HIGHLIGHTS OF STATE TREASURER BOB CASEY'S RECORD
January 2005 – December 2006
Since January 2005, the Pennsylvania Treasury Department has processed over 42 million payments totaling more than $113 billion. Over 22 million of these payments were by check; the rest were electronic.
Under the leadership of State Treasurer Bob Casey, the Treasury Department is also earning competitive returns on taxpayer dollars, while investing these funds in a way that enhances the quality of life for Pennsylvania families.
IMPROVING TREASURY’S BANKING AND INVESTMENT FUNCTIONS
Treasurer Casey is responsible for investing about $15 billion annually, $4 billion of which is working capital that is invested daily and used to pay the Commonwealth’s bills. The Treasurer also manages the many banking relationships used to deposit state funds, clear state checks, and hold approximately $105 billion in securities owned by the Commonwealth and the state pension funds.
Since taking office, Treasurer Casey has made a comprehensive effort to implement best practices across all of these functions while lowering costs and increasing accountability. His actions have saved taxpayers nearly $10 million in annual fees, leading to higher investment earnings and a more efficient and effective Treasury Department.
Pennsylvania Making Unprecedented Investment in Clean Technology
Treasurer Casey’s new $90 million Keystone Green Investment Strategy is one of the nation’s most comprehensive plans to promote greater public and private investments in clean technologies such as alternative and renewable energy sources. Under this new strategy, Treasurer Casey has established a new investment fund, the Keystone Green Fund, to attract and leverage private sector investments in clean technology products and firms that will benefit Pennsylvania’s economy. The Fund will include up to $40 million in Treasury assets and several million more from Pennsylvania-based energy funds.
Treasurer Casey’s Keystone Green Investment Strategy will also reallocate up to $50 million in Treasury assets from existing investment managers to those who can demonstrate a track record of providing superior returns on their investments in clean technology stocks. At Treasurer Casey’s direction, his staff is developing new investment screens for its investment managers and outside consultants to use when evaluating a company’s potential exposure to environmental liabilities. Treasurer Casey also announced that Pennsylvania has joined the INCR, a network of institutional investors and financial institutions that promotes better understanding of the financial risks and investment opportunities posed by climate change.
Treasurer Casey Improved and Lowered the Cost of Investing and Banking
To improve services and save nearly $1.5 million a year in bank custody fees, Treasurer Casey consolidated the Treasury Department’s business into one custody bank. Mellon Bank now holds the nearly $105 billion in securities owned by the Commonwealth and the pension funds. This consolidation also eliminated the “middleman” in a contract to provide highly specialized accounting services to Treasury that will save taxpayers $500,000 a year.
Treasurer Casey saved taxpayers nearly $3 million by reducing the fees associated with the buying and selling of $2.8 billion in equity securities managed by the Treasury Department. Once again, Treasury leveraged its buying power and lowered the price-per-share trading fee to less than one cent. This is a significant savings, considering that institutional customers normally pay between 4-6 cents per trade.
Prior to 2005, the management of the Commonwealth’s $4 billion in working capital had been outsourced at an annual fee of about $4 million. Treasurer Casey ordered an analysis of this arrangement and determined that this critical function could be done internally at a fraction of the cost and with increased yields on the investment. He hired a Director of Trading who, along with existing Treasury staff, has enabled him to bring these cash management activities back in-house, saving taxpayers $4 million a year.
Treasurer Casey Strengthened Institutional Investing and Proxy Voting Decisions
Treasurer Casey has taken action to significantly improve the way in which the Treasury Department exercises the Commonwealth’s ownership interests in public equities. In 2005, he retained Glass, Lewis & Co., one of the nation’s leading investment research and proxy advisory firms, to provide Treasury with specific recommendations on accounting policies, financial statement transparency, corporate governance, litigation and regulatory developments, related-party transactions, executive compensation, and board of director independence. Glass, Lewis’ expertise enables Treasury to make more informed investment and proxy voting decisions, as well as to vote in ways that promote transparency and good governance and enhance shareholder value.
