and correct,
which entails fully utilizing the pre-audit function.

SAFEGUARDING PUBLIC FUNDS

31

06

TREASURY PLAYS AN IMPORTANT

ROLE OVERSEEING THE STATES
FINANCIAL AFFAIRS, AND MUST
CONTINUALLY ADAPT TO ENSURE
LEGALITY AND ACCURACY IN
AUDITING AND OPERATIONS.
Continue to adapt to automation, electronic
processing, and other new methods of handling
payment requests.
Enhance pre-audit efficiency and productivity with
a specific focus on agency system controls, workflow requirements, and payment authorization
roles. Adopt continuous auditing practices to:
improve payment analyses and expedite the
correction of errors; minimize individual manual
audits; and free up resources to conduct more
in-depth reviews of high-risk payments and
complex payments to health and social service
organizations.
Supplement the pre-audit review process with a
more comprehensive investigation when a payment request triggers questions of legal basis for
payment.
Conduct ongoing reviews and risk assessments
of Treasurys main operational elements. Use
Treasurys internal auditors to evaluate the
Departments various control strategies against
best practices and standards in the financial
industry.

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REALIZING TREASURYS VISION

Increase the scope, timeliness, and efficiency of

unclaimed property reporting for holders. Provide
alternatives to lengthy comprehensive audits when
appropriate, and encourage property holders to
use their own due diligence efforts to locate
rightful owners more quickly.
Work with Department of Revenue to carry out
auditing of Credit Carry Forward (CCF) Personal
Income Tax Returns.
Ensure that Treasurys auditors maintain the professional skills required in a constantly changing
environment by developing a school recruitment
program and providing advanced training and
certification requirements. The skills of Treasurys
auditors determine how effectively the Department
lawfully disburses payments.
Treasury plays an important role overseeing Pennsylvanias financial affairs and must continually assess
and adapt its processes to ensure the legality and
accuracy in auditing and operations. ( 06 )

PROCESS EVALUATION
Continuously monitor and evaluate business processes to achieve greater efficiency and to ensure that
effective safeguards are in place, thus strengthening
the Departments ability to manage the quality of its
operations and daily output.
ACTION ITEMS
Include all of Treasurys bureaus in planning the
Departments internal budgetary process. Pursue
zero-based budgeting model approach. Increase
the Departments advocacy into the development
of the Administrations budget as well.
Conduct an end-to-end review of the entire payment
process to ascertain what the Departments strengths
and weaknesses are relative to internal control and
redundancy. Refine and reconfigure the payment
process, as appropriate, by eliminating unnecessary
documentation steps and redundancies.
Establish a working group with the Department of
Revenue and Office of the Budget to continually
assess the reliability and accuracy of cash flow
forecasts and to conduct trend analyses.

Develop a Comprehensive Continuity of Operations

Plan to enable the Departments functions and personnel to respond to and recover from natural or
man-made interruptions in operations. The plan
will outline recovery of critical business functions
in the areas of (1) testing and exercise progression, (2) measuring performance readiness, and
(3) vendor and business partner resiliency. This
plan has implications both within Treasury in dealings
with other governmental agencies, customers,
vendors, and service providers.
Standardize and streamline procurement practices
by monitoring the expiration dates of existing
contracts and allowing sufficient time to consider
renewal options and obtain the greatest level of
response from interested new vendors. Develop a
system to track the procurement needs of
Treasurys various bureaus and offices. Continue
to take advantage of the procurement opportunities
provided by the Department of General Services in
order to obtain the best possible prices for goods
and services.

SAFEGUARDING PUBLIC FUNDS

33

MODERNIZING
THE BUSINESS
OF TREASURY

TO KEEP PACE WITH AN

EVOLVING WORLD, TREASURY
MUST PURPOSEFULLY AND
CONTINUOUSLY REASSESS
AND REENGINEER ITS
PROCESSES AND FUNCTIONS.
Treasury is largely defined by the performance of its
core functions, such as processing receipts of revenue
and requests for payment, investing funds, auditing,
and managing cash flow. Treasury must reexamine,
at least annually, how it carries out its services and
updates its operations to reflect changing business
practices, as well as consider new activities. Conducting long-range strategic planning and realigning
Treasurys organizational structure are significant
steps needed to update the Departments operations.
Seeking out best practices with respect to Treasurys
core functions will be critical in order to achieve
optimal performance. (Note: Upgrades to Treasurys
information technology component are covered separately in section 3.)*

ORGANIZATIONAL STRUCTURE
AND OUTLOOK
Continually assess the adequacy of the Departments
organizational structure, its goals, and its strategic plan to efficiently and effectively respond to
changing business needs.

36

REALIZING TREASURYS VISION

As business processes evolve, Treasury must

address its changing needs by moving certain
functions from one bureau to another and/or by
developing critical staff positions. For example,
the new positions of Chief Information Officer and
Chief Security Officer are critical to redesigning
the Departments information technology function
(see p. 54).

