Pennsylvania Government Reform Anna Maria Kiehl, CPA Comptroller /Chief Accounting Officer, Office of Budget, Comptroller Operations

Commonwealth of Pennsylvania Financial Organization Structure Appointed by Executive Deputy Secretary of the Budget Appointed by Secretary of Budget Appointed by Governor Elected Official Governor Secretary of Budget Executive Deputy Secretary of the Budget Comptroller Director of Budget Auditor General Treasurer 2

Governor Tom Corbett’s Reform Initiatives Performance-based Budgeting and a Biennial Budget Cycle Transparency in State Government Consolidation of Services Reducing the Size of Government Privatization opportunities, e.g., state-owned wine and spirit stores Operational efficiencies – Travel Policy revisions/Out of State Travel restrictions, Management Salary Freezes, Vehicle Policy revisions Pension reform Welfare Reform Salary Freeze and Out of State Travel restrictions Focus on Consolidations and Reform within and across state agencies Task Force forming to review privatization opportunities, i.e., LCB, print shop, fleet cars Tighter Travel policy and state-assigned vehicles policy Introduction of Performance-based Budgeting Passed legislation requiring a searchable, on-line database for the public Enhanced Accountability and Transparency - Passed legislation requiring a searchable, on-line database for the public

PA’s Ten Years of Continuous Improvements 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 ImaginePA - SAP Budget, Finance, Procurement, Reporting – (Start - March 2001) HR, Payroll (Start – March 2001) Go Live 3 Phases between July 2002 and January 2003 Go Live January 2004 SRM (Start - February 2006) Procurement Upgrade March 2007 EBP Upgrade August 2006 XML Go Live July 2007 Go Live Training November 2007 Revenue Initiative (Start - Within OB 2006) Agency Kick Off June 2007 Reporting July 2008 Finance Transformation (Start - February 2008) Scheduled Go Live – May 2009 Go Live May and June 2009 SAP Budget Control system (October 2009 - June 2010) Go Live July 2010

Comptroller Operations before transformation Inflexible Organizational Structure The Office of the Budget had two bureaus and five comptroller offices providing accounting and payment services. Offices were aligned around agencies rather than business processes. This inefficient structure resulted in higher operating costs and payment delays. Inefficient, Costly Processes Nonstandard processes and procedures in each office and bureau Frequent non-value-added handoffs of paper documents Labor-intensive effort, often resulting in delayed payments to vendors Duplicate scanning performed in Comptroller Operations and Treasury Department Paper, Paper and MORE Paper! Paper invoices sent to hundreds of different locations across the state for processing Thousands of paper documents stored in filing cabinets Excessive annual mailing costs associated with transporting paper documents No visibility of invoice status Inflexible Organizational Structure The Office of the Budget had two bureaus and five comptroller offices providing accounting and payment services. Offices were aligned around agencies rather than business processes. This inefficient structure resulted in higher operating costs and payment delays. Inefficient, Costly Processes Nonstandard processes and procedures in each office and bureau Frequent non-value-added handoffs of paper documents Labor-intensive effort, often resulting in delayed payments to vendors Duplicate scanning performed in Comptroller Operations and Treasury Department Paper invoices sent to hundreds of different locations across the state for processing Thousands of paper documents stored in filing cabinets Excessive annual mailing costs associated with transporting paper documents No visibility of invoice status

Finance Transformation Goals: FASTER, BETTER, CHEAPER!

Major Changes Occurred in Three Areas: PEOPLE Consolidated 535 staff members in a central location and organized them around function. Implemented a centralized call center for state vendors, contractors and agency personnel. Established a Workforce Development and Training Office to provide financial, accountability and audit training to all commonwealth employees. Instituted a Quality Assurance function to assess and monitor the adequacy of internal controls, process design and performance metrics.

Major Changes Occurred in Three Areas: TECHNOLOGY Created centralized post office boxes for the receipt and scanning of invoices to reduce sorting and handling costs. Integrated invoice images and electronic approval capabilities within the existing IT system for both purchase-order and non-purchase-order-related invoices. Expanded the use of electronic invoicing with utility companies to reduce payment time and processing costs and receive rebates. Employed electronic imaging of checks to expedite the recognition of commonwealth revenue, allowing for deposits to be synchronized with the financial reporting system. Developed reports and dashboards to improve invoice lifecycle visibility and performance metrics.

Major Changes Occurred in Three Areas: PROCESS Developed a completely paperless procure-to-pay process. Provided electronic real-time visibility of invoices. Eliminated non-value-added handling of paper invoices and revenue documents. Developed and documented standardized procedures for payables, revenue, accounting and auditing. Streamlined approval processes by removing requirements for duplicate approvals. Eliminated the printing of paper documents for certain revenue documents. Developed a reporting solution for required Federal stimulus section 1512 reporting. Formed an audit committee and implemented a risk-based audit approach to an annual, internal audit plan that is more aligned with the administration’s priorities.

… and realized significant benefits Standardization of policies and procedures Improved allocation of resources Collocated staff for a more flexible organization and increased capacity Maximized the existing integrated, ERP system. New electronic invoice process Identified areas for continuous process improvement/efficiencies Improved coordination and communication within commonwealth agencies. workflow technology

The Pennsylvania Office of Comptroller Operations Budget Secretary Executive Deputy Secretary for Budget and CFO Audit Committee State Comptroller/ Chief Accounting Officer, Office of Comptroller Operations Office of Workforce Development and Training Bureau of Planning and Management Bureau of Commonwealth Payroll Operations Bureau of Liquor Control Board Services Bureau of Commonwealth Accounting Bureau of Payable Services Bureau of Financial Management Bureau of Quality Assurance Bureau of Audits

Impressive Results in 24 Months Invoice Processing All processing is paperless and approvals handled electronically between agencies and the comptroller. Scanned invoice images, contracts, purchase orders, and other supporting documentation are stored in a central repository for access by all agencies. Invoices are paid in 30 days unless later pay dates are agreed on in advance. Treasury Review Treasury is no longer scanning invoice a second time, reducing their invoice review by 5-11 days. Vendor Accountability Vendor invoicing requirements were implemented for the first time in PA state government. Invoices are scanned within 24 hours and are presented to the State Treasurer on the average within 4-5 days of receipt. Vendor Self service to register to do business and look up payment statuses is available. More than 95% of calls to the Vendor Service Center are answered. Utility Billing 15,000 utility invoices are received electronically each year. Late charges and shut off notices are no longer received. Elimination of “Paper Pushing” Several paperless initiatives have been worked to eliminate printing, handling, mailing and time. Scanning is done one time and stored in a central repository for all agencies. Human Resources Doing more with less – consolidation of offices led to a reduction of positions through attrition. Many professional positions were transitioned from civil service to non-civil service to enable management to get the right people in the right positions. Accounting Decentralized revenue accounting to recognize revenues sooner and implemented an Image Capture Letter process for the deposit of checks. Auditing State-wide internal audit function -mandated audits and enterprise-wide risk assessments. An audit committee also advises the Comptroller and audit director.

Finance Transformation Results

Finance Transformation Results

The Impact of Finance Transformation on Comptroller Operations

The Comptroller’s role in current Government Reform initiatives Support of the Governor’s Transparency project – Penn Watch portal Elimination of Travel Per Diems – system, process, and policy changes Strengthening of Financial Policies and Management Controls Support for Privatization of State-owned Wine & Spirit stores Continuous Identification of Process and System Improvements Collaboration with other agencies to save costs, eliminate redundancy & paper Using Internal Audits and a statewide audit committee to focus audit resources on risk Expansion of Purchasing card and pursuing Vendor discounts