a

GAO

United States Government Accountability Office

Report to the Chairman, Committee on 

Transportation and Infrastructure, House 

of Representatives

October 2005 AMTRAK 

MANAGEMENT

Systemic Problems 

Require Actions to 

Improve Efficiency, 

Effectiveness, and 

Accountability

GAO-06-145
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-06-145.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact JayEtta Z. 

Hecker at (202) 512-2834 or 

heckerj@gao.gov. 

Highlights of GAO-06-145, a report to the 

Chairman, Committee on Transportation 

and Infrastructure, House of 

Representatives 

October 2005

AMTRAK MANAGEMENT 

Systemic Problems Require Actions to 

Improve Efficiency, Effectiveness, and 

Accountability 

Amtrak’s basic business systems need to be strengthened to help achieve 

financial stability and meet future operating challenges. Recently, Amtrak’s 

management has taken positive steps to instill some discipline and control 

over operations. However, fundamental improvements beyond these efforts 

are needed to better measure and monitor performance, develop and 

maintain financial controls, control costs, acquire goods and services, and be 

held accountable for results. Several key themes emerged across all five 

areas GAO reviewed. 

• Amtrak lacks a meaningful strategic plan that provides a clear mission 

and measurable corporatewide goals, strategies, and outcomes to guide 

the organization. Also absent is a comprehensive strategic planning 

process, characteristic of leading organizations GAO has studied. Also, 

while Amtrak has recently taken steps to improve its acquisition 

function, GAO found that some major departments independently made 

large purchases and did not always adhere to Amtrak’s procurement 

policies and procedures. Amtrak lacks adequate data on what it spends 

on goods and services, preventing it from identifying opportunities to 

leverage buying power and potentially reduce costs. Similarly, 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 4 years; no effective 

corporatewide cost containment strategy exists to address them. 

 

• Financial reporting and financial management practices are weak in 

several areas. Financial information and cost data for key operations, 

while improved, remain limited and often unreliable. For example, 

Amtrak’s on-board food and beverage service lost over $160 million for 

fiscal years 2002 and 2003. Amtrak’s poor management and enforcement 

of its food and beverage contract (an outside contractor is responsible 

for procuring and distributing food and beverages for most of Amtrak’s 

trains) may have contributed to this loss. Regarding financial reporting, 

GAO found that Amtrak had omitted or misallocated key expenses in 

several areas, substantially understating operating expenses in reports 

that managers use to assess performance. Similarly, Amtrak has not 

developed sufficient cost information to target potential areas to cut 

costs, accurately measure performance, and demonstrate efficiency. 

• Developing transparency, accountability, and oversight is critical for 

achieving operational success. Since Amtrak is neither a publicly traded 

private corporation nor a public entity, it is not subject to many of the 

mechanisms that provide accountability for results. Mechanisms that do 

apply, such as oversight by the board of directors and the Federal 

Railroad Administration, are limited or have not been implemented 

effectively. Current congressional review of Amtrak offers an 

opportunity for addressing these transparency and accountability issues. 

Amtrak has struggled since its 

inception to earn sufficient 

revenues and operate efficiently. 

In June 2002, Amtrak’s new 

president began major efforts to 

improve efficiency. However, the 

financial condition of the company 

remains precarious, requiring a 

federal subsidy of more than $1 

billion annually. Capital backlogs 

are now about $6 billion, with over 

60 percent being attributable to its 

mainstay Northeast Corridor 

service. GAO reviewed Amtrak’s 

(1) strategic planning, (2) financial 

reporting and financial 

management practices, (3) cost 

containment strategies, (4) 

acquisition management, and (5) 

accountability and oversight. 

What GAO Recommends

GAO makes recommendations in 

all five areas reviewed. These are 

designed to improve the strategic 

planning process; improve financial 

information; strengthen controls 

over costs and acquisition of goods 

and services; and strengthen 

transparency, accountability, and 

oversight. GAO also suggests that 

Congress ensure that future 

legislation for intercity passenger 

rail service contains clear goals and 

stakeholder roles, and incentives 

for results and accountability. 

Department of Transportation 

officials, in general, agreed with the 

report’s findings. Amtrak’s 

president was not convinced GAO’s 

recommendations would achieve 

the results GAO expects but, in 

general, did not comment on 

specific recommendations. 
Page i GAO-06-145 Amtrak Management

Contents

Letter 1

Executive Summary 2

Purpose 2

Background 3

Results in Brief 4

Principal Findings 7

Matters for Congressional Consideration 18

Recommendations for Executive Action 18

Agency Comments and GAO Evaluation 19

Chapter 1

Introduction

25

Amtrak’s Financial Struggles Have Led to Changes in Corporate 

Direction and Organization 26

Most Recent Changes Have Focused on Improved Management, 

Financial Stability, and Infrastructure Renewal 31

Amtrak’s Operations, Governance, and Oversight Are Covered by a 

Variety of Requirements 35

Objectives, Scope, and Methodology 38

Chapter 2

Amtrak Lacks a 

Comprehensive 

Strategic Plan and a 

Performance-Based 

Approach to Better 

Ensure Cost-effective 

Results

43

Leading Organizations Manage by Focusing on Missions and Goals 

Spelled Out in a Strategic Plan 44

Amtrak Lacks a Strategic Plan That Includes Key Elements 

Necessary to Comprehensively Manage the Corporation 46

Amtrak’s Planning Process Could Benefit from Increased Use of a 

Performance-Based Framework to Achieve Its Goals 53

Amtrak’s Proposed Strategic Reform Initiatives Face Significant 

Implementation Challenges 59

Conclusions 61

Recommendations for Executive Action 61

Chapter 3

Financial Management 

Practices Could Better 

Support Amtrak’s 

Decision Making

63

Financial Reports Lacked Certain Relevant Information and 

Contained Significant Errors 63

Internal Control Weaknesses Existed in the Two Areas GAO 

Reviewed 69

Amtrak Has Made Progress in Improving Financial Management 

Practices, but More Work Remains 80
Contents

Page ii GAO-06-145 Amtrak Management

Conclusions 83

Recommendations for Executive Action 84

Chapter 4

Despite Increasing 

Operating Losses and 

Federal Subsidies, 

Amtrak Has Not 

Developed a 

Comprehensive Cost 

Control Strategy

87

Amtrak’s Annual Operating Loss Has Grown to over $1 Billion and Is 

Projected to Increase to over $1.4 Billion, While Federal Subsidies 

Have Increased 88

Amtrak Has Not Developed a Comprehensive Cost Control 

Strategy 93

Amtrak’s Management Tools Do Not Constitute a Comprehensive 

Cost Control Strategy 97

Lack of Cost Data Limits Amtrak’s Ability to Identify Areas to 

Efficiently Reduce Costs or to Measure the Results of Cost 

Control Actions 98

Amtrak Should Continue to Use Common Rail Industry Practices in 

Focusing on Its Cost Control Efforts 101

Conclusions 102

Recommendations for Executive Action 103

Chapter 5

Amtrak’s Acquisition 

Function Is Limited in 

Promoting Efficiency, 

Cost-effectiveness, and 

Accountability

104

Effective Acquisition Requires Key Organizational Elements 104

Elevating Procurement Function in Organization Structure Has Not 

Yet Resulted in a More Strategic Approach to Acquisition 105

Communication and Enforcement of Policies and Procedures Have 

Been Limited 110

Amtrak’s Knowledge and Information System Does Not Support a 

More Strategic Approach to Acquisitions 123

Conclusions 126

Recommendations for Executive Action 126

Chapter 6

Amtrak Does Not Have 

Adequate Oversight of 

or Accountability for 

Its Performance and 

Results

129

Public-Private Nature of Amtrak Significantly Influences Oversight 

and Accountability Efforts 130

Amtrak’s Board of Directors Has Not Exercised Sufficient Oversight 

or Held Management Accountable for Results 133

Oversight of Amtrak’s Performance by Some Key Stakeholders Has 

Been Limited 138

Clarifying Amtrak’s Role—and Its Key Overseers—Is Critical to 

Establishing Accountability 140

Conclusions 143

Matters for Congressional Consideration 144
Contents

Page iii GAO-06-145 Amtrak Management

Recommendations for Executive Action 144

Appendixes

Appendix I: Methodology for Selecting Procurement Contract Files for 

Review 146

Appendix II: Comments from the National Railroad Passenger 

Corporation 149

GAO Comments 154

Appendix III: GAO Contact and Staff Acknowledgments 157

Tables Table 1: Amtrak’s Five Management Tools 33

Table 2: Summary of Effects of Understatements and Potentially 

Lost Revenue for the 3-year Period Ending September 30, 

2004 72

Table 3: Examples of Key SERP Terms That Were Not Defined 74

Table 4: Specific Recommendations—Financial Reporting and 

Financial Management Practices 85

Table 5: Assumptions in Amtrak’s Strategic Reform Initiative for 

Fiscal Year 2011 Operating Savings 90

Table 6: Amtrak’s Real Total Revenues, Operating Expenses, Total 

Expenses, and Operating Ratios, Fiscal Years 2002 to 

2004 91

Table 7: Procurement Presentations to Major Amtrak Departments 

in 2005 111

Table 8: Number of Contracts GAO Reviewed, with Expenditures in 

Fiscal Years 2002 and 2003, That Were Competitively and 

Noncompetitively Awarded 113

Table 9: Extent to Which Noncompetitive Contract Awards GAO 

Reviewed Included Adequate Justifications 114

Table 10: Contracts with Numerous Extensions Resulted in 

Significant Dollar Increases 115

Table 11: Specific Recommendations—Acquisition 

Management 127

Figures Figure 1: Key Elements of a Strategic Plan 8

Figure 2: Amtrak’s Constant Dollar Operating Losses and Federal 

Operating Subsidy, Fiscal Years 2002 to 2009 13

Figure 3: Federal Subsidies to Amtrak, Fiscal Years 1971 to 2005 29

Figure 4: Intercity Passenger Rail Market Share, 1951 to 2004 30

Figure 5: Amtrak Organization Chart, as of October 2004 31
Contents

Page iv GAO-06-145 Amtrak Management

Figure 6: Projected Funding Needs in Amtrak’s June 2004 Strategic 

Plan 34

Figure 7: Key Elements of a Strategic Plan 45

Figure 8: Examples of Missions and Goals from Other Railroads 49

Figure 9: Snapshot of the Engineering Department’s Dashboard 

System 57

Figure 10: Amtrak’s Vision and Strategic Reform Initiatives 59

Figure 11: Examples of Relevant Information Not Included in 

Amtrak’s Monthly Performance Reports 65

Figure 12: Amtrak’s Constant Dollar Operating Losses and Federal 

Operating Subsidy, Fiscal Years 2002 to 2009 89

Figure 13: Organizational Elements Critical to Effective 

Acquisition 105

Figure 14: Components of a Framework for Evaluating Federal 

Investments 143

Abbreviations

AAMPS Amtrak Accounting, Material and Purchasing System

Amtrak OIG Amtrak Office of Inspector General

DOT Department of Transportation

FMFIA Federal Managers Financial Integrity Act of 1982

FRA Federal Railroad Administration

GAGAS generally accepted government auditing standards

GPRA Government Performance and Results Act of 1993

IPA independent public accountant

MBTA Massachusetts Bay Transportation Authority

RPI route performance information

SBU strategic business unit

SEC Securities and Exchange Commission

SERP Supplemental Executive Retirement Plan

STB Surface Transportation Board

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Page 1 GAO-06-145 Amtrak Management

United States Government Accountability Office

Washington, D.C. 20548

A

October 4, 2005 Letr

The Honorable Don Young

Chairman, Committee on Transportation

 and Infrastructure

House of Representatives

Dear Mr. Chairman:

As requested, this report discusses the National Railroad Passenger 

Corporation’s (Amtrak) management and performance. This includes 

information on Amtrak’s strategic planning and a performance-based 

framework, financial reporting and financial management practices, cost 

containment strategies, acquisition management, and accountability and 

oversight. We make recommendations in each of these areas as well 

suggestions to Congress about intercity passenger rail policy.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. We will then send copies to other appropriate congressional 

committees, the President of Amtrak, and the Secretary of Transportation. 

We will also make copies available to others upon request. In addition, the 

report will be available at no charge on the GAO Web site at 

http://www.gao.gov.

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-2834 or heckerj@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. GAO staff who made major contributions to this 

report are listed in appendix III.

Sincerely yours,

JayEtta Z. Hecker

Director, Physical Infrastructure Issues
Page 2 GAO-06-145 Amtrak Management

Executive Summary

Purpose In recent years, it has become clear that intercity passenger rail service has 

come to a critical juncture regarding its future in the United States. The 

National Railroad Passenger Corporation (Amtrak), the current provider of 

intercity passenger rail service, continues to rely heavily on federal 

subsidies, now totaling more than $1 billion per year. Since it began 

operating in 1971, Amtrak has received federal subsidies totaling about $29 

billion. Given the precarious financial condition of the corporation, there is 

a wide diversity of proposals for what might be done to provide more selfsufficient and efficient intercity passenger rail service, ranging from 

limiting Amtrak’s role and introducing competing rail service to keeping 

Amtrak intact and providing increased funding to improve its equipment 

and infrastructure.

To help inform congressional deliberations on these issues, the Chairman, 

House Committee on Transportation and Infrastructure, asked GAO to 

examine Amtrak’s management and performance. GAO’s review focused 

specifically on aspects of Amtrak’s management and financial operations. 

The five areas that GAO addressed, which collectively provide insight into 

the performance of Amtrak, include (1) strategic planning and a 

performance-based framework, (2) financial reporting and financial 

management practices, (3) cost containment strategies, (4) acquisition 

management, and (5) accountability and oversight. 

To address these issues, GAO reviewed documents on Amtrak’s strategic 

planning process and preparation of goals and objectives, reviewed control 

activities related to Amtrak’s financial reporting and the design of internal 

control policies over certain expenses, reviewed financial reports and 

obtained data on Amtrak’s operating costs, and reviewed Amtrak’s 

procurement policies and procedures. GAO also reviewed legislation 

relevant to the management and governance of Amtrak, including Amtrak’s 

articles of incorporation and bylaws. GAO reviewed recent grant 

agreements between Amtrak and the Federal Railroad Administration, 

observed internal control practices over certain operating expenses, and 

evaluated selected contracts for the acquisition of various services for 

compliance with procurement policies and procedures. Finally, GAO 

interviewed Amtrak officials regarding the five areas addressed in this 

report, discussed management and accountability issues with members of 

Amtrak’s board of directors, and interviewed officials at selected freight 

and commuter railroads. A more complete discussion of GAO’s objectives, 

scope, and methodology is presented in chapter 1 of this report. 
Executive Summary

Page 3 GAO-06-145 Amtrak Management

Background Amtrak, although federally established and unable to operate without 

substantial federal subsidies to remain solvent, is not a government agency, 

but rather a private, for-profit corporation. It currently operates a 22,000-

mile network providing service to 46 states and the District of Columbia, 

mainly using track owned by freight railroads. Amtrak also owns about 650 

miles of track, primarily on the Northeast Corridor between Boston, 

Massachusetts, and Washington, D.C. Amtrak served about 25 million 

passengers in fiscal year 2004 and about two-thirds of Amtrak’s ridership 

takes trains on the Northeast Corridor. Its financial condition remains 

precarious, and, according to Amtrak’s management, the corporation will 

require billions of dollars to improve infrastructure for operation of the 

nationwide intercity passenger rail service.

Amtrak’s financial struggles have led to numerous changes in corporate 

direction and organizational structure. Amtrak has also been influenced by 

requirements in the Amtrak Reform and Accountability Act of 1997 that it 

become operationally self-sufficient by 2002—a goal Amtrak did not meet. 

In 2002, under the direction of a new president, Amtrak established a more 

centralized, functional organization; adopted a new approach to 

management; and stated its intent to focus on financial stability and 

achieving a “state of good repair.”1

 As a centerpiece for these changes, 

Amtrak’s president adopted a multipronged management approach that is 

based on the following five tools—all of which were designed to instill a 

sense of discipline to company operations: 

• department goals that are to be a basis for Amtrak’s budget;

• defined organization charts that identify a clear chain of command and 

are to be used to control labor costs; 

• a capital program of specific projects and production targets needed to 

stabilize the railroad;

• a zero-based operating budget with a focus on maintaining or reducing 

the budget; and

1

A “state of good repair” is the outcome expected from the capital investment needed to 

restore Amtrak’s right-of-way (track, signals, and auxiliary structures) to a condition that 

requires only routine maintenance.
Executive Summary

Page 4 GAO-06-145 Amtrak Management

• monthly performance reports, which are to be Amtrak’s primary tool for 

reporting on company performance results, internally and externally. 

In April 2005, as GAO’s report was being prepared, Amtrak’s management 

and its board of directors released a proposed set of strategic reform 

initiatives—containing, among other things, a new vision statement—that 

would substantially change how the corporation operates. Among other 

things, this proposal would give states a larger role in deciding what 

services to offer and introduces greater potential for competition in 

providing intercity passenger rail service. The future of this proposal is 

largely unknown, and implementation will require both legislative changes 

(such as the federal government either assuming annual debt service 

payments or eliminating Amtrak’s debt burden as well as removing Amtrak 

from the railroad retirement system) and extensive changes internally 

within Amtrak. 

Results in Brief At a time when Amtrak is at a critical crossroads, GAO found that the 

corporation faces major challenges in instituting and strengthening its most 

basic business systems. Fundamental improvements are needed in the way 

Amtrak measures and monitors performance, develops and maintains 

financial controls, controls cost, acquires goods and services, and is held 

accountable for results. Although Amtrak management has taken steps to 

instill discipline and control over its operations, the corporation still lacks 

effective operating practices characteristic of well-run organizations, 

whether public or private. Regardless of the future role that the 

administration and Congress may determine for Amtrak, major 

improvements are needed in the corporation’s strategic management and 

cost controls. The following are highlights of the progress made and 

improvements needed in each of the five core areas GAO reviewed: 

• Strategic planning and management: Amtrak has improved its 

management approach in recent years through the implementation of 

such things as organization charts and operating budgets and the 

monitoring of employment levels (called headcount). However, it lacks 

a comprehensive strategic planning process and performance-based 

framework characteristic of leading organizations (including 

government entities and private corporations) that GAO has studied in 

the past. For example, Amtrak lacks a meaningful strategic plan that 

articulates both a comprehensive mission statement and corporatewide 

goals to indicate how Amtrak plans to accomplish its mission. Amtrak 

has developed a capital plan (which it calls a strategic plan) that focuses 
Executive Summary

Page 5 GAO-06-145 Amtrak Management

on the corporatewide goal of achieving a state of good repair, but it 

lacks a strategic plan that includes measurable corporatewide goals, 

strategies, and outcomes to guide the entire organization. In addition, 

without a mission or corporatewide goals, Amtrak cannot ensure that 

the annual department-specific goals developed by Amtrak’s various 

departments support or improve overall corporate performance. 

Although Amtrak’s management tools provide a framework for 

developing annual goals and budgets, these tools do not provide a longterm, integrated approach for managing the corporation and focus on 

outputs, not outcomes. Amtrak also needs a performance-based 

approach to its strategic planning process—that is, developing action 

plans for improving performance, generating key data to monitor 

performance, and using incentives to ensure responsibility and 

accountability—to achieve goals. As part of its newly proposed reform 

initiative, Amtrak plans to release a strategic plan in the fall of 2005, 

which will include a mission and goals for the company. This is a step in 

the right direction, but challenges, such as the need for congressional 

action and the ability to keep employees focused on long-term change, 

exist to fully implementing these initiatives. 

• Financial reporting and financial management practices: In recent 

years, Amtrak’s management has placed increased emphasis on 

providing reliable financial information, and progress has been made. 

For example, Amtrak’s independent public accountant (IPA) previously 

reported multiple areas of significant internal control weaknesses as 

part of an annual audit of Amtrak’s financial statements. For fiscal year 

2004, the IPA reported that much progress had been made. In general, 

however, Amtrak has not implemented “preventive controls” necessary 

to better ensure the production of relevant and reliable financial 

information for management and stakeholders. GAO found that 

improvements are needed in the usefulness of information provided to 

management and stakeholders, in the design and implementation of 

internal control practices over certain areas of expense, and in Amtrak’s 

efforts to strengthen financial management practices. For example, one 

key report used by Amtrak’s management on a monthly basis omitted 

depreciation from each train route and business line, which totaled $606 

million in 2003 and $479 million in 2002; this omission substantially 

understated reported expenses, which, in turn, hindered making a 

meaningful analysis of operating results and an assessment of 

performance. In another instance, as the result of omitting certain 

accrued benefit expenses in allocating such costs, employee benefits 

were understated by more than $100 million, and Amtrak failed to 
Executive Summary

Page 6 GAO-06-145 Amtrak Management

adequately document more than $500,000 in supplemental retirement 

benefits awarded to Amtrak executives. 

• Cost containment: Amtrak has instituted measures (such as controls 

over headcount levels) designed to contain costs, and its efforts have 

had some success. However, Amtrak’s annual operating losses have 

grown and are now over $1 billion annually. These losses are projected 

to rise about 40 percent over the next 4 years. Efforts to contain costs 

have been limited for two main reasons. First, the company has not yet 

developed a comprehensive, corporatewide cost containment plan that 

provides cost reduction goals, identifies how those goals are to be 

achieved, and provides for continuous improvement on those goals. 

Second, Amtrak has not fully developed unit cost and asset performance 

metrics that could help reduce costs and demonstrate efficient use of its 

resources. As part of its cost containment strategy, GAO found that 

Amtrak also needs to continue to use and seek to expand its use of cost 

reduction practices prevalent in the railroad industry—such as 

benchmarking and efficiency reviews. This would allow Amtrak to 

compare its practices with those of more efficient railroads and other 

transportation sector businesses to help decrease Amtrak’s operating 

costs. Absent any changes, continued and increasing federal 

subsidization to keep the company solvent will be needed.

• Acquisition management: Amtrak’s system for acquiring goods and 

services—when compared with the best practices of leading 

organizations—lacks critical elements needed to ensure efficiency, costeffectiveness, and accountability. In recent years, Amtrak has taken 

steps to centralize its purchasing function to provide more authority and 

oversight and Amtrak has recently published a procurement manual, 

which provides detailed guidance on acquisition policies and 

procedures. However, some Amtrak units have made spending decisions 

and purchased services independent of the procurement department 

and sometimes in violation of the company’s stated procurement 

policies and procedures. In addition, GAO’s review of certain contracts, 

for the purchase of such things as advertising and professional services, 

showed a high frequency of noncompetitive contracts—that is, either 

sole or single source awards—and questionable review and approval 

practices. Further, review of expenditure data and selected transactions 

revealed the inappropriate use of a purchasing tool (designed for small 

purchases of $5,000 or less) for which standards were clearly 

delineated. Finally, GAO found that Amtrak’s knowledge and 

information systems related to procurement are fragmented and have 
Executive Summary

Page 7 GAO-06-145 Amtrak Management

limited ability to produce useful spending information. As a result of 

these problems, Amtrak cannot ensure that it is receiving the best value 

when acquiring goods and services.

• Accountability and oversight: Although Amtrak operates in the public 

spotlight, few formal accountability mechanisms apply, and those that 

do have not been effectively used. Amtrak’s position as an organization 

that is neither a publicly traded private corporation nor a public entity 

means that it is not subject to many of the mechanisms that provide 

information to stakeholders or hold the company accountable for 

results. For example, Amtrak is not subject to either Securities and 

Exchange Commission rules, regulations, or public disclosure 

requirements, nor is it accountable to shareholders holding common or 

preferred stock since, by law, shareholders have little or no role in 

selecting members of the board of directors. Accountability and 

oversight mechanisms that do apply, such as oversight by the board of 

directors and the Federal Railroad Administration, are limited or have 

not been implemented effectively. 

Principal Findings

Amtrak Lacks a 

Comprehensive Strategic 

Plan and a PerformanceBased Approach to Better 

Ensure Cost-effective 

Results 

Leading organizations GAO has studied—both public and private—use 

strategic planning as a foundation for articulating a comprehensive mission 

and goals for all levels of the organization. This effort involves several 

important elements. (See fig. 1.) The first element is developing a 

comprehensive mission that employees, clients, and other stakeholders 

understand and find compelling. Leading organizations also seek to 

establish clear hierarchies for performance goals and measures for each 

organizational level linking them to overall corporate goals. Without clear, 

hierarchically linked performance measures, managers and staff 

throughout the organization will not have straightforward road maps 

showing how their daily activities can contribute to attaining 

corporatewide goals and mission. 
Executive Summary

Page 8 GAO-06-145 Amtrak Management

Figure 1: Key Elements of a Strategic Plan

In contrast, Amtrak has not yet developed a meaningful strategic plan that 

includes critical elements characteristic of leading organizations we have 

studied. Specifically: 

• No comprehensive mission statement. Amtrak has no comprehensive 

mission statement to provide and communicate a clear focus for the 

company. Amtrak’s president believes that the administration and 

Congress are responsible for developing a mission, but federal law 

already articulates the company’s purpose—to operate a national rail 

passenger transportation system. As any public or private organization, 

Amtrak is responsible for taking this purpose and establishing a clearly 

defined mission, a critical task that neither the management or the 

board of directors has yet accomplished. 

• Limited corporatewide goals. Although Amtrak’s management has 

established a goal for the corporation—returning the railroad to a state 

of good repair—this goal is too narrowly focused and does not 

encompass all corporate activities. For example, Amtrak’s goal of a state 

of good repair and related capital plan address infrastructure aspects of 

the organization, such as repairing bridges and rails. Although this plan 

guides Amtrak’s capital function, Amtrak lacks a strategic plan that 

articulates measurable corporatewide goals, strategies, and outcomes 

Mission statement

• Provides focus for the organization

• Explains why the organization exists, identifies

what it does, and describes how it does it

growth of clearly stated mission and often results-oriented

ain what results are expected from the organization's major

tions and when to expect those results

de strategies that describe the operational processes, staff skills,

nologies, and other resources needed to support the achievement

e strategic goals and mission

hip between organizationwide goals and annual goals

rganizationwide goals are to be linked to annual goals and the day-to-day

activities of managers and staff

• Clear hierarchies of goals demonstrate how the organization's activities

contribute to the overall direction and performance of the organization

• Annual goals include performance measures and quantifiable targets

to demonstrate results

MISSION

UNIT-SPECIFIC ANNUAL GOALS NIT-SPECIFIC ANNUAL GOALS

ORGANIZATIONWIDE STRATEGIC GOALS RGANIZATIONWIDE STRATEGIC GOALS

Source: GAO.
Executive Summary

Page 9 GAO-06-145 Amtrak Management

for other important aspects of its operations, such as human capital, and 

other lines of business, such as commuter rail and reimbursable 

services. 

• Annual goals are not tied to comprehensive mission or corporatewide 

goals. Absent an overall comprehensive mission and corporatewide 

goals, Amtrak’s departments develop goals based on their activities and 

the priorities of Amtrak’s president. Without a process for developing 

department-specific goals that relate to a comprehensive mission and 

corporatewide goals, departments cannot effectively assess or 

communicate whether their goals improve overall company 

performance. Moreover, the departments’ abilities to establish and 

achieve goals are hampered by a lack of data analysis and Amtrak’s 

organizational restructuring. Amtrak officials said that, in some cases, 

these goals are an expression of “aspiration,” rather than a realistic 

target. 

• Management tools focused on the short term, not the long term. 

Although Amtrak’s management tools provide a framework for 

developing annual goals and budgets, these tools do not provide a longterm, integrated approach for managing the corporation, and they focus 

on outputs, not outcomes. Without a strategic plan to guide all business 

activities, Amtrak does not have a process for integrating the efforts 

across the organization or for assessing and addressing company risks. 

Moreover, without a strategic plan, Amtrak does not have overall 

corporate performance measures and cannot establish a clear 

understanding of what it is trying to accomplish with its resources and 

company activities. 

Leading organizations GAO has studied also adopt a performance-based 

approach to ensure that all activities and individuals are working toward 

and achieving results. Although Amtrak’s key departments are making 

some progress in this regard, GAO identified a number of ways in which 

they could improve. Specifically: 

• Develop specific strategies and action plans. Amtrak’s key departments 

do not consistently develop specific strategies or action plans for 

critical actions and milestones to achieve goals. For example, in 

addressing train delays, one department was still in the process of 

developing a plan that deals mainly with mitigating passenger-loading 

problems and did not develop documented strategies or actions for 
Executive Summary

Page 10 GAO-06-145 Amtrak Management

other problems that affect on-time performance, such as freight or 

commuter train interference.

• Provide performance-based incentives. While Amtrak managers say 

they hold their managers accountable for achieving department goals, 

Amtrak does not have a pay-for-performance management system to 

provide incentive for achieving goals. Although Amtrak has proposed 

such a system to its board of directors, the board has concerns about the 

system, such as which management positions would be eligible and the 

operational and financial metrics to make merit pay and bonus 

decisions. 

• Improve performance-based data. Amtrak’s ability to monitor, evaluate, 

and report on performance is hindered by its data systems and reporting 

processes. This was a theme that was common across virtually every 

area GAO reviewed. For example, although the transportation, 

engineering, and mechanical departments report on their goals in a 

quarterly review, they do not report on all of their goals in this report. 

For example, the transportation department did not report on three of 

its eight goals at the end of fiscal year 2004. 

In April 2005, the board, in conjunction with Amtrak management, issued a 

set of strategic reform initiatives for Amtrak, which is a first step toward 

developing a more strategic approach for the company. These initiatives 

include a proposed vision for Amtrak and for the future of intercity 

passenger rail and a proposed transition to planning and reporting by lines 

of business. Amtrak intends to release a new strategic plan for fiscal year 

2006, which would ultimately result in the development of a comprehensive 

mission and goals for each line of Amtrak’s business. Department goals 

would then be aligned to each line of business, according to an Amtrak 

official. The proposed changes in planning and reporting could provide 

Amtrak with a more all-encompassing approach, but fully implementing 

these initiatives requires overcoming major challenges. For example, as the 

chairman of Amtrak’s board noted, legislative action is required to 

implement many aspects of the plan. These legislative actions include, 

among other things, the federal government either assuming Amtrak’s 

annual debt service payments or eliminating Amtrak’s debt burden (about 

$3.8 billion in short- and long-term debt at the end of fiscal year 2004) as 

well as transitioning Amtrak out of the railroad retirement system. Amtrak 

officials also noted that major challenges internally within Amtrak, 

including the time and effort needed to implement these initiatives and the 

ability to keep its employees focused on long-term change, even with the 
Executive Summary

Page 11 GAO-06-145 Amtrak Management

uncertainty of Amtrak’s future, may hinder implementation of the new 

planning process.

Financial Management 

Practices Could Better 

Support Amtrak’s Decision 

Making

GAO examined the following three aspects of Amtrak’s financial 

management and accountability framework: (1) the usefulness of financial 

information provided to management and external stakeholders, (2) the 

design of internal control over selected areas of expense, and (3) Amtrak’s 

efforts to strengthen financial management practices. Opportunities for 

improvement are present in all three of these areas.

• Although Amtrak has made progress in establishing a more systematic 

process to provide financial information to management and 

stakeholders, much of the financial information it uses for day-to-day 

management purposes lacks certain relevant information or is of 

questionable reliability. Amtrak’s monthly performance report, which 

Amtrak’s president had deemed a “critical” document for managing the 

company, demonstrated this issue in several respects. For example, the 

monthly reports did not include relevant information on Amtrak’s food 

and beverage revenue and expenses, even though food and beverage 

financial losses were over $160 million for fiscal years 2002 and 2003. 

Also, information in another key report was often of questionable 

reliability. For example, data reported in monthly reports subsequently 

required significant adjustments—requiring up to 7 months to 

complete—to correct errors in amounts before financial statements 

could be issued. As a result, the reliability of the information provided to 

managers and stakeholders during the fiscal year was limited. 

• GAO reviewed internal control practices in two areas—employee 

benefit expenses and food and beverage service—and found 

weaknesses in both. Employee benefits, for example, as reported in 

monthly performance reports, were understated by more than $100 

million because certain accrued employee benefit expenses were not 

considered. Further, documentation was inadequate to fully support 

more than $500,000 of supplemental retirement benefits awarded to 

Amtrak executives. In the area of food and beverages, poor enforcement 

of contract provisions may have contributed to Amtrak’s spending $2 for 

every $1 in revenue from on-board service. For example, Amtrak has 

never required the contractor supplying food and beverages for its trains 

to submit an independently audited annual report of budget variances 

for key items, even though the contract requires such a report. Also, 

Amtrak has never audited the contractor’s purchase data—which is 
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Page 12 GAO-06-145 Amtrak Management

allowed under the contract—to ensure that the contractor is passing 

along any discounts or rebates the contractor receives on items 

purchased.

• For fiscal years 2003 and 2002, Amtrak’s IPA reported multiple areas of 

significant internal control weaknesses as part of an annual audit of 

Amtrak’s financial statements. However, for fiscal year 2004, the IPA 

reported that much progress had been made and only one significant 

weakness remained—involving accounting for capital assets.2

 Amtrak’s 

progress in addressing its control weaknesses is an important 

achievement. In general, however, its efforts have been achieved 

primarily through the implementation of manual detective controls 

instead of preventive controls. Thus, improvements made by the end of 

fiscal year 2004 enable the production of useful financial information 

after the fact—typically, 5 to 6 months after the end of the year. 

However, until effective controls are established that prevent errors in 

financial information and address their underlying causes, Amtrak’s 

ability to produce relevant and reliable financial information for 

management and stakeholders to use for decision making will be 

hampered.

Despite Increasing 

Operating Losses and 

Federal Subsidies, Amtrak 

Has Not Developed a 

Comprehensive Cost 

Control Strategy 

Amtrak’s annual operating loss was over $1 billion in fiscal year 2004 and is 

projected to increase about 40 percent to over $1.4 billion by fiscal year 

2009. (See fig. 2.) Amtrak has made efforts to cut costs, reducing its total 

expenses by 9 percent (in constant dollars) from fiscal years 2002 to 2004 

by reducing headcount and introducing organizational efficiencies, among 

other things. Amtrak reduced its total employment by about 3,500 

employees and reduced its labor costs by about $200 million over the same 

period. Amtrak is working to reduce its costs through, among other things, 

labor negotiations with its unions; the introduction of health care 

contributions from its employees; the use of outsourcing for several of its 

mechanical, engineering, and other functions; and the creation of unit cost 

metrics in some of its operating departments to measure productivity. 

During the same period, Amtrak’s revenues have decreased by 16 percent. 

In addition, Amtrak’s projected losses may be understated, since they do 

2

On June 27, 2005, Amtrak management provided GAO with a draft copy of the internal 

control report from its IPA, which is based on the IPA’s audit of the fiscal year 2004 financial 

statements. GAO’s comments on fiscal year 2004 are based solely on the contents of this 

draft internal control report. This report was subsequently issued on August 12, 2005.
Executive Summary

Page 13 GAO-06-145 Amtrak Management

not include interest expenses that are reported in its financial statements 

and rely on $377 million in reduced costs that Amtrak estimates could be 

achieved as a result of operating efficiencies and benefits from capital 

investments it plans to undertake in fiscal years 2005 to 2009. Amtrak also 

faces serious challenges to reducing costs in the future. For example, 

Amtrak’s labor costs, which account for almost 50 percent of its total 

expenditures, are expected to increase over the next 5 years, putting more 

of a burden on Amtrak to reduce its other costs in order to significantly 

reduce its operational costs. These projections also do not take into 

account the removal in April 2005 of its Acela trainsets from service for an 

undetermined period due to brake-related problems. The absence of the 

Acela trainsets could have a significant impact on Amtrak’s fiscal year 2005 

revenues.

Figure 2: Amtrak’s Constant Dollar Operating Losses and Federal Operating Subsidy, Fiscal Years 2002 to 2009

Note: Amounts are in constant 2004 dollars. Fiscal years 2005 to 2009 figures for operating loss and 

federal subsidy are Amtrak projections. Operating losses from fiscal year 2002 to 2004 and projected 

losses from fiscal years 2005 to 2009 do not include interest expenses.

-2,000

-1,500

-1,000

-500

0

500

1,000

Federal operating subsidy adjusted

Operating loss adjusted

2002 2003 2004 2005 2006 2007 2008 2009

Fiscal year

Dollars in millions

Source: GAO analysis of Amtrak and Federal Railroad Administration data.