TARGETING INVESTMENTS TO HELP PENNSYLVANIA FAMILIES
In addition to ensuring that state investments achieve competitive market returns and meet the highest fiduciary standards, Treasurer Casey has used the authority of the Treasury Department to help people.
Treasurer Casey Created a $50 Million Loan Program to Improve Health Care
Throughout his public career, Bob Casey has been one of Pennsylvania’s leading advocates for improving health care quality, increasing health care access, and restraining health care costs.
As State Treasurer, he understands that the ability of health care providers to access affordable financing alternatives is directly related to the quality of health care available to Pennsylvania families and vitally important to the overall economic health of our Commonwealth.
That is why he created the first-ever Hospital Enhancement Loan Program (H·E·L·P). The $50 million Treasurer Casey has invested in H·E·L·P to enable licensed acute care hospitals to secure lower-cost financing for critical facility and technology upgrades and to provide patients with higher-quality care.
H·E·L·P’s unique composite bond offering combines several hospitals’ projects into one simultaneous bond issuance. This will allow upfront costs to be shared, so hospitals pay less in transaction costs than if they issued bonds on their own. The reduced costs enable hospitals to spend more on health care and less on loan fees.
In addition to lower transactional costs for participants in the composite bond offerings, certain hospitals that advance one or more of H·E·L·P’s criteria benefit from additional savings in the form of lower bank fees. These criteria include: improving patient safety; strengthening the delivery of patient care through the purchase of necessary new equipment, technology or software, or the construction or renovation of hospital facilities; and improving patient care in medically underserved areas.
Treasurer Casey Invested $20 Million to Provide Energy Loans to Homeowners
To combat the skyrocketing price of fuel, Treasurer Casey launched an unprecedented statewide initiative to promote energy conservation and reduce home heating bills. The new Keystone Home Energy Loan Program (KeystoneHELP) will help thousands of homeowners throughout Pennsylvania borrow money at low interest rates to purchase energy-efficient appliances and to make other ENERGY STAR improvements to their homes that will conserve energy and reduce heating and cooling costs.
Treasurer Casey’s $20 million investment in KeystoneHELP provides working capital for AFC First Financial Corporation of Allentown to offer unsecured loans with a 10-year repayment period at 7.99% interest to finance the purchase of ENERGY STAR heating and cooling systems or other energy efficient products. Low-income homeowners are able to obtain loans at an even lower rate of 5.99% interest. Already, $4.5 million in loans have been made to homeowners throughout Pennsylvania. In September 2006, KeystoneHELP was the recipient of Penn Future’s Green Power Leadership Award, for helping to make Pennsylvania homes more cost- and energy-efficient.
STRENGTHENING THE PENNSYLVANIA COLLEGE SAVINGS PLANS
Treasurer Casey Overhauled the Pennsylvania Guaranteed Savings Plan
Since taking office in January 2005, Treasurer Casey has worked to substantially enhance and improve the Pennsylvania Guaranteed Savings Plan to encourage greater investment in the GSP and to make it one of the very best college savings options for Pennsylvania families.
College savings made easier with new Upromise® partnership
In August 2006, Treasurer Casey announced a new partnership between the Treasury Department and Upromise®, a free rewards service that helps families save for college by earning cash back on qualified purchases from some of America’s leading companies, including 20,000 grocery and drug stores, 14,000 gas stations, 8,000 restaurants, thousands of retail store locations and more than 400 online shopping sites. The more than 53,000 Pennsylvania families saving for college through the GSP are now able to save even more while shopping and dining out.
In addition to providing the free rewards service, Upromise Investment Advisors, LLC replaced Delaware Investments as the provider of administrative services for the GSP, which currently has about $1.1 billion in assets. Families now have the ability to open and manage GSP accounts on-line, as well as to link their GSP accounts with their Upromise accounts.
An overhaul of Pennsylvania’s 529 Direct Investment Plan is also underway. In the next few months, families saving for college will be able to invest with one of the nation’s most respected mutual fund firms. The new vendor for Pennsylvania’s 529 Direct Plan will offer a wider range of investment products at lower costs than the current vendor.