Conduct a biannual review of Treasurys internal

management structure and policies. Adopt and
adhere to General Administration management
directives, policies, and procedures where appropriate, for enhanced uniformity, consistency of
management standards, and cost effectiveness.
The initial internal management assessment may
require a consultant to review Treasurys structure
and policies.

ACTION ITEMS
Develop and maintain a Treasury Policy Office that
creates and researches policy issues pertaining
to investments, banking, federal issues, and
fiscal operations.
Create a comprehensive two-year strategic plan
(in future editions of e-Treasury) that defines the
Departments objectives, priorities, and goals.
Establish a timeline for each strategy and action
item that will be used for internal assessment of
the progress of Treasurys strategic plan. Update
the timeline annually so that performance results
can be measured accurately. Include results and
strategic plan revisions in the Annual Report.

*Please refer to e-Treasury report supporting documents at www.patreasury.org

Improve resource management including coordinating Department-wide projects and assignments, matching specific personnel and resources
with Treasurys stated long-range goals and timelines, and balancing long-range goals and priorities
with routine operational mandates.
Develop a fully integrated internal communications
structure into every aspect of Treasurys operations
to avoid confusion, delay, and additional cost.
Create legislative initiatives that will provide the
statutory changes that may be required to implement strategies and action items.

FINANCIAL ASSET MANAGEMENT

Ensure that requirements and guidelines for managing financial a sets are current and appropriate for
the investment environment as it evolves. Update
Treasurys policies and processes to reflect institutional investing best practices and a sophisticated
investment environment. Review these policies at
least annually.
As the investment environment evolves, Treasury
needs to take advantage of emerging opportunities,
and Treasurys funds need to be appropriately
positioned to achieve the best possible return relative to new risks. ( 07 )
ACTION ITEMS
Obtain a critical capital investment in investment
technology tools to help the Bureau of Cash
Management and Investments and the Investment
Committee plan, analyze, and evaluate Treasurys
investments. Standardize communications between
Treasury staff and financial service providers to improve reporting and increase operational efficiency.

MODERNIZING THE BUSINESS OF TREASURY

37

07

POSITION TREASURYS
FUNDS FOR LIQUIDITY
REQUIREMENTS AND
TO ACHIEVE THE BEST
POSSIBLE RETURN
RELATIVE TO RISKS.
Regularly evaluate manager performance. Develop
routine procedures for measuring the performance
of investment programs and portfolios, with a
focus on risk-adjusted returns and performance
relative to peer universes.
Assess portfolio management assignments. Periodically evaluate the costs and benefits of external
versus internal funds management. Consider
incremental costs, managerial considerations, and
risk/reward benefits for specific investments.
Support emerging financial service providers.
Work with smaller or newer financial service
providers, including minority- and women-owned
firms, to complement Treasurys existing providers
and asset allocation. Such firms are focused and
often have low cost structures, resulting in longterm out-performance.
Give preference to Pennsylvania financial service
providers who exhibit best in class characteristics to enhance Pennsylvanias economy and
increase revenues for the state.

38

REALIZING TREASURYS VISION

BANKING SERVICES AND SELECTION

Continually review Treasurys relationships with
banks, including both custodian and depository
banks, to ensure that the Department is obtaining
the best services available in the marketplace with
credit-worthy institutions. As part of this review, the
Department may explore the banks roles in the
communities they serve and assess whether their
policies and programs give Commonwealth residents
access to affordable, basic banking services.
Treasury provides significant business to various
banks. Focused evaluations will ensure that the
Department receives the best value from the most
credit-worthy institutions, and that premier services
and public initiatives are offered to both Treasury
and Commonwealth residents.
ACTION ITEMS
Standardize communication, fee, and production processes with the check-clearing banks
Treasury uses.

Review active depository selection. Working with

the Board of Finance and Revenue, document
the qualifications banks must meet (capabilities,
community services, and residency) to be eligible
to serve as active depositories for Treasury.
Require information from financial institutions that
can be provided to residents of Pennsylvania to
assist with consumer decisions.

CENTRALIZED INFORMATION SYSTEM

Continually assess the operational efficiency and
effectiveness of Treasurys legacy systems and
electronic communication capabilities, and take
the appropriate actions to correct inefficiencies.
The pace and nature of information in the modern
business environment requires faster, accurate intercommunication to ensure meaningful and effective
results. ( 08 )

ACTION ITEMS
Operate a secure Web-based payment processing platform for approved agencies and business partners. The platform will offer updates
about the status of agency payment requests
throughout the process in real-time, which
will reduce the number of telephone inquiries,
improve customer service, and allow vendors
to better manage their cash flow. Sections of
the Web-based portal can be separated so
that sensitive information can be accessed
only by approved users, and information about
payments already made can be accessed by
the public.
Provide employees online access to, and management of, their personal information as appropriate.
Provide vendors and other appropriate parties online access to business information as appropriate.