Projected
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Page 14 GAO-06-145 Amtrak Management

Amtrak’s cost containment efforts have had limited success for two main 

reasons. First, Amtrak has not developed a comprehensive, corporatewide 

cost containment plan. Management’s focus has been on creating and 

monitoring its yearly operating budget and managing headcount levels, 

leaving its various departments to decide on how much emphasis, if any, to 

place on other cost containment actions. Second, Amtrak has not fully 

developed unit cost and asset performance metrics that could help reduce 

costs and demonstrate efficient use of its resources. Amtrak officials said 

that such factors as recent increases in ridership and overhauls completed, 

when combined with recent decreases in employees (headcount), show 

that the company is “doing more with less.” However, a significant portion 

of the reduction in headcount came as a result of termination of a 

commuter rail service and mail and express freight services—not 

necessarily from finding efficiencies while offering the same level of 

service. Without unit cost or asset performance statistics, Amtrak is less 

able to understand and measure its performance as well as demonstrate 

progress toward being more efficient. Some of Amtrak’s departments are 

beginning to develop cost metrics, but they are encountering difficulty in 

obtaining detailed and reliable data as well as baseline statistics for trend 

analyses. Amtrak has some corporatewide efficiency metrics, such as 

ticket and passenger revenue per passenger mile, but these metrics do not 

demonstrate asset performance, such as output per unit of labor or per 

gallon of fuel consumed. The latter would give better insight into how 

efficiently Amtrak is using its assets. 

Amtrak also needs to continue and expand its use of widely used industry 

cost containment practices—such as benchmarking, outsourcing, and 

efficiency reviews. Doing so would allow Amtrak to compare its practices 

with those of more efficient railroads and other transportation sector 

businesses to help decrease Amtrak’s operating costs. Regarding 

benchmarks, freight railroads GAO contacted compare their cost 

containment strategies against those of their competitors as a means of 

incorporating best practices into their strategies. While some of Amtrak’s 

departments have used benchmarking, other departments can use this 

technique to compare their performance against the other companies in the 

industry. With respect to outsourcing, Amtrak has outsourced several 

functions, including some maintenance of equipment and maintenance of 

way functions, and its commissary operations, and it has recently identified 

other noncore functions as possible candidates for outsourcing. However, 

Amtrak management has recognized that it must develop accurate cost 

statistics to effectively compare in-house costs with the costs of 

outsourcing. With respect to efficiency reviews, managers from freight 
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Page 15 GAO-06-145 Amtrak Management

railroads told us that they hire operational and process engineers and use 

cross-functional teams to study key aspects of their operations, such as 

internal processes, route schedules, and yard operations, to find out how to 

improve these functions and track improvement efforts. In 2001, an outside 

consulting firm reviewed Amtrak’s operations and recommended 

numerous actions. However, not all of these findings were implemented, 

nor were any resulting savings tracked, because changes in Amtrak’s 

leadership and a subsequent reorganization changed Amtrak’s focus, 

according to Amtrak officials. 

Amtrak’s Acquisition 

Function Is Limited in 

Promoting Efficiency, Costeffectiveness, and 

Accountability in Acquiring 

Goods and Services

Amtrak’s system for acquiring goods and services, when evaluated against 

a set of best practices that typify organizations with highly successful 

systems, is missing critical elements needed to ensure efficiency, costeffectiveness, and accountability. In recent years, Amtrak has made 

improvements in this area, strengthening its purchasing function by (1) 

centralizing as well as elevating this function to the same level as other key 

departments, (2) issuing a procurement manual to communicate company 

procurement policies and procedures, and (3) performing outreach to 

major company departments to clarify and provide training on certain 

procurement policies and procedures. Nonetheless, as noted below, GAO 

identified several opportunities for improvement. 

First, Amtrak has not yet succeeded in fully integrating the procurement 

function and adopting a more strategic approach to acquisitions 

throughout the company. When planning acquisitions of goods and 

services, departments that need these goods and services have sometimes 

functioned independently of the procurement department. This does not 

allow leveraged buying and may have resulted in Amtrak paying more than 

necessary for some purchases. For example, in fiscal year 2004, the Amtrak 

technologies department issued and signed a contract modification 

expanding an existing software contract without the procurement 

department’s knowledge and in violation of Amtrak’s procurement policy. 

This expansion increased the value of the contract by $200,000. 

Second, while the procurement department has made efforts to become 

more involved with other departments’ procurement of goods and services, 

it has not adequately communicated and enforced policies and procedures 

intended to promote competition, obtain best prices, and protect the 

financial interests of the company. Amtrak only recently (June 2005) issued 

a comprehensive procurement manual that provides detailed guidance for 

procurement staff to follow when awarding contracts, and, basically, some 
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Page 16 GAO-06-145 Amtrak Management

departments, acting independently in purchasing goods and services, have 

not conformed to Amtrak’s own procurement policies and practices. The 

lack of clear direction and accountability until recently may have 

contributed to goods and services being acquired noncompetitively—that 

is, either sole or single source contracts—and independently of the 

procurement department. For example, GAO reviewed in detail a 

nonprobability sample of 61 contracts that had expenditures in 2002 and 

2003, a substantial number (36) were awarded noncompetitively, and these 

contracts often did not include sufficient justification, which was required 

for a noncompetitive award. Further, review of selected transactions 

revealed the inappropriate use of a purchasing tool (designed for small 

purchases of $5,000 or less) for which standards are clearly delineated. In 

some instances, this tool was used for purchases of over $100,000. 

Additionally, some departments have authority to acquire services 

independent of the procurement department. GAO’s review of one of these 

services—acquisition of outside legal services—showed weaknesses 

indicating that Amtrak may not be receiving the best value for the money 

and may be making improper payments. Problems with respect to outside 

legal services included lack of competition, lack of spend analysis, lack of 

specificity in documenting terms and conditions of the services to be 

provided, inadequate review of invoices, and inadequate supporting 

documentation for payments. 

Finally, a poor knowledge and information system limits Amtrak’s ability to 

identify opportunities for potential cost savings. Simply put, Amtrak cannot 

accurately determine how much it spends on goods and services, thereby 

missing opportunities to better leverage buying power and reduce overall 

spending. To make strategic, mission-focused acquisition decisions, leading 

private and public sector organizations establish spend analysis systems 

that provide knowledge about which goods and services are being 

acquired, the amount spent, and who is buying and supplying them. This 

knowledge allows organizations to identify opportunities to leverage 

buying, save money, and improve performance. In contrast, Amtrak’s 

knowledge and information system does not produce the data needed to 

enable Amtrak to identify strategic sourcing opportunities. Such data could 

enable Amtrak to leverage its buying power and potentially reduce 

procurement costs. 
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Page 17 GAO-06-145 Amtrak Management

Amtrak Does Not Have 

Adequate Oversight of or 

Accountability for Its 

Performance and Results

Fundamental changes are required to implement the needed improvements 

GAO identified with respect to measuring and monitoring performance, 

developing and maintaining financial records and internal controls, 

controlling costs, and procuring goods and services. However, as Amtrak 

focuses much of its attention on restoring its infrastructure to a state of 

good repair, there is a serious question regarding whether the company will 

sufficiently address these areas.

Oversight and accountability mechanisms to better ensure that needed 

improvements are addressed are limited or have not been exercised 

effectively. A major contributing factor is the unusual situation under 

which Amtrak operates—as neither a publicly traded private corporation 

nor a public entity. This means that Amtrak is not subject to accountability 

and oversight mechanisms by which other private or public entities would 

have to abide. For example, unlike publicly traded private corporations, 

Amtrak is not subject to accountability to stockholders or financial 

markets or to Securities and Exchange Commission rules, filings, and 

public disclosure requirements. Also, unlike public entities, Amtrak is not 

subject to the Government Performance and Results Act of 1993, the 

Federal Managers Financial Integrity Act of 1982, or various other 

reporting and accountability requirements established in law or regulation. 

Another factor is that existing oversight mechanisms are not working or 

are limited in scope. For example, although Amtrak has a board of 

directors with oversight authority, the board has been operating with less 

than a full complement of positions filled for considerable periods of time 

and conducts little formal oversight of performance. Also, federal 

regulators, such as the Federal Railroad Administration, have exercised 

limited oversight of Amtrak’s operations or overall performance. 

Both the administration and Amtrak have proposed reforms that would 

change the basic operating structure, establish competition for intercity 

rail, and provide a different method for distributing federal subsidies. The 

effect of these changes, if implemented, on improving oversight and 

accountability mechanisms is unknown at this juncture. Reaching 

agreement on to whom Amtrak is accountable, however, is a critical first 

step. Without it, inadequate accountability will continue, and the issues 

raised in this report may not receive the visibility needed to resolve them. 

The board and other key stakeholders can take actions within the current 

operating framework, such as developing policies and procedures to 

increase oversight and accountability. 
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Page 18 GAO-06-145 Amtrak Management

Congress has a central role in this issue. It created Amtrak and has 

continued to subsidize its operations over time. Amtrak’s reauthorization 

expired in September 2002, and Congress is now considering what, if any, 

changes are needed in the structure and financing of intercity passenger 

rail. As part of this reauthorization, Congress will also play a role in 

determining the type of oversight to be provided and the accountability 

mechanisms to be used to ensure that the desired results and outcomes are 

achieved. As we reported in April 2003, the key components of a 

framework for evaluating federal infrastructure investments include (1) 

establishing clear, nonconflicting goals; (2) establishing the roles of 

government and private entities; (3) establishing funding approaches that 

focus on and provide incentives for results and accountability; and (4) 

ensuring that the strategies developed address the diverse stakeholder 

interests and limit unintended consequences. We continue to believe these 

components are important in evaluating and establishing federal policy 

toward intercity passenger rail. 

Matters for 

Congressional 

Consideration

As part of the deliberation about the future of Amtrak and intercity 

passenger rail, Congress may wish to consider establishing a national 

policy for intercity passenger rail, and determining the appropriate role for 

Amtrak by ensuring that reauthorization or reform legislation (1) 

establishes clear, nonconflicting goals; (2) establishes the roles of both the 

federal and state governments as well as private entities; (3) establishes 

funding approaches that focus on and provide incentives for results and 

accountability; and (4) provides that the strategies developed address the 

diverse stakeholder interests and limit unintended consequences. 

Recommendations for 

Executive Action

GAO is making detailed recommendations to Amtrak in all five areas 

examined. These recommendations are designed to improve (1) strategic 

planning to better guide the company, (2) financial information and 

financial management practices for better management of operations and 

for transparency internally and with key stakeholders, (3) corporatewide 

cost containment efforts to maximize efficiency and minimize operating 

losses, (4) acquisition of goods and services to ensure that the company 

gets the best value for the money, and (5) accountability and oversight 

mechanisms to better ensure that needed management improvements are 

sufficiently addressed and resolved and to provide needed transparency 

among key internal and external stakeholders. Specific recommendations 

in each area are found at the end of each report chapter.
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Page 19 GAO-06-145 Amtrak Management

Agency Comments and 

GAO Evaluation

GAO provided a draft of this report to the Department of Transportation 

(DOT) and Amtrak for review and comment. GAO received oral comments 

from DOT officials, including the department’s general counsel. The DOT 

officials told GAO that, in general, they agreed with the draft report’s 

findings, and they said the recommendations would be helpful as they work 

with Amtrak to achieve significant improvements in program and financial 

management (in accordance with Congress’ statutory mandate that Amtrak 

become self-sufficient). The DOT officials agreed that if Amtrak receives 

federal funds, it needs to strengthen its accountability to the public and the 

federal government in a way that is effective, notwithstanding its peculiar 

corporate structure. Further, DOT officials told GAO that the department 

has worked with the Amtrak board of directors to enhance the board’s 

oversight of Amtrak in a number of beneficial ways. DOT officials said that 

in 2005, the board has been especially active and has met with unusual 

frequency in an effort to require Amtrak management to address necessary 

changes. They also noted that the board’s ability to work through board 

committees might benefit by having a full roster of congressionally 

confirmed directors in place, something that has not occurred since 2002. 

Finally, the DOT officials emphasized the potential utility of an expanded 

role for FRA, including additional legal authority to implement tools for 

enhanced oversight, such as the authority to impose more flexible and 

effective grant provisions for the funding it provides to Amtrak and the 

associated withholding of funds for nonperformance. FRA also provided 

clarifying and technical comments that GAO incorporated into this report 

as appropriate.

Amtrak provided its comments in a letter from its president and chief 

executive officer. (See app. II.) Overall, the president said that he was not 

convinced that GAO’s recommendations would produce the results GAO 

expects, saying that there is no “silver bullet” for fixing Amtrak, nor is there 

a cookie-cutter approach that can be taken. Rather, he said that steady 

incremental improvements are best. In general, Amtrak did not comment 

on GAO’s specific recommendations. The president also said that since 

coming to Amtrak, management has focused on maintaining liquidity, 

cleaning up the books, and rebuilding its plant and equipment, which has 

allowed the company to do more work with fewer people and keep 

operating needs flat. Basically, he said that “the results speak for 

themselves.” 

GAO believes that, although improvements have been made, the overall 

results have not been satisfactory. During the last 3 fiscal years, Amtrak’s 
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Page 20 GAO-06-145 Amtrak Management

operating losses have increased to over $1 billion annually, and such losses 

are projected to increase about 40 percent by 2009. In addition, GAO found 

systemic problems in all five areas that it reviewed and found that Amtrak 

faces major challenges in instituting and strengthening its basic business 

systems. Certainly, the president’s actions have helped quell what would 

likely have been even higher losses, but further fundamental changes are 

needed to help address a situation that is not yet under control. The 

recommendations contained in this report reflect sound and proven ways 

adopted by leading organizations to efficiently and effectively manage their 

operations. The importance of robust strategic planning, sound financial 

management, across-the-board cost control strategies, disciplined 

procurement practices, and strong oversight is undeniable. In GAO’s 

opinion, not recognizing the value of these areas and not adapting them to 

Amtrak’s environment will continue to lead to suboptimal results. 

The views reflected in the comments of Amtrak’s president that steady 

incremental improvements are the best approach for addressing Amtrak’s 

problems do not appear consistent with the magnitude of changes 

discussed in Amtrak’s April 2005 strategic reform initiatives. In April 2005, 

Amtrak’s management and board of directors released their strategic 

reform initiatives—initiatives characterized by Amtrak as a dramatic 

departure from business as usual that would substantially change how 

Amtrak operates. As Amtrak’s board chairman stated in April 2005, these 

initiatives include structural, operating, and legislative changes that, among 

other things, would outline a new focus on planning, budgeting, 

accounting, and reporting of financial activity and performance along 

Amtrak’s business lines; increase state financial involvement in existing 

and emerging rail corridors; and open the market for virtually all functions 

and services of intercity passenger rail to competition. The chairman also 

stated that, although Amtrak had made substantial progress in establishing 

an organizational structure and management controls that had resulted in 

cost savings, “we have considerable room for further improvement.” GAO 

believes the strategic reform initiatives clearly acknowledge the substantial 

systemic problems facing Amtrak, including those discussed in this report, 

as well as the need for reform in how intercity passenger rail service is 

delivered. GAO encourages Amtrak’s president and management to work 

together with the board of directors to ensure that the issues and 

challenges raised in the strategic reform initiatives are addressed. This will 

be important if Amtrak is to make meaningful progress in addressing its 

problems and becoming more efficient.
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Page 21 GAO-06-145 Amtrak Management

Amtrak’s president also commented about specific areas, as follows:

• Strategic planning: The president said that Amtrak’s management team 

has identified the problems “as only we can” and has developed an 

approach that “works best for us.” He said that the strategic planning 

mechanisms we recommend or that government agencies adopt may not 

be in line with those followed by Amtrak, but the goals are the same. He 

reiterated that to him, while process is important, results are what 

matter. GAO agrees that results matter, but, overall, results are not 

improving. As both public and private organizations have long 

recognized, sound strategic planning mechanisms or “processes” are 

vital to chart a clear direction and mission, develop road maps for costeffective operations based on this mission, and measure and be held 

accountable for results. The management tools Amtrak has adopted 

since May 2002, while helpful, are focused too narrowly and are clearly 

insufficient to stem the operating losses the company is experiencing. 

By focusing on “outputs,” such as overhauls and track laid, rather than 

“outcomes,” such as achieving on-time performance and a certain level 

of customer service, company management has no assurance that 

limited funds are being used for those areas that result in the highest 

return with respect to the impact on operating losses and the efficient 

and effective management of the company. GAO believes adopting a 

systematic and organized strategic approach—in line with GAO’s 

recommendations—is necessary to achieve the results that both 

management and the public expect.

• Procurement management: Amtrak’s president said that many of the 

issues GAO raised in the draft report are ones that Amtrak has focused 

on for a number of years, and the company is in the process of 

implementing changes in this area. GAO commends Amtrak for 

recognizing the need to improve its procurement function. However, 

GAO’s work shows that there continues to be substantial systemic 

problems with Amtrak’s procurement function and that additional 

actions are needed to ensure Amtrak is getting the best value for its 

money in the acquisition of goods and services and in recognizing cost 

saving opportunities.

• Financial management: Amtrak’s president commented that, during his 

tenure, Amtrak’s financial performance has improved dramatically and 

that the company closes its books on time and reports monthly results 

more quickly than most companies of its size. In addition, the president 

noted that Amtrak’s material internal control weaknesses and 
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Page 22 GAO-06-145 Amtrak Management

reportable conditions (as reported by Amtrak’s IPA), and the dollar 

value of net audit adjustments, had all decreased. Amtrak’s president 

agreed that Amtrak’s financial processes were labor intensive, but he 

said that lack of modern technology had not stymied Amtrak’s efforts to 

produce results. GAO agrees that Amtrak has made improvements in its 

financial management and reporting and that the number of material 

internal control weaknesses and reportable conditions has decreased. 

This report acknowledges these improvements. However, GAO’s work 

shows that there continue to be substantive problems related to 

financial management at Amtrak—problems that act to undermine the 

usefulness of financial information produced and adversely impact 

Amtrak’s ability to make sound business decisions. These problems 

include monthly performance reports that are not as useful as they 

could be and that contain financial data that are not reliable, inadequate 

internal controls related to certain expenses (such as employee benefits 

expenses and Amtrak’s food and beverage service), and weak efforts to 

strengthen management practices and make financial information 

transparent. GAO believes Amtrak will find it difficult to make sound 

business decisions related to its operations and its different lines of 

business, control its costs and operating losses, increase its efficiency 

and cost-effectiveness, and demonstrate progress in achieving outcomebased goals and objectives without addressing these financial 

management problems. 

• Food and beverage service: The president said that Amtrak has recently 

taken a number of actions to better manage this service, including 

reforming the delivery of food service (such as eliminating food and 

beverage service on selected short-distance trains) and renegotiating its 

contract with Gate Gourmet (formerly called Dobbs International). 

Amtrak’s president also noted that GAO’s draft report failed to mention 

the cost of labor as it relates to food and beverage service—a cost that 

both GAO and Amtrak agree is the largest single cost of the operation. 

GAO agrees that Amtrak’s actions regarding its food and beverage 

service are steps in the right direction, and GAO encourages Amtrak to 

continue to seek ways to improve management and controls over this 

service. Both GAO’s June 2005 testimony before the Subcommittee on 

Railroads, House Committee on Transportation and Infrastructure, and 

its August 2005 report on Amtrak’s food and beverage service discussed 

management and control problems related to this service and made
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Page 23 GAO-06-145 Amtrak Management

recommendations for improving this control.3 Both the testimony and 

the report also acknowledged the labor costs associated with Amtrak’s 

food and beverage operation. GAO agrees that labor costs associated 

with Amtrak’s food and beverage service are substantial and should be 

an integral component in any strategies and plans Amtrak develops to 

improve the efficiency and cost-effectiveness of this service. GAO’s 

June 2005 testimony indicated that a recent Amtrak Inspector General 

report suggested a way that Amtrak could address its food and 

beverage labor costs. Since labor costs associated with the food and 

beverage service are part of Amtrak’s overall labor cost structure, it 

was beyond the scope of GAO’s work for this report to analyze these 

specific costs. This present report discusses internal controls related to 

Amtrak’s food and beverage service and identifies ways Amtrak can 

strengthen these controls to ensure this service is operated more 

efficiently and cost-effectively. 

Amtrak also made various clarifying and technical comments that GAO has 

addressed in the text of this report. Among the technical comments was a 

proposal by Amtrak’s procurement department to liberalize Amtrak’s policy 

related to delegation authority for contract changes. This proposal was in 

response to GAO’s recommendation that Amtrak ensure that contract 

changes be approved in accordance with the company’s current delegation 

of authority policy. At the time of GAO’s review, this policy limited change 

order approvals on the basis of the cumulative value of contracts—that is, 

the level of authority needed to approve contract change orders is 

determined by the cumulative value of the contract, not the amount of the 

change order. Amtrak’s proposal would change this policy to allow 

approval of change orders by a contracting agent until the total value of all 

contract changes meets or exceeds the agent’s delegated authority to 

approve changes. Additional changes beyond this dollar value would then 

require approval by an individual with a higher level of delegation 

authority. GAO agrees that some flexibility in the approval authority may be 

desirable, especially for relatively low-dollar value changes. However, in 

liberalizing its approval authority for change orders, Amtrak should 

proceed cautiously by setting monetary thresholds for contracting agents 

that represent a relatively low-dollar value when compared with the 

3

GAO, Amtrak: Management and Accountability Issues Contribute to Unprofitability of 

Food and Beverage Service, GAO-05-761T (Washington, D.C.: June 9, 2005); and Amtrak: 

Improved Management and Controls over Food and Beverage Service Needed, GAO-05-867

(Washington, D.C.: Aug. 24, 2005).
Executive Summary

Page 24 GAO-06-145 Amtrak Management

original value of the contract. Doing so would allow more efficient use of 

procurement department resources while maintaining oversight of contract 

changes. Also, as GAO recommends in this report, Amtrak’s procurement 

department, regardless of whether or not this proposal is adopted, should 

exercise proper oversight of its contracting agents to ensure adherence to 

its current delegation of authority policy. 
Page 25 GAO-06-145 Amtrak Management

Chapter 1

Introduction Chapte1r

Intercity passenger rail is at a critical crossroads regarding its future in the 

United States. The current provider of intercity passenger rail service, the 

National Railroad Passenger Corporation (Amtrak), has struggled since its 

inception in 1970 to earn sufficient revenues and continues to rely heavily 

on federal subsidies to remain solvent; currently, these subsidies total more 

than $1 billion annually. Despite federal subsidies, the corporation has 

continued to experience financial difficulties. For example, in June 2001, 

Amtrak was forced to mortgage a portion of Pennsylvania Station in New 

York City to raise $300 million; in July 2002, it had to obtain a $100 million 

loan from the federal government in order to meet expenses and continue 

operating. In June 2002, under a new president and chief executive officer, 

Amtrak underwent reorganization. However, the financial condition of the 

corporation is still precarious, and, according to management, the railroad 

will require billions of dollars to improve its infrastructure and achieve a 

“state of good repair” as it continues to operate a nationwide intercity 

passenger rail service.1

In recent years, various congressional and administration proposals have 

called for restructuring intercity passenger rail in the United States. These 

proposals have included breaking Amtrak up and introducing competing 

rail service. For example, one recent proposal would create a separate 

infrastructure corporation as a means to maintain and rehabilitate the 

Northeast Corridor—which runs from Washington, D.C., to Boston, 

Massachusetts, and is a critical component in Amtrak’s passenger rail 

system—and other infrastructure. A separate operating corporation would 

be created to provide rail service. Under this proposal, much of the 

responsibility for intercity passenger rail service would be delegated to 

states or groups of states operating through interstate compacts, and the 

operating corporation that succeeds Amtrak would have to compete to 

provide service.2

 In contrast, other proposals call for little restructuring at 

all and instead would keep Amtrak intact and provide it with increased 

funding to improve equipment and infrastructure.

1

A “state of good repair” is the outcome expected from the capital investment needed to 

restore Amtrak’s right-of-way (track, signals, and auxiliary structures) to a condition that 

requires only routine maintenance. 

2

On April 13, 2005, the Secretary of Transportation offered proposed legislation for 

restructuring intercity passenger rail, called the Passenger Rail Investment Reform Act. In 

general, this proposal would transition the ownership and management of the Northeast 

Corridor to an interstate compact of Northeast Corridor states and the District of Columbia, 

reduce (and after 4 years eliminate) operating subsidies for long-distance train service, and 

require that train operations be opened to competition. 
Chapter 1

Introduction

Page 26 GAO-06-145 Amtrak Management

To aid Congress as it deliberates on the future of Amtrak and intercity 

passenger rail in the United States, the Chairman, House Committee on 

Transportation and Infrastructure, asked us to examine various aspects of 

Amtrak’s management and performance. This report discusses Amtrak’s (1) 

strategic planning and a performance-based framework for achieving goals; 

(2) financial reporting and internal control practices and how well they 

support management and accountability of the corporation; (3) costs and 

cost containment strategies, including the existence and use of metrics to 

identify and understand the nature of the corporation’s costs; (4) 

acquisition management, including the procurement department’s 

placement within Amtrak and integration into other departments’ 

acquisition activities, compliance with procurement policies and 

procedures, and the quality of Amtrak’s knowledge and information 

systems; and (5) overall accountability and oversight of the corporation. 

Amtrak’s Financial 

Struggles Have Led to 

Changes in Corporate 

Direction and 

Organization

The Rail Passenger Service Act of 1970 created Amtrak to provide intercity 

passenger rail service because existing railroads found such service to be 

unprofitable. Currently, Amtrak operates a 22,000-mile network that 

provides service to 46 states and the District of Columbia. In operating this 

network, Amtrak mainly uses track owned by freight railroads. Amtrak 

owns about 650 miles of track, primarily on the Northeast Corridor 

between Boston, Massachusetts, and Washington, D.C. In fiscal year 2004, 

Amtrak served about 25 million passengers, or about 68,640 passengers per 

day. According to Amtrak, about two-thirds of its ridership is wholly or 

partially on the Northeast Corridor.

Amtrak has undergone numerous changes in its corporate direction and 

organizational structure in an attempt to improve its financial condition. 

These changes were influenced, in part, by the Amtrak Reform and 

Accountability Act of 1997, which required Amtrak to become 

operationally self-sufficient by December 2002.3

 Examples of changes over 

the last decade include the following:

• Establishment of strategic business units (SBU). In September 1994, 

Amtrak’s then president stated that a vision for the corporation needed 

to be articulated and that decisions needed to be more market-driven. 

Between October 1994 and January 1995, with the assistance of a 

3

This act prohibited Amtrak from using federal funds for operating expenses, except an 

amount equal to excess Railroad Retirement Tax Act payments, after 2002.
Chapter 1

Introduction

Page 27 GAO-06-145 Amtrak Management

management consulting firm, Amtrak reorganized into the SBUs in an 

attempt to address these issues. According to Amtrak, the SBUs were 

established to provide a method for better managing performances and 

differences in businesses or markets within the company and were 

designed to anticipate and facilitate rapid response to change, place 

decision making close to the customer, and establish authority and 

accountability. Amtrak established three SBUs—Northeast Corridor, 

Intercity, and West. The SBUs were largely self-contained units that had 

their own chief executive officers, handled their own rail service, 

procured their own materials and supplies, and handled their own 

financial management and planning. Amtrak also established corporate 

and service centers to support the SBUs and provide services that either 

had economies of scales or required special technical skills.4

 In 

undergoing this reorganization and establishing the SBUs, the 

expectation was that this new structure would, among other things, 

result in fewer management positions, lower costs, and establish 

accountability for results.

• Improvement of financial health by reducing service. In 1995, Amtrak 

attempted to improve its financial condition by changing its approach to 

route and service actions. In particular, Amtrak eliminated 9 routes, 

truncated 3 routes, and changed the frequency of service on 17 routes. 

The expectation was that Amtrak could save about $200 million from 

these actions while retaining a high percentage of revenues and 

passengers. 

• Improvement of financial health by expanding service. In December 

1999, Amtrak again changed corporate direction by adopting a strategy 

that consisted of 15 planned route and service actions, the majority of 

which involved an expansion of service. The expectation was that by 

increasing service significant new revenue would be generated, 

especially from hauling mail and express cargo. 

None of the above changes met expectations. Instead of the SBUs leading 

to decreased costs, Amtrak’s operating costs generally increased. For 

example, as we reported in May 2000, Amtrak incurred about $150 million 

4

For example, Amtrak retained a chief financial officer, a general counsel, and a chief 

mechanical officer. The corporation also retained a board of directors to provide overall 

governance, a president to manage the company and establish strategic direction, and a 

management committee to set corporate policy.
Chapter 1

Introduction

Page 28 GAO-06-145 Amtrak Management

more in expenses than planned over the 1995 to 1999 period.5 Employment 

levels were a significant factor. Although Amtrak’s total employment 

generally decreased from 1994 to 1996, by 1999 Amtrak had about the same 

number of management employees and more agreement employees (unionrepresented) than in 1994.6

 In addition, Amtrak’s operating loss (total 

revenue minus total expense) fluctuated between fiscal years 1994 and 

2002 but generally increased from about $770 million in fiscal year 1995 to 

about $1 billion in fiscal year 2002.7

 At the same time, Amtrak continued to 

receive substantial federal operating and capital support.8

 (See fig. 3.) 

Subsequent financial results from the service actions in 1995 and 1999 also 

did not meet expectations. As we reported in April 2002, the 1999 service 

expansion failed, in part, because Amtrak overestimated the mail and 

express revenue it was able to generate and because Amtrak failed to 

obtain a full understanding of freight railroad concerns before 

implementing the expansion strategy.9

 At the time of our report, most of the 

route actions of the service expansion had been canceled.

5

GAO, Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty Controlling Its 

Costs and Meeting Capital Needs, GAO/RCED-00-138 (Washington, D.C.: May 31, 2000). As 

we reported, Amtrak missed its expense targets from 1995 through 1997 by about $355 

million. However, in 1998 and 1999, Amtrak spent less than planned by $205 million. The net 

was $150 million more than planned.

6

In 1999, Amtrak employed about 22,500 agreement employees and about 2,700 management 

employees—about the same total number as in 1994. Between September 2000 and 

September 2002, total Amtrak employment decreased from 24,886 to 21,442.

7

In nominal dollars; values exclude federal and state capital payments recognized as 

revenue.

8

In fiscal years 2004 and 2005, Amtrak received over $1 billion in federal subsidies.

9

GAO, Intercity Passenger Rail: Amtrak Needs to Improve Its Decisionmaking Process for 

Its Route and Service Proposals, GAO-02-398 (Washington, D.C.: Apr. 12, 2002).
Chapter 1

Introduction

Page 29 GAO-06-145 Amtrak Management

Figure 3: Federal Subsidies to Amtrak, Fiscal Years 1971 to 2005

Note: Amounts are in nominal dollars. Excludes $880 million in loan guarantees but includes about 

$2.2 billion in Taxpayer Relief Act funds received in fiscal years 1998 and 1999. Amounts for fiscal year 

1998 exclude $199 million in capital funds since Amtrak received Taxpayer Relief Act funds in that 

year. The receipt of Taxpayer Relief Act funds precluded Amtrak from receiving the $199 million in 

capital funds.

Amtrak’s financial condition, instead of improving, deteriorated. In June 

2001, Amtrak mortgaged a portion of Pennsylvania Station in New York 

City for $300 million to meet expenses. In November 2001, the Amtrak 

Reform Council—an independent oversight body created by the Amtrak 

Reform and Accountability Act of 1997—formally determined that Amtrak 

would not reach operational self-sufficiency by December 2002, as required 

by the act. Finally, in July 2002, Amtrak obtained a $100 million federal loan 

to meet expenses and continue operating. As we reported in April 2003, 

Amtrak also had developed a substantial deferred capital backlog of 

infrastructure improvements—about $6 billion worth ($3.8 billion, or about 

63 percent, of which was attributable to the Northeast Corridor).10

10GAO, Intercity Passenger Rail: Issues for Consideration in Developing an Intercity 

Passenger Rail Policy, GAO-03-712T (Washington, D.C.: Apr. 30, 2003). In April 2005, the 

Department of Transportation Inspector General estimated this backlog at about $5 billion.

0

500

1,000

1,500

2,000

Dollars in millions

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Fiscal year

Source: GAO analysis of Federal Railroad Administration data.
Chapter 1

Introduction

Page 30 GAO-06-145 Amtrak Management

Aside from the financial struggles, reorganizations, and route and service 

actions, Amtrak has also struggled with a small share of the intercity travel 

market (see fig. 4). On the basis of data obtained from the Federal Railroad 

Administration (FRA), intercity passenger rail accounted for a relatively 

substantial portion (15 percent or more) of the travel market through the 

mid-1950s. However, by the early 1970s—about the same time Amtrak was 

created—the rail portion of intercity travel had declined to just over 1 

percent of the intercity travel market. Since 1981, the passenger rail portion 

of the intercity travel market has been less than 1 percent, and, in 2004, 

intercity passenger rail was estimated at 0.5 percent of the market. FRA 

officials said decisions to invest in a national highway program and 

improvements in air travel, in part, led to the dramatic decreases in rail 

ridership.

Figure 4: Intercity Passenger Rail Market Share, 1951 to 2004

Note: Data used to prepare this table are based on various estimates made by FRA. Unit of measure is 

millions of intercity passenger miles. A passenger mile is one person transported one mile. The market 

share is based on intercity passenger rail’s share of the total intercity passenger miles of automobiles, 

buses, air carriers, and railroads.

0

5

10

15

20

25

1951 1961 1971 1981 1991 2001 2002 2003 2004

Percentage

Year

Source: Federal Railroad Administration.
Chapter 1

Introduction

Page 31 GAO-06-145 Amtrak Management

Most Recent Changes 

Have Focused on 

Improved 

Management, Financial 

Stability, and 

Infrastructure Renewal

In June 2002, under Amtrak’s new president and chief executive officer, the 

corporation abolished the SBUs and reorganized again. In making this 

organizational change, Amtrak recognized that the previous structure was 

too complex, had overlapping management duties, and had inefficient 

management decision making. The reorganization was to establish a more 

centralized, functional structure; establish accountability; and form a more 

orderly, lean hierarchy. (See fig. 5 for Amtrak’s current organization chart.)

Figure 5: Amtrak Organization Chart, as of October 2004

According to Amtrak’s new president, the company faced a multitude of 

problems at the time of his arrival. These problems included (1) no 

approved and distributed budget (even though the fiscal year was half 

over); (2) a finance department that was unable to close its books for fiscal 

year 2001 (and did not do so until 1 year after the close of fiscal year 2001); 

(3) no organization charts; (4) little control over employment (called 

“headcount”); and (5) an organization with fragmented responsibility for 

President and

Chief Executive

Officer

Government

Affairs

Business

Diversity

Labor

Relations

Human

Resources Finance

Law

Department

Marketing

and Sales

Procurement

and Materials

Management

Strategic

Planning

and Contract

Administration

Transportation

Engineering

Mechanical

Police and Security

Environmental Health 

and Safety

Operations Planning

Source: GAO analysis of Amtrak data.

Operations
Chapter 1

Introduction

Page 32 GAO-06-145 Amtrak Management

large functional areas, such as transportation, engineering, and mechanical 

(equipment). Amtrak’s president told us that, when he arrived, he needed a 

structure to help him gain control of the company and that many functions 

were in poor shape. For example, he said that the procurement function 

was a part of the finance department and had no clear purchasing authority 

or review. Amtrak adopted a number of strategies to address these 

problems. These strategies included restoring company accounting 

practices to strict compliance with generally accepted accounting 

principles; preparing a multiyear project-specific capital plan to achieve a 

state of good repair; and using the budget process to establish operating 

goals and objectives and to hold managers accountable. Amtrak’s president 

said these strategies were used to reduce headcount; increase production 

(e.g., ties installed, cars overhauled); and shift maintenance activities into 

planned production lines as opposed to spot repairs.

In conjunction with the 2002 organizational change, Amtrak’s president 

also adopted a new approach to management that focused on five 

management tools: (1) defined organization charts, (2) zero-based 

operating budget, (3) capital budget (communicated through a 5-year 

strategic plan), (4) department-by-department goals and objectives, and (5) 

monthly performance reports. (See table 1.) The performance reports were 

to contain financial as well as production and budget variance information. 

Amtrak uses the five management tools not only to manage the company 

but also to help contain costs. The changes were designed to increase 

control over Amtrak, instill a sense of discipline in how the company was 

operated, and simplify the management structure to assign more 

responsibility to fewer people and hold them accountable for results. Since 

the reorganization, Amtrak has centralized many of its departments (such 

as the mechanical and marketing and sales departments) and established a 

budget process focused on the five management tools and control of 

headcount.
Chapter 1

Introduction

Page 33 GAO-06-145 Amtrak Management

Table 1: Amtrak’s Five Management Tools

Source: GAO analysis of Amtrak data.