GSP accounts now worth more
Treasurer Casey has also cut costs for the GSP by eliminating expensive surcharges on tuition credits that were reinstated in 2003 when the GSP fund was facing a $52 million actuarial deficit. Positive investment performance and moderate tuition inflation allowed Treasurer Casey to eliminate the so-called premiums retroactive to September 1, 2005, to encourage more Pennsylvania families to invest in the GSP.
GSP is only 529 plan with an investment grade rating from Moody's
Shortly after taking office, Treasurer Casey took the unprecedented step of hiring one of the world’s most respected sources for credit ratings, research and risk analysis to conduct a comprehensive review of the GSP. In November 2005, Moody’s Investors Service assigned the GSP an investment grade rating of A3. According to Moody’s, “obligations rated ‘A’ are considered upper medium grade and subject to low credit risk.”
As a result of Treasurer Casey’s action, the more than 53,000 families saving for college through the GSP now know that their college savings are in an A-rated investment.
Since the GSP began making payouts in 1997, the Treasury Department has paid out over $260 million on behalf of more than 18,300 college students attending nearly 1,200 different schools or campuses. Collectively, the families of those students have earned more than $73 million on their GSP investments.
Understanding the savings needs of Pennsylvania families
Treasurer Casey has hired the Harrisburg-based media firm, Neiman Group, and The Gallup Organization to conduct market research to better understand the college savings needs of Pennsylvania families, how best to meet those needs, and the most effective method of publicizing the message that the GSP is an A-rated, tax-advantaged way to save for college. The data collected from the Gallup research are being used to help Neiman and the Treasury Department promote the GSP to more Pennsylvania families.
Direct Investment Plan
Pennsylvania’s 529 Direct Investment Plan has also been overhauled. As of November 20, 2006, families saving for college are able to invest with one of the nation’s most respected mutual fund firms – The Vanguard Group. The revised program offers a wider range of investment products at lower costs. Administrative services for the Direct Plan will be provided by Upromise and Pennsylvanians saving in the Direct Plan will be able to take advantage of the Upromise rewards service.
New state and federal tax benefits for investing in Pennsylvania's College Savings Plans
Treasurer Casey joined members of the General Assembly and the Governor in pushing for a new state tax law that allows Pennsylvania taxpayers to deduct up to $12,000 a year in contributions to a 529 account on their state income tax. The GSP is now the only college saving option that gives Pennsylvania families both a tax break for contributions and qualified withdrawals, as well as a guarantee that their investments will keep pace with tuition inflation.
Treasurer Casey also successfully lobbied Pennsylvania’s Congressional delegation to permanently extend the law that provides a federal tax exemption on qualified withdrawals from Section 529 plans. The law was set to expire on December 31, 2010.
EXPANDING TREASURY’S USE OF AUDITS AND INVESTIGATIONS
As Auditor General, Bob Casey earned a reputation as a tenacious fiscal watchdog and an innovative and activist public official. He is building on that reputation as State Treasurer.
Treasurer Casey Created a New Office of Investigations to Crack Down on Fraud
Treasurer Casey created a new Office of Investigations in Treasury to address complaints of suspected forgery and counterfeiting involving Commonwealth checks and alleged fraud in connection with unclaimed property claims, replacement checks, vendor payments, and internal operations. Supervised by a former federal prosecutor and state Inspector General, this office investigates cases of suspected fraud reported by other Treasury offices and financial institutions providing services to the Treasury Department.
Since January 2005, the Office of Investigations has opened 288 cases. Twenty-nine involved alleged counterfeit checks totaling nearly $574,000. Forty-eight related to unclaimed property claims worth over $2.5 million. Eighty cases involved payments for unemployment compensation, workers’ compensation, or supplemental Social Security. Forty-five cases, approximately sixteen percent, have been referred to prosecutors and law enforcement for prosecutive review or further investigation. Two hundred fifty-eight cases have been closed.