MODERNIZING THE BUSINESS OF TREASURY

39

TREASURY MUST ENSURE

THAT IT OBTAINS AND
MAINTAINS BEST PRACTICES
OF INSTITUTIONAL INVESTING
STANDARDS.
08

THE MODERN BUSINESS

ENVIRONMENT REQUIRES
FAST AND ACCURATE
INTERCOMMUNICATION TO
ENSURE EFFECTIVE RESULTS.

40

REALIZING TREASURYS VISION

MODERNIZING THE BUSINESS OF TREASURY

41

PROGRAM MANAGEMENT EVALUATION

ACTION ITEMS

Continually evaluate the effectiveness of Treasurys

approach to program management, with a focus
on its core operations of processing payments and
investments, 529 college savings program, unclaimed property, and strategic investments. Take
advantage of opportunities for cost reduction and
improved services. Through evaluating management
on a routine basis, Treasury can assess whether or
not its practices, quality and costs are compliant
with Department standards. Other questions to
consider during evaluation include: Is it a good
business for Treasury? Is it well run? Is it a business
Treasury should be in? Should Treasury manage the
program internally or use outside vendors? What is
the most cost-effective option?

Direct internal audit staff to conduct performance audits of Treasurys program management. Performance auditing addresses program
effectiveness, economy, efficiency, the extent
to which program goals are being achieved,
merits of alternative approaches, and the reliability of established program measures. These
objectives are flexible and adaptable to the rapidly
changing environment in which Treasury operates.

Program management the process of directing

staff activities that enable Treasury to carry out its
functionis critical and determines the effectiveness of the organization. ( 09 )

42

REALIZING TREASURYS VISION

Fully allocate costs of the Department to nonmandated programs to rationalize budgetary requests and appropriations. These allocations will
help balance program budgets and will prompt
discussion about continuing existing programs or
considering alternative uses for those resources.
Assess the role of the Bureau of Contracts and
Public Records (BCPR). Realign the BCPRs role
with the requirements of Treasury under Pennsylvanias new Right-to-Know legislation and make
additional operational changes as necessary.

Examine the INVEST program. Improve the efficiency

of Treasurys operational and marketing support for
the INVEST program; conduct internal reviews and
adopt best practices for its respective functions.
Evaluate Treasurys 529 college savings program.
Improve the efficiency of Treasurys operational
and marketing support for its 529 program (otherwise known as nowU and, previously, TAP);
conduct internal reviews and adopt best practices
for its respective functions.

ACTION ITEMS
Identify and implement alternative payment
methods, such as electronic payment cards, to
expand the options available through Treasury.
Work toward the goal of reducing the use of
paper checks in favor of electronic methods and
create better payment options for recipients.

FUNCTIONS REVIEW

Develop a continuous internal communication

procedure for cash management matters between
the Bureau of Fiscal Operations and the Bureau
of Cash Management and Investments to optimize
timing on the payment and investment of funds.

Regularly assess the strategic value of Treasurys

internal functions; identify redundant, outdated, and
duplicative processes; and determine which processes can be eliminated, reconfigured, or reengineered.

Identify possible improvements to Treasurys

current concentration account structure and electronic funds transfer structure.

Monitoring and evaluating Treasurys functions

will make the Department more aware of needed
improvements. ( 10 )

MODERNIZING THE BUSINESS OF TREASURY

43

09

STRONG PROGRAM
MANAGEMENT WILL DIRECT
STAFF ACTIVITIES AND
ENABLE TREASURY TO
FUNCTION EFFECTIVELY.
10

MONITORING AND EVALUATING

TREASURYS FUNCTIONS WILL
MAKE THE DEPARTMENT MORE
AWARE OF A NEEDED CHANGE.

44

REALIZING TREASURYS VISION

MODERNIZING THE BUSINESS OF TREASURY

45

ADDRESSING PUBLIC NEEDS

Continually assess the sufficiency of Treasurys services in addressing the publics needs and consider
modifying or expanding services already available to
the public (e.g., Treasurys Web site). As the face of
finance, Treasury should also capitalize on its role
as the Commonwealths financial expert by addressing financial literacy issues for consumers and state
employees and serving as a financial information
clearinghouse.
Communication and responsiveness to the public
is critical to achieving Treasurys mission.
ACTION ITEMS
Upgrade the Departments Web site to provide more
comprehensive and easy-to-access information.
Expand and implement other electronic copy, hard
copy, and audio- and video-based communication.