As part of the reorganization, Amtrak also refocused its efforts on 

stabilizing the corporation financially and restoring the infrastructure to a 

state of good repair. For example, Amtrak’s April 2003 strategic plan 

(covering the period of fiscal years 2004 to 2008) stated that intercity 

passenger rail was in crisis, in part, due to physical deterioration and 

financial instability. To address these issues, the plan identified over $5 

billion in total capital funding needs—with annual funding needs (both 

operating and capital) ranging from about $1.8 billion in fiscal year 2004 to 

about $1.4 billion in fiscal year 2008. These funds were to be used to, 

among other things, return plant and equipment to a state of good repair, 

control operating deficits, and restore liquidity to the corporation. The plan 

was designed to address Amtrak’s immediate problems and to buy time for 

policy makers to decide the future structure of intercity passenger rail. 

Amtrak’s June 2004 strategic plan (covering the period of fiscal years 2005 

to 2009) similarly reiterated the need to stabilize the railroad and make 

capital investments in infrastructure. It identified about $4 billion in capital 

funding needs over the 5-year period—with about $1.7 billion in average 

annual funding needs (operating, capital, and debt service).11 Under this 

Tool Description

1. Organization chart • Identifies a clear chain of command

• Basis for developing Amtrak’s budgets

• Used to control Amtrak’s labor costs

2. Operating budget • Based on the headcounts and resources needed to accomplish 

department activities (zero-based budgeting process)

• Focuses on maintaining or reducing the budget

3. Capital budget • Based on capital investment needed to stabilize the railroad

• Includes specific projects with production targets

• Communicated through Amtrak’s strategic plan

4. Goals and 

objectives

• Developed by each department 

• Basis for Amtrak’s budgets

5. Monthly 

performance report

• Summarizes Amtrak’s financial results, operating statistics, and 

capital activity

• Primary tool for reporting Amtrak’s performance, both internally 

and externally

11The calculation of annual funding needs excludes $203 million in funds that were needed 

in fiscal year 2005 for working capital and were also needed to repay a Department of 

Transportation loan.
Chapter 1

Introduction

Page 34 GAO-06-145 Amtrak Management

plan, operating support was projected to remain constant at $570 million 

per year, while capital funding needs were expected to increase from fiscal 

years 2005 to 2006 and then gradually to decrease. (See fig. 6.) Again, the 

June 2004 plan was designed to address Amtrak’s immediate problems of 

stabilizing the railroad while bringing the infrastructure to a state of good 

repair.

Figure 6: Projected Funding Needs in Amtrak’s June 2004 Strategic Plan

Note: The $203 million shown for fiscal year 2005 was a one-time need for working capital and was 

also needed to repay a Department of Transportation loan.
Chapter 1

Introduction

Page 35 GAO-06-145 Amtrak Management

Amtrak’s Operations, 

Governance, and 

Oversight Are Covered 

by a Variety of 

Requirements

Amtrak’s operations, governance, and oversight are covered by a hybrid of 

public and private sector requirements. Amtrak was created as a 

corporation under federal law. Until 1997, Amtrak was classified as a 

mixed-ownership government corporation under the Government 

Corporation Control Act. Although federally created and the recipient of 

substantial federal financial assistance—about $29 billion since it began 

operating in 1971—Amtrak is to be operated as a for-profit corporation.

We reported in December 1995 that the Government Corporation Control 

Act was intended to make government corporations accountable to 

Congress for their operations while allowing them the flexibility and 

autonomy needed for their commercial activities.12 A mixed-ownership 

corporation can be defined as a corporation with both government and 

private equity. In the case of Amtrak, the federal government held preferred 

stock of the corporation, and there were private entities that held common 

stock.13 At the time of our 1995 report, Amtrak had nine board of director 

(board) members, five were appointed by the President and the remaining 

four were the Secretary of Transportation, the president of Amtrak, and 

two individuals selected by Amtrak’s preferred stockholder (the federal 

government). Also at that time, Amtrak reported that it was not subject to 

and did not administratively adopt such statutes as the Government 

Performance and Results Act of 1993 (GPRA) and the Federal Managers 

Financial Integrity Act of 1982 (FMFIA). GPRA was designed to impose a 

new and more businesslike framework for management and accountability, 

including a requirement that federal agency missions be clearly defined and 

that both long-term strategic and annual goals be established and linked to 

mission statements. FMFIA imposed requirements for heads of federal 

agencies to evaluate and report on internal controls.14

12GAO, Government Corporations: Profiles of Existing Government Corporations, 

GAO/GGD-96-14 (Washington, D.C.: Dec. 13, 1995). 

13At the end of fiscal year 2004, the federal government continued to hold preferred stock of 

Amtrak (approximately 109 million shares, with a book value of about $10.9 billion), and 

there were 9.4 million shares of common stock outstanding (with a book value of about $94 

million) held by three railroads and a holding company.

14Internal controls are plans of organization, methods, and procedures adopted by 

management to ensure that (1) resource use is consistent with laws, regulations, and 

policies; (2) resources are safeguarded against waste, loss, and misuse; and (3) reliable data 

are obtained, maintained, and fairly disclosed in reports.
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Introduction

Page 36 GAO-06-145 Amtrak Management

The Amtrak Reform and Accountability Act of 1997 changed Amtrak’s 

status as a mixed government corporation by removing Amtrak from the 

list of mixed-ownership government corporations. Today, Amtrak is at 

most similar in nature to a “government-established private corporation.” 

Reflecting its private stature, Amtrak is not subject to most statutes that 

make federal establishments accountable. Statutes such as GPRA and 

FMFIA do not apply to Amtrak. Amtrak is a closely held corporation whose 

stock is not publicly traded; it is not subject to Securities and Exchange 

Commission oversight or to provisions of the Sarbanes-Oxley Act of 2002. 

However, as conditions to Amtrak’s continued receipt of federal subsidies, 

Amtrak is subject to such federal statutes as the Freedom of Information 

Act and the Inspector General Act of 1978. Recent grant agreements 

between FRA and Amtrak have also made Amtrak subject to federal 

regulations applicable to for-profit organizations as well as certain federal 

procurement regulations.15 Amtrak is also subject to limited jurisdiction by 

the Surface Transportation Board over matters such as compensation 

disputes with other railroads, as well as federal railroad safety laws 

administered by FRA.16

As a private, for-profit corporation, most statutes and regulations that 

govern the activities of federal entities do not apply to Amtrak. This 

includes federal acquisition regulations. Instead, Amtrak develops its own 

policies and procedures for handling the acquisition of goods and services. 

Under the terms of grant agreements between Amtrak and FRA, Amtrak is 

expected to comply with procurement, ethical, and other standards, 

including standards governing the conduct of employees engaged in the 

award and administration of contracts. Generally, contracts are to be 

awarded competitively using written procurement procedures, thereby 

ensuring that materials and services purchased with federal grant funds are 

obtained in a cost-effective and appropriate manner. The standards also 

require that procurement records and files shall include the basis for 

contractor selections, justifications for the lack of competition, and the 

basis for contract cost or price. Amtrak has incorporated both the federal 

15Under the fiscal year 2005 operating grant agreement between Amtrak and FRA, Amtrak is 

subject to 49 C.F.R. Part 19, Uniform Administrative Requirements for Grants and 

Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit 

Organizations, and 48 C.F.R., Subpart 31.2, Contracts with Commercial Organizations. 

16Amtrak also told us it was subject to federal environmental laws (including the Clean 

Water Act, the Clean Air Act, and the Resource Conservation and Recovery Act); the 

Occupational Health and Safety Act; and regulations of the Food and Drug Administration.
Chapter 1

Introduction

Page 37 GAO-06-145 Amtrak Management

standards and their requirements in its procurement manual issued in June 

2005. FRA is responsible for ensuring compliance with procurement 

standards.

Amtrak’s corporate governance is defined in its articles of incorporation 

and bylaws. Amtrak is domiciled in the District of Columbia. The board is 

responsible for managing the affairs and business of the corporation and 

for oversight of Amtrak’s president and management team. The Amtrak 

Reform and Accountability Act of 1997 reduced Amtrak’s board from nine 

to seven members, who are appointed by the President with the advice and 

consent of the Senate. The Secretary of Transportation represents the 

federal government as a member of Amtrak’s board. The board has 

operated with less than a full complement of voting members (seven 

members) since July 2003. Between October 2003 and June 2004, the board 

had only two voting members (excluding the Secretary of Transportation or 

his designee).17 As of May 2005, the board had three members, (excluding 

the Secretary of Transportation or his designee and the president of 

Amtrak). Amtrak’s bylaws also authorize the establishment of committees 

to assist the board in carrying out its management responsibilities. In 

March 2002, the board eliminated ad hoc committees, along with the 

corporate strategy committee and the safety, service, and quality 

committee. At that time, the audit, corporate affairs, finance, compensation 

and personnel, and legal affairs committees were created. As of May 2005, 

the board continued to have these five committees. Finally, Amtrak’s 

bylaws permit the corporation to conduct periodic shareholder meetings as 

necessary. Following enactment of the Amtrak Improvement Act of 1981, 

which abolished election of members of the board of directors by the 

common shareholders, Amtrak has not held a shareholders’ meeting. 

Oversight of Amtrak’s activities, other than through the board, is provided 

by a number of means. Congress plays a role through the authorization and 

appropriations process. The Amtrak Reform and Accountability Act of 1997 

authorized federal appropriations for Amtrak through September 30, 

2002.18 Although a new authorization had not been enacted as of July 2005, 

the authorization process permits Congress to review Amtrak’s previous 

and planned use of federal resources. The appropriations process provides 

17The president of Amtrak is a member of the board but is not a voting member.

18Amtrak continued to receive funds in fiscal years 2003 to 2005 through annual 

appropriations.
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Introduction

Page 38 GAO-06-145 Amtrak Management

Congress with the opportunity to oversee Amtrak’s stewardship of federal 

funds on an annual basis. Starting with Amtrak’s fiscal year 2003 

appropriations legislation, Congress adopted measures to increase the 

Secretary of Transportation’s responsibility for providing oversight and 

accountability for the federal funds used for intercity passenger rail 

service. Among other things, these measures require that Amtrak transmit a 

business plan to the Secretary of Transportation and Congress, 

supplemented by monthly reports describing work completed, changes to 

the business plan, and reasons for the changes. The business plan is to 

describe the work to be funded with federal funds. Consistent with 

requirements begun in the fiscal year 2003 appropriations act, Amtrak and 

FRA have entered into grant agreements for the use of fiscal years 2003, 

2004, and 2005 federal funds. FRA determines Amtrak’s compliance with 

these grant agreements.

Amtrak’s activities are also subject to review by the Inspector General’s 

offices within Amtrak and the Department of Transportation (DOT), as well 

as review by GAO. The Amtrak Office of the Inspector General (Amtrak 

OIG) was established by the Inspector General Act Amendments of 1988 to 

provide independent audits and investigations; promote economy, 

efficiency, and effectiveness; and prevent and detect fraud and abuse in 

Amtrak programs and operations.19 The Department of Transportation 

Inspector General also plays a role in assessing Amtrak’s financial 

performance and is charged with assessing Amtrak’s financial performance 

and needs for every year after 1998 in which Amtrak requests federal 

financial assistance. GAO has the authority to review Amtrak activities and 

transactions. Over the years, we have issued numerous reports and 

testimonies on Amtrak’s financial performance and the need for federal 

financial assistance. 

Objectives, Scope, and 

Methodology

The overall objective for our work was to determine whether Amtrak is 

using its federal resources in the most efficient and cost-effective manner. 

Our specific objectives were to determine (1) Amtrak’s strategic planning 

process and the extent to which Amtrak has implemented a performancebased approach; (2) Amtrak’s financial reporting and internal control 

practices and how well they support management and accountability of the 

corporation; (3) Amtrak’s costs and cost containment strategies, including 

19GAO, Activities of the Amtrak Inspector General, GAO-05-306R (Washington, D.C.: Mar. 4, 

2005).
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Introduction

Page 39 GAO-06-145 Amtrak Management

the existence and use of metrics to identify and understand the nature of 

the corporation’s costs; (4) Amtrak’s acquisition of goods and services, 

including organizational alignment and strategic focus, compliance with 

procurement policies and procedures, and information management; and 

(5) the overall accountability and oversight of the corporation. We focused 

on these five objectives since these are key elements to addressing the 

efficiency and cost-effectiveness with which federal resources are used by 

Amtrak. We did not explicitly review information technology and human 

capital issues—which are two additional elements of a management and 

accountability framework used in leading organizations to successfully 

manage resources. We also did not review revenue issues, such as Amtrak’s 

strategies and controls for setting fares or projecting revenue estimates. 

Our scope was primarily limited to Amtrak’s policies and procedures from 

fiscal years 2002 to 2004. However, we collected data prior to this time 

period to provide context and to ascertain what trends, if any, exist.

To address strategic planning and performance-based issues, we reviewed 

documents describing Amtrak’s management tools; strategic planning 

process; and the process for preparing budgets, goals, and objectives. We 

reviewed minutes of Amtrak board meetings and interviewed Amtrak and 

FRA officials and members of Amtrak’s board to understand the 

corporation’s strategic planning process and interviewed Amtrak officials 

on the extent to which a performance-based management framework had 

been implemented. We used this information to analyze the nature of 

Amtrak’s strategic planning process, identify whether Amtrak had 

established a clear statement of its mission, and determine whether this 

mission was linked to measurable goals and objectives. We also reviewed 

and analyzed Amtrak’s monthly performance reports and the department 

quarterly reports for the transportation, mechanical, and engineering 

departments to assess performance information generated by Amtrak. We 

interviewed commuter and freight railroad officials and VIA Rail Canada 

(VIA Rail)20 officials to determine industry strategic planning practices. We 

used relevant GAO reports and widely used standards and best practices, 

as applicable, to determine criteria for assessing Amtrak’s management 

structure as well as to suggest best practices to Amtrak.

To assess Amtrak’s financial reporting and management practices, we 

gained an understanding of control activities related to financial reporting, 

the design of internal control practices over the expenses related to food 

20VIA Rail Canada is Canada’s intercity passenger rail provider.
Chapter 1

Introduction

Page 40 GAO-06-145 Amtrak Management

and beverage operations and employee benefits, and efforts to strengthen 

management practices. We also reviewed selected workpapers for fiscal 

years 2002 and 2003 that were relied on by an independent public 

accountant (IPA) firm to issue an opinion on the Amtrak consolidated 

financial statements, IPA letters that considered internal control practices 

over financial reporting, and reports by the Amtrak OIG. We observed 

control practices over certain key areas of expense and analyzed interim 

financial information for areas such as train route performance, food and 

beverage operations, and employee benefit expense. To test the reliability 

of the financial data provided by Amtrak officials, when practical, we 

compared such information with amounts reported in Amtrak’s audited 

financial statements for fiscal years 2002 and 2003. We interviewed officials 

from various Amtrak departments and the Amtrak OIG as well as officials 

from FRA, Amtrak’s IPA, and the food and beverage contractor. In addition, 

we interviewed and collected information from officials from several 

freight and commuter railroads. This information was used in conjunction 

with GAO’s Standards for Internal Control in the Federal Government, to 

assess how well Amtrak’s financial reporting and management practices 

support the management and external stakeholders’ efforts.

To address cost and cost containment issues, we reviewed Amtrak financial 

reports and obtained data on Amtrak’s operating costs. We also interviewed 

Amtrak, FRA, freight and commuter railroads, and VIA Rail officials about 

cost control practices. The freight railroads were selected on the basis of 

their size in terms of operating revenue and track mileage and carloads 

originated, and, in the case of commuter railroads, both the volume of 

ridership in 2002 and the size of capital and operating budgets, among other 

factors. VIA Rail was selected because it is a large (in terms of route miles 

operated) intercity passenger railroad and has characteristics similar to 

Amtrak in that VIA Rail operates both long- and short-distance intercity 

passenger service and relies on government support to maintain 

operations. We used Amtrak documents and interviews with Amtrak 

officials to assess Amtrak’s cost containment strategy and the company’s 

knowledge of its costs. In performing our analysis, we used information 

from Amtrak’s audited financial statements for fiscal years 2002 and 2003. 

We also used information from Amtrak’s preliminary financial statements 

for fiscal year 2004. These statements were in the process of being audited 

during our review. Amtrak released its audited financial statements in 

August 2005 after our audit work was completed. However, to test the 

reliability of the preliminary information we used, where practical, we 

compared data from the preliminary statements with the audited 

statements. We found no major differences.
Chapter 1

Introduction

Page 41 GAO-06-145 Amtrak Management

To address acquisition issues, we reviewed Amtrak’s procurement policies 

and procedures; drafts of Amtrak’s procurement manual; and other 

documentation, such as organization charts and department goals. We also 

reviewed reports prepared by the Amtrak OIG on procurement issues. We 

observed how procurement requests are handled and processed and 

discussed Amtrak’s acquisition practices with officials from the 

procurement department. We reviewed data on expenditures made for 

advertising, sales promotion, professional services, and consulting and 

reviewed a nonprobability sample of 61 contract files associated with these 

services to assess compliance with Amtrak’s procurement policies and 

procedures.21 (See app. I for our contract selection methodology.) We also 

(1) reviewed expenditure data related to Amtrak’s use of outside legal 

services and the law department’s guidelines applicable to outside legal 

services and (2) discussed the law department’s practices for acquiring 

outside legal services with law department officials—including specific 

examples of how they acquire those services. In addition, we discussed 

procurement practices with officials in other departments, such as the 

finance, marketing and sales, engineering, and mechanical departments. To 

obtain an understanding of acquisition practices in other railroads, we 

discussed procurement practices with officials at four freight railroads and 

five commuter railroads as well as with procurement officials at VIA Rail. 

To assess the reliability of the procurement data Amtrak provided, we 

compared them with Amtrak audited financial statement data for fiscal 

years 2002 and 2003 for the accounts we reviewed. (The expenditure data 

came from a different database.) We then asked Amtrak to reconcile 

differences that we identified between the two sets of accounts. Because 

Amtrak officials said this reconciliation had to be done manually and would 

take substantial time, data were reconciled for only one account—sales 

promotion. Consequently, we used the procurement expenditure data only 

to select a nonprobability sample of procurement contracts to review. 

Similarly, we could not reconcile expenditure data for Amtrak’s outside 

legal services—taken from the law department’s case management 

system—with audited financial data. As a result, these data were only used 

to identify selected matters to discuss with law department officials about 

how outside legal services are acquired. Finally, we used information on 

payments of invoices for outside legal services from Amtrak’s accounts 

21Results from nonprobability samples cannot be used to make inferences about a 

population, because in a nonprobability sample some elements of the population being 

studied have no chance or an unknown chance of being selected as part of the sample.
Chapter 1

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Page 42 GAO-06-145 Amtrak Management

payable system. Again, because we could not reconcile the accounts 

payable information with the audited financial data, these data were used 

solely to select a nonprobability sample of 10 invoices to assist us in 

understanding the controls over payments for outside legal services.

To address overall accountability and oversight issues, we reviewed 

legislation relevant to the management and governance of Amtrak, 

Amtrak’s articles of incorporation and bylaws, and recent grant agreements 

between Amtrak and FRA. We also reviewed various proposals to reform 

both intercity passenger rail and Amtrak operations put forth by the 

administration and Amtrak’s board and management. Finally, we discussed 

oversight and accountability issues with Amtrak, board, and FRA officials 

and reviewed previous GAO reports on Amtrak’s financial condition and 

operations. We used this information to identify the type and degree of 

oversight and accountability that has been exercised by various Amtrak 

stakeholders and the potential role that reform efforts might play in future 

oversight and accountability of Amtrak or other intercity passenger rail 

operators. 

In performing our work, we reviewed and considered best practices 

described in documents from leading organizations in each of our five 

areas. These documents included various GAO reports and guides issued 

over the years on strategic plans and planning processes, financial 

management and internal controls, the implementation of GPRA 

requirements, acquisition practices, and the components of a framework 

for analyzing federal investments. These documents helped us to compare 

Amtrak’s management practices with those of leading organizations.

We conducted our work from April 2004 to July 2005 in accordance with 

generally accepted government auditing standards. 
Page 43 GAO-06-145 Amtrak Management

Chapter 2

Amtrak Lacks a Comprehensive Strategic Plan 

and a Performance-Based Approach to Better 

Ensure Cost-effective Results Chapte2r

Although Amtrak has improved its management approach in recent years, 

it still lacks a comprehensive strategic planning process and performancebased framework characteristic of leading organizations. Leading 

organizations we have studied use strategic planning to articulate a mission 

and goals for all levels of the organization, measure progress toward those 

goals, and ensure accountability for results. Amtrak, however, has not 

developed a comprehensive strategic plan that includes a mission 

statement and corporatewide goals to articulate what it is trying to 

accomplish. In the absence of a clear statement of its overall mission, 

Amtrak developed a capital plan (titled by Amtrak a “strategic plan”), 

which focuses mainly on one goal—restoring the company’s infrastructure 

to a state of good repair. Although this plan provides guidance for its 

capital funding, Amtrak lacks a meaningful strategic plan that articulates 

measurable corporatewide goals, strategies, and outcomes. Similarly, while 

the five management tools instituted by Amtrak’s president provide a 

framework for determining annual goals and budgets, they do not provide 

an approach that sufficiently focuses on outcomes (such as service and ontime performance) rather than outputs (such as units of production). The 

departments within Amtrak have developed their own department-specific 

goals, but without a mission or corporatewide goals, Amtrak cannot ensure 

that its department-specific goals support or improve overall corporate 

performance. Further, many department goals were set without a sufficient 

understanding of current baselines or what was achievable. 

Evidence of a robust, corporatewide performance management framework 

is also absent. Key departments within the company—the engineering, 

mechanical, transportation, and marketing and sales departments—could 

benefit from a performance-based approach to achieving goals—that is, 

developing and documenting strategies or action plans to achieve goals; 

using an incentive-based system to help ensure clear responsibility and 

accountability for supporting corporate performance; and generating key 

data for monitoring, evaluating, and reporting on performance. 

In April 2005, Amtrak’s board and management released a set of strategic 

reform initiatives that includes a vision for Amtrak and suggests that 

Amtrak, among other things, plan and report by lines of business—but 

challenges exist to fully implementing these initiatives. Specifically, Amtrak 

officials noted such challenges as the need for legislative action and the 

ability to keep its employees focused on long-term change. These 

challenges, along with the uncertainty of Amtrak’s future, may all affect 

whether Amtrak’s initiatives are adopted and implemented. 
Chapter 2

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Plan and a Performance-Based Approach to 

Better Ensure Cost-effective Results

Page 44 GAO-06-145 Amtrak Management

Leading Organizations 

Manage by Focusing on 

Missions and Goals 

Spelled Out in a 

Strategic Plan

Leading organizations we have studied—both public and private—use 

strategic planning as the foundation for their activities.1

 For these 

organizations, the strategic plan articulates a mission and goals for all 

levels of the organization that are tied to the strategies that will be used to 

achieve those goals. The strategic plan provides a foundation for strategic 

management initiatives, such as organizational realignment; performance 

planning, measurement, and reporting; accountability for results; and 

improvements to the capacity of the organization to achieve its goals. The 

strategic planning process facilitates communication within the 

organization as well as with external clients and allows oversight bodies to 

assess overall performance. For example, in the federal arena, GPRA 

established a strategic planning process as a way to demonstrate and 

communicate performance and focus federal agencies on the results of 

their activities (outcomes) as opposed to the activities themselves. Publicly 

traded, private companies—such as the freight railroads whose officials we 

interviewed—said they rely on strategic planning to establish, assess, and 

communicate company goals, resources, and strategies for the next 3 to 5 

years. 

Strategic plans developed by the leading organizations we studied include 

the basic elements outlined in figure 7. One of these elements is a clear 

linkage between the overall organizational mission, organizationwide 

strategic goals, and the activities of all organizational units. The first step in 

the process involves developing a comprehensive mission statement that 

employees, clients, customers, partners, and other stakeholders 

understand and find compelling.2

 The leading organizations we studied 

then seek to establish clear hierarchies for performance goals and 

measures by linking the performance goals and measures for each 

organizational level to successive levels and ultimately to the 

corporatewide goals and mission. Annual goals provide a connection 

between the corporatewide strategic goals and the day-to-day activities of 

managers and staff and provide measures of progress toward achieving the 

1

GAO, Executive Guide: Leading Practices in Capital Decision-Making, GAO/AIMD-99-32

(Washington, D.C.: December 1998). In this executive guide, criteria were developed to 

select a mixture of private and public organizations, including, but not limited to, the Mobil 

Corporation, General Electric, Washington State, and Minnesota.

2

GAO, Comptroller General’s Forum: Highlights of a GAO Forum on High-Performing 

Organizations: Metrics, Means, and Mechanisms for Achieving High Performance in the 

21st Century Public Management Environment, GAO-04-343SP (Washington, D.C.: Feb. 13, 

2004).
Chapter 2

Amtrak Lacks a Comprehensive Strategic 

Plan and a Performance-Based Approach to 

Better Ensure Cost-effective Results

Page 45 GAO-06-145 Amtrak Management

corporatewide mission. Without clear, hierarchically linked performance 

measures, managers and staff throughout the organization lack 

straightforward road maps showing how their daily activities can 

contribute to attaining corporatewide goals and mission.

Figure 7: Key Elements of a Strategic Plan

In addition, a performance-based framework is essential for ensuring that 

all activities and individuals within the organization are working toward 

goals and achieving results. Within this framework, organizations identify 

strategies and resources to achieve their goals; hold individuals 

accountable for contributing to those goals; and use performance data to 

monitor, evaluate, and report on progress toward goals. Once these 

organizations develop fact-based understandings of how their activities 

contribute to accomplishing their mission and broader results, they 

evaluate and adjust their efforts, if necessary, to optimize their 

contributions to corporate results.

Mission statement

• Provides focus for the organization

• Explains why the organization exists, identifies

what it does, and describes how it does it

growth of clearly stated mission and often results-oriented

ain what results are expected from the organization's major

tions and when to expect those results

de strategies that describe the operational processes, staff skills,

nologies, and other resources needed to support the achievement

e strategic goals and mission

hip between organizationwide goals and annual goals

rganizationwide goals are to be linked to annual goals and the day-to-day

activities of managers and staff

• Clear hierarchies of goals demonstrate how the organization's activities

contribute to the overall direction and performance of the organization

• Annual goals include performance measures and quantifiable targets

to demonstrate results

MISSION

UNIT-SPECIFIC ANNUAL GOALS NIT-SPECIFIC ANNUAL GOALS

ORGANIZATIONWIDE STRATEGIC GOALS RGANIZATIONWIDE STRATEGIC GOALS

Source: GAO.
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Amtrak Lacks a 

Strategic Plan That 

Includes Key Elements 

Necessary to 

Comprehensively 

Manage the 

Corporation 

Amtrak has not developed a comprehensive strategic plan that articulates a 

mission, corporatewide goals that are tied to the mission, strategies that 

will be employed to achieve those goals, and outcomes for efforts needed 

to run all the components of its operations—both capital and operating. 

Amtrak developed a capital plan—which it calls a strategic plan—that 

covers capital projects, ties to the capital budget, and supports the state of 

good repair goal, but Amtrak does not have a documented plan that 

includes measurable or comprehensive corporatewide goals or strategies 

for other aspects of the company’s operations. Units within Amtrak have 

developed department-specific goals, but without a strategic plan, Amtrak 

cannot ensure that these goals support corporatewide performance.

Amtrak Lacks a 

Comprehensive Statement 

of Its Overall Mission 

Amtrak does not have a comprehensive statement of its overall mission to 

provide and communicate a clear focus for the company. One Amtrak 

official noted that the issue of Amtrak’s mission is at the heart of the 

Amtrak debate. Amtrak’s president has not established a comprehensive 

mission for Amtrak. Instead, he has focused on repairing and improving the 

railroad and believes that policy makers—such as the administration and 

Congress—are responsible for determining Amtrak’s role. However, federal 

statute already articulates a purpose for the company—to operate a 

national rail passenger transportation system.3

 To bring focus, Amtrak, like 

any public or private organization, is responsible for taking that broad 

purpose and establishing a clearly defined mission that describes 

specifically what the organization plans to do and how it plans to do it. 

Amtrak’s board of directors has a role in defining this mission, but until 

recently, the board has not been active in doing so. The chairman of 

Amtrak’s board agreed that the board is responsible for establishing a 

mission for Amtrak, but the Amtrak board meeting minutes between 

February 2002 and August 2004 did not contain any written documentation 

of the board discussing a vision or mission for Amtrak. The board chairman 

said the absence of a full complement of board members has limited the 

board’s ability to develop a mission for the company.4

3

49 U.S.C. § 24701.

4

Over the period of October 2003 to June 2004, the board only had two voting members, 

exclusive of the Secretary of Transportation or his designee. 
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Better Ensure Cost-effective Results

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Amtrak’s Corporatewide 

Goal and Strategies 

Encompass Only Part of Its 

Operations

Since April 2003, Amtrak’s president focused the company’s efforts on 

returning the railroad to a state of good repair—that is, to improve the 

condition of its equipment and infrastructure. In testimony before the 

Senate Committee on Commerce, Science, and Transportation in 2003, 

Amtrak’s president noted that repairing and improving the railroad is in 

“everyone’s interest” because regardless of Amtrak’s future structure, 

Amtrak’s infrastructure will have to be in a state of good repair to provide 

intercity passenger rail service. As we reported in April 2003, Amtrak had 

developed a substantial deferred capital backlog (about $6 billion—$3.8 

billion of which was attributable to the Northeast Corridor),5

 and in reports 

dating back to 1995, we noted that this issue needed to be addressed soon. 6

Amtrak officials have noted that, in the past, the absence of a focus on a 

state of good repair had resulted in such things as deteriorating bridges, 

increased trip times, and decline in overall ride quality. 

Amtrak’s goal of a state of good repair addresses infrastructure 

deficiencies. However, the company’s focus on this one issue leads to an 

unbalanced approach to the management of its business. For example, 

Amtrak’s goal of a state of good repair addresses the company’s capital 

program, including the repair or replacement of rails, bridges, and 

locomotives, but does not encompass important elements of Amtrak’s 

operations—such as human capital and customer service—and lines of 

business—such as commuter rail and reimbursable services.7

 Focusing on 

one priority at the expense of others may skew the company’s overall 

performance and keep managers and oversight bodies from seeing the 

whole picture. In the subsequent chapters, we explain how Amtrak has 

significant challenges in a number of areas, such as an increasing operating 

loss and the procurement of goods and services. Not broadening its focus 

to include the myriad of other challenges and critical areas at Amtrak could 

continue to jeopardize the future viability of the company and undermine 

efforts to control the required level of federal subsidies and ensure federal 

dollars are efficiently and effectively spent. 

5

GAO-03-712T. 

6

GAO, Intercity Passenger Rail: Financial and Operating Conditions Threaten Amtrak’s 

Long-Term Viability, GAO/RCED-95-71 (Washington, D.C.: Feb. 6, 1995); Northeast Rail 

Corridor: Information on Users, Funding Sources, and Expenditures, GAO/RCED-96-144

(Washington, D.C.: June 27, 1996); and GAO/RCED-00-138.

7

Amtrak operates six commuter rail services under contract and provides mechanical and 

engineering services for third parties.
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Amtrak does not have a meaningful strategic plan but rather has developed 

a detailed 5-year capital plan to support its corporatewide goal of a state of 

good repair. Amtrak titled this document a “strategic plan,” but Amtrak’s 

president and board chairman both acknowledge that this plan is 

essentially a capital plan that covers capital projects and ties to the capital 

budget. The capital goals in Amtrak’s plan translate to capital production 

goals for certain departments, such as the mechanical and engineering 

departments, and link to achieving the goal of a state of good repair. For 

example, the engineering department had a performance goal to install 

155,760 concrete ties in fiscal year 2004. By completing this goal, the 

engineering department is supporting Amtrak’s goal of achieving a state of 

good repair, although without a strategic plan, it is unclear how important 

this performance goal is toward achieving a state of good repair or to what 

extent achieving this goal will remedy the infrastructure deficiency. 

Although Amtrak has a detailed capital plan, Amtrak lacks a strategic plan 

that articulates a comprehensive mission, measurable corporatewide goals, 

strategies, and outcomes for the efforts needed to run all the components 

of its operations—both capital and operating. For example, Amtrak does 

not have a documented plan that states measurable corporatewide goals or 

strategies for controlling or reducing costs, managing on-time 

performance, increasing the productivity of the workforce, or reducing 

dependence on federal funding in its strategic plan. Amtrak’s capital plan 

for fiscal years 2005 through 2009 includes information on Amtrak’s 

operating loss—noting that its operating loss will increase over the next 

several years. To offset this increase, the plan proposes implementing 

“additional service, crew, and equipment efficiencies.” This plan, however, 

does not include measurable targets or strategies to achieving these 

efficiencies. Amtrak’s president maintains that the operating budget 

provides guidance for these initiatives. Although the operating budget 

provides financial targets for the departments, it does not, however, 

articulate measurable goals, strategies, or outcomes for the corporation. 

Amtrak’s president acknowledged that there was very little documentation 

of plans, strategies, and goals. He said that Amtrak was looking to produce 

results, not develop documents and written strategies during this time. He 

also said that staff knew what they needed to get done during the 2002 to 

2005 time frame—reduce headcount and increase production. In our view, 

however, this is a risky approach since there is no assurance that goals and 

strategies are clearly communicated and understood by those responsible 

for carrying them out. Moreover, it is also important to establish clear, 

consistent goals at the organization and agency levels in order to identify 
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Better Ensure Cost-effective Results

Page 49 GAO-06-145 Amtrak Management

the risks that could impede the efficient and effective achievement of these 

goals.

Unlike Amtrak, some of the railroads we contacted develop comprehensive 

corporatewide goals to support their missions. Figure 8 illustrates 

examples from these railroads. For example, one freight railroad company 

developed a mission statement that focuses on its three constituencies—

customers, employees, and shareholders—and established six categories 

of business objectives to implement that mission and drive its strategic 

planning process. In another example, VIA Rail established a mission 

statement that is supported by its six corporatewide goals. 

Figure 8: Examples of Missions and Goals from Other Railroads

Sources: Freight railroad officials and VIA Rail Canada's strategic plan.

Example from a Freight Railroad

Mission: To be a company where our customers want to do business, our employees are proud to work, and 

shareholder value is created.

Categories of business objectives:

● Safety

● Operations performance

● Financial performance

● Asset utilization

● Customer satisfaction

● Human resources

Example from VIA Rail Canada

Mission: Working together to consistently deliver safe, efficient, and environmentally responsible services for 

travelers in Canada.

Corporatewide goals:

● Safety: To ensure a safe and secure work and operating environment for colleagues, customers, and the 

general public who come in contact with VIA Rail's operations.

● People: Working together to create an environment that promotes a passionate commitment to VIA Rail's 

business success.

● Growth: To be the first choice of travelers in all markets that we serve.

● Service: To consistently provide our customers with excellent travel experiences.

● Environment: To conduct our business of meeting the needs of our customers in an environmentally 

sustainable and responsible manner.

● Entrepreneurship: To move toward self-sufficiency by reducing government funding for operations and applying 

savings toward new capital investment.
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Without a Link to a Mission 

or Corporatewide Goals, 

Amtrak’s DepartmentSpecific Goals Do Not 

Demonstrate Support of 

Corporate Outcomes 

Absent a strategic plan containing a comprehensive mission and 

corporatewide goals and strategies, Amtrak lacks a process for developing 

annual department-specific performance goals that ensures these goals 

support or improve corporate outcomes. Leading organizations we studied 

developed fact-based understandings of how their activities contribute to 

accomplishing their overall mission and broader results.8

 In contrast, 

Amtrak’s capital-related goals link to its capital plan, while Amtrak’s 

department heads generate operations-related goals that are based on the 

priorities and activities of their own departments and seek to align those 

goals with the priorities of Amtrak’s president. Except for providing a 

standard template for stating the departments’ goals, Amtrak has little 

companywide written guidance on how to develop department goals and 

objectives. 

The process Amtrak uses provides no assurance that goals developed by a 

department contribute to improved overall company performance. Amtrak 

managers said some department goals, such as those related to on-time 

performance, safety, and ticket revenue, are self-evident. We agree that 

these goals are important for Amtrak’s performance. However, without a 

strategic plan that addresses all company activities, the departments 

cannot (1) assess or communicate the extent to which their departmentspecific goals are related to the priorities of the organization or (2) 

contribute to Amtrak’s overall performance. 

