Pennsylvania spins up 21st-century financial system
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After a mainframe failure, state officials took advantage of the opportunity to build a system that would automate payments and standardize data collection.
Pennsylvania officials have released a set of applications that helped them catch up on nearly a decade’s worth of financial service improvements in the aftermath of a mainframe failure.
The upgrades have given the state greater control in meeting its financial requirements. Features include software that gives managers the ability to audit the 21 million payments the state’s Treasury Department makes annually and tools that standardize data access at 60 Pennsylvania agencies.
“Technologically speaking, we migrated from the 19th to the 21st century,” said PN Narayanan, CIO of Pennsylvania’s Treasury Department. “We were in a place where we didn’t have any way to predict or to provide reliable systems, and now we have a technology and infrastructure that [are] much more integrated, reliable and much more secure.”
When the state’s aging mainframe failed in 2008, it exposed to risk some $10 million worth of payments the commonwealth made on a daily basis and triggered a massive disaster recovery effort. It also touched off the financial service transformation.
“It couldn’t have happened at a more convenient time — the day before Thanksgiving, [which gave us] four days to recover,” Narayanan said. Even so, it became clear that the vintage system, which was supported by a dwindling workforce of Cobol programmers, needed to be replaced.
In the aftermath of the mainframe failure, Treasury officials formulated a plan to automate payments from all branches of the state government and its three major pension systems. The plan called for Treasury to replace the mainframe and 25 internal systems, establish a common general ledger code structure across the state, build standard XML and web service interfaces for all agencies, and audit all payment records.
The plan gained momentum when officials realized the human cost of what was at stake. “The legislature realized very quickly that if payments could not be made, vulnerable citizens would be in trouble because they could not get payments at the right time, including health care benefits or unemployment checks,” Narayanan said.
Central to the project’s success was finding software tools that could give auditors and financial managers a greater degree of control over and access to data on individual payments and audits. In particular, officials needed to meet a requirement that every payment that left the state was lawful and accurate. That meant developing the ability to conduct prepayment audits of transactions with a limited number of financial analysts on the payroll, Narayanan said.
To maintain an accurate payment stream and defend against fraud, officials had to improve financial managers’ ability to target different datasets and set up audits on the fly, he added. It was a capability that would have been almost impossible under the old mainframe.
That system’s constraints forced the department to make best-case approximations of the payment data stream. Auditors could only sample payments beyond a particular, often preset, threshold and had to infer whether all the other payments would be accurate or not.
For the new system, the department issued a request for proposals for tools that could produce audit algorithms for scrutinizing each tax dollar the state spent. “The idea was to replace the entire payment system, revamp all the investments and consolidate the core financial functions into an [enterprise resource planning] system,” Narayanan said.
Treasury uses Oracle’s PeopleSoft Financials to handle cost-payable processes and Oracle Governance, Risk and Compliance for audit analytics and forensic analysis on payment processes. The GRC module also helps managers see who made critical changes to system setups and what users have done with the authority they’ve been assigned.
Officials worked with the product developers to adapt it for prepayment audits, a twist that helped Treasury create rules without the IT department’s involvement.
“With this set of technologies, analysts and auditors can alter their own algorithms,” said Sid Sinha, Oracle’s senior director of application development. “They can create a rule that is much like an audit checklist, or they can say, ‘I want to look at this agency or vendor.’ Over time, they can be much more responsive to changes in their environment.”
The Pennsylvania team also tackled its data networking backbone, especially the task of building common interfaces for different source systems.
“We were receiving files from multiple different sources, including SAP, PeopleSoft, mainframe systems and homegrown systems,” Narayanan said. Eventually the department standardized on XML, a move that eliminated having to “deal with 30 different interfaces for moving data among 60 different offices and agencies.”
The whole transformation has given financial managers a clearer overview of transactions. “Visibility across our different teams — controller, audit cash management and treasury teams — has improved a lot,” Narayanan said. “We can see at any point in time our exact cash flow, cash availability and payment data. Everything is visible across the department.”