Create greater interactive online access to Treasury

and its services. Enable the public to interact and
do business with Treasury in a more convenient,
streamlined fashion by introducing interactive
on-line access on the Departments Website (e.g.,
payment-tracking portals, 529 college savings
program account access, easier navigation).
Increase the efficiency of services provided by the
Bureau of Unclaimed Property. For example:
Work with other states to help locate holders of
unclaimed property.
Leverage the Internet to increase electronic
holder claims reporting and processing.
Determine the extent and types of holders who
are not reporting unclaimed property.
Continue to work with outside private firms to
conduct audits and report unclaimed property
to Pennsylvania.
Use the full benefits of the electronic notary
process.

Evaluate the necessity of, and improve the functionality and access to, Treasurys regional offices.
Determine the optimal size and scope of duties
required of regional offices. Improve regional
communications with headquarters through technology (e.g., video-conferencing) and relocate the
Philadelphia and Pittsburgh regional offices
within each city to better serve the public and
improve functionality.
Create and enhance public-private partnerships
(e.g., the e-Treasury Blue Ribbon Commission) to
develop additional financial services for state
agencies and the public. Public-private partnerships
give Treasury access to the private sectors vast base
of experience and knowledge, and can promote
innovation within the Department.

Provide links on Treasurys Web site to financial

Web sites, such as the Department of Banking
and Pennsylvania Securities Commission, that
include information pertaining to:
Consumer alerts, fraud alerts, financial safety and
protection information, and advocacy groups.
Broad trends in the economic markets, such
as inflation, energy prices, and investments.
Information on available rates for mortgages,
automobile loans, credit cards, savings accounts, CDs, and money market accounts.
Capital markets.

Collaborate with other state agencies on the

creation of legislation to mandate financial literacy
requirements in the public education system.

Review the bureaus staffing levels and services

compared to similar programs in other states.

46

REALIZING TREASURYS VISION

MODERNIZING THE BUSINESS OF TREASURY

47

REDESIGNING
INFORMATION
TECHNOLOGY

11

AN I.T. ORGANIZATIONAL
TEMPLATE WILL ENABLE
TREASURYS I.T. STAFF TO
OPERATE EFFICIENTLY AND
SECURELY IN A CHANGING
ENVIRONMENT.
Todays technology and information systems drive
business processes and increase productivity, output, and savings. In its daily business, Treasury
strives to use its information technology (I.T.)
resources in ways that maximize results. To continue
to maintain excellence in safeguarding the publics
funds and providing necessary services, the Department must seek and adopt evolving technologies.
I.T. governance, architecture, procurement, assessing
employee skill sets, and aligning the bureaus
approaches with business needs are critical elements
to building and maintaining a successful organization.
Moving forward will require a new, individualized
focus on the develoment and implementation of
computer systems. Most importantly, a greater
emphasis must be placed on implementing greater
I.T. security as the Department develops new and
innovative I.T. processes and solutions.*

INFORMATION TECHNOLOGY
STRATEGIC VISION AND
ORGANIZATIONAL TEMPLATE

minimizes reliance on paper records; integrates

processing platforms across organizational elements;
and eliminates unnecessary redundancies.

Increase training. Develop a long-range training

program with promotional incentives to improve
staff capabilities and skills.

An I.T. organizational template will improve the

Departments overall operations and enable Treasurys I.T. staff to operate effectively, efficiently,
economically, and securely in a continually changing
environment. ( 11 )

Create the position of Webmaster to control the

operations, maintenance, and development of
Treasurys Web site. The Webmaster should be
located within the Office of Communications.

ACTION ITEMS
Create the position of Chief Information Officer
(CIO). Establish a deputy-level position of Chief
Information Officer to oversee all information technology operations and the interconnectivity and
interoperability of Treasurys functions between
various offices and bureaus.
Encourage collaboration. Establish a continuing
process for collaborative dialogue between Treasury and other Commonwealth agencies regarding
I.T.-related issues.

Develop a dedicated I.T. plan that employs common

databases; utilizes portable, Web-based applications;

50

REALIZING TREASURYS VISION

*Please refer to e-Treasury report supporting documents at www.patreasury.org

Separate the strategic planning and systems

development functions, and the routine production
and support functions. At the same time, develop
an I.T. structure that supports the specific needs of
the two separate areas.
Maximize the use of electronic communication.
Make electronic dissemination of information more
available and diminish use of mail and hard copy.
Create and maintain an Information Technology
Advisory Committee, a committee of volunteers
(outside experts) to advise the Treasurer on the
current issues and best practices related to the
information technology field and how to effectively
address those issues and practices. Outside

experts will allow Treasury to gain direct access

to innovative practices found in other areas of the
business and academic world in order to incorporate them into Treasurys I.T. organizational
template. The outside experts shall ensure that
they do not have a business conflict that would
compromise the independence of their advice.
Obtain and utilize an external information technology consultant to develop a comprehensive
information technology management platform.
The consultant should be independent by not
offering products and services that are recommended by its I.T. assessment.
Separating the duties of systems development and
production and support will ensure that system
designers and system operators have individual
responsibilities, and for security reasons cannot
access both realms. ( 12 )

REDESIGNING INFORMATION TECHNOLOGY

51

12

SEPARATING THE DUTIES OF

SYSTEM DESIGNERS AND SYSTEM
OPERATORS WILL CREATE
INDIVIDUAL RESPONSIBILITIES
AND GREATER SECURITY.
13

TREASURY MUST CONSTANTLY

UPGRADE SECURITY TO
PROTECT NUMEROUS
PIECES OF CONFIDENTIAL
INFORMATION FROM THE
LATEST SECURITY THREATS.