In addition to the lack of a process for developing department-specific 

goals that relate to a mission and corporatewide goals, Amtrak’s 

department-level targets9

 in fiscal years 2003 and 2004 were not always set 

with a clear understanding of current baselines or what a department could 

hope to achieve. This lack of clarity, according to Amtrak officials, resulted 

from such things as the following: 

• Limited experience or data on which to set goals and targets. 

According to Amtrak officials, in previous years, goals existed in areas 

such as safety and on-time performance, and some departments 

developed their own set of goals. However, prior to fiscal year 2003, 

8

GAO-04-343SP.

9

According to the Office of Management and Budget, a “target” is defined as a quantifiable or 

otherwise measurable characteristic that tells how well a program must accomplish a 

performance measure. 
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departments were not required to develop goals as a basis for Amtrak’s 

budgets. As a result, some department-level targets in fiscal years 2003 

and 2004 were based on assumptions, not an analysis of data, because 

data did not exist. An Amtrak official acknowledged that in fiscal years 

2003 and 2004, there was no hard link between goal setting and data 

analysis. For example, the target for the transportation department’s 

injury goal10 in fiscal years 2003 and 2004 was based on the previous 

year’s target since, according to an official in the transportation 

department, the department did not achieve its goal of a 3.8 injury ratio 

in the previous fiscal years. The engineering department established a 

delay minute target for fiscal year 2003 but missed the target by over 

60,000 minutes because, according to the chief engineer, the department 

set the goal without an understanding of the impact of the company’s 

increased capital activities.11 Without data, goals have also been set by 

making incremental improvements to historical trends. For example, 

the engineering department established an absenteeism target to reduce 

absenteeism by 10 percent over the fiscal year 2003 results. Amtrak 

officials said that, in some cases, Amtrak’s goals are an expression of 

“aspiration” rather than a realistic target. For example, Amtrak’s on-time 

performance has averaged about 75 percent from fiscal years 1990 to 

2003, yet the transportation department set its fiscal year 2004 on-time 

performance at 85 percent. 

• Organizational restructuring. According to officials, Amtrak’s 

organizational restructuring effort also affected the departments’ ability 

to establish and achieve goals. For example, officials in the mechanical 

department noted that although the department established goals in 

fiscal years 2003 and 2004, officials were more focused on the 

restructuring effort than on achieving department goals and maintain 

that organizing the department’s structure, policy, and standards are 

critical components required to meet the departments’ goals.

10The injury ratio is determined by the number of injuries per 200,000 work-hours, which is 

an industry standard in reporting employee injury rates.

11In fiscal year 2003, the engineering department’s target for reducing the number of delay 

minutes caused by capital work was 111,212 delay minutes. Amtrak’s chief engineer noted 

that fiscal year 2003 was the first time an effort had been made to set a goal for delay 

minutes due to capital investment activities. He stated that the fiscal year 2003 capital 

program was a major increase in capital activities over the prior years and foreseeing the 

combined impact of these activities was beyond the department’s capabilities in fiscal year 

2003. However, he stated, in fiscal year 2005, these delays are being forecasted and 

measured and thoughtful goals are being established.
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Amtrak officials recognize that goal development at Amtrak is a work in 

progress and believe that the departments are more focused in setting more 

strategic and measurable goals. For example, in a review of the marketing 

and sales department’s ticket revenue goals for fiscal years 2003, 2004, and 

2005, we found that the department had established more specific targets 

for its 2005 goal than for its 2003 goal. However, without a mission 

statement or corporatewide goals, Amtrak cannot demonstrate or ensure 

that its departments’ activities contribute to accomplishing corporate 

results. 

Amtrak’s Five Tools Support 

Short-term Results but Not 

the Long-term Management 

of the Corporation 

Amtrak’s five management tools provide a process for identifying Amtrak’s 

need and use for resources on an annual basis and produced some results. 

As noted in chapter 1, Amtrak’s president instituted five management 

tools—the organization chart, operating budget, capital program 

(communicated through a document that Amtrak calls a strategic plan), 

goals and objectives, and monthly performance reports. These tools are 

used to manage the corporation, control costs, and address the challenges 

that existed when Amtrak’s president arrived at Amtrak. Annually, each 

department is required to develop budgets that are based on activity levels 

and clear, specific, measurable goals. Amtrak’s president stated that 

because of these tools, Amtrak has seen results, including decreased 

headcount and increased production activities, from what Amtrak 

characterized as “a program that had been all but eliminated by fiscal year 

2002” to a production line approach with tangible results. 

Although Amtrak’s tools provide a framework for developing annual goals 

and budgets, these tools do not provide a long-term, integrated approach 

for managing the corporation and focus on outputs (units of production), 

not outcomes (results, such as better service or on-time performance). One 

important internal control standard is risk assessment, and a precondition 

to risk assessment is the establishment of clear, consistent goals and 

objectives both at the entity level and the activity (program or mission) 

level.12

Without a strategic plan to guide all business activities, Amtrak does not 

have a process for integrating the efforts across the organization or for 

assessing and addressing company risks. Moreover, without a strategic 

12GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001).
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plan, Amtrak does not have overall corporate performance measures and 

cannot establish a clear understanding of what it is trying to accomplish 

with its resources and company activities. 

Amtrak’s Planning 

Process Could Benefit 

from Increased Use of 

a Performance-Based 

Framework to Achieve 

Its Goals

While Amtrak’s key departments—the mechanical, engineering, 

transportation, and marketing and sales departments—have made some 

progress in setting goals, they will likely continue to struggle in achieving 

those goals without incorporating elements of a performance-based 

framework. These elements include

• developing strategies or action plans that describe the processes, 

methods, and resources necessary to achieve the goals; 

• linking unit goals to individual responsibilities to hold individuals 

accountable for contributing to the achievement of the goals; and

• using reliable performance data to monitor, evaluate, and report 

performance results and determine how well activities and programs 

contribute to achieving goals and improving performance.

Amtrak’s Key Departments 

Do Not Consistently 

Develop Comprehensive 

Strategies to Achieve 

Department Goals 

Amtrak’s key departments do not consistently develop comprehensive 

strategies or action plans for achieving their key goals. For example, the 

marketing and sales department articulated specific objectives or actions 

for achieving its ticket revenue goal in fiscal years 2003 and 2004. In 

contrast, the transportation department is still in the process of 

implementing a plan to address train delays caused by passengers boarding 

the train, but the department did not develop documented strategies or 

action plans for other elements that affect on-time performance, such as 

freight or commuter train interference. An official in Amtrak’s 

transportation department noted that some goals lack action plans because 

some goals and objectives lend themselves to action plans better than 

others and that “aspirational goals” often come down to “just work harder.”

Without action plans, Amtrak lacks clearly stated strategies for how it 

intends to achieve its goals. For example, the mechanical department 

established a goal in fiscal year 2004 to create a “national” mechanical 

department but did not develop a specific action plan to achieve that goal. 

Although Amtrak’s president acknowledged that Amtrak did not have a 

written action plan for establishing the national mechanical department, he 
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maintains that he and his staff knew what needed to be done to establish 

the national department. Officials in the mechanical department stated that 

organizational charts were used to detail the position requirements and 

equipment assignments by location, and that standard work scopes were 

also developed. However, without a documented action plan, Amtrak 

cannot ensure that critical actions and milestones are established and 

accurately communicated to those involved in the transition or monitor 

progress toward the transition.13

An Incentive-Based 

Performance Management 

System Could Strengthen 

Accountability for 

Achieving Goals 

To hold the department heads accountable for goals and budgets, Amtrak’s 

president holds quarterly and periodic reviews with department heads, 

who are required to sign off on financial and headcount information in the 

company’s monthly performance reports. For example, the department 

heads within the operations department—including the engineering, 

mechanical, and transportation departments—review the status of their 

budgets and goals every quarter in a meeting with Amtrak’s president and 

senior vice president of operations. Departments outside of the operations 

department, such as the marketing and sales department, meet with 

Amtrak’s president on a periodic basis to review the department’s budget 

and discuss the status of some department goals. 

Although Amtrak managers told us that they hold their managers 

accountable for achieving department goals and the results of the goals are 

factored into annual personnel evaluations, Amtrak does not have a payfor-performance management system to provide incentive for achieving 

goals. That is, individual performance is not directly tied to compensation. 

Leading organizations we have studied seek to create pay, incentive, and 

reward systems that clearly link employee knowledge, skills, and 

contributions to organizational results. Amtrak officials noted that 

management has considered implementing a performance-based 

compensation system and has discussed a plan with Amtrak’s board of 

directors. However, because of other concerns being addressed by the 

board, Amtrak management’s pay-for-performance plan has not been on the 

13In our December 2004 report, we found that Amtrak did not develop an implementation 

plan for addressing the key challenges related to the settlement between Amtrak and the 

Consortium of Bombardier and Alstom. We also reported in February 2004 that Amtrak’s 

lack of comprehensive project management for the Northeast High-Speed Rail Improvement 

Project contributed to its inability to achieve project goals. 
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board’s agenda as of March 2005, and, according to an official, Amtrak does 

not plan to implement such a plan this fiscal year.

According to an Amtrak official, the board has been working with 

management to resolve their concerns about the pay-for-performance 

system, such as which management positions would be eligible and the 

operational and financial metrics to make merit pay and bonus decisions. 

Another Amtrak official noted that the current performance evaluations do 

not have much impact on performance because there is no satisfactory or 

unsatisfactory rating and no tie to compensation. An Amtrak official from 

the strategic planning department noted that a pay-for-performance system 

is critical to successfully implementing Amtrak’s strategic reform 

initiatives. This type of system, he stated, is essential for Amtrak to act 

more like a private entity. However, it would be difficult for Amtrak to 

implement a pay-for-performance system without first establishing 

organizationwide goals that provide the basis for aligning daily activities 

with broader results.

Amtrak’s Data Systems and 

Processes Limit Its Ability 

to Monitor, Evaluate, and 

Report on Performance 

A common theme we found in numerous areas we reviewed involved 

Amtrak’s limited ability to effectively monitor, evaluate, and report on 

performance due to the shortcomings of some of its data systems and 

reporting processes. These shortcomings were manifested in several ways. 

First, we found numerous instances where key reports were missing 

relevant information or where information was of questionable reliability. 

As discussed in more detail in chapter 3, we found that Amtrak’s monthly 

performance reports, a key document used by managers and stakeholders 

alike, did not contain information that would enhance their relevance to 

users. For example, information on Amtrak’s food and beverage service did 

not include gross profit analysis, revenues, cost of meals, and other basic 

metrics. Second, as discussed in detail in chapter 4, Amtrak lacks certain 

key cost metrics, such as cost-per-revenue passenger mile and cost-perlocomotive overhaul that would allow managers to better measure 

performance, assess whether resources are being used efficiently, and 

identify potential cost-saving areas. Finally, as discussed in detail in 

chapter 5, Amtrak’s procurement and financial databases are limited such 

that management does not have detailed, reliable, and comprehensive data 

on total spending for the estimated $500 million it spends annually on 

goods and services. The absence of such information, which is due, in part, 

to limitations in Amtrak’s computer systems and lax controls over data 

reliability, makes it difficult to identify strategic sourcing opportunities, 

leverage Amtrak’s buying power, and reduce procurement costs. 
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One department we reviewed had made progress. That is, Amtrak’s 

engineering department has developed a data system that allows the 

department’s managers to monitor performance in a real-time basis. The 

department developed a computer “dashboard” system that is updated 

every day and requires the department’s 45 managers to review the status 

of their goals on a daily basis after they log into their computers. See figure 

9 for a snapshot of the dashboard. For example, one “dial” on the 

dashboard shows the real-time status of the department’s safety goal 

compared with the year-to-date and month-to-date targets. The chief 

engineer said that if these data show a variance in a goal, he can “drill” into 

the data to determine the unit within the department that is experiencing 

problems and the person responsible for that unit. He then contacts the 

head of the specific division to discuss the cause and the actions taken to 

address the problem. Although this system does not monitor all of the 

department’s goals, it allows managers to monitor, analyze, and quickly 

respond to changes in performance goals on the basis of real-time 

information.
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Figure 9: Snapshot of the Engineering Department’s Dashboard System

Despite positive developments in some areas, Amtrak’s overall reporting 

processes lack management controls, which can lead to an incomplete and 

inaccurate picture of performance. Leading organizations we have studied 

prepare annual performance reports that document the results the 

organization achieved compared with the goals they established. To be 

useful for oversight and accountability results, these reports, among other 

things, clearly communicate performance results. In contrast, although an 

Amtrak official noted that all departments are encouraged to report on 

their goals through the monthly performance reports, Amtrak’s key 

departments do not consistently report on all their goals through an 

Source: Amtrak. 
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established process, such as quarterly reviews or the monthly performance 

reports. For example:

• Although the transportation, engineering, and mechanical departments 

report on budgets and goals in a quarterly review process with Amtrak’s 

president and senior vice president of operations, they do not report on 

all of their goals in these reports. For example, the transportation 

department did not report on three of its eight goals at the end of fiscal 

year 2004—including goals on reducing road vehicle equipment 

expenses and meeting public health and Food and Drug Administration 

standards relating to food handling, water point inspection, and facility 

comprehensive plans. According to one official, these goals are not 

included in these reports because they have less emphasis for the 

department than safety and on-time performance goals and involve only 

$1.5 million of the department’s $1 billion budget. He noted that the 

managers within the transportation department report on these goals to 

the vice president of transportation. Without a formal process for 

reporting on these goals, it is unclear whether these goals were 

achieved. 

• Similarly, officials in the marketing and sales department stated that 

they work with the finance department to determine which goals to 

report in the monthly performance reports. Through the monthly 

performance report, the marketing and sales department reported on its 

ticket revenue, ridership, and safety targets but did not report on the 

status of its targets relating to developing and implementing service and 

product improvements. Officials in the marketing and sales department 

noted that the department monitors the progress of its goals and 

updates the progress on a quarterly basis.

Amtrak officials told us that the departments report on “key” department 

goals through the monthly performance reports and monitor other goals 

within their departments. This selective reporting does not provide the 

complete transparency needed to provide management and key 

stakeholders with a complete and accurate picture of each department’s 

performance and the performance of Amtrak as a whole. Also, presumably 

all established goals, while perhaps not all equal in terms of importance to 

the department, are relevant and important or they would not have been 

established. Reporting on only certain goals is counter to a systematic 

performance-based approach and may ultimately impede stakeholders 

from knowing the complete information from which to judge overall 

performance.
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Amtrak’s Proposed 

Strategic Reform 

Initiatives Face 

Significant 

Implementation 

Challenges

In April 2005, the board, in conjunction with Amtrak management, released 

its proposed strategic reform initiatives, which included a proposed vision 

for the future of intercity passenger rail service14 and Amtrak’s role in this 

vision. 15 (See fig. 10.)

Figure 10: Amtrak’s Vision and Strategic Reform Initiatives

14This vision for an intercity passenger rail system is outlined through four objectives: (1) 

development of passenger rail corridors based on a federal-state capital matching program, 

with states serving as the developers and “purchasers” of competitively bid corridor 

services; (2) return of the Northeast Corridor infrastructure to a state of good repair and 

operational reliability, with all users gradually assuming financial responsibility for their 

proportionate share of operating and capital needs; (3) continuation and possible 

addition/elimination of certain national long-distance routes based on established 

performance thresholds; and (4) emergence of markets for competition and private 

commercial participation in all passenger rail functions and services. 

15Amtrak Strategic Reform Initiatives and FY06 Grant Request, April 2005.

Sources: Amtrak Strategic Reform Initiatives and FY06 Grant Request, April 2005.

Amtrak's vision for its role in an intercity passenger rail system

● Deliver superior service - including continued excellence in operational safety and security, and 

infrastructure/asset management, while becoming more market- and customer-oriented

● Serve as a catalyst for change - helping the nation's intercity passenger rail system achieve the long-term 

objectives described above

● Evolve into one of a number of competitors for passenger rail services and routes, all positioned on equal 

competitive footing

Amtrak's strategic reform initiatives for advancing its vision for intercity passenger rail

● Amtrak's structural initiatives

Establish and reinforce management controls

Organize planning and reporting by business lines

Advance competition and privatization

● Amtrak's operating initiatives

Enhance financial performance

Improve customer service and on-time performance

Transition operating and capital funding responsibilities

● Legislative initiatives

Establish adequate, reliable long-term federal funding for intercity passenger rail

Initiate state leadership in developing and managing rail corridors

Establish federal legislation to promote competition
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Unlike in prior years, the proposal notes that the strategic plan for fiscal 

years 2006 through 2010 will contain business plans for each line of 

business, along with operating and capital investment plans to meet the 

objectives—driven by milestones, goals, and timetables. According to an 

official in Amtrak’s strategic planning group, Amtrak intends to develop a 

strategic plan for fiscal year 2006 that would include a company mission 

statement and goals that would tie to the mission and goals of each line of 

business, and Amtrak’s department goals would be based on the mission 

and goals for Amtrak’s lines of business. In addition, the proposal states 

that Amtrak will (1) provide regular reports on its progress toward this 

plan, as well as continued monthly performance and financial reports, 

along with future annual assessments of lessons learned at each phase, and 

(2) will propose any adjustments to the plan details or overall objectives as 

necessary. Amtrak proposes to complete the implementation planning 

process during the summer of 2005 and release the plan in the fall of 2005.

If fully implemented, these proposed changes in planning and reporting 

could potentially provide Amtrak with a more comprehensive management 

approach and guidance for the various components of its business, 

including its capital program, and provide better information both 

internally and externally on Amtrak’s overall performance. However, 

challenges exist to fully implementing these initiatives. First, as Amtrak’s 

board chairman noted, legislative action is required to implement many 

aspects of the plan. These legislative actions include, among other things, 

the federal government either assuming Amtrak’s annual debt service 

payments or eliminating Amtrak’s debt burden (about $3.8 billion in shortand long-term debt at the end of fiscal year 2004) and transitioning Amtrak 

out of the railroad retirement system. Second, Amtrak officials noted that 

major challenges within Amtrak exist in implementing this new planning 

process, including the time and effort needed to implement these initiatives 

and the ability to keep people focused on long-term change, even with the 

uncertainty of Amtrak’s future.

As of May 2005, the missions and goals for the lines of business were in the 

process of being developed and should be completed within the next 

couple of months, according to an Amtrak official. In addition, the 

departments were developing their goals for fiscal year 2006, using the 

same process from the past 3 fiscal years. With the goal development 

process already under way, this official noted that Amtrak decided that the 

departments would continue to develop their goals while the mission and 

goals for the lines of business were also being developed. Once the mission 

and goals for the lines of business are determined, Amtrak officials will 
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assess whether the departments’ goals conflict with the goals established 

for each line of business and, if so, adjust the goals accordingly. Amtrak 

officials also told us that the departments met in June 2005 to discuss goals 

and ensure coordination and support between departments. 

Conclusions Amtrak’s management tools have allowed the company to operate with a 

more structured process. Among other things, these tools provide Amtrak 

with a clearer organizational structure, a mindset of managing to goals and 

objectives, and a means of reporting progress. These tools represent a good 

first step. In a number of respects, however, these tools present a limited 

framework when compared with other organizations that have progressed 

further in their strategic planning efforts. It is clear that Amtrak will need to 

continue moving aggressively in this area, because current efforts have not 

been sufficient to provide all elements of the organization with a clear 

mission, an understanding of how to set and accomplish goals that 

contribute to this mission, or sufficient information on the progress being 

made toward a mission. This action will be needed in spite of what may 

happen with regard to Amtrak’s proposed changes to its structure and its 

role in intercity passenger rail. To address the multitude of challenges 

facing Amtrak and provide useful performance information to Congress, 

Amtrak needs to build the capability to define goals, set priorities, ensure 

follow-through, and monitor progress. 

Recommendations for 

Executive Action 

To build on the strategic planning efforts already under way at Amtrak, we 

recommend that Amtrak’s president take the following four steps to create 

a strategic planning and performance-based management approach: 

• prepare a comprehensive strategic plan with a clearly defined mission, 

organizational goals and objectives that encompass all of Amtrak’s 

activities, and strategies or action plans to achieve those goals;

• establish annual performance goals that tie to the mission and 

corporate goals;

• develop an incentive-based performance management system that 

ensures responsibility for goals is clearly articulated at all levels of the 

organization; and
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• assess and develop the data systems and processes necessary to 

monitor, evaluate, and report—both internally and externally—on 

progress toward Amtrak’s mission and strategic and annual 

performance goals. 
Page 63 GAO-06-145 Amtrak Management

Chapter 3

Financial Management Practices Could Better 

Support Amtrak’s Decision Making Chapte3r

Improvements are needed to ensure that Amtrak’s management and 

stakeholders are provided with useful financial information, and that 

financial management practices are sufficient. We examined three aspects 

of Amtrak’s financial management: (1) the usefulness of financial 

information provided to management and external stakeholders, (2) the 

design of internal control over selected areas of expense, and (3) Amtrak’s 

efforts to strengthen management practices. While progress has been 

made, all three areas are in need of further improvement. 

First, although Amtrak has made progress in establishing a more 

systematic process to provide financial information to management and 

external stakeholders, much of the financial information it uses for day-today management purposes lacks certain relevant information or is of 

questionable reliability. Second, our review of the design of internal control 

practices in two areas—employee benefit expenses and food and beverage 

service—-identified a number of weaknesses. For example, not considering 

certain accrued employee benefit expenses resulted in an understatement 

of more than $100 million in employee benefit expenses and a potential lost 

revenue of $12 million under reimbursable agreements, and poor 

enforcement of contract provisions may have contributed to Amtrak’s 

spending $2 for every $1 in revenue from on-board food and beverage 

service. Third, although progress has been made in responding to other 

internal control weaknesses identified by Amtrak’s IPA in recent reports, 

the progress has come mainly through the implementation of manual afterthe-fact detective controls that do not prevent errors from entering the 

system. In addition, Amtrak missed opportunities to increase the 

usefulness and transparency of financial information by restricting public 

reporting of work performed by its IPA. 

Financial Reports 

Lacked Certain 

Relevant Information 

and Contained 

Significant Errors 

In recent years, Amtrak has placed increased emphasis on improving the 

financial information used to manage the company. However, although 

Amtrak has made progress in improving its financial information, we found 

that this information could be more useful. After reviewing 29 monthly 

performance reports and three year-end addenda1

 issued from May 2002 

through September 2004, we found that the reports’ shortcomings limited 

their usefulness to management and external stakeholders. They lacked 

certain relevant information and contained significant errors. Since these 

1

Two of these addenda were for fiscal year 2002, and the third was for fiscal year 2003. The 

year-end addendum for fiscal year 2004 was not available at the time of our analysis.
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reports were issued, Amtrak has made further progress, but more remains 

to be done.

Certain Relevant 

Information Was Not 

Included in Monthly 

Performance Reports

Our past work has shown that one common component of strategies 

adopted by leading organizations in the area of financial management is 

providing meaningful information to managers and external stakeholders. 

Amtrak has taken steps in this area by creating monthly performance 

reports containing a variety of financial information, including financial 

information for specific train routes, called route performance information 

(RPI). According to Amtrak officials, these reports are now one of Amtrak’s 

key management tools. We view the reports as a positive step: they 

represent a significant contribution toward establishing a systematic 

process to provide financial information to internal and external 

stakeholders. 

Although the monthly performance reports are an improvement, we found 

that practices were not in place to ensure the monthly reports contained 

information that would enhance the relevance to management and external 

stakeholders. The information available in the reports included preliminary 

financial statements and budget reports. Amtrak officials view the monthly 

reports as summary documents and believe a sufficient amount of 

information is being provided. We agree the monthly reports are summary 

documents. Missing, however, was information that could enhance 

management decision making and stakeholder input, such as information 

about food and beverage service activities, employee benefits, and core 

business operations (see fig. 11). For example, enhanced food and 

beverage-related information would include gross profit analysis, revenue 

information (including separate amounts for food and beverage sales), 

information on the cost of meals, and other metrics basic to a food service 

operation. The absence of this information hinders the assignment of 

accountability for performance internally or externally by key 

stakeholders. 
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Figure 11: Examples of Relevant Information Not Included in Amtrak’s Monthly 

Performance Reports 

The RPI included in the monthly performance reports also lacked certain 

relevant information, as follows: 

• First, the financial information was at a summary level that did not allow 

detailed analysis of individual train routes. Only aggregate amounts 

were provided for total revenue, expense, and net profit or loss for each 

of the approximately 45 train routes that are Amtrak’s core business line 

(rail passenger transportation) as well as for its noncore business lines 

(principally, commuter rail operations and reimbursements for 

equipment and right-of-way maintenance services). Not available, for 

example, were specific amounts for such expense components as 

salaries, employee benefits, and overhead for each train route and 

noncore business line. Also absent was comparative expense 

information, such as month-to-month and year-to-year changes in 

expenses. Such information could be useful in addressing issues raised 

in congressional testimony by Amtrak’s board chairman on April 19, 

2005. In this testimony, the chairman outlined a need to focus on 

providing reporting of financial activity and performance along Amtrak’s 

business lines.2

2

Testimony of David M. Laney, Esq., chairman of Amtrak’s board of directors, before the 

Subcommittee on Surface Transportation and Merchant Marine, Senate Committee on 

Commerce, Science, and Transportation, on Tuesday, April 19, 2005. 

Source: GAO analysis of Amtrak monthly performance reports.

Food and beverage service

Revenue and expense information specific to Amtrak's food and beverage service, an area with significant 

financial challenges. Despite food and beverage-related financial losses totaling about $160 million for fiscal years 

2002 and 2003, the monthly performance reports we reviewed did not separately report any information on food 

and beverage revenue or expense, but instead combined these amounts with other reporting line item amounts.

Employee benefits

Employee benefit cost trends, changes in the components of benefit costs, and initiatives to manage these 

costs were not included in the monthly reports. While the monthly reports include a comparison of actual 

employee benefit expenses to budgeted amounts, additional information related to these significant costs, 

which totaled over $1.5 billion in the 3 fiscal years ended September 30, 2004, or about 16 percent of Amtrak's 

total operating expenses, was not provided. 

Lines of business

For core business operations (rail passenger service) and each noncore line of business (commuter rail 

operations, reimbursable agreements, and commercial activities): (1) components of key expenses (i.e., salaries 

and benefits) and (2) trends in key expense categories and differences in actual versus budgeted results.
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• Second, even the summary information for each train route and 

business line did not include depreciation expense. This expense, which 

totaled $606 million in 2003 and $479 million in 2002, was not allocated 

by train route or by business line. Amtrak did not include the allocation 

of depreciation expense, because management believes allocating such 

a large noncash item is not helpful in determining the operational result 

of a route. For example, Amtrak told us that total depreciation expense 

includes depreciation of the capitalized costs of certain sale and 

leaseback transactions, the required accounting for which Amtrak 

believes inflates the “true” capitalized costs of these assets and, thus, 

the related depreciation expense. However, not allocating these 

significant expenses had the effect of understating reported expenses 

for core and noncore business lines by 19 percent and 15 percent, 

respectively. For a capital-intensive business, this information is critical 

to assessing performance and making business choices about individual 

train routes and noncore business line activities, such as commuter rail 

operations. 

Information in Monthly 

Performance Reports Was 

of Questionable Reliability 

A third limitation of the information in the monthly performance reports 

was that it was of questionable reliability. We identified several problems 

related to reliability, as follows:

• Financial information was incorrect and had to undergo subsequent 

adjustments. Information in the monthly reports was generated from 

data that subsequently required significant adjustments to correct errors 

in amounts before audited financial statements could be issued. As a 

result, the reliability of the information provided to managers and 

stakeholders during the fiscal year was questionable. For example, 

according to Amtrak, after the close of the fiscal year, corrections made 

to the Amtrak financial information included management entries and 

audit adjustments, with the latter being made only after receiving signoff from the external auditor (the fiscal year 2002 opinion was dated 

March 31, 2003 and the fiscal year 2003 opinion was dated February 25, 

2004).3

 These adjustments, which totaled hundreds of millions of dollars 

3

In its technical comments on a draft of this report, Amtrak told us that releasing unaudited 

data on a monthly basis and then releasing final audited data after sign-off by independent 

auditors is the norm for all corporations. We agree; however, because of the magnitude of 

the misstatements in Amtrak’s unaudited monthly data and the time required after the end of 

the year before the information is corrected, the information used for decision making 

during the year is not reliable and, therefore, is not useful.
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for fiscal years 2002 and 2003 and required 197 separate entries to 

correct the books and records, were not reflected in the monthly reports 

and the RPI data until 7 months after the end of the fiscal year. The 

magnitude of these misstatements might have been detected had 

Amtrak performed a comprehensive risk assessment to identify the core 

causes of these vulnerabilities in accounting and financial reporting 

controls that adversely impacted the usefulness of the monthly 

performance reports and RPI data. Amtrak has noted that financial audit 

adjustments, one of the types of corrections made at year-end, have 

decreased significantly from fiscal years 2002 through 2004, which 

would have a positive effect on the reliability of interim financial 

information provided to stakeholders. However, a risk assessment 

would be particularly important to identifying the need for and 

designing practices to improve the reliability of information in monthly 

performance reports by reducing all types of adjustments at year-end. In 

our discussions with Amtrak officials, we were told that no such risk 

assessment had been performed. 

• Changes to methods for allocating costs to individual train routes 

were insufficiently documented. Amtrak officials could not provide us 

with documentation to support any of the changes made to how 

expenses were allocated for any of the reports we reviewed. For 

example, Amtrak did not document who authorized the changes, the 

reason for or effect of the changes, or even the number of changes that 

were made. Further, without documentation to support changes made 

to how expenses were allocated, it was not practical for us to 

independently replicate the amount of expenses charged to individual 

train routes. As a result, we were unable to determine the effect of the 

changes we identified on the quality of information provided to 

stakeholders. In addition, officials advised us that since the beginning of 

RPI publication in 1993, no comprehensive review had been performed 

of the allocation methods to assess the reasonableness, consistency, and 

reliability of results.4

 In providing technical comments on a draft of this 

report, Amtrak officials told us on September 2, 2005, that many areas, 

such as fuel and insurance expenses, have been reviewed through 

special studies over the years and that allocation methodologies are 

4

Amtrak officials told us that at the start of fiscal year 2004, Amtrak began documenting 

some of the changes to allocation rules. This effort could be a positive change in controls. 

However, our limited review of certain supporting documentation generated from this 

practice identified inconsistencies in the amount and nature of the support. In addition, we 

could not ensure that all changes to the allocation rules were documented.
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reviewed continuously, eliminating the necessity for a comprehensive 

review. We were not provided with evidence of such reviews and, as 

previously noted, we found that changes to how expenses were 

allocated were not documented. 

• Overreliance on allocation of cost. It is generally preferable to directly 

identify as many costs as practical to cost centers or activities such as 

train routes and to indirectly allocate the remainder on some reasonable 

and consistent basis.5

 However, Amtrak relied heavily on indirect cost 

allocation methods in assigning costs to individual routes. In all, for 

fiscal years 2002 and 2003, Amtrak allocated about $4.3 billion of costs 

using cost allocation methods and directly assigned only about $357 

million, or about 8 percent. This practice impacts the reliability of the 

RPI being presented to key stakeholders. Amtrak officials told us that a 

significantly higher percentage of costs is, in effect, direct. That is, 

certain costs pertain only to a single route and are accordingly allocated 

fully to that route, producing the same result as direct assignment. 

However, we were not provided with evidence to support the assertion 

that a percentage significantly higher than 8 percent of costs is directly 

assigned. 

• Sufficient support for reported amounts was not available. Amtrak did 

not generate sufficient support for amounts reported as reconciling 

items of the RPI to the grand total of expenses reported in Amtrak’s 

statement of operations. For example, we requested support for $2 

billion of expenses reported as RPI reconciling amounts in fiscal years 

2003 and 2002. We sought this supporting information to assess the 

reliability of the total expense amounts allocated to the individual train 

routes. However, an Amtrak official said that the information was not 

readily available and would need to be developed for our purpose, and 

that such a reconciliation was considered redundant and unnecessary. 

When we received some of the information that we requested for 2003, 

we found errors affecting the reliability and credibility of the RPI. For 

example, approximately $11 million of employee benefit expense had 

been improperly included with the expenses for noncore lines of 

business and was not, as should have occurred, allocated in an equitable 

manner to all business lines. As a result, we estimated that the 

information in the RPI for the expenses of core business lines (intercity 

rail passenger transportation) was understated by an estimated $9.5 

5

Statement of Federal Financial Accounting Standards, Number 4.
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million; the expenses for commuter rail operations and other noncore 

business lines were overstated by the same amount. 

In addition, we found that depreciation expense in the amount of $479.3 

million was reported in the RPI for fiscal year 2002 at $44.3 million, an 

understatement of $435 million. A corresponding overstatement of $435 

million was reported in the RPI for the expense of noncore business lines. 

Amtrak officials have suggested this instance was an insignificant 

“typographical error”; however, we view it as the product of inadequate 

control procedures over the generation of the RPI. We also found that an 

amount of $19.8 million, which was identified as prior period adjustments, 

was not consistent with the audited financial statements for 2003, which 

reflected no prior period adjustments. In total, expenses per the RPI agreed 

with total expenses per the audited financial statements. However, given 

the specific errors identified, this situation could only occur with offsetting 

differences of like amounts in other RPI-reported amounts. Thus, the RPI 

also included misstatements in one or more other areas to adjust the report 

for these errors. 

Internal Control 

Weaknesses Existed in 

the Two Areas GAO 

Reviewed

A sound, entitywide system of internal control is an integral part of 

effective management. Internal control helps to ensure effectiveness and 

efficiency of operations, reliability of financial reporting, and compliance 

with applicable laws and regulations. Managers need to continually assess 

and evaluate their internal control practices to ensure that they are welldesigned and well-operated, are appropriately updated to meet changing 

conditions, and provide reasonable assurance that organizational 

objectives are being met.

We reviewed the internal control practices in two key areas of Amtrak’s 

business and found weaknesses in both areas.6

 The two areas we reviewed, 

selected because of their size and importance, were the following: 

6

We conducted our review using the principles underlying GAO’s Standards for Internal 

Control in the Federal Government. We applied these principles as our standard because of 

the significance of the federal role in Amtrak’s operations and the importance of Amtrak’s 

responsibility to account for its stewardship of the billions of dollars of government 

resources provided to it. These principles are consistent with the internal control principles 

established by the American Institute of Certified Public Accountants and are used in audits 

of nongovernmental entities.
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• Employee benefit expenses. These expenses totaled more than $1.5 

billion over the 3-year period ending September 30, 2004, and represent 

approximately 16 percent of the total operating expenses over that 

period. 

• Food and beverage service. Food and beverage service expenses totaled 

more than $324 million over the 2-year period ending September 30, 

2003, and represent approximately 5 percent of the total operations 

expenses over that period. In addition, food and beverage service is 

critical from a financial standpoint because, as our analyses show, 

Amtrak loses substantial sums of money on food and beverage service.

The weaknesses we found adversely affected the quality of financial 

information provided to management and external stakeholders. In the 

employee benefit area, for example, control weaknesses resulted in a 

misstatement of expenses among lines of business of nearly $105 million 

and in potential lost revenue from third-party reimbursements totaling $12 

million for the 3-year period we reviewed. In the food and beverage area, 

although Amtrak incurred $2 in expense for every $1 in revenue, it did not 

ensure compliance with key contractual provisions that would have 

enhanced the quality of the information available for management 

purposes. 

Internal Control over 

Employee Benefit Expenses 

Needs Further 

Improvements

During our review of the 3-year period ending September 30, 2004, we 

noted improvements in Amtrak’s monitoring of actual and allocated 

employee benefit costs; however, control weaknesses exist in the benefits 

programs for both Amtrak’s employees and its senior executives. The 

weaknesses in the larger program relate primarily to how benefit costs are 

allocated and adjusted, while the weaknesses in the senior executive 

program relate primarily to establishing the basis for performance award 

amounts. 

Costs of Providing Benefits Were 

Understated and Not Fully 

Recovered

Amtrak did not allocate accrued postretirement health benefit expenses 

among its lines of business; instead, it allocated only the company’s
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estimated cash contributions to fund health benefit expenses for current 

retirees.7

 As a result, the cost information provided to stakeholders on the 

different lines of business was incomplete and understated. Amtrak’s 

practice of allocating only the estimated cash contributions is also different 

from the practice used by Class I freight railroads in developing shipping 

rates.8

 In setting their rates, these railroads identify and include as a basis 

for setting rates the full costs of these benefits, whereas Amtrak identifies 

and recovers only the cash basis costs for services performed for third 

parties. 

