(The U.S. House of Representatives Committee on Transportation issued the following news release on November 3.)
WASHINGTON — A two-year investigation by the Government Accountability Office (GAO) into Amtrak’s management and spending practices uncovered numerous procurement abuses, inadequate financial controls and questionable spending, leading GAO to predict that Amtrak’s current $1 billion annual operating loss will increase by $400 million a year by FY 2009.
The GAO report states “while Amtrak has recently reduced costs, revenues are declining faster than costs, leading to operating losses exceeding $1 billion annually. These losses are projected to grow by 40 percent within four years; no effective corporatewide cost containment strategy exists to address them.”
The GAO report entitled “Systemic Problems Require Actions to Improve Efficiency, Effectiveness, and Accountability” was publicly released today and can be accessed at the GAO website at: www.gao.gov
Other highlights of the report include:
Amtrak procures $500-$600 million in goods and services per year, but was unable to provide GAO with detailed, comprehensive data on total spending.
There is no company-wide strategic plan or cost containment strategy (page 92).
Over $500,000 in performance bonuses were given to Amtrak managers, despite the lack of measurable performance goals. These awards were issued even though the company’s financial picture had not been finalized. David Gunn, Amtrak’s current president, received a substantial cash performance bonus, although the performance goals in his employment contract were never filled in (page 73).
No-Bid contracts were awarded without justification even when Amtrak’s own guidelines required justification (pages 112-114).
Initial contracts were expanded far beyond their original scope – a software contract was increased from $60,000 to over $500,000 (page 107); a signal survey services contract went from $45,000 to over $764,000 (page 115).
Of $4.3 billion in costs for 2002-03, only $357 million (8 percent) was directly assigned to each train line. Amtrak allocated the other 92 percent of costs to the various lines using arbitrary formulas, for which GAO could not find supported (page 68).
Purchase order arrangements designed for contracts under $5000 were used for $100,000 purchases.
Rep. Richard Baker To Chair Amtrak Working Group
The GAO report was the focus of the first meeting this morning by the Amtrak Working Group, a bipartisan panel of House Transportation and Infrastructure Committee Members assigned to evaluate the information from the GAO, the Amtrak Inspector General and the Department of Transportation Inspector General.
U.S. Rep. Don Young (R-Alaska), the Chairman of the Transportation and Infrastructure Committee, appointed U.S. Rep. Richard Baker (R-LA) to Chair the Amtrak Working Group. Baker also serves as the Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, which uncovered numerous financial irregularities within Fannie Mae and Freddie Mac.
“I look forward to meeting with the other members of the working group during the next few months to review the materials that have been developed on Amtrak’s stewardship of intercity passenger rail,” Baker said. “This GAO report certainly provides comprehensive and detailed information concerning the current state of intercity passenger rail transportation.”
“Over the last two years the GAO has been working at my request on an evaluation of Amtrak’s management and performance,” Young said. “The report was structured to provide comprehensive and detailed information concerning the current state of intercity passenger rail transportation under Amtrak’s stewardship. As we assess the current federal role and look to the future opportunities to meet intercity passenger rail transportation needs, it is imperative that any system we adopt or continue to support operates in an efficient and businesslike manner.
“This GAO report has raised very serious questions about the planning, acquisition procedures, cost controls, and financial management at Amtrak. In addition, we will also be receiving information from the Amtrak and DOT Inspector Generals regarding their investigations into Amtrak’s management and spending practices.
“Rep. Baker is the ideal person to lead this effort to thoroughly examine Amtrak’s management practices, how it acquires its goods and services, and the accuracy of the information provided to the Congress and the public.
“In light of the heavy federal subsidy used to keep Amtrak solvent, I am specifically interested in allegations of wasteful spending, poor business practices, inadequate record keeping, and the lack of a comprehensive strategic plan,” Young said.
The Amtrak Working Group has been asked to determine whether there is sufficient information to warrant the establishment of a formal Congressional taskforce to address this issue. Baker’s group has until February 17, 2006, to report back to the Committee
The following are Members of the Amtrak Working Group:
GOP Members
Richard Baker (R-LA), Chairman
Vernon Ehlers (R-MI)
Sam Graves (R-MO)
Mark Kennedy (R-MN)
John Boozman (R-AR)
Democrat Members
Elijah Cummings (D-MD), Ranking Democratic Member
Jerrold Nadler (D-NY)
Brian Baird (D-WA)