52

REALIZING TREASURYS VISION

REDESIGNING INFORMATION TECHNOLOGY

53

INFORMATION TECHNOLOGY
SECURITY
Create a comprehensive I.T. security and personnel
approach that protects the Departments information flow and business transactions, increases the
reliability and performance of the Departments
infrastructure, yet can interface with Commonwealth agencies and the Departments business
partners in the most cost-effective and most efficient
manner possible.
Treasury needs to protect numerous pieces of confidential information from the latest security threats,
ranging from bank account codes to addresses and
social security numbers. Its critical that Treasury
constantly upgrade security. ( 13 )
ACTION ITEMS
Create the position of Chief Security Officer (CSO).
Appoint a Chief Security Officer who will review the
security of the Departments data infrastructure
and be responsible for I.T. security (the confidentiality of information being transmitted and stored)

54

REALIZING TREASURYS VISION

and operational security (the reliability of technologys performance). The CSO will be independent
of the I.T. office and will report directly to the
Executive Deputy Treasurer.
Examine I.T. business resiliency. Perform a capacity
analysis of Treasurys I.T. structure and determine
if the Department has sufficient built-in redundancies in its systems to ensure adequate backup in the event of an unexpected interruption to
its operations.
Determine off-site storage options. Evaluate the
ways Treasury can enhance its resiliency for data
storage and electronic processing capabilities to
ensure instantaneous recovery in the event of an
interruption in production. Consider the range of
alternative solutions available, including relocating
some or all of the functions outside of the Finance
Building to state-managed centers, looking at the
need for private emergency back-up facilities,
and weighing the costs and benefits of adopting
an active-active processing configuration.

INTEGRATED FUNCTIONS
Integrate key business functions of the Department
and network the various databases and applications
within Treasury, with a focus on reducing processing
costs and time while increasing accuracy.
ACTION ITEMS
Create a server migration timetable. Establish a
deadline for Treasury and its business partners
to complete the migration from the mainframe
to a server-based environment to ensure crossfunctionality among other Treasury systems.
Integrate and coordinate Treasurys financial recordkeeping system (TABS) with the systems of other
Treasury offices.
Consolidate the Departments various database
systems.

REDESIGNING INFORMATION TECHNOLOGY

55

OPTIMIZING
SAVINGS AND
REVENUES

14

EFFICIENCY AND IMPROVED

PERFORMANCE MAY BE REALIZED BY CONSIDERING CASH
FLOW NEEDS AND SELECTING
INVESTMENTS CONSISTENT
WITH TREASURYS LIABILITIES.
Treasury must take advantage of every opportunity
to create savings for taxpayers and tap every source
of revenue for conducting its operations. Treasury
already strives to optimize savings and revenues by
seeking superior returns on its investments, procuring goods and services at the lowest reasonable cost,
and diligently restraining Departmental spending.
Treasury must formalize the processes it uses to ensure that new opportunities for savings and revenues
are continually explored. Also, Treasury must remain
constantly aware of additional ways to enhance its financial soundness.*

Prudently diversifying assets across multiple asset

classes, instruments, and managers can help minimize losses. Efficiency and improved performance
may be realized by considering cash flow needs and
selecting investments that are consistent with Treasurys liabilities. ( 14 )
ACTION ITEMS
Determine how Treasury can better optimize
investment results and minimize losses by:
Adhering to stringent credit requirements.
Layering risks.

INVESTMENTS STRATEGY

Considering alternative investments.

Regularly reevaluate asset allocation strategies to

ensure that they meet Commonwealth liability and
cash flow needs, while taking into account the timing
of the ultimate disposition of the funds. In addition,
regularly review all investments with the focus on
improving performance, and lowering management
and transaction fees.

Strengthening monitoring and oversight processes, and requiring monitoring and over
sight processes from existing managers.
Requiring errors and omissions insurance.
Ensuring that financial providers have a current
business resiliency plan.
Establish a process for negotiating and continually reviewing reasonable and competitive fees
with financial service providers. Whenever
possible, advocate obtaining most favored nation

58

REALIZING TREASURYS VISION

*Please refer to e-Treasury report supporting documents at www.patreasury.org

OPTIMIZING SAVINGS AND REVENUES

59

FOCUS ON CASH FLOW AND

LIABILITY ANALYSIS, ASSET
ALLOCATION AND OPERATIONAL
EFFICIENCY TO MINIMIZE RISKS
AND OPTIMIZE LIQUIDITY AND
RETURNS.
status and other pricing advantages negotiated by
Commonwealth entities when dealing with a provider
already doing business with the Commonwealth.
Examine transaction fees. Thoroughly review the
performance of Treasurys existing brokerage
commission recapture program and explore
alternative ways to ensure that Treasury enjoys
best execution the appropriate combination of
timing and pricing in the marketplace.