In addition, for fiscal years 2002 through 2004, Amtrak used standard rates 

that did not result in the allocation of the actual amount of benefit 

expenses to all of its different lines of businesses, including reimbursable 

work performed for other entities in return for a fee, which resulted in 

potentially lost revenue totaling $12 million. Amtrak established standard 

benefit expense rates at the beginning of each year and applied the rates to 

actual labor expenses as they were incurred throughout the year. However, 

it was not until fiscal year 2003 that Amtrak began to periodically adjust its 

benefit expense rates to reflect actual experience. We noted that the 

amount of the misstatements decreased in 2004 when compared with the 

earlier years we reviewed. Also, because the following year’s benefit 

expense rates are established before Amtrak issues its audited financial 

statements, the company would need to adjust the rates used for the effect 

of prior year-end adjustments—a practice it first employed in 2004.

The net effect of these weaknesses was an understatement of benefit 

expenses among Amtrak’s lines of business totaling nearly $105 million and 

potentially lost revenue totaling $12 million. (See table 2.) The largest 

understated amount—$76.9 million—resulted from the difference between 

the amount Amtrak allocated using estimated cash contributions ($25.8 

7

The cash basis method of accounting reflects revenues when received and expenses when 

paid rather than at the time the revenue is earned or the expense is incurred, which applies 

to accrual accounting. 

8

These methods are governed by applicable law and related regulations issued by the 

Surface Transportation Board (STB). The STB developed a standardized costing model for 

the freight railroads that is used for, among other things, developing variable expenses the 

STB needs to evaluate the reasonableness of maximum shipping rates during dispute 

proceedings. We recognize that Amtrak is not required to comply with requirements 

imposed on the freight railroads, but the practices of the freight railroads offer an 

interesting illustrative comparison to those of Amtrak. Class I railroads are the nation’s 

largest railroads.
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million) and the total accrued postretirement expenses ($102.7 million). 

Also, by not adjusting standard benefit rates to reflect higher actual 

amounts, Amtrak understated expenses among its lines of business by 

another $28 million. 

Table 2: Summary of Effects of Understatements and Potentially Lost Revenue for 

the 3-year Period Ending September 30, 2004

Source: GAO analysis of Amtrak data.

By not including accrued postretirement expenses in billings to outside 

parties, Amtrak may potentially lose revenue; it also risks not collecting all 

accrued benefit expenses should commuter or reimbursable contracts be 

terminated. When we brought this issue to the attention of Amtrak officials, 

they said that outside parties might be resistant to reimbursing Amtrak for 

an allocable share of these expenses. However, we reviewed examples of 

commuter and reimbursable contracts and found that a reasonable 

interpretation of the contractual provisions supports the use of full accrual 

expenses as the basis for amounts charged under these agreements 

consistent with how such amounts are determined under Amtrak’s overall 

method of accounting. 

Dollars in millions

Issue Understatement

Potentially lost

revenue

Not allocating full accrued costs of 

employee benefits $76.9 $7.5

Not adjusting standard benefit rates to 

actual amounts 28.0 4.5

Total $104.9 $12.0
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Control Practices over 

Supplemental Executive 

Retirement Plan Awards Were 

Weak 

Control practices over Amtrak’s Supplemental Executive Retirement Plan 

(SERP) were weak.9

 In February 2000 and January 2004, $551,765 was 

granted in 34 separate SERP awards. Five awards totaling $147,580 were 

given to the two individuals who served as Amtrak’s president and chief 

executive officer during this period; the remaining awards went to 25 other 

persons. We identified three main weaknesses with the way in which these 

awards were made:

• Criteria to evaluate performance were absent. The employment 

contract for Amtrak’s current president provides that the board will 

authorize payment of a SERP award after a review of performance, 

based on criteria or goals set forth in a separate document as a guide. 

After we inquired about these criteria, an Amtrak official told us that no 

separate document existed setting forth the criteria that the board 

should use in evaluating performance. Board minutes approving the 

awards did not identify any specific performance goals that were 

achieved. For example, the board approved an award to a former 

president on the basis of Amtrak’s performance in fiscal year 1999 and 

the positive outlook for fiscal year 2000. However, Amtrak reported 

losses of $846 million, $840 million, and $877 million for fiscal years 

1998, 1999, and 2000 (ending September 30, 1998, 1999, and 2000, 

respectively). 

• Key terms needed to implement the process effectively were not 

defined. The SERP document contains important terms that are not 

adequately defined and, in some cases, are inconsistent with language 

found in board minutes and resolutions that implemented the plan. (See 

table 3 for examples.) The most important term that is not defined in the 

SERP is the “target” that must be met before the board will approve an 

award. Two terms included in the SERP—“financial targets” and 

“corporate plan targets”—can mean different things. For example, the 

latter term may include nonfinancial performance measures. Amtrak’s 

management informed us that these terms had not been expressly

9

Amtrak’s board passed a resolution in September 1999 approving the implementation of a 

SERP. The board also accepted management’s proposal that, “contingent on Amtrak meeting 

its annual Corporate Plan targets and subject to board approvals, the SERP would provide 

an additional contribution of up to 10 percent of management committee members’ pay into 

individual non-qualified deferred compensation accounts that will be 100 percent vested at 

the time contribution is made.
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defined.10 Such ambiguity leaves open the possibility that the board 

could apply inconsistent definitions, adversely affecting the credibility 

of award decisions. 

• Awards were granted before financial results were finalized. The 

board granted awards in February 2000 and January 2004; the awards 

granted in 2004 were given before the company had issued its audited 

financial statements. This practice may not be prudent, given Amtrak’s 

history of significant changes to reported operating results upon audit. 

Table 3: Examples of Key SERP Terms That Were Not Defined

Source: GAO analysis of Amtrak data.

Adequate control practices over activities involving the SERP are 

necessary for Amtrak to fulfill its responsibilities to be accountable for 

stewardship of its resources, including federal subsidies. 

On-board Food and 

Beverage Service Control 

Practices Need 

Strengthening

During fiscal years 2002 and 2003, Amtrak incurred $2 in expense for every 

$1 in revenue from its on-board food and beverage service. The total loss 

for these 2 years was over $160 million. This loss must be funded by other 

revenue sources, including federal subsidies; reduction in expenses; or 

some combination of the two. Amtrak’s control practices over its on-board 

food and beverage service need strengthening. We found that, although this 

10For the January 2004 awards, the board’s resolution stated the reasons for the awards were 

that “Amtrak achieved significant reductions in spending and managed to complete the year 

under budget, meeting its financial goals for FY03.” However, it is not clear what aspects of 

the budget the board was referring to in its resolution. Amtrak’s management could not tell 

us whether the board’s reference to the budget meant revenue, expenses, net income, or 

some or all of these. The board did not expressly approve in advance the financial targets 

that would serve as performance measures for any subsequent SERP awards.

Term used in SERP 

document

Term used in board 

resolution Potential effects

Financial targets Corporate plan targets No consistency in basis for award

Management 

committee member; 

senior staff employee

Management 

committee member 

Lack of clarity as to who is eligible; when 

asked, management could not provide a 

definitive list 

Compensation Pay Inconsistency in how amount of award is 

determined
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activity has significant inherent risk, Amtrak did not ensure compliance 

with key provisions of its contract11 or adequately monitor contractor 

activity. 

Contract Provisions Were Not 

Enforced

Amtrak has not enforced key contract provisions, which has negated its 

ability to prevent and detect improper payments for food and beverage 

service. We identified three key provisions that were not enforced. 

• Providing an annual report. The contract requires the contractor to 

provide an independently audited annual report within 120 days 

following the end of each contract year. This report was to be certified 

by contractor officials. Within the annual report, the contractor was to 

provide (1) actual and budgeted amounts for key line items and (2) a 

narrative explanation for any actual to budget variance greater than 1 

percent in the aggregate for all commissaries.12 However, Amtrak has 

not required the contractor to provide this annual report for any of the 5 

years the contract has been in place. Amtrak was unable to provide 

documentation regarding why this key contract provision was not 

enforced. Amtrak officials told us that they relied on contractorprovided monthly operating statements and on reports from the Amtrak 

OIG instead of the annual report. 

These mechanisms, while useful, would not meet fundamental control 

purposes. We found that the monthly operating statements lacked 

critical information that was to be included in the annual report and, 

importantly, lacked independence because they were prepared by the 

party seeking reimbursement and were not audited. In contrast, the 

contractually required annual report was to have been certified by 

contractor officials and audited by a certified IPA. The Amtrak OIG 

reports, while providing management with information on some 

aspects of Amtrak’s food and beverage service activities, should not be 

viewed as a substitute for a comprehensive internal control program. 

Internal control should be a continuous built-in component of 

11In January 1999, Amtrak entered into a contract with Dobbs International (now called Gate 

Gourmet International (Gate Gourmet)). This contract expires on September 30, 2006. 

Under the terms of the contract, Gate Gourmet supplies substantially all food and beverage 

service items for on-board sales by Amtrak employees. The contract includes one 5-year 

extension option.

12Amtrak owns 11 commissaries nationwide. Gate Gourmet operates these commissaries for 

Amtrak.
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operations that, among other things, considers the results of audits and 

ensures prompt resolution. This component is especially critical in an 

operational area where Amtrak is losing considerable money. In 

addition, upon reviewing the Amtrak OIG’s work, we found that certain 

scope limitations existed. For example, the Amtrak OIG noted in a 

report on the food and beverage contract to Amtrak management that 

its work in this area had been limited due to the contractor’s failure to 

provide certain requested information and documentation. 

• Determining whether discounts and rebates were adequately passed 

along. Under the contract with Gate Gourmet, Amtrak is permitted to 

receive discounts and rebates on food and beverage purchases by the 

supplier. However, Amtrak has not implemented processes to ensure 

that rebates and discounts received directly from suppliers or indirectly 

through its contractor are accurate and complete. The contract allowed 

Amtrak to audit the contractor’s allocations of trade and quantity 

discounts received from purchases of food and beverages. However, 

Amtrak has neither requested an audit of the discounts credited to it 

over the 5 years the contract has existed, nor requested that the 

contractor certify that all discounts due to Amtrak had been credited to 

its account. Again, Amtrak was unable to provide us with written 

documentation supporting its decision or its consideration of this issue. 

Contractor representatives told us that many discounts are immediately 

reflected in the prices billed and, therefore, directly provided to Amtrak. 

They said that other supplier-offered discounts are paid or credited to 

the contractor retroactively, which are then allocated to individual 

accounts of the contractor (like Amtrak) on the basis of the percentage 

of aggregate purchases of the discounted items. Amtrak officials advised 

us that discounts and rebates totaling $278,385 and $278,073 for fiscal 

years 2003 and 2002, respectively, had been received on gross purchases 

subject to discounts and rebates of $3.6 million and $2.9 million, 

respectively.13 Amtrak officials also explained that the majority of 

rebates are received directly from suppliers and reviewed. However, no 

formal procedures have been established to review and verify the 

accuracy of the amount of rebates and discounts actually received from 

the suppliers. Because Amtrak did not require an independent audit or 

13Total purchases by the contractor for Amtrak exceeded $90 million for the 2-year period, 

roughly 13 times the amount of purchases the contractor reported as being subject to 

discounts and rebates. 
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otherwise analyze the trade and quantity discounts received, it has 

limited assurance that such amounts were reasonable and complete. 

• Measuring contractor performance. The contract called for 

performance standards and measures to assist Amtrak in monitoring 

and evaluating contractor performance. These standards and measures 

have not been established in accordance with the provisions of the 

contract. Amtrak officials explained that these standards are addressed 

elsewhere in the contract. However, we believe that preparation of 

formal standards and measures, as called for in the contract, would have 

facilitated increased oversight. Under the contract, these standards 

include timeliness and completeness of deliveries, adherence to product 

specifications, food safety and sanitization practices, proper accounting 

for stock, and compliance with laws and regulations. Performance 

measurements could be used to evaluate performance against 

established performance standards, with the appropriate incentives and 

penalties applied on the basis of performance. In addition, appropriately 

used performance standards would be a mitigating control to partially 

address the risk associated with relying on contractor-produced 

monthly reports as the basis for payment to the same contractor. 

Contractor Purchases Need 

More Monitoring

While Amtrak performs several activities to monitor food and beverage 

purchases by the contractor, these activities could be bolstered. We found 

that items were purchased at amounts that varied significantly without 

sufficient explanation or documentation of the variances. Amtrak officials 

said that they monitored contractor purchases using daily reports that 

listed quantity, unit size, cost, and the last prior purchase of the previous 

day’s purchases. Also, Amtrak staff at its various commissaries sign off on a 

daily summary of invoices paid by its contractor and randomly verify the 

consistence of supplier invoices and receiving documentation. Further, 

Amtrak makes available to all employees via its intranet, various revenue 

reports that capture information by train, car type, location, dates, and 

usage reports that allow the review of stock issued to trains. However, 

Amtrak has not formally established internal control procedures, which 

would include ensuring that (1) all reviews are conducted in a timely and 

consistent manner, (2) identified errors or other issues are documented 

and tracked, and (3) corrective actions taken are documented to ensure 

completion. During fiscal years 2002 and 2003, Amtrak’s data showed that it 

incurred $2 in expense for every $1 in food and beverage revenue, which 

resulted in a 2-year loss of over $160 million. 
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We used forensic auditing techniques, including data mining,14 to 

selectively review over $80 million of purchase order information for 

fiscal years 2002 and 2003. Our review found that the contractor was 

generating purchase orders with significant variances in unit order prices 

during both fiscal years 2002 and 2003. For example, the order prices of a 

12-ounce Heineken beer ranged from $0.43 to $1.04 per bottle in 2003, the 

order prices of a 4-ounce beef tenderloin ranged from $3.37 to $7.19, and 

the order prices of a 10-ounce strip steak ranged from $3.02 to $7.58. In 

2002, the Heineken beer order prices ranged from $0.63 to $3.93 per bottle, 

the beef tenderloin ranged from $0.30 to $6.60, and the strip steak ranged 

from $3.52 to $16.35 per portion. 

Amtrak officials told us that purchase order information did not always 

reflect actual amounts paid—either in total or per unit. For example, 

Amtrak officials said a price change may have occurred between the time 

an item was ordered and when it was delivered. They also said recordkeeping errors may have occurred, and unit prices in the inventory system 

may, for example, be based on a different pack size than that received or 

from that used for the last purchase. However, given the importance of 

purchase orders in a food and beverage operation, it is important that 

internal control practices include processes to systematically analyze and 

monitor purchase order information. No such procedures were established 

by Amtrak. 

To determine whether order prices reflected actual amounts paid, we 

nonstatistically selected 37 payment transactions and reviewed the 

underlying supporting documentation provided by Amtrak, including 

purchase orders, receiving records, vendor invoices, and evidence of 

payments. The supporting documentation provided for these transactions 

identified significant variances in certain unit prices paid during fiscal 

years 2002 and 2003. For instance, our review of the supporting 

documentation provided for the 37 payment transactions found payments 

for the Heineken beer ranged from $0.43 to $1.04 per bottle, payments for 

the beef tenderloin ranged from $3.05 to $6.59 per portion, and payments

14Data mining applies a search process to a data set, analyzing for trends, relationships, and 

interesting associations. For instance, data mining can be used to efficiently query 

transaction data for characteristics that may indicate potentially improper activity.
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for the strip steak ranged from $4.70 to $5.28 per portion.15 Amtrak officials 

stated that the strip steak examples were “emergency purchases.” 

However, following our request for documentation to support this claim, 

the Amtrak senior director of food and beverage service told us on June 29, 

2005, that documentation to support the assertion that these were 

emergency purchases did not exist. The establishment of internal control 

procedures that require the documentation of the (1) identification and 

correction of errors and (2) approval for emergency purchases would 

ensure that adequate documentation is readily available for review by 

internal and external parties.

We also found that, Amtrak, on the basis of amounts reported by the 

contractor, paid the contractor each month for the cost of food and 

beverages purchased for Amtrak, as well as for commissary and associated 

labor expenses and other expenses incurred—the contract is a 

reimbursable contract. The contractor was also paid a fee based on the 

cost of on-board stock. However, Amtrak did not establish adequate 

internal control to address the potential risk of paying the contractor on the 

basis of contractor-reported amounts that did not include adequate 

supporting documentation. During fiscal years 2002 and 2003, contractorprepared monthly operating statements were the basis for amounts paid by 

Amtrak totaling over $138 million to the contractor for goods and services 

provided. However, because proof of actual contractor payments made to 

suppliers was not required, and because of the other significant internal 

control weaknesses we previously listed, Amtrak had limited assurance 

that the amounts paid to the contractor were valid.

15In our June 2005 testimony on Amtrak’s food and beverage service (GAO-05-761T), we 

stated that in 2002 Amtrak purchased Heineken beer, in 12-ounce bottles, at a price as high 

as $3.93 per bottle. This information was based on the documents provided to us by Amtrak. 

However, based on additional documents that Amtrak provided us on June 29, 2005, it 

appears that this purchase was for 10 half-kegs of beer, not 10 cases as indicated on the 

documents Amtrak previously provided. 
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Amtrak Has Made 

Progress in Improving 

Financial Management 

Practices, but More 

Work Remains 

For fiscal years 2002 and 2003, Amtrak’s IPA reported multiple areas of 

significant internal control weaknesses as part of an annual audit of 

Amtrak’s financial statement.16 However, for fiscal year 2004, the IPA 

reported that much progress had been made and only one significant 

weakness involving accounting for capital assets remained.17 Amtrak’s 

progress in addressing its control weaknesses is an important achievement. 

In general, however, its efforts have been achieved primarily through the 

implementation of manual detective controls instead of preventive 

controls. Thus, improvements made by the end of fiscal year 2004 enable 

the production of useful financial information after the fact—typically, 5 to 

6 months after the end of the year. However, until effective controls are 

established that prevent errors in financial information and address their 

underlying causes, Amtrak’s ability to produce relevant and reliable 

financial information for management and stakeholders to use for decision 

making will be hampered.

Progress Was Made in 

Addressing Internal Control 

Weaknesses 

In audits for fiscal years 2002 and 2003, Amtrak’s IPA noted that the 

company had made progress in addressing internal control weaknesses 

that previously had been reported to Amtrak’s board of directors. Further, 

based on its audit of Amtrak’s fiscal year 2004 financial statements, the IPA 

reported that much progress had been made and that only one significant 

weakness—involving accounting for capital assets—remained. However, 

the IPA noted that improvement had been achieved primarily from the 

implementation of manual detective controls compared with preventative 

16As of June 27, 2005, Amtrak’s IPA had not issued its report on the audit of Amtrak’s 

financial statements for the fiscal year ending September 30, 2004—approximately 9 months 

earlier; however, on this same day, Amtrak management provided us with a copy of the 

internal control report from the IPA based on its work on the audit of the fiscal year 2004 

financial statements. Our comments on fiscal year 2004 are based solely on the contents of 

this internal control report.

17Amtrak’s IPA reported one material weakness in this internal control report. A material 

weakness, under standards established by the American Institute of Certified Public 

Accountants, is a reportable condition in which the design or operation of one or more 

internal control components does not reduce to a relatively low level the risk that errors or 

fraud in amounts that would be material in relation to the financial statements may occur 

and be detected within a timely period by employees in the normal course of performing 

their assigned functions. Reportable conditions are matters coming to the IPA’s attention 

that, in its judgment, relate to significant deficiencies in the design or operation of internal 

control and could adversely affect the organization’s ability to record, process, summarize, 

and report financial data consistent with the assertions of management in the financial 

statements.
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controls. Such detective, or “back-end,” controls take place after 

transactions have been recorded and then corrected for misstatements 

after the fact. These controls are subject to human error, and a loss of key 

individuals could result in control breakdowns. In addition, it is relatively 

labor-intensive to ensure that such controls are operating effectively. 

We reviewed Amtrak’s response to the IPAs findings in fiscal years 2002 to 

2003 with respect to internal control weaknesses regarding capital assets 

and found that Amtrak’s response could be improved. We selected this area 

because of its size and significance—depreciation and amortization 

represented approximately 20 percent of Amtrak’s total operating expenses 

for fiscal year 2003, and Amtrak’s capital assets represent more than 83 

percent of its total assets. Amtrak’s IPA had identified ongoing problems in 

this area in fiscal year 2001 audits. Similar to what the IPA observed, we 

found that Amtrak’s response was limited mainly to back-end control 

procedures—that is, Amtrak looks at transactions after they had been 

recorded and corrects for misstatements after the fact. Such back-end 

procedures do not identify core causes of accounting mistakes and prevent 

the errors from entering the system.18 In contrast, front-end prevention 

control practices should, if fully and properly implemented, among other 

things, improve the usefulness of Amtrak’s internal financial information. 

Importantly, without the appropriate front-end procedures to prevent 

errors from entering the system, information used by management and 

external stakeholders for decision making may not be reliable. Potential 

front-end procedures could include such things as monthly or more 

frequent reviews for accuracy and appropriateness by management of (1) 

capital expenditures incurred to date, (2) expected costs to complete 

against initial and revised project budgets, and (3) all proposed manual 

journal entries. 

18We discussed with Amtrak’s IPA the approach Amtrak had taken. Representatives of the 

IPA told us their work did not extend to considering the appropriateness of the strategy 

Amtrak employed or whether the approach would be sufficient for interim financial 

reporting, such as the preparation of monthly reports that are to be provided to 

management and external stakeholders. 
Chapter 3

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Page 82 GAO-06-145 Amtrak Management

Other Opportunities to 

Increase the Usefulness and 

Transparency of Financial 

Information Have Been 

Missed 

Amtrak management missed several other opportunities to use its IPA’s 

work to increase the usefulness and transparency of its financial 

information. These opportunities relate to making all audit reports 

available to the public and expanding the work that the IPA conducts. 

Report on Internal Control and 

Compliance Was Not Made 

Public

Amtrak’s IPA is engaged to report on the results of the audit of the 

consolidated financial statements of Amtrak. The IPA reports on the results 

of the audit of the consolidated financial statements, conducting this work 

in accordance with Generally Accepted Auditing Standards issued by the 

American Institute of Certified Public Accountants. This set of standards is 

typically used for audits of publicly and privately owned organizations. 

Amtrak’s IPA is also separately charged with reporting in accordance with 

generally accepted government auditing standards issued by the 

Comptroller General of the United States. These standards, which are 

designed to meet the needs of users of government audits, prescribe two 

additional reporting requirements—reporting on internal control and 

reporting on compliance with laws, regulations, and provisions of contracts 

or grant agreements.

The public sees the results of only one of these efforts. Amtrak tasked its 

IPA with issuing two reports, but the only report that is publicly available is 

the report that provides an opinion on the results of the audit of Amtrak’s 

financial statements. The second report, which covers internal control and 

compliance with laws, regulations, contracts, and grants, is restricted to 

the use of Amtrak’s management and the board of directors. DOT officials 

told us that they also receive the second report. Many other entities with 

significant federal ties (through direct subsidies, loan guarantees, or other 

direct and indirect relationships) receive and make publicly available 

reports by their IPAs that are in accordance with generally accepted 

government auditing standards. These entities include the United States 

Postal Service, Pension Benefit Guaranty Corporation, and Railroad 

Retirement Board. Amtrak officials were not able to provide us with a 

distribution list for this second report, and, according to these officials, 

they had no recollection of these reports being requested by or sent to any 

external parties. 

The concept of accountability for public resources is important in our 

nation’s governing processes. Legislators, government officials, and the 

public want to know, among other things, whether (1) government 
Chapter 3

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Page 83 GAO-06-145 Amtrak Management

resources, such as the over $29 billion in subsidies provided to Amtrak, are 

managed properly and used in compliance with laws and regulations and 

(2) services are being provided efficiently, economically, and effectively. 

The desirability of transparency with respect to audit information on 

Amtrak’s internal control and compliance with laws and regulations is, in 

our view, high given Amtrak’s public mission and the large federal subsidies 

involved. 

Increasing IPA Role Could Help 

Improve Information

Amtrak’s financial information could also be improved by using additional 

expertise available from the IPA—some of this expertise is already called 

for by contract but not utilized. The contract between Amtrak and its IPA 

called for work addressing compliance with certain federal regulations 

concerning overhead rates developed and applied to recover indirect costs 

associated with work performed for outside parties.19 While the contract 

contemplated this type of work, Amtrak did not engage the IPA to perform 

the work. Amtrak could also use the IPA’s experience and knowledge by 

engaging the auditor for additional work related to making its financial 

information more useful to management. For example, engaging the IPA to 

review financial statements on an interim basis may have identified 

opportunities for improvement in the reliability and timeliness of data 

provided to stakeholders. Further, Amtrak could benefit from engaging an 

IPA to perform work specific to enhancing the timeliness and reliability of 

financial information used in monthly reports and for day-to-day decision 

making by management and external stakeholders. While this increased 

role by the IPA would not be without cost, the IPA is in a good position to 

efficiently identify the core causes of errors in financial information and 

other issues and develop controls and processes to prevent these errors. 

Conclusions Although Amtrak has made progress in providing financial information for 

management purposes, the current information lacks the relevance and 

reliability needed to support managers and external stakeholders in 

exercising stewardship over the agency’s operations, including federal 

subsidies. The current information is incomplete, in terms of both what is 

included and how specifically Amtrak’s various train routes and lines of 

businesses can be evaluated. This information also contains significant 

errors. These deficiencies point not only to a need to improve financial 

reporting practices, but also to a deep-seated set of concerns: that is, the 

1948 C.F.R. Parts 140 and 646 and 48 C.F.R. Part 31.
Chapter 3

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Page 84 GAO-06-145 Amtrak Management

types of internal control practices that are needed to help ensure the 

reliability of financial reporting are not in place. Amtrak’s management may 

be able to correct a number of these issues on its own, but the company is 

likely to need outside help in developing a comprehensive approach to 

address internal control weaknesses and improve the financial information 

for management and external stakeholders. 

Recommendations for 

Executive Action

To ensure that Amtrak’s financial reporting and financial management 

practices support sound business decisions and the efficient and effective 

use of federal funds provided to Amtrak, we recommend that the Secretary 

of Transportation direct the Federal Railroad Administrator to take the 

following three actions:

• require Amtrak to submit a plan, which includes specific actions to be 

taken, anticipated outcomes (consistent with the recommendations 

outlined below), and completion dates, to improve its financial 

reporting and financial management practices;

• review and provide Amtrak with feedback and direction, as necessary, 

on this plan to ensure that the most effective approach(s) to improving 

financial reporting and financial management practices are 

implemented; and 

• monitor Amtrak’s performance under the plan and report, at least 

annually, to Congress on progress being made by Amtrak regarding 

improvements of its financial reporting and financial management 

practices—this report should identify any specific actions either Amtrak 

or Congress should take to facilitate such improvements.

To improve Amtrak’s efforts in addressing financial management 

challenges and better support management decision making, we 

recommend that the president of Amtrak take the following eight actions 

discussed in table 4: 
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Table 4: Specific Recommendations—Financial Reporting and Financial Management Practices

Issue Recommendation

Improve usefulness of financial reporting 

Include relevant information in 

monthly performance reports 

Add the following information to monthly performance reports:

• Food and beverage services: separate revenue and expense information, gross profit analysis, 

information on the cost of meals, and other metrics basic to a food service operation.

• Employee benefits: cost trends, changes in the components of benefit costs, and initiatives to 

manage these costs.

• Each line of business: components of key expense line items and functional activities (such as 

salaries and benefits), trends in key expense components, differences in actual versus 

budgeted results, and appropriate performance metrics (such as revenue per passenger mile 

and expense per passenger mile).

• Each train route in the route performance information (RPI): comparative expense and net 

profitability or loss, amounts for depreciation expense, and amounts for other components of 

expenses (such as salaries and benefits).

Increase reliability of information in 

monthly performance reports

Perform a comprehensive risk assessment of financial reporting processes that support 

preparation of monthly performance reports and the RPI, to include determining areas of 

vulnerability, implementing appropriate compensating and mitigating internal controls, and 

ongoing monitoring to ensure compliance.

Make allocation policies and 

procedures more transparent

Document policies and procedures related to controlling the information in the monthly 

performance reports, including the RPI. The policies and procedures should cover how expenses 

are allocated to Amtrak’s routes, as well as specific guidance on documenting the justification 

and authorization of changes made to allocation methods. 

Improve financial management practices

Ensure benefit costs are complete 

and can be recovered in billings to 

outside parties

Allocate accrued postretirement health benefit expenses among Amtrak’s lines of business and 

reflect accrued costs in billings for employee benefits under reimbursable agreements with 

outside entities. Adjust standard benefit expenses rate on a timely basis.

Make compensation decisions more 

transparent

Modify existing controls: 

• Clearly define all significant terms used in Supplemental Executive Retirement Plan (SERP) 

determinations (such terms include management committee member, senior staff employee, 

compensation, financial targets, and performance goals) so that they can be consistently 

applied throughout the process.

• Reconsider the timing of management proposals for SERP awards to ensure that decisions are 

based on information from audited financial statements.

Develop internal control 

enhancements

Develop a comprehensive action plan for immediately implementing preventive controls to 

enhance the reliability of financial data and address the reportable condition over accounting for 

capital assets in the most recent reports and letters of comment from the independent public 

accountant.

Seek assistance in strengthening 

procedures 

Engage an independent public accountant to provide

• special services as necessary to provide assurance over compliance with federal regulations 

concerning overhead rates developed and applied to recover indirect costs associated with 

work performed for outside parties and

• review-level attestation work on Amtrak’s quarterly financial statements.
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Page 86 GAO-06-145 Amtrak Management

Source: GAO.

Recommendations on the findings pertaining to Amtrak’s food and 

beverage service are contained in a separate report issued in August 2005.20

Enhance accountability and 

transparency

Continue to have annual audits of its financial statements performed under U.S. generally 

accepted government auditing standards (GAGAS) and, effective beginning with its fiscal year 

2004 financial statement audit, make publicly available the auditor reports prepared under 

GAGAS reporting standards for financial audits, including those on internal control and 

compliance with laws, regulations, and provisions of contracts and grants.

(Continued From Previous Page)

Issue Recommendation

20GAO, Amtrak: Improved Management and Controls over Food and Beverage Service 

Needed, GAO-05-867 (Washington, D.C.: Aug. 24, 2005).
Page 87 GAO-06-145 Amtrak Management

Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not Developed 

a Comprehensive Cost Control Strategy Chapte4r

Although its operating losses and federal subsidy have been increasing, 

Amtrak has not developed a comprehensive cost control strategy. While 

Amtrak’s operating expenses have decreased over the past 3 fiscal years, its 

operating losses have grown each year and are now over $1 billion1

annually. These losses are projected to increase by about 40 percent over 

the next 4 years. Amtrak’s cost-cutting focus has been on creating and 

monitoring its yearly operating budget and managing headcount levels, 

with its various departments deciding how much emphasis, if any, to place 

on any other cost control actions. However, such cost control actions have 

not been integrated into a comprehensive cost control strategy. Without a 

comprehensive strategy for containing costs, Amtrak will likely miss 

opportunities to reduce its operating losses. Furthermore, Amtrak does not 

have complete and reliable cost data that would support a comprehensive 

strategy. Without these data, Amtrak has limited ability to understand its 

corporate and unit costs and to identify where potential cuts might be most 

effective. Finally, Amtrak needs to continue to employ widely used industry 

cost reduction practices—such as benchmarking, outsourcing, and 

efficiency reviews—to help decrease its operating costs. 

1

All dollar figures in this chapter are adjusted to constant 2004 dollars, unless otherwise 

noted.
Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 88 GAO-06-145 Amtrak Management

Amtrak’s Annual 

Operating Loss Has 

Grown to over $1 

Billion and Is Projected 

to Increase to over $1.4 

Billion, While Federal 

Subsidies Have 

Increased 

Although Amtrak’s operating expenses have decreased, Amtrak’s annual 

operating loss (total revenues minus operating expenses) has grown to 

over $1 billion each year over the last 3 fiscal years. During this same 

period, Amtrak’s federal operating subsidy2

 increased over 200 percent, 

from about $200 million in fiscal year 20023

 to over $700 million in fiscal 

year 2005.4

 Amtrak is projecting that its federal operating subsidy will 

remain stable from fiscal years 2006 to 2009, but that its operating losses 

will increase about 40 percent to over $1.4 billion by fiscal year 2009.5

 (See 

fig. 12.) 

2

Amtrak’s federal subsidy—separated as operating and capital subsidies—is distributed as a 

grant from FRA. Operating subsidies generally support Amtrak’s day-to-day operations, 

including operating and maintaining rolling stock (locomotives and passenger or other 

cars), tracks, and stations. Amtrak’s capital subsidy is designed for the acquisition or 

improvement of the railroad’s rolling stock and infrastructure.

3

The amount for Amtrak’s operating support in fiscal year 2002 does not include the 

following: $230 million in capital for maintenance, which, according to Amtrak officials, 

Amtrak considers an operating expense; $105 million appropriated for various security and 

life safety improvements; or FRA’s fiscal year 2002 $100 million emergency loan to Amtrak.

4

As shown in chapter 1, Amtrak’s total federal subsidy since 1971 has been variable—

ranging from about $9 million in fiscal year 1973 to over $1.7 billion in fiscal year 1999. 

5

For this report, we focused on Amtrak’s expenditures, rather than revenues.
Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 89 GAO-06-145 Amtrak Management

Figure 12: Amtrak’s Constant Dollar Operating Losses and Federal Operating Subsidy, Fiscal Years 2002 to 2009

Note: Amounts are in constant 2004 dollars. Fiscal years 2005 to 2009 figures for operating loss and 

federal subsidy are Amtrak projections. Operating losses from fiscal year 2002 to 2004 and projected 

losses from fiscal years 2005 to 2009 do not include interest expenses.

Amtrak’s operating loss projections may be understated, however, since 

they do not include interest expenses6

 and rely on $377 million in operating 

efficiencies that Amtrak estimates it could achieve as a result of operating 

efficiencies and benefits from capital investments in its Fiscal Year 2005 to 

2009 Strategic Plan. In its April 2005 Strategic Reform Initiatives proposal, 

Amtrak estimates that it can achieve operating savings of nearly $550 

million by fiscal year 2011. To achieve these savings, however, all of the 

elements in the reform proposal must be implemented, including the 

following: receiving an 80 percent federal capital match for state intercity 

passenger rail funds, realizing increased revenues from passengers, 

-2,000

-1,500

-1,000

-500

0

500

1,000

Federal operating subsidy adjusted

Operating loss adjusted

2002 2003 2004 2005 2006 2007 2008 2009

Fiscal year

Dollars in millions

Source: GAO analysis of Amtrak and Federal Railroad Administration data.

Projected

6

Amtrak’s interest expenses (net of interest income) averaged over $140 million between 

fiscal years 2002 and 2004 (in constant 2004 dollars).
Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 90 GAO-06-145 Amtrak Management

obtaining additional state operating contributions for corridor trains, and 

eliminating all of its legacy debt by the federal government. (See table 5.)

Table 5: Assumptions in Amtrak’s Strategic Reform Initiative for Fiscal Year 2011 

Operating Savings 

Source: GAO analysis of Amtrak data.

Note: This table does not include the financial impact of a working capital infusion or other 

assumptions, such as no restructuring charges, from fiscal years 2006 to 2011.

These projections also do not take into account the removal in April 2005 of 

Amtrak’s Acela trainsets from service for an undetermined period due to 

brake-related problems. The absence of Acela trains could have a 

significant impact on Amtrak’s fiscal year 2005 revenues.7

Both Amtrak’s revenues and total expenses decreased between fiscal years 

2002 and 2004. Amtrak’s revenues decreased by over 16 percent, and its 

Dollars in millions

Assumptions Proposed savings

Revenue enhancements

Cumulative benefit from gas price increases $80

Customer service enhancement benefit 100

Proportionate share access payment increase 

from Northeast Corridor commuter agencies 30

Additional state operating contributions from 

fully allocated costing on all corridor trains 115

Additional state operating contributions from 

fully allocated costing on all long-distance trains 15

Subtotal $340

Cost reductions

Outsourcing $90

Productivity 60

Phase-out of Railroad Retirement Tax 55

Subtotal $205

Total $545

7

Amtrak’s senior vice president of operations recently stated that Amtrak is losing over $1 

million each week the Acela trainsets are out of service. According to Amtrak’s May 2005 

monthly performance report, between April 15 and May 31, 2005, Amtrak lost $17.5 million 

in revenue as a result of the Acela trainsets being out of service.
Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 91 GAO-06-145 Amtrak Management

total expenses decreased by over 9 percent.8 Amtrak’s revenues decreased

more than its expenses by over $50 million. (See table 6.) The relationship 

between these decreases in both revenues and expenses can be reflected 

by the change in Amtrak’s operating ratio, which shows that for every $1.00 

in revenue, Amtrak spent $1.51 in fiscal year 2002. In fiscal year 2004, this 

increased to $1.63. As of July 2005, this number for the fiscal year to date 

decreased slightly to $1.61.