The value of Treasurer Casey’s new investigative unit cannot be overstated. In one case involving the attempted fraud of a 94-year-old nursing home resident, Treasury investigators stopped the theft of all or part of an unclaimed property claim totaling $107,000. As a result of this investigation, the full amount of the claim was paid to the rightful owner, and the evidence of the fraud scheme was referred to U.S. and Canadian law enforcement agencies. In 2006, Treasury investigators obtained evidence and made criminal referrals of two other similar cases involving fraud schemes operated from Canada which attempted to obtain Pennsylvania unclaimed property by using American attorneys as unknowing fronts.
In another case, eight Commonwealth unemployment compensation checks were cashed with forged endorsements at a Philadelphia check-cashing agency. Treasury investigators coordinated their inquiry with the Philadelphia Police Department and the U.S. Department of Labor’s Office of Inspector General. The Philadelphia District Attorney’s Office has brought charges against one individual to date in this case.
Treasurer Casey Reorganized and Strengthened the Unclaimed Property Audit Unit
Pennsylvania's Unclaimed Property Act allows the State Treasurer to examine the records of any holder of unclaimed property - including private entities such as banks and insurance companies - at reasonable times and with reasonable notice. Treasurer Casey has reorganized the Unclaimed Property Audit Unit and expanded its reach to also focus on public entities that are required to report unclaimed property to the state, but had not been audited previously.
Fifty-four audits have been initiated since January 2005; including audits of the Pennsylvania Turnpike Commission, the Pennsylvania Liquor Control Board, the City of Pittsburgh's Confiscated Non-Narcotics Proceeds Trust Fund, three universities within the Pennsylvania State System of Higher Education, the Philadelphia School District, the Domestic Relations Division of the Philadelphia Courts, Penn National Gaming, Inc, and eight audits at the county level.
Since 2005, 17 of Treasurer Casey's unclaimed property audits found entities holding over $8 million of unclaimed property currently reportable and due to Treasury.
One of these audits discovered that Pittsburgh-based General Nutrition, Inc. owes the Commonwealth over $4 million in unclaimed property resulting from uncashed checks, unredeemed gift certificates and credit balances. Treasurer Casey recommended that General Nutrition establish procedures to track checks more than six months old, report unredeemed credit balances to the state after five years, and implement management controls to track gift certificates that have not been used.
Auditors also conducted a follow-up examination of the unclaimed property in the possession of the Philadelphia Sheriff's Office. A 2004 audit had concluded that the Sheriff's Office had an unclaimed property liability of approximately $11 million. During 2005, Casey's auditors spent five months obtaining and reviewing records to verify claims by the Sheriff's Office that the amount owed was less than $11 million. In March 2006, Treasury released a post-audit reportwhich identifiedthe remaining liability as approximately $2.9 million. InJune 2006, the liabilityfor the audit period was satisfied as the result of the Sheriff's Office making payments of $1.7 to the City of Philadelphia and $1.2 million to Treasury.
Casey issued an audit report of unclaimed property in the City of Pittsburgh's Confiscated Non-Narcotics Proceeds Trust Fund. This audit report established the amount of money in the fund that is due to the Commonwealth as unclaimed property. The remaining money, which has accumulated since 1991, will then be available for distribution to local law enforcement agencies. Treasury is currently reviewing the Allegheny County District Attorney's Office's efforts to obtain court-ordered forfeitures of the funds where possible (approximately 80 percent of the total) before the remainder is turned over to Treasury.
Treasurer Casey Created a Special Pre-Audit Unit to Stop Inappropriate Spending
In addition to being responsible for the investment and management of Commonwealth revenues, the State Treasurer has the authority to pre-audit bills and payment requisitions before payment is made. As he did with the Auditor General’s post-audit function, Bob Casey has expanded the State Treasurer’s pre-audit function through the creation of a special unit that conducts in-depth assessments of fiscal controls and contractual compliance well in advance of when requisitions are sent to the Treasury for payment.
