Reengineering financial management: Pittsburgh's Unisource 2000 project.

• Author: Miranda, Rowan

In an effort to cope with persistent financial problems, the City of Pittsburgh has pursued process reengineering, using information technology to radically redesign budgeting and accounting systems.

Throughout the country, major corporations have sought to reengineer their business processes in an attempt to remain competitive. Reengineering is an organizational change strategy that promises dramatic improvements in performance if standard operating procedures (SOPs) are redesigned from scratch and modern information technology is used in the redesigned processes. Asserting that incremental changes at best lead to incremental results, reengineering consultants stress the need for "discontinuous thinking." Although reengineering can serve as a strategy for downsizing organizations, its aim is to add value to organizations and their customers by applying information technology to streamline processes.

The City of Pittsburgh is a 200-year-old corporation with more than 4,500 employees, an operating budget of $350 million and a six-year capital budget plan of $180 million. Pittsburgh also has lost half of its population over the past 20 years. Unisource 2000 is a major reengineering effort that the city government has established to redesign the city's accounting, budgeting, and control processes by providing managers with timely information that will improve service delivery decisions.

The impetus for this project came in early 1994 from the city's newly elected mayor. Faced with a general fund balance of -$20 million for FY1993 and an estimated fund balance of -$50 million after FY1994, the mayor's office of management and budget (OMB) took steps to address the city's dwindling cash position and sought support for a long-term initiative to rethink the city's fundamental business processes.

The short-term fiscal management strategy relied on traditional tools such as hiring freezes, across-the-board cuts, layoffs, and postponement of major purchases. Because the city had repeatedly faced fiscal problems and previous mayors had responded with similar steps, department heads found it difficult to trim fat from areas that had already faced deep cuts. OMB supported the information systems director's view that a long-term strategy using information technology to transform department operations was the best vehicle to improve efficiency and ultimately to provide value to residents and businesses.

Obstacles to Reengineering

In comparison to its use in the private sector, why have governments had difficulty embracing reengineering? The City of Pittsburgh's experiences illustrate that governments face a number of obstacles to the introduction of process reengineering.

Monopoly Bureaus. One reason why the use of reengineering has lagged in the public sector is that bureaus generally exist in an environment without competition, which allows them to operate inefficiently initially and resist innovation. Fiscal limitations ensure that this will not continue forever. Without access to major new sources of revenue, the City of Pittsburgh will have to implement steps to improve the efficiency of government operations if it is to maintain taxpayer and business confidence. The financial situation motivated the mayor and city council to invest in a serious reengineering effort, even if it meant disrupting bureaucratic fiefdoms by consolidating or eliminating departments to accommodate new business processes.

Rigidity of SOPs. Many bureaucratic routines are embedded in legislative statutes and corporate charters which make it difficult to "redesign from scratch." Also, the piecemeal bargaining concessions made to unions over time can lead to work rules that often frustrate financial managers and employees alike. A true reengineering effort, such as the one Pittsburgh is seeking to adopt, may require home rule charters or labor contracts to change. Civic and political leadership is crucial for such efforts to succeed.

Relationships Between Branches of Government. A major impediment to change is the poor relationship among different branches of government. For example, generally accepted accounting principles (GAAP) basis accounting traditionally was viewed as an attempt by the independently elected controller to embarrass the mayor's office. OMB passed...