Table 6: Amtrak’s Real Total Revenues, Operating Expenses, Total Expenses, and Operating Ratios, Fiscal Years 2002 to 2004 

Source: GAO analysis of Amtrak data.

a

Amounts for fiscal years 2002, 2003, and 2004 include mail and express revenues and expenses. For 

fiscal year 2004, operating expenses and total expenses do not include $82.4 million in noncash 

special charges for discontinuance of mail and express service.

b

Amounts may not equal due to rounding.

c Total revenues exclude federal operating subsidies.

d

The operating ratio is calculated as operating expenses divided by total revenues. Operating ratios 

more than 1 indicate total operating expenses are higher than total revenues.

e

Total operating expenses do not include interest or depreciation expenses.

f

Total expenses include interest and depreciation expenses.

The reasons for decreasing revenues and expenses include the following: 

• Revenues: The termination of the Massachusetts Bay Transportation 

Authority (MBTA) commuter rail contract resulted in a $150 million 

revenue loss in fiscal year 2004, or about 40 percent of the total 

8

Fiscal year 2004 total expenses include depreciation and net interest expenses but do not 

include a one-time special charge of $82.4 million in noncash expenses Amtrak took as a 

result of termination of its mail and express business.

Dollars in thousands

Fiscal yeara

Description 2002 2003 2004

Change from fiscal years

2002 to 2004b

Total revenuesc $2, 313,642 $2,117,908 $1,931,512 $(382,130)

Operating expensesd 2,849,451 2,652,004 2,450,472 (398,979)

Operating ratioe 1.23 1.25 1.27 0.04

Total expensesf $3,488,917 $3,417,610 $3,158,016 $(330,901)

Total revenue to total expense 

ratio 1.51 1.61 1.63 0.13
Chapter 4

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Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 92 GAO-06-145 Amtrak Management

reduction in Amtrak’s revenue. Revenues also decreased in part because 

Amtrak phased out its mail and express freight line of business in fiscal 

year 2004.9

• Operating expenses: Decreases occurred in most of Amtrak’s major 

expense categories. Labor costs, Amtrak’s largest single expenditure 

category, accounted for about $200 million, or over 60 percent, of the 

overall decrease in expenses. Amtrak reduced its overall labor costs 

alone by almost 12 percent from fiscal years 2002 to 2004. This reduction 

was mainly achieved by reducing employees by about 3,500 over the 

same time period; about 1,500 of this reduction was due to the 

termination of the MBTA contract.10

Amtrak will likely face challenges to reduce its operating costs through 

reductions in labor costs in the future. Amtrak’s labor costs account for 

almost 50 percent of its total expenditures in fiscal year 2004. The labor 

force is about 85 percent unionized; therefore, attempts to reduce labor 

costs for much of Amtrak’s labor force must be negotiated with the unions. 

According to Amtrak officials, by April 2005, Amtrak had signed contracts 

with 3 of its 15 unions, representing about 37 percent of Amtrak’s union 

workforce. If the pattern from these three agreements extends to the 

agreements with the other unions, Amtrak officials estimate that wage 

costs could increase by almost 10 percent over the 5-year life of the 

agreements. Amtrak officials expect that each labor union settlement will 

include this same level of wage increase, since Amtrak has extended this 

level of wage increase to every union as part of its initial offer in the 

current bargaining round. Amtrak’s labor relations officials are negotiating 

changes to work rules to increase productivity and lower headcount, which 

could lower labor costs. However, since Amtrak does not keep formal track 

of labor productivity savings or have labor productivity measures for its 

workforce, it is unclear how Amtrak will know if these savings are actually 

being achieved. As union labor wages increase and other labor cost 

reductions are uncertain, Amtrak may be pressured to reduce other costs 

in order to achieve significant reduction in its operating costs. 

9

Part of the revenue decrease between fiscal years 2003 and 2004 can also be attributed to a 

one-time $30 million sale of assets in fiscal year 2003.

10Amtrak operated MBTA’s trains and maintained their equipment and infrastructure under a 

contract that ended on June 30, 2003.
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According to Amtrak officials, Amtrak may be able to offset other cost 

increases, such as health care costs, by introducing employee contributions 

toward health insurance premiums. Prior to the current round of labor 

negotiations, union employees did not contribute toward their health 

insurance costs, which constituted about 18 percent of Amtrak’s total labor 

costs in fiscal year 2004. Amtrak officials stated that Amtrak has 

successfully implemented employee contributions in the three agreements 

it has already signed, and that these contributions are a part of Amtrak’s 

initial negotiation offer to each of its unions.11 However, since both work 

rule changes and employee health care contributions are subject to 

negotiation with each labor union, it is uncertain if Amtrak will be able to 

implement them across its workforce. 

Amtrak Has Not 

Developed a 

Comprehensive Cost 

Control Strategy

Amtrak has not developed a comprehensive cost control strategy that uses 

performance or cost information to most effectively direct its cost control 

efforts. In our work on GPRA, we noted that leading organizations in the 

public and private sector—in their efforts to improve performance while 

reducing costs—use performance information as a basis for allocating 

scarce resources and for assessing which of their processes are in the 

greatest need of improvement in terms of cost, quality, and timeliness. In 

particular, we found that no picture of how taxpayers’ money is being spent 

is complete without adequate cost and performance information. By 

analyzing the gap between where they are and where they need to be in 

order to achieve desired outcomes, management in leading organizations 

can target those processes that are in the most need of improvement, set 

realistic improvement goals, and select appropriate improvement 

techniques.12

We found examples of comprehensive cost strategies at several of the 

railroads we studied. One freight railroad, for example, adopted a 

corporatewide review of its entire cost structure to identify less 

incremental and more strategic cost saving opportunities. Railroad officials 

said this effort, under its chief financial officer, resulted in $90 million to 

$100 million in cost savings per year. VIA Rail, Canada’s intercity passenger 

11In the three agreements signed, employees are ultimately expected to contribute $75 per 

month toward their health insurance premiums.

12GAO, Executive Guide: Effectively Implementing the Government Performance and 

Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).
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Strategy

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rail company, also has had a focused corporatewide effort to reduce costs 

since its government funding decreased in the early 1990s. Since that time, 

according to VIA Rail officials, VIA Rail has maintained its corporatewide 

cost reduction efforts in large part due to its fixed subsidy level from the 

Canadian government. Because VIA Rail’s management knows that it will 

receive a set amount every year in government subsidy and no more, it has 

a clear incentive to contain its costs below its revenues and subsidy 

amount. VIA Rail is further incentivized to reduce costs because any 

amount of the federal subsidy not spent can be set-aside by the railroad for 

future use. 

Amtrak’s efforts to develop a cost control strategy or to obtain the 

information necessary to do so have been unsuccessful. For example, 

Amtrak’s chief financial officer announced a department goal for fiscal year 

2003 “to develop system-wide costs and standards for major activities,” 

which would “provide a better understanding of its cost structure, leading 

to better [cost] control.” However, Amtrak’s former chief financial officer 

stated that this goal “did not take off,” leaving no effective corporatewide 

impetus or action plan to ensure it was implemented. Amtrak’s controller 

cited two reasons why Amtrak has not created a corporatewide cost 

containment strategy. First, Amtrak does not have any detailed 

benchmarks (i.e., information or standards) available that could be used in 

its efforts to create corporatewide cost information. Amtrak has not 

developed reliable and accurate unit cost information or standards to 

construct benchmarks because it has no reliable cost information on which 

to base them. Second, Amtrak does not have an integrated, reliable, or 

timely way to track and collect cost information across all departments. 

Amtrak’s controller told us that Amtrak’s current financial software was 

not designed to capture cost information from different departments 

across the country. The software currently in use has been implemented 

piecemeal over time, making it difficult for different versions to interact 

and share data. 

Amtrak’s acquisition function is a good example of the company’s 

difficulties in identifying costs and cost saving opportunities. Although 

Amtrak officials told us that they analyzed procurement spending, we 

subsequently found that they were unable to conduct an enterprisewide
Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 95 GAO-06-145 Amtrak Management

spend analysis13 to develop a picture of what the company is spending on 

goods and services and to identify those cost areas for strategic sourcing14

and potentially substantial savings opportunities. When we asked Amtrak 

for examples of a spend analysis, it took company officials several months 

to provide such examples, and what was provided was primarily a 

compilation of savings that had been achieved through various 

procurement department initiatives. On the basis of data provided, we 

could not determine how much, if any, of these savings had been achieved 

through an analysis of spending. Procurement officials subsequently 

explained that no specific individual or group within the department is 

responsible for conducting a spend analysis, and there is no systematic 

process for conducting such analyses. Rather, Amtrak officials told us that 

all procurement department staff are responsible for identifying cost 

savings opportunities. Moreover, while not disagreeing with the value of a 

spend analysis, procurement department officials indicated that such 

analyses would be extremely difficult without a system that accurately 

produced the necessary data—a system that does not currently exist at 

Amtrak. 

Setting up a spend analysis program can be challenging, according to our 

prior research on leading companies that have used this tool to reengineer 

their approach to procurement and produce billions of dollars in savings.15

Like Amtrak, companies have had problems accumulating sufficient data 

from internal systems that (1) do not capture all of what a company buys or 

(2) are being used by different parts of the company but are not connected. 

What private companies and federal agencies are doing to overcome the 

data challenges could serve as a guide to improving Amtrak’s ability to 

conduct a spend analysis to strategically reduce procurement costs. Private 

13A “spend analysis” is a tool that provides companies with knowledge about how goods and 

services are being acquired, about the amount spent, and about who is doing the buying and 

supplying. Conducting a spend analysis also provides opportunities to leverage buying 

power and reduce costs for commonly purchased goods and services.

14“Strategic sourcing” is a process used by leading commercial companies and a small 

number of federal agencies to establish an organizationwide approach to leveraging the 

organization’s buying power and fostering new ways of doing business. 

15GAO, Best Practices: Using Spend Analysis to Help Agencies Take a More Strategic 

Approach to Procurement, GAO-04-870 (Washington, D.C.: Sept. 16, 2004); Best Practices: 

Improved Knowledge of DOD Service Contracts Could Reveal Significant Savings, GAO03-661 (Washington, D.C.: June 9, 2003); and Best Practices: Taking a Strategic Approach 

Could Improve DOD’s Acquisition of Services, GAO-02-230 (Washington, D.C.: Jan. 18, 

2002).
Chapter 4

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Page 96 GAO-06-145 Amtrak Management

companies have developed formal, centralized spend analysis programs 

through the use of five spend analysis key processes—automating, 

extracting, supplementing, organizing, and analyzing data.16 Companies 

that use a spend analysis find that they are buying similar products and 

services from numerous providers, often at greatly varying prices. For 

example, one company conducted a spend analysis of the 

telecommunications services it used and reduced the number of vendors 

from three to one, thereby saving $3.2 million in the first 8 months of the 

new contract.17

Similarly, other railroads confirmed the value of spend analyses as well as 

the need to have consolidated, organized, and reliable procurement data to 

conduct such an analysis. For example, officials at VIA Rail indicated that 

they have not yet conducted a central, comprehensive analysis of their 

spending because they have not had the necessary information systems. 

However, they have worked to improve their systems to a level that will 

permit this type of formal, centralized spend analysis. An official at another 

freight railroad indicated that the railroad has a department specifically 

dedicated to conducting spend analyses and identifying ways to maximize 

the cost-effectiveness of certain procurements. While this department does 

not analyze the railroad’s procurement spending across the board, it can 

identify companywide areas for coordinated purchasing and potential cost 

savings. Like the commercial best practices identified in our prior work, 

members of this cross-functional group are drawn from other departments, 

such as the finance department and a user department (a department that 

needs acquisition services), to work on special projects and analyze 

spending in given areas and to work closely with the procurement 

department.18 This department found that they could save $4.9 million in 1 

year by paying for prep work services (maintenance or repair services) for 

freight cars on a per car basis, rather than by the hour. This new approach 

provides an incentive for the service provider to work more efficiently.

16GAO-04-870, pp. 5-9. 

17GAO-02-230, p. 10.

18GAO-02-230, GAO-03-661, and GAO-04-870. 
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Developed a Comprehensive Cost Control 

Strategy

Page 97 GAO-06-145 Amtrak Management

Amtrak’s Management 

Tools Do Not 

Constitute a 

Comprehensive Cost 

Control Strategy

Amtrak currently seeks to control costs through the use of five 

management tools,19 which Amtrak’s president has used to manage and try 

to stabilize Amtrak’s financial situation. For example, according to Amtrak 

officials, Amtrak’s management uses its annual budget to focus on the 

structure and size of Amtrak’s labor force, which has facilitated Amtrak’s 

making labor force reductions—resulting in lower labor costs. However, 

even though they are implemented across the company, these tools alone 

do not constitute a corporatewide cost control strategy. These tools are not 

a part of a corporatewide plan that identifies cost goals, identifies how 

these goals are to be achieved, and provides for the continuous 

improvement on those goals. For example, Amtrak’s monthly performance 

reports, while providing information about past performance, does not 

provide any explicit cost reduction goals or identify ways to reduce costs.

In the absence of a corporatewide cost containment strategy, Amtrak’s cost 

control efforts, outside of using its five management tools, have been 

largely unfocused and inconsistently applied throughout the company. 

According to Amtrak finance officials, Amtrak’s focus has been on 

producing and monitoring its annual operating budget, among other things, 

which has taken emphasis away from a more strategic view of its cost 

structure. Amtrak’s executive management provides verbal guidance on 

department goals each year, but each department then individually chooses 

what costs to focus on when creating their goals. Consequently, each 

department’s management decides how much focus (if any) to place on 

cost containment. This practice may lead to a narrow focus on specific 

costs or lead to conflicting cost containment efforts among departments. 

For example, Amtrak’s chief engineer said that, without strategic 

coordination and planning, a goal to reduce overtime in the engineering 

department could lead to an increase in repair times for signals on the 

Northeast Corridor, which in turn could lead to significantly increased train 

delays. This situation could adversely affect the transportation and other 

departments. 

19As discussed in chapter 1, Amtrak’s five management tools include the following: clear 

goals and objectives, defined organization charts, zero-based operating budget, capital 

program, and monthly performance reports.
Chapter 4

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Page 98 GAO-06-145 Amtrak Management

Lack of Cost Data 

Limits Amtrak’s Ability 

to Identify Areas to 

Efficiently Reduce 

Costs or to Measure 

the Results of Cost 

Control Actions

In our work on effectively implementing GPRA, we found that in 

establishing unit cost information, an organization can

• demonstrate the cost-effectiveness and productivity to stakeholders,

• link levels of performance with budget expenditures,

• provide baseline and trend data for stakeholders to compare 

performance, and 

• provide a basis for focusing an organization’s efforts and resources to 

improve its performance.20

The railroad industry is an asset-intensive business, and the efficient 

performance of those assets is critical to the financial performance of any 

railroad. For example, unit cost metrics, such as cost-per-passenger 

revenue mile, cost-per-locomotive overhaul, or cost-per-mile of rail 

replaced, could show the cost performance of each of Amtrak’s core 

functions (e.g., transportation, maintenance of equipment, and 

maintenance of track and infrastructure). However, Amtrak has not fully 

developed unit cost and asset performance metrics like these that could 

demonstrate the efficient use of its resources and help to identify and 

reduce costs. 

Most of the freight railroads we contacted, as well as VIA Rail, used unit 

cost and performance metrics to inform their business decisions in key 

areas, such as transportation, maintenance of equipment, and maintenance 

of infrastructure. As one railroad executive stated, unit cost and 

performance metrics are “predictive tools to understand how improvement 

translates into increased revenue, lower expenses, and/or higher profits.” 

In addition, the Association of American Railroads has developed a set of 

asset performance metrics for the freight railroad industry, such as tonmiles per employee, ton-miles per locomotive, and ton-miles per dollar of 

operating expense, to show how efficiently that industry uses its assets and 

spends its money relative to output. 

In 2000, we reported on the importance of these measures for Amtrak 

because these measures indicate the efficiency with which Amtrak’s 

20GAO/GGD-96-118.
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resources, such as labor, are being utilized.21 We said that without 

productivity metrics, Amtrak can neither demonstrate nor manage the 

efficiency of its individual resources. For example, Amtrak uses production 

statistics like overall ridership, number of overhauls completed, or miles of 

rail replaced to demonstrate production in its core activities. Amtrak 

believes that recent increased production in these core activities, when 

combined with its recent decrease in employees, show that it is “doing 

more with less.” However, as we previously noted, a significant portion of 

the reduction in Amtrak’s headcount came from the termination of MBTA 

and mail and express freight services—not necessarily from finding 

efficiencies while offering the same level of service. Without unit cost or 

asset performance metrics, it is unclear how well Amtrak is performing per 

unit of production, how well it is utilizing any specific asset, or where it 

could most effectively target its cost reduction efforts.

Some of Amtrak’s departments are now beginning to develop some unit 

cost metrics for selected maintenance of equipment and infrastructure 

functions, such as cost per car or locomotive overhauled. These efforts, 

which involve creating new metrics and data systems, have not yet been 

coordinated across the company and have proven to be challenging. One 

obstacle encountered so far is the lack of detailed data. For example, 

Amtrak’s chief mechanical officer stated that the mechanical department 

had to first redesign the way information was gathered in their 

maintenance facilities to create meaningful unit cost statistics per car or 

locomotive overhauled, inspected, or repaired. Current cost benchmarks 

for labor and material costs were developed when the mechanical 

department’s system was first implemented but have not been updated with 

new labor rates or material prices—making estimation and benchmarking 

for these costs unreliable until new information is gathered.

Labor cost figures are also unreliable, since there is no link between 

Amtrak’s payroll system and the mechanical department’s system. 

Department officials stated that they plan to add links to Amtrak’s payroll 

and add material cost and ordering capabilities to their current system 

once it is stabilized. A department official stated that testing of the link to 

Amtrak’s payroll system has started, and the department is planning to fully 

implement the link by the end of fiscal year 2006. In addition, a mechanical 

department official stated that there are no production statistics available 

prior to fiscal year 2003, thereby forcing the department to construct new 

21GAO/RCED-00-138.
Chapter 4

Despite Increasing Operating Losses and 

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Strategy

Page 100 GAO-06-145 Amtrak Management

baseline production statistics for each maintenance facility. Department 

officials attributed this lack of data to several recent reorganizations, the 

storage of data in several unconnected computers, and the departure of 

several key department staff. Department officials also stated that because 

Amtrak’s approach to equipment maintenance has changed since fiscal 

year 2002, any production statistics that were available would not be 

directly comparable. 

According to Amtrak’s chief engineer, the engineering department is also 

currently designing an Internet-based system using Global Positioning 

System devices in maintenance vehicles to help gather data about how 

much time maintenance crews spend on maintenance tasks. The 

department plans to use these data in developing unit cost information. 

Prior to implementing this project, the department did not have a 

mechanism for gathering accurate cost data. Further, the department has 

just started to set productivity benchmarks and will soon begin an 

infrastructure inventory. According to the chief engineer, this system will 

take about a year to implement and to begin gathering data. This 

information will be used to begin establishing cost and productivity 

benchmarks. Using the information gathered by this new system, the 

engineering department hopes to achieve 3 to 4 percent productivity gains 

each year for the next 5 years. 

A lack of detailed data also prevents Amtrak from creating more 

comprehensive corporatewide efficiency metrics. Amtrak does have some 

corporatewide efficiency metrics that demonstrate overall corporate 

revenue and expense performance. These metrics include ticket and 

passenger revenue per passenger mile and total and core revenues and 

operating expenses per seat mile.22 However, these metrics do not 

demonstrate asset performance, such as output per unit of labor or per 

gallon of fuel consumed. The latter data would give insight into how 

efficiently Amtrak is utilizing its assets. When we tried to emulate some of 

Association of American Railroad’s corporate performance metrics for 

Amtrak, we found that Amtrak could not provide comparable output or 

asset data to allow for the creation of some of the measures. For example, 

we could not create a clear revenue-per-passenger-mile-per-employee 

measure. Although Amtrak could provide the number of revenue passenger 

miles for its core intercity passenger business, it could not provide the 

22“Core revenues and operating expenses” refer to those revenues and expenses for Amtrak 

intercity passenger rail train operations. They do not include commuter rail service.
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Strategy

Page 101 GAO-06-145 Amtrak Management

number of employees broken out between its different lines of business. An 

Amtrak official stated that because some employees work across its 

different lines of business, this breakout could not be completed. 

Amtrak Should 

Continue to Use 

Common Rail Industry 

Practices in Focusing 

on Its Cost Control 

Efforts

Amtrak has implemented some commonly used rail industry practices—

such as benchmarking, outsourcing, and efficiency reviews of operations—

to contribute to its cost control efforts. Amtrak could also identify more 

opportunities to use these practices. Doing so would allow Amtrak to 

compare its practices with those of more efficient railroads and other 

transportation sector businesses to help decrease Amtrak’s operating 

costs. Examples of actions Amtrak could take in this area include the 

following:

• Benchmarking: Officials at most of the freight railroads we spoke with 

stated that they compared their cost containment strategies against 

their competitors in the industry. Such comparisons may be beneficial to 

share best practices within the industry. While some Amtrak 

departments have used benchmarking to improve their safety and other 

practices, other departments could use the same techniques to learn 

best practices and benchmark themselves against the best railroads and 

other organizations to improve performance. DOT officials also believed 

that Amtrak needs to do a better job at developing benchmarks for 

assessing performance, and that such benchmarks should be based on 

other passenger transportation providers, such as airlines.

• Outsourcing: Officials at some of the railroads we interviewed told us 

that they have outsourced some of their noncore functions to reduce 

their operating costs. For example, all of the freight railroads we 

contacted have contracted out some of their functions, such as car and 

locomotive maintenance services or legal representation, to outside 

contractors. Amtrak officials stated that they have been very aggressive 

in their use of outsourcing. They said Amtrak has outsourced half of its 

engineering functions; most of its information technology work; and 

some of its mechanical function, including locomotive painting and 

some wreck repairs. Amtrak officials stated that they are looking to 

outsource more locomotive repair activities in the future, including 

overhauls of its Acela trainsets. Recently, Amtrak has tentatively 

identified other noncore functions that it could outsource to outside 

contractors, such as janitorial/cleaning and food service functions. In 

addition, Amtrak’s April 2005 Strategic Reform Initiatives noted that 

accurate cost statistics for those functions would have to be created in 
Chapter 4

Despite Increasing Operating Losses and 

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Page 102 GAO-06-145 Amtrak Management

order to compare Amtrak’s cost performance against any prospective 

contractor’s cost performance. 

• Efficiency reviews: One railroad official with whom we spoke said that 

his railroad had hired operational and process engineers to study the 

railroad’s internal processes, route schedules, and yard operations to 

find out how to improve these functions and reduce their operating 

costs. Another railroad had internal cross-functional teams—comprising 

departments such as train operations, engineering, finance, and 

others—that continually analyzed up to seven different areas of 

operating costs, implemented ways to reduce costs, and tracked the 

resulting savings. An outside consulting firm studied Amtrak’s 

operations and organization in fiscal year 2001. This review 

recommended several changes to reduce or control costs, including, 

among other things, increasing employee productivity, reducing crew 

sizes and overtime expenditures, and reducing food and beverage costs. 

However, not all of these findings were implemented nor were any 

resulting savings tracked because changes in Amtrak’s leadership, and 

its subsequent reorganization, changed Amtrak’s focus, according to 

Amtrak officials.

Conclusions With operating losses having reached $1 billion and projected to increase 

even more, Amtrak’s cost reduction efforts need to have as much impact as 

possible. Cost containment efforts are of particular interest for the federal 

government because without significant progress in reducing operating 

losses, substantial and continued federal subsidies will likely be needed to 

keep the company solvent. Our review of Amtrak’s cost containment 

efforts indicates that Amtrak has opportunities for a more corporatewide 

approach for containing costs—for example, it can ensure that all relevant 

departments are taking meaningful steps to examine such issues as ways to 

reduce injuries or overtime. While Amtrak has looked to outsource 

functions to reduce costs, there are also indications that it can learn from 

other railroads’ efforts in this regard as well as from these railroads’ efforts 

to benchmark performance and conduct efficiency reviews. However, 

developing a successful strategy will be challenging, if not impossible, 

unless Amtrak can develop comprehensive and reliable cost data. A lack of 

cost standards and benchmarks, coupled with the lack of corporatewide 

integrated data collection software, will continue to prevent Amtrak from 

obtaining the detailed information it needs to understand its cost structure 

and to develop a sound strategy for attacking costs. 
Chapter 4

Despite Increasing Operating Losses and 

Federal Subsidies, Amtrak Has Not 

Developed a Comprehensive Cost Control 

Strategy

Page 103 GAO-06-145 Amtrak Management

Recommendations for 

Executive Action

To ensure that Amtrak can better meet the challenge of increasing its 

efficiency and reducing its operating costs, we recommend that the 

president of Amtrak take the following four actions:

• comprehensively assess Amtrak’s cost structure and the performance of 

its assets; 

• establish efficiency and unit cost measures with clear inputs to 

benchmark individual asset and corporate productivity, which will 

demonstrate efficient use of Amtrak’s resources;

• develop a cost containment strategy that uses these new cost measures 

and guides the cost reduction actions across all departments; and 

• continue the use of and seek more opportunities to use cost 

containment practices that are widely used in the railroad industry, 

including a spend analysis of goods and services procured, 

benchmarking, outsourcing, and efficiency reviews. 
Page 104 GAO-06-145 Amtrak Management

Chapter 5

Amtrak’s Acquisition Function Is Limited in 

Promoting Efficiency, Cost-effectiveness, and 

Accountability Chapte5r

Amtrak’s system for acquiring goods and services, which accounts for an 

estimated $500 million to $600 million in annual expenditures for the

company, is missing critical elements necessary for efficient, cost-effective 

purchasing. Our past work in assessing the effectiveness of the acquisition 

function in leading organizations shows that several elements are key to 

ensuring that sound purchasing processes are being followed and to

promoting efficiency, cost-effectiveness, and accountability. These 

elements include placing the function appropriately in the organization and 

backing it with organization leadership, creating and enforcing clear and 

consistent policies and procedures throughout the organization, and 

ensuring that its knowledge and information system1

 can provide 

meaningful and reliable data. 

Amtrak’s acquisition function, while improving, continues to face 

challenges in all three areas. First, although Amtrak has centralized and 

elevated its procurement function, there is still ample evidence to show 

that other departments have made sizable acquisitions without involving 

the procurement department. This practice can limit Amtrak’s ability to 

obtain goods and services at the most economical prices or to otherwise 

protect the company. Second, in the past, Amtrak did not adequately 

communicate or enforce its procurement policies and procedures, limiting 

its ability to ensure that sound contracting practices are followed. Amtrak 

has recently taken actions that may help in this regard, including 

developing a procurement manual, conducting more training, and 

monitoring purchases more thoroughly. Finally, an inadequate knowledge 

and information system limits Amtrak’s ability to analyze spending and 

identify opportunities for potential cost savings. As a result, Amtrak cannot 

ensure that its resources have been utilized appropriately when acquiring 

goods and services. 

Effective Acquisition 

Requires Key 

Organizational 

Elements

Our body of work on acquisition best practices has identified several 

factors that can help organizations better ensure that their procurements

1

An effective knowledge and information system is an enterprisewide system that integrates 

financial and operating data to support both management decision making and external 

reporting requirements. 
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Page 105 GAO-06-145 Amtrak Management

are undertaken in an efficient and effective manner.2 As figure 13 indicates, 

these factors include a company’s or agency’s organizational leadership and 

alignment, acquisition policies and procedures, and knowledge and 

information management system.3

Figure 13: Organizational Elements Critical to Effective Acquisition

Elevating Procurement 

Function in 

Organization Structure 

Has Not Yet Resulted in 

a More Strategic 

Approach to 

Acquisition 

An effective acquisition function requires the appropriate placement within 

the organization, leadership’s fostering of good acquisition practices, and a 

strategic focus toward acquisition planning and management throughout 

the company.4

 To its credit, Amtrak has made improvements to its 

procurement function, particularly related to its organizational leadership 

and alignment. For example, after Amtrak’s current president eliminated 

the SBUs in 2002, the procurement units from each of the SBUs were 

centralized into a single procurement department, and the department 

head was elevated to the level of vice president, reporting directly to the

2

GAO, Transportation Security Administration: High-Level Attention Needed to 

Strengthen Acquisition Function, GAO-04-544 (Washington, D.C.: May 28, 2004).

3

A fourth factor identified in GAO-04-544 concerns human capital issues, which we do not 

address in this report. 

Source: GAO-04-544, p. 2.

Organizational leadership and alignment

The appropriate placement of the procurement function within an organization can facilitate effective 

management of acquisition activities, including planning and overseeing acquisitions throughout the 

organization. In addition, organization leaders need to create a climate that fosters good acquisition practices.

Policies and procedures

To facilitate effective planning, award, administration, and oversight of contracts, and to help ensure the best 

value for goods and services, the organization must have clear, consistent, and enforceable policies and 

procedures. Internal controls and performance and accountability measures help to ensure that policies and 

procedures are implemented and have the desired outcomes.

Knowledge and information management

To make informed strategic decisions aimed at reducing costs, improving service levels, measuring compliance, 

and managing providers, the organization must have a knowledge and information system that can produce 

meaningful and reliable data.

4

GAO, Homeland Security: Successes and Challenges in DHS’s Efforts to Create an 

Effective Acquisition Organization, GAO-05-179 (Washington, D.C.: Mar. 29, 2005).
Chapter 5

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president.5 In previous years, the procurement department had been part of 

Amtrak’s finance department, which, according to the vice president of the 

procurement department, made it difficult to ensure the use of sound 

acquisition practices. He also said that elevating his position to the level of 

other key departments within the organization, such as operations, 

marketing, and finance, provided him with more authority to oversee and 

enforce acquisition policies throughout the company. Additionally, Amtrak 

adopted a new electronic system—known as eTrax—that tracks the 

acquisition process and allows for greater oversight. For example, this 

system includes controls over purchase requisitions prepared by user 

departments—those departments that need acquisition services—as well 

as controls over payment requests, a tool used for small dollar purchases.

Further, adherence to acquisition policies has taken on greater significance 

as a result of the grant agreement between FRA and Amtrak. As we 

discussed in chapter 1, the grant agreement requires Amtrak to follow 

procurement standards that ensure that goods and services are acquired in 

a cost-effective manner and in compliance with applicable federal statutes 

and executive orders. Although FRA is responsible for ensuring 

compliance with procurement standards, its oversight has been limited 

because of a lack of resources. FRA officials have told us that they have 

had to rely on Amtrak for assurance that they are in compliance with the 

requirements of the grant agreement. An FRA official told us that, although 

the grant agreement for fiscal years 2003 and 2004 included language that 

Amtrak comply with federal procurement standards, it was not until the 

fiscal year 2005 grant agreements that Amtrak, for the first time, was 

expected to fully comply with the procurement standards in the grant 

agreements. This compliance includes seeking, to the maximum extent 

practicable, competition in the acquisition of goods and services. The FRA 

official said that, in fiscal years 2003 and 2004, FRA was concerned about 

whether Amtrak could comply with such standards, and, therefore, the 

standards were not strictly enforced.

Despite these attempts to oversee and increase controls over the 

acquisition process, the procurement department has yet to become fully 

integrated into Amtrak’s planning and management process, limiting the 

5

Currently, the procurement department is responsible for the acquisition of goods and 

services throughout Amtrak, with the exception of acquiring outside legal services, labor 

arbitration agreements, executive recruitment search services, electric propulsion 

agreements, and audit and investigative services. 
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Page 107 GAO-06-145 Amtrak Management

extent to which good acquisition practices have spread throughout the 

organization. When planning spending for service acquisitions, user 

departments have often functioned independently of the procurement 

department and made spending decisions without coordinating or 

partnering with the procurement department. Procurement department 

officials told us that the extent of their involvement in user departments’ 

planning process depends on whether user departments inform them of 

their plans before submitting requisitions. 

Our work disclosed numerous examples of acquisitions made by user 

departments independent of the procurement department. For example:

• The engineering, mechanical, and marketing and sales departments 

frequently used payment requests to purchase services well in excess of 

$5,000, the maximum threshold specified by Amtrak.6

• In 2003, the operations planning department agreed to terms and fees 

with a software vendor for a pilot program, although Amtrak policies 

require that only the procurement department agree to terms and 

conditions. Documentation in the contract file indicated that the 

operations planning department had already authorized $8,500 in travel 

expenses by the time the procurement department was brought into the 

process. Subsequently, the vendor refused to provide the procurement 

department with a cost breakdown and comply with certain travel 

requirements because of the agreements already reached. The contract 

was initially valued at $60,000, and 11⁄2 years later, its value increased by 

another $500,000 when Amtrak fully implemented the pilot program. 

When the contract manager processing the acquisition learned what the 

operations planning department had done, she required that it document 

why the travel requirements were not included in the contract.

• More recently, in fiscal year 2004, Amtrak technologies (a unit of 

Amtrak’s finance department) issued and signed a contract modification 

expanding an existing software services contract without the 

procurement department’s knowledge. This expansion increased the 

value of the contract by $200,000. The Amtrak OIG detected what 

Amtrak technologies had done during the course of an audit that the 

procurement requested on the contract. The Amtrak OIG recommended 

6

Amtrak increased the maximum threshold for payment requests from $2,000 to $5,000 in 

November 2004.
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that Amtrak technologies follow established procurement policies when 

acquiring services.

These activities were detected after the fact; no controls existed at the time 

to prevent their occurrence. In the case of payment requests, the vice 

president of procurement has since taken on the role of approving payment 

requests for departments that have used them inappropriately. In the case 

of user departments awarding contracts and agreeing to terms and 

conditions independently, procurement department officials indicated that, 

before fiscal year 2002, very few controls were in place and departments 

frequently operated independent of the procurement department. Since 

fiscal year 2002, the vice president of procurement has been working to 

reign in departments that were considered to be “out of control.” While 

procurement department officials believe that they have brought more 

acquisitions under control, they explained that changing the culture within 

Amtrak has been a gradual process, and they believe that they still have a 

long way to go. 

The independent acquisition of services has prevented the procurement 

department from managing these procurements and controlling spending. 

Moreover, Amtrak has likely paid more for services than it would have 

otherwise. When user departments negotiate terms and fees on their own, 

they lose the opportunity to use the procurement department’s expertise in 

negotiating terms that are in Amtrak’s best interest. Further, when user 

departments award contracts independently, they put Amtrak at both a 

business and a financial risk. The procurement department’s standard 

service contracts are written to ensure that Amtrak’s interests are 

protected. Contracts issued outside of the department may obligate Amtrak 

to the prices and terms of the agreement, but may not include the language 

that protects Amtrak’s interests.

Both in previous studies and in discussions with freight railroads, we have 

found that a more centralized approach can save money and provide other 

benefits. As we reported in 2002, leading companies have taken a more 

strategic approach when acquiring services by identifying opportunities to 

leverage their buying power, reduce costs, and better manage their 

suppliers.7

 For example, these companies helped business managers 

acquire key services and made extensive use of cross-functional teams to 

help better identify service needs, select providers, and manage contractor 

7

GAO-02-230.
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performance. Similarly, officials from a freight railroad we contacted for 

this study told us that they used strategic sourcing8

 to completely 

restructure their acquisition function. They explained that, as a result of 

significant staff reductions and a need to outsource to suppliers, they 

changed from a department that primarily processed purchase orders to 

one that used cross-functional teams focused on procurement planning, 

sourcing, and managing suppliers. The officials indicated that this 

restructuring saved the railroad more than $240 million over 3 years. We 

also recently reported that the Department of Homeland Security had 

demonstrated some successes in implementing a strategic sourcing 

program to leverage the department’s buying power. These successes 

involved greater collaboration among the department’s various 

organizations and a savings of over $14 million since the program’s 

creation.9

Amtrak’s procurement department has recently taken additional steps to 

more fully integrate the procurement department into user departments’ 

acquisition planning and management. For example, the procurement 

department is currently working with the human resources and labor 

relations departments to identify all health benefits contracts. Once these 

contracts have been identified, procurement department officials told us 

that they will develop a strategy, consolidate the contracts, and open them 

for competition as they come up for renewal in an effort to achieve cost 

savings. Additionally, the procurement department official responsible for 

services contracts is becoming more involved in user departments’ 

planning activities by attending their staff meetings and developing a 

tracking system to alert departments when contracts are expiring or 

running low on funds. 

