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THE FUTURE OF
PENNSYLVANIA
TREASURY
ENVISIONING
THE FUTURE OF
PENNSYLVANIA
TREASURY
1.0
06
2.0
EXECUTIVE SUMMARY
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3.0
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ROBIN L.
WIESSMANN
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
INTRODUCTION
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
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.
EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
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
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.
EXECUTIVE SUMMARY
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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
EXECUTIVE SUMMARY
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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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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.
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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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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.
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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.
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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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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.
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
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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.
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MODERNIZING
THE BUSINESS
OF TREASURY
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.
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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.
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.
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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.
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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.
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ACTION ITEMS
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.
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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.
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
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09
STRONG PROGRAM
MANAGEMENT WILL DIRECT
STAFF ACTIVITIES AND
ENABLE TREASURY TO
FUNCTION EFFECTIVELY.
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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.
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REDESIGNING
INFORMATION
TECHNOLOGY
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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
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.
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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)
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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.
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OPTIMIZING
SAVINGS AND
REVENUES
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INVESTMENTS STRATEGY
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
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SETTING
STANDARDS
FOR FINANCIAL
SERVICES
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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.
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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.
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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.
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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.
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TAPPING THE
POTENTIAL
OF TREASURYS
EMPLOYEES
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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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Ensuring staff has appropriate skills and abilities to enhance employment development.
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.
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A STRONG RECRUITMENT
PROGRAM WILL ENSURE
TREASURY HAS THE
APPROPRIATE STAFF AND
CAPABILITIES TO FULFILL
THE DEPARTMENTS MISSION.
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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:
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 )
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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.
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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ROBIN L.
WIESSMANN
TREASURER