In this way, the Treasury Department can better protect the public’s money and stop wasteful or unlawful spending before it occurs. Taxpayers benefit from this approach because less money is wasted, and the money that is saved is invested by the Treasury Department, thereby creating additional investment earnings.
Since January 2005, the Treasury Department’s Bureau of Fiscal Review pre-audited over 630,000 payment requests and identified approximately $119 million in savings.
This Bureau works closely with the new pre-audit unit that Treasurer Casey created by reviewing requisitions for the expenditure of state funds in order to verify supporting documentation and ensure compliance with applicable requirements.
Now, instead of simply verifying that invoices match contracts, Treasurer Casey has auditors making sure that taxpayers are actually getting what they are paying for.
Since January 2005, the pre-audit unit has conducted numerous reviews and completed three audits. One of the audits highlighted the Department of Public Welfare’s (DPW) weak administration of a disaster relief advancement account. Another audit focused on payments made by DPW’s South Mountain Restoration Center to a pharmaceutical vendor for generic drugs that were misclassified as brand name drugs. The third audit examined victims compensation claims awarded by the Pennsylvania Commission on Crime and Delinquency.
One of the reviews conducted by this new unit focused on travel expense payments for the newly established Gaming Commission. The review resulted in reconciliations and recommendations to the Commission’s staff. The unit has also begun a review of Commonwealth agency advancement accounts, which handle approximately $372.5 million in Commonwealth funds annually.
Treasurer Casey Expanded the Office of Internal Audits
Treasurer Casey has expanded the role of the Office of Internal Audits to provide greater assurance that the internal control frameworks within the Department are properly designed and working successfully. In the past 18 months, Internal Audits has performed a wide range of services to Treasury, including risk assessments and operational surveys, as well as consulting, compliance, and audit engagements. Prior to 2005, the work of this office was limited primarily to providing assistance to outside auditors.
Treasurer Casey Prioritized Investigations of Uncashed Checks and Forgeries
To improve its effectiveness, Treasurer Casey transferred the unit that looks into uncashed checks and forgeries out of the Comptroller’s Office and integrated its work with that of the new Office of Investigations. Now, instead of just reacting to individual complaints, Treasury employees proactively review thousands of uncashed checks, reach out to payees, expedite check replacements, conduct thorough investigations, and work with other state agencies to identify and eliminate the causes of uncashed checks totaling millions of dollars.
During the past 24 months, Treasury helped replace 1,565 Commonwealth checks totaling nearly $7.6 million and redeposit 198 Commonwealth checks totaling nearly $10.4 million.
Treasurer Casey has implemented an initiative to prioritize uncashed checks in large amounts and checks to government agencies, hospitals, non-profits, schools and utilities. Since January 2005, his staff identified over $52, 000 in uncashed unclaimed property checks and $552,000 in unclaimed property due to public utility companies. The staff also found over $20,600 in uncashed Commonwealth checks for state universities and nearly $40,000 in unclaimed property for local governments, including Philadelphia.
Treasurer Casey has made the investigation of forgery claims a priority of the Department. In the past, this has been a task for the Commonwealth’s depositor banks.
Since January 2005, Treasury’s Forgeries Unit received 599 new forgery claims totaling over $565,039 and closed 424 forgery claims totaling over $497,141.
RETURNING UNCLAIMED PROPERTY TO ITS RIGHTFUL OWNERS
Treasurer Casey Dramatically Improved the Bureau of Unclaimed Property
Under state law, the Commonwealth is responsible for custody and control of abandoned and unclaimed financial assets. The State Treasurer is responsible for returning that property to its rightful owners.
Since January 2005, the Treasury Department has returned over $205 million to more than 150,000 owners of unclaimed property. In 2005, the Department returned 280% more unclaimed property than in 2004.