8

Strategic sourcing is a process used by leading commercial companies and a small number 

of federal agencies to establish an organizationwide approach to leveraging the 

organizations’ buying power and fostering new ways of doing business.

9

GAO-05-179.
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Communication and 

Enforcement of 

Policies and 

Procedures Have Been 

Limited 

Amtrak has not always adequately communicated and enforced acquisition 

policies and procedures for services, which limited its ability to ensure that 

sound contracting practices were followed. Recent steps have been more 

positive: that is, the procurement department has issued a manual of 

acquisition policies and procedures, and the department also is taking 

steps to ensure that existing policies, along with review and approval 

processes, are followed. The types of problems we identified with past 

procurements illustrate the importance of these steps. 

Acquisition Policies and 

Procedures Were Not 

Clearly Communicated in 

the Past

Amtrak’s acquisition policies and procedures have not always been clearly 

communicated to the entire organization. Leading organizations we have 

studied adopt clear, transparent, and consistent policies and procedures 

that govern the planning, award, administration, and oversight of 

acquisitions. These policies and procedures must also be clearly 

communicated to all involved in the acquisition function.10 Although the 

procurement department periodically issued directives specifying policies 

and procedures for the acquisition of goods and services, these directives 

did not provide detailed guidance for procurement staff to follow when 

awarding contracts. Additionally, according to procurement department 

officials, user departments either circumvented or were unaware of 

existing acquisition policies and procedures set forth in these directives. 

Recently, Amtrak has taken steps to address the lack of clear and 

comprehensive guidance. In June 2005, the procurement department issued 

a comprehensive procurement manual for acquisition staff. The 

procurement department’s staff said their initial goal was to complete the 

manual by October 2003. However, according to a procurement department 

official, completion of the manual was delayed because of needed reviews 

by the law department and the need to incorporate FRA grant agreement 

language during the course of developing the manual. 

Amtrak’s procurement department officials also have conducted outreach 

efforts to inform user departments of current acquisition policies and 

procedures. For example, since February 2005, the vice president of the 

procurement department has made presentations about acquisition 

policies and procedures to user departments. (See table 7.) According to a 

procurement official, the intent was to deliver these presentations only to 

10GAO-04-544. 
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major departments. However, other departments, such as the human 

resources and transportation departments, which are responsible for 

providing medical benefits and food and beverage service, were not 

scheduled to receive this presentation. Procurement and finance 

department officials have also made presentations to field offices about the 

various acquisition tools available. These presentations covered specific 

acquisition tools, such as payment requests for small purchases and the use 

of purchase cards for low-cost items, as well as the process for paying 

invoices. 

Table 7: Procurement Presentations to Major Amtrak Departments in 2005

Source: Amtrak.

Established Acquisition 

Policies and Procedures 

Have Not Been Enforced

Amtrak has not consistently enforced established policies and procedures 

for the acquisition of goods and services. As we recently reported, leading 

organizations recognize the need to ensure that their prescribed policies 

and procedures are being enforced so that acquisitions are made 

appropriately.11 We found, however, that Amtrak was not following such 

policies and procedures in many instances. Our review of a nonprobability 

sample of 61 service contract files covering $85.3 million (75 percent) of 

the expenditures for professional services, consulting, marketing, and sales 

promotion services in fiscal years 2002 and 2003, as well as our review of 

expenditure data and our discussions with officials from both the 

Department or unit Date of presentation

Engineering February 1, 2005

Finance February 15, 2005

Law March 3, 2005

Police and security March 7, 2005

Amtrak technologies (unit of the finance 

department)

March 21, 2005

Mechanical April 12, 2005

Environmental, health, and safety May 2, 2005

Marketing and sales June 20, 2005

11GAO-04-544.
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procurement department and user departments, demonstrated the 

following four problems:12

• a high frequency of noncompetitive awards, 

• insufficient or no justification for many noncompetitive contract 

awards, 

• a lack of appropriate approval for sizable increases in contract costs, 

and 

• bypassing of the procurement department through inappropriate use of 

payment requests.

Frequency of Noncompetitive 

Contract Awards 

Of the 61 contracts we examined in detail, 13 a substantial number, 36 (59 

percent), of the awards were made noncompetitively.14 As table 8 indicates, 

the majority of them were made before fiscal year 2003. The vice president 

of the procurement department generally acknowledged that the extent of 

Amtrak’s noncompetitive procurement of services was too high and needed 

to be reduced. Leading organizations we have studied15 recognize the 

importance of competition to better ensure that the best value is obtained 

in awarding contracts. In fact, Amtrak’s acquisition policies and procedures 

12Results from nonprobability samples cannot be used to make inferences about a 

population, because in a nonprobablity sample some elements of the population being 

studied have no chance or an unknown chance of being selected as part of the sample. See 

appendix I for the file selection methodology that we used in conducting this review. We 

focused on fiscal years 2002 and 2003 because they were the most recent years for which 

audited financial statements were available for the purpose of assessing the reliability of 

expenditure data. 

13Of the 61 contracts we reviewed, Amtrak could locate no documentation for 4. They 

provided printouts of information from their acquisition system for these 4 contracts. These 

printouts contained minimal information, which allowed minimal analysis. For another 

contract, Amtrak was missing one of the three folders of documents prepared during the 

course of the contract. We analyzed this contract to the extent allowed by the available 

documentation.

14We define noncompetitive awards as those that Amtrak considered as either sole or single 

source. We obtained information regarding whether a contract was a sole or single source 

award by reviewing documentation in the contract file and, if necessary, discussing them 

with procurement department officials.

15GAO-03-661 and GAO-02-230.
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require that goods and services be acquired competitively to the maximum 

extent practicable. 

Table 8: Number of Contracts GAO Reviewed, with Expenditures in Fiscal Years 

2002 and 2003, That Were Competitively and Noncompetitively Awarded 

Source: GAO analysis of Amtrak data.

Insufficient or No Justification 

for Noncompetitive Contracts 

A significant number of the noncompetitive contracts we reviewed had 

either no justification or insufficient justification. Amtrak acquisition 

policies in force at the time these contracts were awarded required 

justifications spelling out the specific circumstances warranting a 

noncompetitive procurement for procurements valued at $100,000 or 

more.16 Guidance in effect at the time identified specific circumstances that 

were not acceptable justifications for noncompetitive awards, such as a 

preference for a particular vendor by the user department. Of the 36 

noncompetitively awarded contracts we reviewed, 21 were valued at 

$100,000 or more and thus required justifications. However, 10 of these 21 

contracts did not include justifications or had justifications that did not 

conform to the guidance in effect at the time. As table 9 illustrates, the 

degree of compliance has increased since 2002, when SBUs were 

eliminated. Procurement department officials attributed the lack of 

compliance before 2002 to poor overall controls over service acquisitions. 

Contracts reviewed

Time frame 

awarded

Competitively

awarded

Noncompetitively

awarded Undetermined Total

Before fiscal 

year 2002 12 14 3 29

Fiscal year 

2002 6 13 0 19

Fiscal year 

2003 3 9 1 13

Total 21 36 4 61

16In February 2004, this threshold was reduced to $25,000.
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Table 9: Extent to Which Noncompetitive Contract Awards GAO Reviewed Included 

Adequate Justifications

Source: GAO analysis of Amtrak data.

Beginning in 2002, after the procurement function was centralized and 

continuing through 2004, the procurement department began instituting 

new controls, which included adherence to the justification requirement 

for noncompetitive procurements. Current policies allow noncompetitive 

procurements in circumstances such as the following:

• Only one source is known to satisfy Amtrak’s requirements.

• Contractor has unique capability, expertise, or equipment.

• Emergency situations.

• Follow-on work, when awarded to another contractor, would increase 

cost substantially or result in unacceptable delays or risk.

• Need is of such compelling urgency that Amtrak would be seriously 

harmed without the acquisition.

Several procurement department officials indicated that, more recently, 

user department requests for noncompetitive procurements have been 

rejected more often, and it has become much more difficult for user 

departments to get approval for such contracts. To illustrate, procurement 

department officials provided several examples of noncompetitive requests 

that the vice president of procurement had rejected. For example, an 

August 2004 request from the mechanical department and a March 2005 

request from the engineering department were both rejected because they 

Contracts reviewed

Time frame 

awarded

Justification

conformed to

Amtrak

requirements

No justification

provided or

justification did not

conform to Amtrak

requirements

Insufficient

documentation to

determine Total

Before fiscal 

year 2002 1 5 2 8

Fiscal years 

2002 or 2003 8 5 0 13

Total 9 10 2 21
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would have likely resulted in additional noncompetitive acquisitions. The 

vice president of procurement also noted that the engineering department’s 

request was based on a noncompetitive acquisition that had been obtained 

inappropriately through the use of a tool intended for small dollar 

purchases.17

Contract Changes Were 

Inappropriately Approved 

Many of the contracts we reviewed—38 of the 61—included changes, some 

of which increased the contract’s cost. In four instances, the final dollar 

amount was several times larger than the initial amount as a result of these 

changes. (See table 10.) 

Table 10: Contracts with Numerous Extensions Resulted in Significant Dollar 

Increases

Source: GAO analysis of Amtrak data.

Note: The above information was based on our review of 61 contracts for professional services and 

advertising, sales promotion, and consulting services. Dollar amounts in this table represent the 

amounts authorized in the contracts, not the expenditures actually made.

Although the cost of contracts can change over time, many of the changes 

to the 38 contracts were not approved in compliance with Amtrak’s policies 

and procedures. Amtrak requires that, when a contract is changed, the 

person approving the extension should have approval authority equal to the 

new total dollar value of the contract. Of the 91 total changes in these 

contracts, however, at least 41 were approved by individuals who did not 

have the appropriate level of authority. The majority—28—occurred in 

fiscal year 2003 or later.18 For example, in the software development 

17Procurement department officials provided two other examples of denials from earlier in 

fiscal years 2003 and 2004. However, we found, during the course of our contract file 

reviews, that one of these denials was ultimately approved.

Type of contract 

Number of

extensions

Initial dollar

amount

Final dollar

amount

Frequent rider loyalty 

program 6 $6,118,407 $32,362,167

Software support 7 397,200 1,029,688

Software development 12 318,418 1,460,238

Signal survey services 4 45,000 764,418

18Although the contracts we reviewed were awarded in fiscal years 2002 and 2003 or earlier, 

we reviewed all contract changes that had occurred through our review in fiscal year 2005.
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contract identified in table 10, a director with an approval authority of 

$100,000 for noncompetitive contracts approved a series of changes that 

were each individually less than $100,000. However, as indicated in the 

table, the cumulative value of the contract exceeded his level of authority. 

Amtrak’s vice president for procurement indicated there is debate within 

the procurement field about change order approval authority. In his 

opinion, the authority to approve changes should be based on the 

incremental amount of the change because having higher level officials 

approve small dollar changes is not an efficient use of their time. However, 

as evidenced by our contract file reviews, a series of small changes could 

result in a much larger contract. 

Inappropriate Use of Payment 

Requests 

We found many instances in which user departments were inappropriately 

using payment requests to purchase services. Payment requests are 

intended to be used for small dollar acquisitions having a maximum 

threshold of $5,000.19 These requests allow user departments to acquire 

goods and services directly from vendors without involving the 

procurement department. Goods and services acquired using payment 

requests are not obtained competitively, and user departments lose the 

opportunity to use the procurement department’s expertise in negotiating 

contract terms. Additionally, payment requests are not considered 

contracts and, therefore, do not protect Amtrak’s rights and interests as 

would a contract. Using payment requests makes it impossible for the 

procurement department to track and oversee acquisitions because they 

obviate the need for purchase orders, Amtrak’s primary means of 

monitoring contract purchases. 

Because reliable expenditure data were absent, we did not quantify the 

extent to which payment requests were used. Nevertheless, procurement 

department officials acknowledged that payment requests are often used 

inappropriately, and we found numerous instances of their inappropriate 

use. Some of these requests exceeded the threshold substantially. For 

example: 

• In fiscal year 2002, the engineering department used a payment request 

for inspection services from a single supplier valued at more than 

$72,000.

19The $5,000 threshold has been in effect since November 2004. Previously, the threshold 

was $2,000.
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• In fiscal year 2004, the engineering department used two payment 

requests for the same vendor to acquire services valued at more than 

$79,000.

• In fiscal year 2004, the mechanical department used a payment request 

for software services from one vendor valued at almost $13,000. 

• In fiscal year 2004, the marketing and sales department used a payment 

request for photography services from one company valued at $109,000. 

We also found instances in which user departments utilized payment 

requests for goods and services when Amtrak also had contracts in effect. 

For example:

• The marketing and sales department used payment requests to pay 

invoices of $68,596 and $109,888 in fiscal years 2003 and 2004, even 

though a specific contract covering those services was already in effect. 

• The mechanical department used payment requests to pay invoices of 

$2,500 for professional services to a vendor for 3 consecutive fiscal 

years, despite having contracts for similar services in effect with the 

same vendor.

Amtrak officials gave several reasons for the inappropriate use of payment 

requests. First, not all officials were aware of the procurement policies and 

procedures. Marketing and sales department officials said they incorrectly 

interpreted the policy governing the use of payment requests. For example, 

one department official said he incorrectly thought that involving the 

procurement department was required only for significant and recurring 

expenditures, such as those exceeding $1 million; he was not aware of the 

$5,000 limit for the use of payment requests. Second, procurement officials 

noted that user departments likely find it more convenient to use payment 

requests because the vendor gets paid faster. Officials in the engineering 

and mechanical departments confirmed this. For example, Amtrak’s chief 

engineer said that engineering department staff had likely used payment 

requests out of convenience, but he acknowledged that their use was not 

justified. Similarly, the chief mechanical officer also said that his 

department probably found payment requests to be more convenient and 

noted that they sped up the acquisition process. Procurement officials also 

explained that if funding or time is running out on a purchase order, user 

departments will use payment requests to ensure that the vendor gets paid.
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Marketing and sales, engineering, and mechanical department officials all 

acknowledged that their departments had used payment requests 

inappropriately in the past but said this situation had been corrected. The 

vice president of marketing and sales also indicated that she had taken 

corrective actions to ensure adherence to procurement policies and 

procedures. These actions include scheduling training for staff and 

bringing acquisitions previously made using payment requests under the 

control of the procurement department. 

Procurement department officials indicated they also have been working to 

reduce the misuse of payment requests through several means. For 

example, as previously mentioned, the vice president for procurement 

approves all payment requests—through eTrax—from user departments, 

such as engineering and mechanical, that have misused these payments in 

the past. Information from the procurement department indicates that the 

vice president denied 29 payment requests totaling more than $255,000 

between December 2004 and May 2005. Also, a new database has been 

established to better track the expiration date and remaining funds for 

contracts exceeding $1 million. Although smaller contracts are not 

included in the database, a senior director in procurement indicated that 

individual contract managers in the procurement department are expected 

to monitor them on their own. He noted, however, that user departments 

are ultimately responsible for monitoring their contracts. 

Review of Procurement of 

Outside Legal Services 

Showed Weaknesses in 

Areas Exempt from 

Procurement Department 

Review 

In addition to the acquisition activities under Amtrak’s procurement 

department, we also discussed acquisition activities with officials from 

other departments authorized to acquire selected services independently. 

Amtrak’s delegation of authority specifically provides selected departments 

with the authority to procure goods and services in five areas without the 

involvement of the procurement department. We reviewed one of these 

areas,20 outside legal services, because of the relatively large dollar value of 

the legal services procured—$48 million during a 2-year period, ending

20The other four services acquired independently of the procurement department are 

electrical power for the Northeast Corridor, labor arbitration agreements, audit and 

investigative services, and the use of executive recruitment firms.
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September 30, 2003.21 We found several weaknesses in the processes for the 

procurement and payment of outside legal services that increase the risk 

that Amtrak is not receiving best value for these services and is making 

improper payments for these services. These weaknesses included (1) a 

lack of competition in selecting firms, (2) a lack of spend analysis on 

outside legal services, (3) a lack of specificity in documenting terms and 

conditions of the services to be provided, (4) an inconsistent review of 

invoices for compliance with established billing guidelines, (5) inadequate 

documentation supporting purchases for certain matters, and (6) a lack of 

segregation of key approval and payment functions.

Lack of Competition Amtrak makes limited use of competition in acquiring outside legal 

services. Law department officials said they normally contract with firms 

they have used in the past as long as their performance has been good and 

their prices are reasonable. While Amtrak’s procurement policy is to obtain 

goods and services as competitively as possible, law department officials 

said the only time the department would have firms compete for outside 

legal services is if a matter is highly sensitive or visible, or if the matter 

concerns a relatively new area. They explained that many matters are 

time-sensitive and do not allow time for competition. Other matters require 

specific legal expertise, including an understanding of Amtrak’s history, 

business, and statutory and regulatory environment. Additionally, law 

department officials said they need to use attorneys admitted to the bar in 

the states in which lawsuits are filed and thus need to use attorneys 

throughout the country. 

While selecting outside legal counsel may involve many important 

considerations besides price, officials of other railroads we contacted 

indicated that they have been successful when using competition to acquire 

either some or all of their outside legal services. For example, VIA Rail 

requires that all user departments, including their law department, obtain 

two or more bids before acquiring goods and services. Although VIA Rail’s 

law department acquires its own outside legal services, it is still subject to 

the company’s procurement policies and procedures. Officials from one 

freight railroad said they competitively selected a law firm to handle all of 

their outside legal work on intellectual property. Additionally, officials 

21In commenting on a draft of this report, Amtrak noted that its legal costs compare 

favorably with Class I railroads. Since our purpose was to evaluate how Amtrak acquires 

legal services and related internal controls over such acquisitions, we did not compare 

Amtrak’s costs for legal services with other railroads’.
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responsible for acquiring outside legal services at three commuter railroads 

indicated that they periodically compete legal services to develop a list of 

firms that they plan to use over a period of time, such as 3 to 5 years.

In commenting on a draft of this report, Amtrak indicated that it has 

retained law firms based on solicitation to multiple firms with varying 

degrees of success. We acknowledge that the acquisition of legal services 

can be unique, and it can be difficult in certain circumstances to obtain 

competition for such services. However, we believe Amtrak can more 

aggressively seek competition in its acquisition of outside legal services. 

The examples we describe represent a variety of ways in which other 

railroads have tried to use competition and leverage buying power that 

Amtrak should consider in its efforts to more efficiently manage spending 

on outside legal services.

Lack of a Spend Analysis on 

Outside Legal Services

Amtrak’s law department has not used a spend analysis22 on outside legal 

services in order to determine whether it receives the best value possible in 

terms of service and cost. Law department officials said they have 

undertaken some efforts to control spending—for example, within a given 

practice area or for support services such as copying. However, the 

department has not analyzed its spending as a whole to identify 

opportunities to reduce spending. 

One such opportunity to reduce spending could be to reduce the number of 

law firms used. Although law department officials said they do not have 

enough work to direct to a specific firm to leverage buying and obtain 

volume discounts, Amtrak used 149 outside law firms in fiscal year 2002 

and 157 the following year. In contrast, officials at one freight railroad (that 

operates in multiple states similar to Amtrak) indicated that they analyzed 

spending on outside legal services and found that they could effectively 

reduce the number of firms they used. At one time, the freight railroad used 

about 250 outside law firms but decided to pare down this number in order 

to develop stronger partnerships. They believed that frequently used firms 

would be more familiar with the railroad’s business and be in a position to 

serve the railroad more efficiently. Ultimately, this railroad reduced the 

number of firms to 8 core counsels and about 50 additional firms to be used 

for specific areas of expertise or to obtain geographic coverage. According 

to railroad officials, this action reduced costs and enhanced collaborative 

cooperation between the railroad and the outside law firms.

22Spend analysis is discussed more fully in chapter 4.
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Amtrak officials advised us that in 2005 they purchased and installed legal 

case management software that will allow the tracking and analysis of legal 

fee expenses. However, an official confirmed that the new system still will 

not capture payment attributes, such as hourly rates, hours expended per 

matter, professional staff levels, and the time period the services covered.

Lack of Specificity in 

Documenting the Terms and 

Conditions of Services 

Amtrak units do not specifically document the scope and terms of outside 

legal work to be performed. According to law department officials, the 

work to be done is frequently discussed with the firm by the attorney 

working on a matter, but there is not necessarily a record of these 

discussions. Outside law firms are provided with a copy of Amtrak’s billing 

guidelines.23 These guidelines include topics such as how bills are to be 

processed, allowable reimbursable costs, budgets, staffing, and conduct of 

litigation. However, the guidelines do not specifically outline the scope of 

work to be completed, outline the costs of services provided, or require 

acceptance of terms by authorized signature for each individual 

engagement. In contrast, Amtrak procurement policies generally require 

that contracts be signed and that they outline the scope of work to be 

performed and delivery dates for work products. The lack of 

documentation for outside legal services leaves Amtrak vulnerable to 

miscommunication concerning the work expected of outside law firms. 

Inadequate Review of Invoices The law department does not have a sufficient process to ensure that the 

outside legal firm invoices submitted for payment are compliant with 

Amtrak’s billing guidelines, which are to be used to ensure payments are 

made properly. Formal protocols—such as specific review procedures to 

ensure compliance with the billing guidelines—do not exist, thereby 

limiting the effectiveness of the compliance reviews. When the law 

department receives an invoice for services, an attorney is expected to 

review it for compliance with the guidelines, in addition to verifying that 

the work was authorized and the time charged was reasonable based on 

their knowledge of the case. 24 Law department officials told us an 

attorney’s review of invoices for compliance with billing guidelines is 

limited to assessing general compliance and identifying prohibited 

practices such as “block billing,” which is the aggregation of time spent on 

23Amtrak, Amtrak Guidelines for Outside Counsel (March 1998).

24For invoices less than $10,000, the deputy counsel of the practice group managing the 

matter is responsible for approving the invoices, while the Amtrak general counsel approves 

invoices for amounts of $10,000 or more.
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different activities into one amount and billing increments other than 6 

minutes—the standard increment for billing purposes. We reviewed 10 

invoices from fiscal years 2002 and 2003, totaling $843,105, to gain an 

understanding of the attorney review process. We found that 4 of the 10 

invoices, valued at $118,947, did not comply with one or more of the 

requirements in the billing guidelines.25 All 4 of these invoices had 

insufficient detail to assess compliance, and 1 of the 4 invoices reflected 

billed time increments greater than the 6-minute standard billing 

increment. 

Inadequate Documentation 

Requirements for Payments

For settlement agreement payments, the law department does not provide 

sufficient documentation to the accounts payable section of Amtrak’s 

finance department when seeking payment. Amtrak policy requires that 

accounts payable receive adequate documentation to avoid making 

duplicate payments. However, law department officials have determined 

that settlement payments are confidential; therefore, they only send 

“disclaimer” sheets showing the firm’s name, the amount of fees and 

expenses, a stamp of authorization from the department, and a statement 

that the original document is on file. Amtrak officials told us that payment 

requests associated with settlements receive three levels of review within 

the law department prior to approval and, therefore, any concerns about 

inappropriate payment processing is misplaced. We disagree with this 

conclusion. The lack of documentation ensuring adequate review has taken 

place by the internal group with such responsibility—accounts 

payable—increases the possibility of duplicate payments and payments for 

other than approved amounts. 

Insufficient Segregation of Key 

Duties

The law department does not adequately segregate key duties related to 

authorizing, reviewing, and receiving payments for outside legal services. 

These key duties need to be segregated among employees to reduce the 

risk of error, including improper payment. Law department officials said 

that it was common practice to have attorneys obtain the payment on 

behalf of the vendors (rather than having accounts payable send the 

payments directly to the vendor) and then forward these payments with 

25Due to significant weaknesses in the design of controls over the review, approval, 

payment, and monitoring of amounts for outside legal services and the results of our 

walk-through of the process, including inspection of a nonprobability sample of 10 invoices, 

we did not statistically sample payments for outside legal services to estimate what portion 

of the population of payments were appropriately reviewed and approved or to estimate if 

the payments represented a valid use of Amtrak's funds. 
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accompanying documents. Also, attorneys are allowed to create and edit 

the payee’s name and address in addition to approving and receiving 

payment. This practice increases the risk that payments may be sent to 

unauthorized parties and to addresses other than that of the vendor. 

According to an Amtrak official, the practice of the accounts payable 

section sending payments to the law department ended sometime in fiscal 

year 2004, in all cases except settlement agreements. For payments related 

to settlement agreements, the law department still receives and determines 

when payment in a settlement agreement will be disbursed to vendors, 

because management has determined that the law department is in the best 

position to disburse the check. Again, the basis for not establishing 

sufficient procedures does not mitigate the fact that these payments are 

subject to a higher risk of being improper due to inadequately designed 

control practices. 

Amtrak’s Knowledge 

and Information 

System Does Not 

Support a More 

Strategic Approach to 

Acquisitions

Amtrak is missing the third key element of an effective acquisition 

process—meaningful and reliable data stemming from an organization’s 

knowledge and information system. Amtrak’s knowledge and information 

system currently does not produce the data needed that would enable 

Amtrak to identify strategic sourcing opportunities. Such data could enable 

Amtrak to leverage its buying power and reduce procurement costs.

In discussing the first key element of an effective acquisition function, we 

described how a number of leading companies have achieved significant 

savings by adopting a strategic approach to their procurement activities.26

To do so, companies and a small number of federal agencies use a spend 

analysis, which involves automating, extracting, supplementing, 

organizing, and analyzing procurement data. However, Amtrak’s 

procurement and financial databases were able to provide only limited 

information on specific accounts or the types of goods and services being 

purchased (such as professional services, advertising, and sales 

promotion), which precludes conducting a spend analysis. Although the 

vice president of procurement estimated that the company’s annual 

expenditures for goods and services totaled $500 million to $600 million, 

the company was unable to provide detailed, reliable, and comprehensive 

data on total spending. 

26We also discuss these efforts in more detail in GAO-04-870. See also GAO-02-230 and 

GAO-03-661.
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Our review identified several reasons impeding Amtrak’s ability to improve 

its knowledge of procurement spending to support a more strategic 

approach. These reasons include the following: 

• Amtrak’s knowledge and information system is old and requires 

manual manipulation. Leading companies have adopted systems that 

are programmed to routinely extract vendor payment and related 

procurement data from other financial and information systems, thereby 

allowing them to easily obtain needed information. In contrast, 

procurement department officials indicated that the Amtrak 

Accounting, Material and Purchasing System (AAMPS), which is used to 

process acquisition information and interfaces with Amtrak’s financial 

systems, is a “batch system” that dates to the early 1980s.27 As such, this 

system requires manual manipulation to retrieve data. To retrieve data, 

each data request must be individually programmed, by an employee 

who is very familiar with the complex coding inherent in the system, and 

then manually processed. Officials told us that it is difficult to obtain 

needed data because they must be requested in the precise manner 

necessary. 

• Amtrak cannot readily ensure that data are reliable. We identified 

significant discrepancies between the procurement expenditure data we 

obtained and the data shown in the audited financial statements, 

bringing the reliability of these data into question. For example, fiscal 

year 2003 AAMPS expenditure data showed that Amtrak spent $34.2 

million on advertising; however, the audited financial statements for the 

same year listed advertising expenses of $31.6 million, a difference of 

about 8 percent. Similarly, fiscal year 2003 AAMPS data showed 

expenditures of $31 million for professional services; financial 

statement data showed $24.4 million, a 27 percent difference. One 

control procedure that can ensure data reliability is to reconcile the 

discrepancies between AAMPS and the financial system. However, this 

type of reconciliation is difficult and, therefore, not part of Amtrak’s 

normal procedures. For example, company officials recently 

undertook—at our request—a reconciliation between AAMPS data on 

sales promotion and the amounts reported in Amtrak’s audited financial 

statements—discrepancies totaled almost $3 million in fiscal year 2002 

27The eTrax system that we previously discussed is a user-friendly interface that feeds into 

AAMPS. The system is used, for example, to process purchase requisitions and payment 

requests.
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and $165,000 in fiscal year 2003. This process took about 1 month and 

considerable staff time because it had to be done manually. 

• Questionable reliability of AAMPS data prevents accurate tracking of 

spending. Our review disclosed two problems that resulted in 

inaccurate acquisition data that hinders Amtrak management’s ability to 

accurately track spending. First, a limited review of acquisition 

transactions revealed charges coded to incorrect accounts. For 

example, payments of about $2 million to municipal and state 

governments between fiscal years 2002 and 2004 were incorrectly 

charged to the professional services and consulting accounts. Amtrak 

procurement officials agreed and said these payments were likely tax 

payments. We found several other instances of miscoding and brought 

these to the attention of procurement officials, who agreed that they too 

were incorrectly charged to wrong accounts. Other incidents of 

miscoding involved the cost of a dump truck ($122,000) and ballast 

($150,000), both of which had been charged—in total or in part—to the 

professional services account. Procurement officials attributed data 

reliability problems to poor data entry and review procedures in user 

departments. Various employees in user departments often select the 

accounts to be charged when initiating transactions, and they may select 

accounts incorrectly. Although approving officials within the user 

departments are supposed to check to ensure that the accounts are 

charged correctly, they may not do so. Moreover, neither the 

procurement department nor the finance department reviews the coding 

of expenditure transactions, even on a spot-check basis. Even if errors 

are found, the extent to which they can be corrected is limited. 

Procurement and finance officials explained that AAMPS data cannot be 

corrected. They further explained that data in the financial systems can 

be corrected. However, this adjustment would correct only the dollar 

amounts in the account; it would not correct the information used by 

procurement officials to track spending on individual transactions. 

A second source of unreliable data results from the heavy use of 

payment requests by user departments. As previously mentioned, 

Amtrak’s ability to track spending is constrained when payment 

requests are used to acquire goods and services. Payment requests are 

used for a variety of expenditures, such as outside legal services, utility 

bills, and payments to other railroads. As previously discussed, user 

departments have inappropriately used payment requests to acquire 

goods and services. In these instances, Amtrak cannot track spending 

on acquisitions because payment requests do not require purchase 
Chapter 5

Amtrak’s Acquisition Function Is Limited in 

Promoting Efficiency, Cost-effectiveness, and 

Accountability

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orders, which are Amtrak’s primary means of monitoring contracting 

spending. 

Conclusions Amtrak’s improvements in its acquisition function, such as elevating it to 

the same level as other key departments and centralizing activities, are 

good first steps in establishing better control over acquisitions. There are, 

however, several opportunities for improvement on the part of Amtrak and 

FRA. One opportunity relates to more fully integrating this centralized 

function throughout the company, so that user departments are aware of 

and follow established company policies and procedures concerning 

acquisitions and coordinate more closely with the procurement department 

so that it has greater opportunity to add value to the acquisition process. 

Another opportunity relates to ensuring that established policies and 

procedures are followed more closely within the procurement department, 

and that adequate controls are in place for acquisitions handled outside of 

the procurement department (such as procurement of outside legal 

services). Our review showed that not following policies and procedures 

has likely increased what Amtrak has paid for services. Addressing these 

issues, as well as taking steps to develop a more meaningful knowledge and 

information system, would allow Amtrak to track and analyze spending and 

thus better manage its acquisitions. Further, increased oversight by FRA 

could help ensure that procurements are cost-effective and in compliance 

with federal requirements. 

Recommendations for 

Executive Action

To ensure that Amtrak’s acquisition management practices support sound 

business decisions and the efficient and effective use of federal funds 

provided to Amtrak, we recommend that the Secretary of Transportation 

direct the Federal Railroad Administrator to take the following three 

actions:

• Increase oversight by requiring Amtrak to submit a plan, possibly as part 

of the company’s application for grant funds, identifying the specific 

actions that will be taken, consistent with the recommendations 

outlined below, to improve its acquisition management practices.

• Review and provide comments on this plan to Amtrak and work with 

Amtrak management and staff to develop the most cost-effective 

approach(es) to improving acquisition management practices. The 

approach(es) developed should ensure that Amtrak, FRA, and others, as 
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appropriate, have adequate information on which to make business 

decisions regarding the acquisition of goods and services and the use of 

federal resources provided to do so.

• Report at least annually to Congress on progress being made by Amtrak 

regarding improvement of its acquisition management. This report 

should identify any specific actions either Amtrak or Congress should 

take to facilitate improvement in acquisition management, particularly 

improvement in its knowledge and information system and the use of 

acquisition data in identifying opportunities for cost savings.

To help improve Amtrak’s acquisition function and better promote 

efficiency, effectiveness, and accountability when acquiring goods and 

services, we recommend that Amtrak’s president work with the vice 

president of procurement to take actions that will address the various 

issues raised in this chapter. These issues, along with the five specific 

recommendations to address them, are shown in table 11:

Table 11: Specific Recommendations—Acquisition Management 

Issue Recommendation

Distributing and promoting 

current procurement policies 

and procedures

Ensure that all departments receive information on procurement policies and procedures, similar to the 

presentations that have already been given to a number of departments, and ensuring that all 

departments are held accountable for following those policies and procedures.

Enhancing the role of the 

centralized procurement 

function

Take additional action to become more integrated into the planning of all service acquisitions, similar to 

the actions Amtrak’s human resources and labor relations departments are taking with regard to 

awarding health benefits contracts. 

Building greater adherence to 

established procurement 

procedures 

Develop an action plan to better ensure that acquisition policies and procedures are communicated, 

followed, and enforced. This includes

• ensuring that user departments required to procure goods and services through the procurement 

department cannot acquire them independently;

• ensuring that services are acquired competitively to the maximum extent possible, such as enforcing 

the requirement to obtain justifications for noncompetitive acquisitions;

• ensuring that changes increasing the cost of contracts are approved in accordance with current 

delegation of authority, which requires that approvals are based on the cumulative value of contracts, 

not the incremental value of change orders; and

• ensuring the appropriate use of payment requests by enforcing the requirement that payment 

requests not exceed $5,000 and ensuring that they are not used when a contract and corresponding 

purchase order are in effect for a particular vendor.
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Source: GAO.

Providing better control over 

acquisition of outside legal 

services

Together with the law and finance departments, develop standardized acquisition policies and 

procedures for acquiring outside legal services to ensure that

• acquisition of outside legal services is competitive to the maximum extent possible;

• spending on outside legal services is analyzed to identify opportunities to control and reduce 

spending;

• documentation specifying the terms and conditions of the work to be prepared;

• attorneys completely and consistently review invoices for compliance with Amtrak’s billing guidelines;

• the law department follows Amtrak policy by providing approved invoices to the accounts payable 

section for payment; and

• key duties, such as authorizing, reviewing, and receiving payments for outside legal services, are 

segregated, and that attorneys not be allowed to create and edit payees’ names and addresses.

Addressing knowledge and 

information system problems 

• Create an automated, centralized spend analysis system for capturing the type of reliable and 

complete spending data needed to identify opportunities to leverage Amtrak’s buying power and 

provide better management and oversight of purchasing activities and suppliers. The system should 

include features that would

• provide data on what categories of goods and services are being acquired; how many suppliers are 

being used for specific categories; and how much is being spent on specific categories, in total and 

for each user department and with each supplier; and

• ensure that data are more readily and reliably retrievable on an automated and repeatable basis.

(Continued From Previous Page)

Issue Recommendation
Page 129 GAO-06-145 Amtrak Management

Chapter 6

Amtrak Does Not Have Adequate Oversight of 

or Accountability for Its Performance and 

Results Chapte6r

Our work demonstrates that fundamental improvement is needed in the 

way Amtrak measures and monitors performance, develops and maintains 

financial records and internal controls, controls costs, and acquires goods 

and services. In the preceding chapters, we have outlined 

recommendations to improve the policies, procedures, and practices in 

these areas. However, as long as Amtrak continues to focus much of its 

attention on capital needs, there is a serious question concerning whether 

the company will sufficiently address these areas. Without sufficient 

accountability mechanisms and oversight to ensure that needed actions are 

implemented, Amtrak increases the risk of its having continued ineffective 

use of resources; increasing federal subsidies; and, in an extreme case, 

facing possible bankruptcy. 