Regularly consider whether Treasury should use

new investment products or vehicles as they are
introduced into the marketplace. Determine
liquidity, costs, risks, expected returns, and other
relevant criteria.
Evaluate strategic investment opportunities and/or
permitted nontraditional investments. Consider
expected returns, potential risks, and appropriateness of possible strategic investments individually
and in relation to the portfolio.

Consider the All-In cost of investments, including:

Expected risk or loss-adjusted returns.
Volatility impact on returns.
Active vs. passive performance.
Cost benefits.
Proxy-voting costs.
Compliance/oversight.
Other internal operational costs associated
with the investments.
Continually evaluate the balance between the
liquidity pool and the stable core balances, each
with its own purposes, goals, and risk parameters.

60

REALIZING TREASURYS VISION

Review securities-lending program and results.

Optimize the revenues Treasury receives from the
lending of securities held for custodial purposes,
while maintaining appropriate risk controls. Periodically review the terms of the Departments securitieslending program to ensure that the terms are competitive and provide adequate security.
Look at ways to provide additional asset management services for government entities. Leverage
the investment staffs current resources to build
on strengths and economies of scale to provide lowcost services for other Commonwealth entities.

CORE FUNCTION EVALUATION

Examine all facets of Treasurys core functions, with
a focus on improving efficiencies, eliminating redundancies, and reducing costs.
ACTION ITEMS
Examine all processes to determine whether
there are redundancies, and eliminate them to
reduce costs. This effort includes identifying
consulting services that Treasury may need to
improve its operations.
Improve cash flow forecasting. Incorporate data
from the receipt and payment functions of Treasurys Fiscal Operations, as well as other information
obtained from Commonwealth agencies and comptrollers, to assist Treasury in developing a more
robust forecasting model of cash flows.

Providing savings and revenue optimization strategies

to strengthen the programs and services of Treasury
(e.g., INVEST, the 529 college savings program, and
pension funds) must be a priority.
ACTION ITEMS
Review the efficiency of Treasurys call centers
and determine the most cost-effective delivery of
these services.
Implement a service fee for Commonwealth
agencies that normally would not utilize Treasurys
customized financial services.
Fully allocate all costs of the Department.

SERVICE DELIVERY AND

PARTNERSHIP PROGRAMS
Develop and strengthen service delivery and partnership programs to optimize the Departments
savings and revenues, and to benefit the public
and Treasurys partners, clients, and consumers.

OPTIMIZING SAVINGS AND REVENUES

61

SETTING
STANDARDS
FOR FINANCIAL
SERVICES

15

IMPROVING THE PROCESS

FOR DEPOSITS AND PAYMENT
REQUESTS WILL CREATE GREATER
EFFICIENCY AND BENEFIT
STATE AGENCIES DEPENDENT
ON TREASURYS SERVICES.
Every day, Treasury interacts with many state agencies and business partners that need to deposit their
revenues, pay their bills, or otherwise make use of
the Departments services. Because of the diversity
of agency organizations, resources, and reporting
practices, these service requests arrive in a variety of
formats. It is then up to Treasury to decipher these
formats and convert them as necessary for processing and recordkeeping. Treasury must now take the
lead in developing and enforcing uniform standards
that are forward-looking and progressive. Concurrently, Treasury must scrutinize its own operations
and determine where higher standards will result in
greater efficiency and effectiveness.*

ACTION ITEMS
Increase professional staff depth and scope of
expertise in the Bureau of Cash Management and
Investments, particularly in portfolio management
and financial analysis, required for the investment
of state funds. Offer increased pay incentives and
benchmarking salaries with industry peers. The
enhancement of investment staff should be
included in annual budgetary appropriations
dealing with personnel.
Establish internal working groups to identify and
address ongoing and non-recurring investment
issues (e.g., inter-Departmental communication;
mutual fund best practices; regulatory/industry
proposals; and changes, liquidity, and risk).

INVESTMENT PRACTICES/EXPERTISE
Adopt best practices for the investment of Pennsylvanias assets. Leverage Treasurys internal resources
and professional relationships, share knowledge with
peer institutional investors, and tap into external investment professionals.