Treasury collected over $357 million in unclaimed property and received over 188,000 claims. During the same time period, the Bureau of Unclaimed Property handled over 340,000 phone calls regarding claims, 33,000 e-mails, 539,000 Internet inquiries and 15,500 written requests. The Bureau also conducted exhaustive due diligence efforts to increase awareness of Unclaimed Property among Pennsylvania businesses, property owners and the general public, as well as recovering $5.6 million in unclaimed property from 41 other states. In addition, Treasury conducted 28 holder education seminars; attended over 350 outreach events to locate owners of unclaimed property utilizing an improved laptop system for initiating claims on-site; advertised approximately 230,000 names in newspapers across Pennsylvania; and distributed Treasury’s unclaimed property brochures to all 15 Pennsylvania Welcome Centers.
To expedite unclaimed property claims as quickly and as efficiently as possible, Treasurer Casey has overseen numerous operational enhancements, including reorganizing the management team, hiring temporary workers, improving training, updating technology, improving the scanning/imaging/paperless operations, Saturday overtime shifts, and adjusting weekday office hours to better accommodate the public.
Treasurer Casey also brought all of the claims processing back in-house with the establishment of two new regional call centers in Pittsburgh and Scranton, while implementing an upgraded phone system for all locations.
In November 2005, the Treasury Department’s sales of tangible unclaimed property on eBay reached an all-time monthly high of $66,000. Overall, Treasury sold over 7,400 items totaling nearly $552,000, which represents a 20 percent growth over 2004.
ENSURING PROMPT AND ACCURATE STATE PAYMENTS
Treasurer Casey Ensured that Katrina-related Delays Didn’t Slow SSI Payments
Despite a weeklong delay in the transmission of data from federal to state agencies as a result of Hurricane Katrina, Treasurer Casey took steps to ensure that nearly 273,000 Supplemental Security Income (SSI) payments were made on time.
The Treasury Department also took on a new responsibility in the SSI payment process that will save taxpayers an estimated $25 million a year. In recognition of this achievement, the Department in 2005 won the RealSolutions Government Award from Hyland Software.
TAKING ACTION TO REDUCE IDENTITY THEFT
Treasurer Casey Removed Social Security Numbers from Checks, Payroll Reports
As part of his continuing effort to help Pennsylvanians protect themselves from identity theft and safeguard their personal finances, Treasurer Casey directed the removal of Social Security numbers from the nearly seven million Unemployment Compensation benefit checks disbursed annually by the Treasury Department.
He also ordered the removal of Social Security numbers from Treasury earnings statements, payroll reports and savings bond reports.
PROMOTING FINANCIAL LITERACY
Treasurer Casey, Credit Unions Offer Payday Loan Alternative
Treasurer Casey has worked with the Pennsylvania Credit Union Association to develop the first statewide program in the U.S. to help cash-strapped working families avoid costly debt traps. The new Better Choice program provides affordable, 90-day loans of up to $500 with a unique savings component equal to 10 percent of the loan amount.
Unlike predatory payday loans, which impose staggering costs on unsuspecting borrowers, Better Choice loans have low fees and safeguards to prevent borrowers from getting caught in vicious debt traps. Payday lenders typically target those who can least afford to pay the high fees associated with their revolving short-term loans, such as working mothers, military families, and people living paycheck-to-paycheck.
The Better Choice program, which is being offered at 140 locations by 43 credit unions, gives working people a real alternative to borrowing against their next paycheck. With lower costs, extended installment payments, financial counseling, and a savings boost, Better Choice helps families make ends meet without devastating their budgets.
Treasurer Casey’s Advocacy has Helped Protect and Inform Consumers
To further promote financial literacy, Treasury Casey has led an outreach campaign to inform consumers that they should take advantage of a new law that allows them to obtain free credit reports. He has encouraged Pennsylvanians to regularly access the information they need to protect their identities and report any unauthorized credit card charges as soon as possible.
Treasurer Casey has also led the effort to inform consumers about the policies that govern gift cards and the various transaction, service, inactivity and convenience fees that may be imposed on them. He has urged consumers to use gift cards as soon as possible to minimize the chances of the cards being lost, stolen or expired.
In January, Treasurer Casey urged the General Assembly to pass legislation that would eliminate gift card expiration dates and prohibit the imposition of fees on gift cards.
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Updated December 13, 2006
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