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11/4/2005



Rail News: Amtrak

GAO: More business practice improvements needed at Amtrak


Amtrak needs to strengthen its basic business procedures in order to achieve financial stability and meet future operating challenges, according to a report issued yesterday by the Government Accountability Office (GAO).

In the report — conducted because the financial condition of the national passenger railroad "remains precarious" — GAO concluded that although Amtrak managers have taken steps to control operating costs, more improvements are needed to measure and monitor performance, develop and maintain financial controls, control costs, and acquire goods and services.

GAO reviewed Amtrak’s strategic planning, financial reporting and management practices, cost-containment strategies, acquisition management, and accountability and oversight.

Amtrak lacks a "meaningful strategic plan that provides a clear mission and measurable corporate-wide goals, strategies and outcomes to guide the organization," GAO said. The railroad’s revenues are declining faster than costs and losses are projected to increase 40 percent during the next four years, and there is no effective corporate-wide cost-containment strategy to address them, according to GAO.

The report also states that Amtrak’s financial reporting and management practices are weak in several areas, and financial information and cost data for key operations are limited and often unreliable. Amtrak has omitted or misallocated key expenses in several areas, understating operating expenses in reports that managers use to assess performance, according to GAO.

The report has prompted House Transportation & Infrastructure Committee Chairman Don Young (R-Ala.) to create an "Amtrak Working Group" to determine whether there is "sufficient information to warrant the establishment of a formal Congressional task force to address new GAO allegations about Amtrak finances," according to the National Association of Railroad Passengers (NARP), which criticizes Young’s creation of the task force.

"GAO has studied Amtrak endlessly over the past decade," said NARP Executive Director Ross Capon in a prepared statement. "It is not clear why this report warrants creation of a working group. The last thing we need is yet another ‘group’ to study Amtrak."

The association noted that the federal funds Amtrak uses for operations have been declining, and the railroad is seeking increased funding for capital costs to bring infrastructure and rolling stock to a state of good repair. In fiscal-year 2005, the railroad’s total revenues increased $18 million while expenses increased $12 million compared with FY2004, according to NARP.

However, U.S. Transportation Secretary Norman Mineta believes the Amtrak board should rethink its strategy in light of the report’s findings.

"The GAO’s report on Amtrak is unusual — if not unprecedented — in the scope of its review and the severity of its indictment. It is a thoughtful and comprehensive analysis that, frankly, is devastating in its judgment of Amtrak’s performance," he said. "The Amtrak board must stop and take a fresh look at how to proceed in the face of this non-partisan, objective report of systemic failure."



Contact Progressive Railroading editorial staff.

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