64

REALIZING TREASURYS VISION

Create a Commonwealth Financial Network to

identify and assess systemic economic and financial risks and opportunities for agencies and
offices across the Commonwealth.

communication among Commonwealth investment

entities. Leverage the combined size of the council
to negotiate lower fees when sharing a financial
service provider.
Establish Municipal and City Pension Fund Pool
that consolidates the investments of the Commonwealths municipalities and cities. The pools
purpose will be to achieve economies of scale
investment management, which offers lower fees
for management, transactions, and operations
while offering more comprehensive due diligence
and oversight. Pooled funds also offer the potential
of greater returns for beneficiaries. The Pennsylvania Municipal Retirement System (PMRS),
which currently hosts 840 plans on a voluntary
basis, would be an effective model or existing
structure for such an initiative.

EFFICIENCY
Seek ways to continually improve processing efficiency, information exchange, and security for
revenue deposits and payment requests.
Improving the process for deposits and payment
requests will create greater efficiency within Treasury, benefiting the state agencies that depend on
its services. ( 15 )
ACTION ITEMS
Find better ways for data delivery. Receive electronic
data directly from Treasurys Commonwealth partners to eliminate the processing of paper documentation that supports the payment process and
reduce redundant data warehousing.
Establish a standard for required payment requests
information to increase processing efficiency and
information exchange, and to enhance security.

Create a Commonwealth Council of Institutional

Investors. Establish a Commonwealth-wide investment council to share information and improve

*Please refer to e-Treasury report supporting documents at www.patreasury.org

SETTING STANDARDS FOR FINANCIAL SERVICES

65

TREASURYS INVESTMENT IN
INNOVATION AND OPERATIONAL
EXCELLENCE IS CRITICAL
TO REDUCING DIRECT AND
INDIRECT TAXPAYER COSTS.
Create an environment for quality improvement
review in other agencies by:
Systematically informing the agencies about the
results of the Departments preaudit review of
payment requests.
Establishing follow-up procedures with client
agencies to track implementation of corrective
actions that may be necessary to improve
process.
Meeting regularly with the agencies to address
quality control issues.
Review deposits process. Eliminate the paper
transaction process for revenue deposits. Encourage agencies to identify ways to accelerate deposits.
Improve the contract submission process. Devise a
standardized electronic form for agencies to complete when submitting a contract for fiscal review.

66

REALIZING TREASURYS VISION

FINANCIAL TRANSACTIONS
Create and manage all forms of payment transactions. Be responsive to evolving requirements of
business partners and state agencies by offering a
wide array of sophisticated and progressive financial
services.
If Treasury fails to be innovative and responsive,
undue reliance on private sector financial services
will cost the Commonwealth more in service fees.
ACTION ITEMS
Continually review financial services policies through
the proposed Treasury Policy Office (see p. 36).
Research state of the art practices in the global
marketplace, and make ongoing determinations
of applicability, opportunity, and appropriateness
for Treasury.

SETTING STANDARDS FOR FINANCIAL SERVICES

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EMPLOYEES

16

EMPLOYEES ARE TREASURYS

MOST IMPORTANT ASSETS,
AND THEIR SKILLS SHOULD
BE UPDATED IN ACCORDANCE
WITH NEW TECHNOLOGIES AND
BUSINESS PRACTICES.
Employees are Treasurys most important asset.
They carry out the Departments daily mission with
proficiency, innovation, and vigilance. Treasury must
constantly invigorate the workplace by recognizing
employee contributions, sustaining employee dedication, and encouraging employee professional
growth. Above all, Treasury must take full advantage
of the expertise that resides in-house, giving employees opportunities to weigh in on how to make the
Department operate better, faster, and more costeffectively. Treasury must also strive to attract the best
and brightest talent available in the marketplace.*

WORKFORCE DEVELOPMENT
Provide comprehensive programs to enhance employees management and professional skills, cross-train
employees in the critical skills needed to perform
Treasurys core functions, and focus on I.T. training
to navigate changing operational demands, loss of
human capital, and flat budget appropriations. As
the average age of the Departments employees
increases, develop a succession strategy that enables
Treasury to absorb the loss of experienced employees
without undue disruption to its operations.

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REALIZING TREASURYS VISION

Because employees are Treasurys most important

asset, the skills of the employees dictate the success
of the Department. Skills need to be updated and
refined over time as new technologies are implemented
and new business practices are adopted. ( 16 )
ACTION ITEMS
Train staff to function in a continually changing
business environment by:
Conducting a needs assessment survey to
develop appropriate training for all levels of
employees within Treasury, including use of
the Treasury Career Opportunity Committee.

Leveraging the training and staff development

resources available from vendors to train
Treasury employees
Develop plans for employee retention and succession. Enhance employee retention for high-performing individuals. Create alternative career paths or
offer retirement incentives for obsolete positions.
For stronger retention:
Ensure that staff and new hires understand the
Departments mission, values, and vision to facilitate a united sense of purpose and direction.

Ensuring staff has appropriate skills and abilities to enhance employment development.

Offer training opportunities through career

conferences and skill-building workshops.

Offering leadership training that will build a

core of talented managers and enable strong
performers to excel in roles of increasing
responsibility.

Offer opportunities to acquire transferable and

multiple skills.

Offering financial and other incentives for

upgrading skills.

Standardize pay scales for nonunion employees by aligning with industry peers.

For succession:
Create new opportunities for staff whose positions
are being eliminated or significantly changed.
Work with the legislature to create actuarially
sound retirement incentives that ultimately
reduce costs to the Commonwealth for those
employees who have long tenures with the
Commonwealth. Without turnover or with unchecked expansion of staff, there will be little
opportunity to improve diversity or recruit those
with entirely new skill sets.

Provide opportunities for employees to move up

in pay levels without taking on supervisory roles.

Investigate performance-based compensation

for certain special positions.

*Please refer to e-Treasury report supporting documents at www.patreasury.org

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17

A STRONG RECRUITMENT
PROGRAM WILL ENSURE
TREASURY HAS THE
APPROPRIATE STAFF AND
CAPABILITIES TO FULFILL
THE DEPARTMENTS MISSION.
18

A DIVERSE WORKFORCE WILL

PROVIDE NEW PERSPECTIVES
AND WAYS TO INTERACT WITH
ALL SEGMENTS OF THE
POPULATION, AS WELL AS
VARIOUS BUSINESS PARTNERS.

RECRUITMENT
Create and establish a personnel plan that incorporates the positions required to provide the necessary
expertise and focus, particularly in the I.T. and
investment functions, for Treasury to carry out its
responsibilities. Develop a comprehensive and extensive recruiting program that will add to and maintain
the Departments depth of talent and capabilities.
A strong recruitment program will ensure that Treasury
has the appropriate staff and capabilities to fulfill the
Departments mission and mandated functions. ( 17 )
ACTION ITEMS
Develop a recruitment network through universities and professional associations that will strengthen Treasurys staff capabilities in an ever-changing
business environment. Present Treasury as a prestigious place to work while:

Investigating additional nontraditional routes

for recruiting new talent.
Providing a competitive internship program for
Pennsylvanias college students and utilizing the
program as a feeder for Treasury employment.

DIVERSITY
Remain committed to diversity to ensure that the
Department attracts and retains the most qualified
workforce without regard to race, ethnicity, gender,
religious beliefs, sexual orientation, or disability.
Reflect the diversity of the Commonwealth within
Treasurys staff.
A diverse workforce will provide new approaches
and perspectives, and can interact with all segments
of the population, as well as work with various
business partners. ( 18 )

Utilizing internal networking through staff

members.
Conducting outreach events at various venues
where diverse talent is represented.

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73

19

MOTIVATED EMPLOYEES IMPROVE

DEPARTMENT PRODUCTIVITY
AND STRENGTHEN TREASURYS
WORKING ENVIRONMENT.

ACTION ITEMS
Strengthen Treasurys commitment to diversity by:
Establishing and monitoring goals for hiring
and promotion.
Seeking alternative sources for recruiting such
as a specialized consultant to assist in recruiting efforts.
Establishing employee peer mentoring and
counseling to ensure that new hires have an
outlet for career development.

SENSE OF PURPOSE
Foster a sense of pride and purpose among employees. Encourage and promote internal camaraderie,
morale, and greater communication among various
bureaus and offices within the Department. Focus
on, and discuss, the progress of Treasurys vision
and strategic initiatives with all employees.

Motivated employees improve Department productivity. Open communication among various offices,
employees, and senior staff will ensure all areas of
the Department are aware of the direction of the
organization, as well as its current issues and
recent developments. ( 19 )
ACTION ITEMS
Strengthen Treasurys working environment in terms
of personnel management, inter office relations,
and quality of life by:
Conducting an employee survey of the workplace environment to understand the issues
important to the staff.
Establishing a simple and systematic feedback system for obtaining input and recommendations from employees.
Requiring all managers to complete annual
self-assessments.

Embracing staff recognition to highlight excellent employees.

Holding bureau directors brown-bag lunches
frequently to foster communication within the
highest levels of Treasury.
Holding weekly senior staff meetings between
the Treasurer and deputies to discuss strategic
and operational issues.
Creating an employee newsletter to highlight
major issues and achievements pertaining
to Treasury.
Continually update Treasurys strategic plan
(e-Treasury report) and share it with employees as
a motivational tool and guide to making changes
in the way Treasury does business. Provide the
document online to reinforce Treasurys mission,
values, and vision; and to promote continual
transparency and good governance.

Continuing work-life programs (e.g., Fun Fitness Health Fair and Take Your Daughters and
Sons to Work Day).

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TREASURY MUST
BE COMMITTED TO
EMPLOYING BEST
PRACTICES AS
WELL AS GOOD
GOVERNANCE
TO CONTINUALLY
EVOLVE AND
EMBRACE CHANGE.
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REALIZING TREASURYS VISION

77

ROBIN L.
WIESSMANN
TREASURER