Currently, Amtrak’s accountability mechanisms are weak and oversight is 

insufficient. Two factors contribute to this situation. First, although the 

federal government has an interest in Amtrak’s mission, Amtrak operates in 

an unusual situation—that is, as neither a publicly traded private 

corporation nor as a public entity. This means Amtrak is not subject to the 

accountability and oversight mechanisms by which those types of entities 

would have to abide. For example, unlike publicly traded private 

corporations, Amtrak is not accountable to stockholders or financial 

markets and is not subject to Securities and Exchange Commission (SEC) 

rules, regulations, or public disclosure requirements. Also, unlike public 

entities, Amtrak is not subject to GPRA, FMFIA, or to various other 

reporting and accountability requirements established in law or regulation. 

The second factor is that accountability and oversight mechanisms that are 

applicable, such as oversight by Amtrak’s board of directors and FRA, are 

limited or are not being implemented effectively.

Both the administration and Amtrak have proposed reforms that would 

change Amtrak’s basic operating structure, establish competition for 

intercity rail, and provide a different method for distributing federal 

subsidies. The effect of these changes, if implemented, on strengthening 

oversight and accountability mechanisms is unknown. Reaching agreement 

on to whom Amtrak is accountable, however, is a critical first step. Without 

such a step, inadequate accountability will continue, and the issues raised 

in this report may not receive the sustained visibility needed to resolve 

them. Even within the current operating framework, Amtrak’s board and 

other key stakeholders can take actions, such as developing policies and 

procedures and identifying needed information for conducting oversight, to 

increase oversight and accountability. Congress may also want to play a 

stronger role in (1) establishing an accountability mechanism for Amtrak or 
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Page 130 GAO-06-145 Amtrak Management

(2) determining the extent and parties involved in holding Amtrak 

accountable for its performance and results and for the efficient and 

effective use of federal resources. 

Public-Private Nature 

of Amtrak Significantly 

Influences Oversight 

and Accountability 

Efforts

Amtrak operates as neither a public entity nor a publicly traded private 

organization, a factor that influences both the degree of oversight it 

receives and the ability to hold it accountable for results—potentially 

reducing both. In general, Amtrak does not receive the same type of 

oversight that publicly traded, for-profit companies or a government 

corporation might receive. Some typical accountability and oversight 

mechanisms from which Amtrak is exempted are discussed below:

• Stockholder accountability. In general, Amtrak is not subject to the 

oversight and accountability of the financial markets. This situation is 

attributable to the fact that Amtrak’s stock is closely held and not 

publicly traded. In publicly traded companies, poor financial or 

operational performance and nonachievement of goals can quickly be 

reflected by falling stock prices, declining ratings on bonds or other 

forms of corporate financial instruments, and a possible change in board 

membership. As a result, publicly traded companies have a strong 

incentive to perform as efficiently and effectively as possible and to take 

action if performance is not up to expectations. In addition, company 

management has an incentive to work on behalf of its owners—

stockholders—to maximize the value of the business and achieve the 

highest return to stockholders possible. Currently, Amtrak does not 

have such an explicit incentive, since stockholders do not hold Amtrak 

accountable for its performance and results.1

 Amtrak has common 

stockholders,2

 but they have not played a significant role in corporate 

governance since the early 1980s when the Amtrak Improvement Act of 

1981 removed the authority of common stockholders to elect board 

1

This discussion is not meant to imply that Amtrak’s stock should be publicly traded. Rather, 

it is to indicate that Amtrak is not subject to the same oversight and accountability 

mechanisms to which a publicly traded private business might be subject.

2

The common stock is held by four entities: American Premier Underwriters, BNSF Railway 

Company, Canadian National Railway Company, and Canadian Pacific Railway Company. In 

general, these entities received stock at the time that Amtrak was created in exchange for 

equipment and services provided to allow Amtrak to begin operations. The Amtrak Reform 

and Accountability Act of 1997 required Amtrak to redeem the common stock by October 

2002. However, as of May 2005, this stock had not been redeemed.
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members. Since 1981, selection of board members has been controlled 

by the federal government—which holds all of Amtrak’s preferred stock. 

The President appoints board members with the advice and consent of 

the Senate. The Secretary of Transportation currently has a seat on 

Amtrak’s board. Although this is a voting membership, the degree of 

accountability is questionable since the Secretary represents only one of 

seven votes and does not appoint board members. Finally, according to 

FRA, it can withhold grant funding until Amtrak has complied with the 

specific requirements of that funding. Consequently, in this instance, 

Amtrak is accountable to FRA for grant compliance, not necessarily for 

corporate performance.

• Financial market scrutiny. Since Amtrak is not a publicly traded stock 

company, there is no stock market discipline to hold Amtrak 

accountable for its performance and results. The financial market does 

play some role in overseeing Amtrak’s financial performance, since 

Amtrak receives credit ratings that assess the company’s capacity to pay 

its financial obligations. For example, Amtrak receives credit ratings 

from Standard & Poor’s and Moody’s Investor Service.3

 Debt has become 

more of an issue for Amtrak since the corporation’s total short- and 

long-term debt has increased in recent years—from about $1.7 billion to 

about $4.8 billion from fiscal years 1997 to 2002. At the end of fiscal year 

2004, Amtrak’s total short- and long-term debt was about $3.8 billion.4

However, the credit market assesses Amtrak’s ability to repay its debt 

obligations, not overall corporate performance or achievement of 

results. The limited market assessment of Amtrak’s debt reflects 

Amtrak’s continued and heavy reliance on federal subsidies to remain 

solvent. 

• Public disclosure requirements. Although organized as a for-profit 

company with a substantial investment of public funds, Amtrak’s stock 

3

As of March 31, 2005, Amtrak’s credit rating with Standard & Poor’s was BBB/Negative. This 

meant that Amtrak obligations had adequate protection but adverse economic conditions or 

changing circumstances could lead to weakened capacity to meet financial commitments. 

As of February 8, 2005, Amtrak’s credit rating with Moody’s Investor Service was A3. This 

meant that Amtrak’s bonds had favorable investment attributes and were considered uppermedium-grade. However, elements may be present that could suggest impairment at some 

point in the future.

4

This amount includes both long-term debt and capital lease obligations (about $3.7 billion) 

plus the current maturities of long-term debt and capital lease obligations (about $129 

million).
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is closely held by a limited number of stockholders, and the stock is not 

publicly traded. As a result, in general, Amtrak is not subject to either 

SEC rules and regulations or SEC public financial disclosure 

requirements. This includes the filing of 10-K and 8-K reports—which 

are designed to provide information to the public and investors on a 

company’s financial condition and major events shareholders need to 

know about.5

 In publicly traded businesses, these reports serve as a 

form of oversight and accountability concerning financial condition and 

business practices. In lieu of SEC financial disclosure requirements, 

Amtrak does make certain information available about its business. 

Each year, Amtrak is required to submit to Congress by February 15th an 

annual operations report that identifies such things as ridership, 

revenues, and federal subsidies for each of its intercity routes. Amtrak 

also is required to annually submit to Congress a general and legislative 

report that discusses its operations and activities and includes a 

statement of revenues and expenditures for the prior fiscal year. In 

recent years, this report has been significantly late—repeatedly months 

after the close of the fiscal year and the due date of the report to 

Congress. Since fiscal year 2003, Amtrak also has been required to 

prepare and submit to the Secretary of Transportation and Congress a 

business plan to support its request for federal grant funds, which, 

according to FRA, Amtrak has done.

• Application of certain federal laws and requirements. Many laws and 

requirements that apply to federal entities do not apply to Amtrak. As 

discussed in chapter 1, Amtrak is not a government corporation even 

though it continues to rely heavily on federal support to remain 

financially solvent. Certain laws, such as GPRA (which is designed to 

ensure that programs are efficiently and effectively administered, and 

that agencies are held accountable for results) and FMFIA (which 

requires that financial systems and internal controls are in place and 

functioning as intended) are not applicable to Amtrak. As a result, the 

federal government must rely on other means, such as congressional 

oversight during authorization and appropriations hearings and FRA’s 

oversight of grant agreements, to ensure that Amtrak is using federal 

monies wisely, and that results and expectations from federal 

5

The 10-K report is an annual report filed with SEC that provides a comprehensive overview 

of a company’s business and financial condition and includes audited financial statements. 

The 8-K is a report that companies file with SEC to announce major events that shareholders 

should know about. These events include completion of the acquisition or disposition of 

assets as well as changes in corporate governance and management, among other things.
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Page 133 GAO-06-145 Amtrak Management

investments are achieved. These means do not necessarily provide for a 

systematic mechanism to ensure adequate oversight of Amtrak or 

ensure that Amtrak is held accountable for achieving the results it sets 

out for itself.6

Amtrak’s Board of 

Directors Has Not 

Exercised Sufficient 

Oversight or Held 

Management 

Accountable for 

Results

Amtrak’s board of directors and its committees have also not played a 

strong oversight role and held the company accountable for results. 

Generally, an organization’s board of directors plays a key role in corporate 

governance through its oversight of executive management, corporate 

strategies, risk management and audit and assurance processes, and 

communications with corporate stakeholders. As we recently reported, 

corporate governance can be viewed as the formation and execution of 

collective policies and oversight mechanisms to establish and maintain a 

sustainable and accountable organization, while achieving its mission and 

demonstrating stewardship over its resources.7

 Accountability requires that 

an organization effectively demonstrate, internally and externally, that its 

resources are managed properly and used in compliance with laws and 

regulations, and that its programs are achieving their intended goals and 

outcomes and are being provided efficiently and effectively.

Amtrak’s Board Has Not 

Been Fully Engaged in 

Oversight and 

Accountability Efforts

Although responsible for managing the affairs of the corporation and 

ensuring good stewardship over resources, Amtrak’s board has not 

exercised sufficient oversight of the corporation or held management 

accountable for results. Three main factors have contributed to the board’s 

ineffectiveness in this area. First, the board has not had a full complement 

of members over the last several years. As previously discussed in this 

report, Amtrak has not had a full complement of seven voting members 

since July 2003. Over the period of October 2003 to June 2004, the board 

only had two voting members, exclusive of the Secretary of Transportation 

or his designee. According to Amtrak’s board chairman, in the absence of a 

full membership, the board has tried to provide adequate oversight of the 

6

This discussion is not intended to imply that Amtrak should be made a federal agency or 

necessarily brought under federal laws and requirements. This is also not a discussion of 

federal railroad safety laws that do apply to Amtrak. Rather, this discussion is to illustrate 

the unique environment surrounding oversight and accountability of Amtrak’s performance. 

7

GAO, Millennium Challenge Corporation: Progress Made on Key Challenges in First Year 

of Operations, GAO-05-625T (Washington, D.C.: Apr. 27, 2005).
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company, but he acknowledged that oversight has been difficult without a 

full complement of members. Further, he said that, the board has relied 

heavily on FRA for oversight of company operations. In his opinion, FRA 

has both the staff and expertise to evaluate operational-type issues, and it 

can “bridge the gap” on oversight until a full board is in place. DOT’s 

General Counsel, in commenting on a draft of this report, said that the 

department first looks to Amtrak’s board of directors to perform adequate 

oversight of the company and then, working through grants, performs a 

more limited and focused oversight of the company. The General Counsel 

acknowledged that lack of a full complement of members has hindered 

Amtrak’s board from providing sufficient oversight. However, he believes 

that given its limited resources, the board has done the best job it can and 

has been proactive in getting management to address problems.

Second, board oversight has been hindered by the lack of an established 

process or structure for conducting oversight or for ensuring management 

is held accountable for achieving financial and operational goals. Although 

Amtrak’s board is to meet monthly, there is no established process or 

protocol for reviewing corporate performance, and, according to the board 

chairman, the board has mainly focused on capital spending and capital 

projects. The board has deferred to Amtrak management to handle issues 

that arise if financial or other performance does not match established 

goals or budgets. The chairman noted that the board’s action in this regard 

is to ask questions of Amtrak’s president and senior vice president for 

operations about whether Amtrak is achieving results; however, in general, 

the board does not take specific actions when there are variances between 

expectations and performance results. Amtrak’s board chairman believes 

that Amtrak’s management is doing a good job in running the company, and 

that the president, in particular, has done a good job in bringing discipline 

to the corporation. However, he acknowledged that the board has not been 

as engaged in oversight of the company as it should have been. 

Third, as discussed in previous chapters, good information necessary for 

effective oversight has been lacking. For example, Amtrak’s monthly 

performance report—a report, deemed by Amtrak’s president as “critical,” 

that is a primary means for reporting Amtrak’s financial and nonfinancial 

performance, both internally and externally—has significant limitations in 

the context of oversight and accountability. These limitations include the 

following:

• Few measures of overall corporate performance exist. For example, 

one of Amtrak’s stated goals is to bring the railroad to a state of good 
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repair. However, there is little in the monthly performance report 

indicating the corporation’s overall progress toward achieving this goal 

or how much remains to be done to accomplish the goal. While 

individual pieces of information, such as the number of concrete ties 

laid, may indicate work accomplished, these data are not useful as an 

oversight mechanism if they are not set in the context of specific goals, 

objectives, and performance targets that must be accomplished to 

achieve a state of good repair. Amtrak’s board chairman agreed, saying 

that, although the reports provided much financial information, more 

and better metrics on company performance are needed. He said that 

the availability of such information would better assist the board in its 

oversight role. 

• Information on the status of operating improvements is lacking. The 

monthly performance report includes little information about initiatives 

to increase Amtrak’s operational efficiency. Amtrak’s June 2004 strategic 

plan identified nearly $380 million in proposed incremental operating 

improvements8

 over fiscal years 2005 to 2009. These improvements 

included such things as additional service, crew, and equipment 

efficiencies and increased ridership and revenue. While there is 

information on some specific initiatives, such as ridership and revenue, 

there is little, if any, comprehensive, consolidated information about the 

status of these initiatives in the monthly performance report. This may 

be partially attributable to the fact the strategic plan did not link the 

dollar value of incremental improvements to specific initiatives. Since 

these initiatives were integral in determining the amount of Amtrak’s 

operating grant needed, such information is important for the oversight 

of actual grants as well.

• Usefulness of financial information is limited. As discussed in chapter 

3, much of the financial information provided to management and 

external stakeholders lacked certain relevant and reliable information. 

For example, the monthly performance reports contained significant 

errors that were not corrected until several months after the end of the 

fiscal year as part of the annual audit process. This delay affects the 

accuracy of the information for oversight purposes. Further, the 

monthly performance reports we reviewed did not separately report any 

relevant information on food and beverage revenue or expense, despite 

8

The strategic plan identified these improvements as operating efficiencies and benefits 

from capital investments.
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food and beverage-related financial losses totaling about $160 million in 

fiscal years 2002 and 2003. Finally, Amtrak’s president told us that cost 

data for individual routes were unreliable. 

Amtrak Board Committees 

Also Have Not Been Fully 

Engaged in Oversight and 

Accountability Efforts

Not only has the board exercised insufficient oversight, but the board’s 

committees9

 also have not fulfilled their oversight requirements as set out 

in their charters. In March 2002, Amtrak revamped its board committee 

structure.10 Several board committees, such as the audit, corporate affairs, 

and finance committees, have oversight responsibilities. However, many 

board committees have not met since September 2003. Under the board 

committee charters, the audit committee should meet at least four times 

annually, and the legal affairs committee should meet at least quarterly or 

as necessary. The corporate affairs and finance committees should meet 

monthly or as necessary.

Amtrak’s audit committee is a good example of a board committee’s not 

fully fulfilling its oversight responsibilities. This committee’s primary 

functions include oversight of the corporation’s accounting and financial 

reporting processes and the audits of Amtrak’s financial statements and 

internal controls. Although we found that Amtrak’s audit committee 

charter, as amended, contains audit committee duties and responsibilities 

that are consistent with good governance, the audit committee meets 

irregularly and did not fully carry out its oversight responsibilities. In fiscal 

year 2004, the audit committee did not meet at all. Amtrak officials told us 

that there were never enough members on the board in fiscal year 2004 to 

constitute a quorum. Further, while the committee met eight times in fiscal 

year 2003, it met only once in fiscal year 2002. Our review of committee 

minutes for fiscal years 2002 and 2003 and through August 2004 found there 

was no written record of the committee’s reviewing and discussing auditor 

independence, or of management’s code of ethical conduct and its 

compliance with such code. Further, the meeting minutes did not reflect 

9

Amtrak’s board has the following committees: Audit, Compensation and Personnel, 

Corporate Affairs, Finance, and Legal Affairs.

10Prior to March 2002, Amtrak’s board had the following committees: Corporate Strategy; Ad 

Hoc Committee on Legislative Matters; Finance, Audit, and Administration; Budget and 

Management Ad Hoc Committee; Legal Affairs Ad Hoc Committee; Safety, Service, and 

Quality; and Ad Hoc Committee on Safety. One Amtrak official noted that prior to March 

2002, most of Amtrak’s board committees were inactive, and that the board put little 

emphasis on board committees. 
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that any independent meetings were held by the audit committee with the 

IPA.

In commenting on a draft of this report, both DOT and Amtrak officials told 

us that given the limited number of board members, Amtrak’s board had 

assumed the functions of the audit committee. DOT officials said these 

functions included meeting with Amtrak’s IPA to discuss audit and internal 

control issues, some of these meetings were held without the presence of 

Amtrak management. Analysis we performed showed that the board 

performed some audit committee functions or oversight. For example, our 

review of board minutes for fiscal year 2004 indicated that the board did 

hold one independent meeting with the IPA in January 2004, and received 

periodic status reports on the IPA’s audit of Amtrak’s fiscal year 2003 

financial statements.11 However, the board minutes contained no written 

documentation of the full board performing other audit committee 

functions, such as reviewing and discussing auditor independence or 

management’s code of ethical conduct and Amtrak’s compliance with such 

a code—important audit and internal control oversight functions.

Reform Strategies May 

Contribute to Better 

Alignment of Accountability 

and Performance

Although the board and its committees have not been fully engaged in 

oversight and accountability efforts, in April 2005, Amtrak’s board and 

management jointly issued a set of reform strategies. These strategies 

embodied a new vision for Amtrak, and intercity passenger rail in general, 

that called for a number of changes, including reinforcing management 

controls, organizing planning and reporting by lines of business, and 

cultivating competition and private commercial activity in passenger rail 

functions and services. The new vision anticipates developing activitybased costing capabilities, increasing the outsourcing of activities, and 

pricing contracts for services on a unit cost basis. In addition, the reform 

strategies envision better aligning management accountability with 

performance, both by business line and by train route. Although it is yet to 

be seen how these initiatives will develop, we believe better aligning 

11We did not review the fiscal years 2002 and 2003 board minutes for specific audit 

committee functions because the audit committee held meetings during this time period. In 

its comments on a draft of this report, Amtrak noted that the board committees held 

regularly scheduled meetings until September 2003 when there was an insufficient number 

of board members to fulfill the committee functions. As previously discussed, from October 

2003 to June 2004, the board only had two voting members, exclusive of the Secretary of 

Transportation or his designee. During this time period, the audit committee did not hold 

any meetings.
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management accountability with performance will be an important step in 

both better facilitating the oversight of Amtrak and in ensuring better 

accountability for results. 

Oversight of Amtrak’s 

Performance by Some 

Key Stakeholders Has 

Been Limited 

FRA and the Amtrak OIG, as key stakeholders in overseeing various 

aspects of the company’s operations, have provided limited oversight of 

Amtrak’s overall performance. Although responsible for providing billions 

of federal dollars to Amtrak each year in operating and capital subsidies, 

FRA has largely focused its efforts on Amtrak’s compliance with grant 

agreements (about $1.2 billion in each of fiscal years 2004 and 2005) and 

safety regulations. Since fiscal year 2003, Congress has imposed measures 

to increase the Secretary of Transportation’s responsibility for providing 

oversight of and accountability for the federal funds used for intercity 

passenger rail service. Among other things, these measures require that 

Amtrak transmit a business plan to the Secretary of Transportation and 

Congress, supplemented by monthly reports describing work completed, 

changes to the business plan, and reasons for the changes. As we reported 

in February 2004, these measures impacted DOT’s role with respect to the 

expenditure of federal funds provided to Amtrak.12 However, these 

measures only apply to specific years for which they are included in 

appropriations acts. So far, these measures have applied to appropriations 

for fiscal years 2003, 2004, and 2005. In response to these measures, FRA 

has entered into grant agreements with Amtrak, and, according to FRA 

officials, Amtrak has provided the requisite business plans and monthly 

reports.

Although measures are in place to increase FRA’s oversight of Amtrak’s 

operations through grant agreements, FRA officials said they mainly 

dedicate their resources to the oversight of Amtrak’s implementation of 

and funding needs for capital projects and to Amtrak’s cash flow needs. In 

addition, FRA officials said they have been focused on the development 

and implementation of new intercity passenger rail policy. There has been 

less emphasis on oversight of operations and operating budgets. Such 

oversight has mainly come through the review of budgets and budget 

variances. FRA officials said there also has been less emphasis on oversight 

of overall corporate performance or on the extent to which Amtrak is 

12GAO, Intercity Passenger Rail: Amtrak’s Management of Northeast Corridor 

Improvements Demonstrates Need for Applying Best Practices, GAO-04-94 (Washington, 

D.C.: Feb. 27, 2004).
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making progress toward meeting goals it establishes. FRA officials noted 

that Amtrak has no external baseline for performance statistics presented, 

and that better benchmarking of data to similar industries by line of 

business is needed. According to FRA officials, the quality of Amtrak’s 

reporting has been improving. They said, however, that capital spending 

data continue to have problems because of financial system-related 

problems. FRA said Amtrak is aware that it needs to start from scratch with 

its financial system, but funding such an overhaul has been difficult.

FRA officials said DOT has a seat on Amtrak’s board and by virtue of this 

position is knowledgeable about Amtrak’s operations and goals. However, 

according to FRA, historically, the agency has not forced a particular 

approach toward running Amtrak or specifically held Amtrak management 

accountable for meeting or not meeting particular goals. An FRA official 

told us that the agency must be careful about its involvement with 

management decisions since, legally, Amtrak is a private, for-profit 

corporation. FRA officials said the agency can withhold funds from Amtrak 

for grant noncompliance but, to date, no funds have been withheld. In 

commenting on a draft of this report, DOT officials said there are both legal 

and practical issues associated with withholding money from Amtrak. 

According to DOT, legally, FRA can withhold grant monies if Amtrak 

violates specific provisions of the grant agreements. DOT believes its 

oversight role would be more effective if it had broader explicit statutory 

authority to withhold funds from Amtrak as a means to encourage 

achievement of Amtrak’s annual business plan, its financial plan, and other 

performance measures. Such statutory authority would permit DOT to 

withhold discrete specific federal funds, if needed, instead of the current 

situation where withholding grant funds would involve large sums and 

could have a severe impact on Amtrak’s continued operations.

FRA also attributed the lack of resources for its limited, focused approach 

to overseeing Amtrak. For example, FRA officials told us that they have 

had to rely on Amtrak’s procurement department to tell them if Amtrak is 

complying with procurement requirements that are in the grant. According 

to FRA, there has been no direct verification of this compliance. As of 

March 2005, FRA had about six people assigned to intercity passenger rail 

policy development and implementation and Amtrak oversight. Three 

individuals were mostly full-time with the others being part-time. This 

number of staff was expected to increase through the creation of a new
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Results

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division in March 2005 with a new division chief and two new hires 

designated to Amtrak oversight.13

Similar to FRA, the Amtrak OIG also has exercised limited oversight of 

Amtrak’s corporate performance and accomplishment of goals. The 

Amtrak OIG was created by the Inspector General Act Amendments of 1988 

to provide independent audits and investigations; promote economy, 

efficiency, and effectiveness; and prevent and detect fraud and abuse in 

Amtrak programs and operations. For fiscal year 2004, the Amtrak OIG had 

a staff of 88 and a $12.5 million budget. The Amtrak OIG’s Office of Audits 

is responsible for, among other things, conducting independent reviews of 

Amtrak’s internal controls, overseeing and assisting in audits of Amtrak’s 

financial statements, reviewing certain procurements and materials 

acquisitions, and monitoring compliance with laws and regulations. 

Evaluations include measuring Amtrak’s compliance with corporate 

policies. However, as we recently reported, much of the work of this office 

(47 percent of all audits in fiscal year 2004) was focused on specific internal 

matters, such as environmental issues, inventory, and ticket sales.14 An 

additional 29 percent of fiscal year 2004 audits focused on procurementrelated matters. In general, oversight by this office is limited and does not 

include broader evaluations of programmatic matters or corporate 

performance based on corporate goals and metrics. 

Clarifying Amtrak’s 

Role—and Its Key 

Overseers—Is Critical 

to Establishing 

Accountability 

Clarifying Amtrak’s role—and its key overseers—will be critical for 

establishing accountability. While stronger oversight performance by 

Amtrak’s board and refocused efforts by Amtrak’s outside overseers can 

potentially bring about some oversight and accountability improvements, 

Amtrak will continue to have difficulty being more fully accountable if its 

role and the range of stakeholders to which it is accountable are not 

clarified. 

13According to FRA, as of June 2005, responsibility for intercity passenger rail policy 

analysis, board of director issues, and oversight had been consolidated into the existing 

program development division. According to FRA, the final staffing level of this division is 

being developed. The division currently has two full-time staff, with a third position being 

recruited. The division also has access, on a part-time basis, to staff of other divisions in 

FRA’s Office of Railroad Development. 

14GAO-05-306R.
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As we reported over a decade ago, Amtrak and the federal government 

need to make important decisions about the future of intercity passenger 

rail service and the government’s commitment to subsidize such 

operations.15 We stated, at that time, our belief that continuing to operate 

the nationwide passenger rail system would require significantly increased 

resources if Amtrak were to offer quality service. Since our previous report, 

Amtrak has received more than $10 billion in federal subsidies (capital and 

operating).16 Although ridership has increased about 27 percent over the 

period, other measures of service, such as on-time performance, has 

fluctuated and generally decreased from 79 percent in fiscal year 1999 to 

about 71 percent in fiscal year 2004. Amtrak’s market share has also largely 

stabilized at about 0.5 percent of the intercity travel market. However, 

Amtrak’s need for federal support has not abated. Amtrak indicated in its 

April 2005 strategic reform initiative that the company is spending at a rate 

of $1.4 billion per year, and that further increases in the level of capital 

investment will be required to minimize the risks of operational breakdown 

due to years of deferred maintenance. 

Multiple proposals exist for what Amtrak’s future should be, not only in 

defining what Amtrak should be doing, but in defining to whom Amtrak 

should be accountable. In particular, the administration’s current proposal 

for Amtrak would move much of the focus of accountability to the regional, 

state, and local levels. The administration’s proposal would significantly 

restructure the management and accountability of intercity passenger rail 

transportation in the United States. Modeled after the federal-state-local 

partnership in the federal transit program, the proposal would have 

regional, state, and local entities making the fundamental decisions about 

what intercity passenger rail services are justified and will receive public 

financial support. It would also make these entities responsible for 

planning, managing, and financing this service. The federal role would be to 

participate in making capital investments on a grant basis similar to the 

federal transit program, but not to subsidize operation of services that local 

entities would not subsidize themselves. The proposal would essentially 

split Amtrak’s current responsibilities into two separate corporations. One 

corporation would transition train operations to a competitive basis, make 

Amtrak compete to operate intercity passenger service, and introduce the 

competitive forces of the marketplace to provide high-quality service at 

15GAO/RCED-95-71.

16This amount excludes federal loan guarantees.
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Results

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reasonable prices. The other corporation would continue, for a period of 6 

years, to provide the dispatching, maintenance, and infrastructure services 

provided by Amtrak and carry out a multiyear infrastructure plan prepared 

by Amtrak. Title to Amtrak’s assets, including the Northeast Corridor, 

would be transferred to the Secretary of Transportation. An interstate 

compact of eight states and the District of Columbia would manage all rail 

operations on the Northeast Corridor. 

Amtrak has proposed a somewhat similar vision that would include a 

greater role for states in planning and developing passenger rail corridors. 

Its April 2005 strategic reform initiatives states that the current structure of 

intercity passenger rail service is unsustainable, and that a more aggressive 

approach that includes the introduction and development of competition is 

needed. Under both this initiative and the administration’s reform proposal, 

it is clear that states would play an increased role in deciding what services 

are provided, who would provide them, who would cover operating losses, 

and who would oversee the results. 

While there is growing agreement that the current model for providing 

intercity passenger rail service needs to be reexamined, there is much less 

agreement on what should be done. Deciding on a course of action, 

however, is critical. In our view, concerns about Amtrak’s performance and 

accountability will remain unresolved as long as the current situation goes 

unchanged. Better resolve on Amtrak’s board and management’s part to 

hold the company accountable is not enough. 

Congress has a central role in this issue. It created Amtrak and has 

continued to subsidize its operations over time. Amtrak’s authorization 

expired in September 2002, and Congress is now considering what, if any, 

changes are needed in the structure and financing of intercity passenger 

rail. As part of this reauthorization, Congress will also play a role in 

determining the type of oversight to be provided and the accountability 

mechanisms to be used to ensure that desired results and outcomes are 

achieved. As we reported in April 2003, the key components of a 

framework for evaluating federal infrastructure investments include (1) 

establishing clear, nonconflicting goals; (2) establishing the roles of 

government and private entities; (3) establishing funding approaches that 

focus on and provide incentives for results and accountability; and (4) 

ensuring that the strategies developed address the diverse stakeholder 

interests and limit unintended consequences. (See fig. 14.) We continue to 

believe these components are important in evaluating and establishing 

federal policy toward intercity passenger rail. 
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Results

Page 143 GAO-06-145 Amtrak Management

Figure 14: Components of a Framework for Evaluating Federal Investments

Conclusions It is clear that Amtrak’s ability to operate efficiently and effectively is 

impacted by problems at several levels. At one level, Amtrak still has major 

challenges to overcome in strengthening its basic business systems, such 

as financial reporting, cost containment, and control over acquisitions. 

Creating effective systems in these areas is something that Amtrak, like any 

public or private organization, needs to address, and this is the case 

whether Amtrak’s role changes dramatically or whether it continues in its 

current form and its current role. On a different level, however, Amtrak 

faces a unique set of problems, which is not necessarily of its own making 

and which is, to an extent, beyond the company’s ability to resolve. These 

problems involve the issues that bookend this report—what is Amtrak’s 

role, and to whom is it accountable?

Since Amtrak’s reauthorization expired in September 2002, Congress now 

has the opportunity to decide what structure and mechanisms are best 

suited for the provision of intercity passenger rail service, what role 

intercity passenger rail is expected to play in the nation’s transportation 

system, and how this structure will make the most efficient and effective 

use of federal resources. It was not the focus of this report to evaluate the 

merits of various reform proposals or their particular costs and feasibility. 

Sources: GAO (data), Art Explosion (images).

Establish clear, nonconflicting goals

Establish roles of governments and private entities

Establish funding approaches that focus on, and provide 

incentives for, results and accountability

Ensure that strategies developed address diverse stakeholder 

interests and limit unintended consequences

$ $

$

$

$
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of or Accountability for Its Performance and 

Results

Page 144 GAO-06-145 Amtrak Management

However, it is clear that Amtrak’s ability to articulate its mission, align its 

various enterprises, and operate a results-oriented organization would be 

enhanced by a clarification of its role. 

Part and parcel to the debate over the future of intercity passenger rail is 

the issue of adequate oversight and accountability for results and 

outcomes. In part, the current situation is the result of how Amtrak has 

evolved over time in its governance and accountability—an evolution that 

has largely left Amtrak unaccountable to anyone in particular. These 

problems have been exacerbated by the limited oversight exercised by 

Amtrak’s board, and the relatively narrow scope of review activity by other 

oversight bodies, such as FRA. These groups have not filled the void. The 

reauthorization process offers an opportunity for Congress to take a new 

approach in whatever structure it elects to adopt for intercity passenger 

rail—an approach that ensures there is a clear and transparent mechanism 

for oversight and accountability, and that there are consequences if desired 

results and outcomes are not achieved. Without a clear mechanism and 

consequences, an intercity passenger rail provider (whether Amtrak or 

some other entity) will have less incentive to ensure achievement of results 

and outcomes and ensure that resources made available, whether federal 

or nonfederal, are used in the most efficient and effective manner possible. 

Matters for 

Congressional 

Consideration

As part of the deliberation about the future of Amtrak and intercity 

passenger rail, we believe Congress may want to consider establishing a 

national policy for intercity passenger rail and determining the appropriate 

role for Amtrak by ensuring that reauthorization or reform legislation (1) 

establishes clear, nonconflicting goals; (2) establishes the roles of both the 

federal and state governments as well as private entities; (3) establishes 

funding approaches that focus on and provide incentives for results and 

accountability; and (4) provides that the strategies developed address the 

diverse stakeholder interests and limit unintended consequences. 

Recommendations for 

Executive Action

To strengthen the oversight of corporate performance and to increase the 

accountability of Amtrak’s management for achieving the goals and 

objectives it establishes, and to provide the needed transparency among 

key internal and external stakeholders, we recommend that the chairman 

of Amtrak’s board and the board members take the following three actions:
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of or Accountability for Its Performance and 

Results

Page 145 GAO-06-145 Amtrak Management

• develop policies related to the oversight of corporate performance and 

the specific procedures to be used to implement these policies;

• identify, in consultation with Amtrak’s president and senior 

management, the type and frequency of information required to 

implement the policies and procedures for oversight; and

• in conjunction with Amtrak’s management, assess the financial and 

other resources that will be required to develop the measures and 

information required to conduct cost-effective oversight, and prepare an 

action plan to implement needed changes in information and data 

systems to provide the reports and other documents required to meet 

the oversight policies and procedures adopted.

To strengthen DOT and FRA oversight of Amtrak’s performance, we 

recommend that the Secretary of Transportation direct the Federal 

Railroad Administrator to take the following four actions:

• work with Amtrak’s board and management to develop measures of 

overall corporate performance and related outcomes;

• require Amtrak to report on these measures of corporate performance 

and outcomes at least annually;

• identify and make known to Amtrak the range of potential 

consequences of not meeting, or making sufficient progress toward, a 

minimum level of performance on the corporate measures and 

outcomes; and 

• report annually to Congress on the results of FRA’s oversight of 

Amtrak’s corporate performance and Amtrak’s progress toward meeting 

minimum levels of performance and outcomes (this report should 

identify any specific actions Congress should consider taking to better 

facilitate progress on achieving specific outcomes or to identify 

alternative ways the outcome might be achieved). 
Page 146 GAO-06-145 Amtrak Management

Appendix I

Methodology for Selecting Procurement Apendxies

Contract Files for Review ApendxiI

In order to assess the National Railroad Passenger Corporation’s (Amtrak) 

compliance with its acquisition policies and procedures, we reviewed a 

nonprobability sample of 61 service contract files1

 that covered 75 percent 

of the total expenditures for fiscal years 2002 and 2003 in the following 

accounts:2

• Advertising (Account 553201).

• Sales promotion (Account 553209).

• Professional services (Account 505111).

• Consulting (Account 505115). 

We selected the files we reviewed from data identifying expenditures made 

under purchase orders during fiscal years 2002 and 2003; the results of our 

analysis cannot be projected to the universe. Our objective was to obtain a 

mix of contracts with small, medium, and large dollar expenditures during 

fiscal years 2002 and 2003. Because our basis for selection was 

expenditures, as opposed to actual contract awards, the contracts selected 

include those awarded before fiscal year 2002 as well as contracts awarded 

during fiscal years 2002 and 2003. 

Specifically, we selected contracts as follows:

Amtrak provided data on expenditures made under purchase orders during 

fiscal years 2002 and 2003. These data were segregated by financial account 

and identified specific transactions. These data included information such 

as vendors, purchase order numbers, and expenditure amounts for each 

transaction. Each purchase order number—also used as the contract 

1

Results from nonprobability samples cannot be used to make inferences about a 

population, because in a nonprobability sample some elements of the population being 

studied have no chance or an unknown chance of being selected as part of the sample. 

2

We initially selected 2 additional contracts but subsequently excluded them from our 

analysis. One of these was a contract that had been originally awarded in 1994 and, 

according to a procurement department official, was to provide personnel in support of the 

engineering department. Work under this contract had started and stopped over the years 

and assessing it for compliance with Amtrak policies and procedures was not possible. The 

second contract we excluded from our analysis was a contract for maintenance on the Acela 

trainset. In this case, the consortium that had built the Acela had formed a corporation for 

the purposes of performing maintenance, and a purchase order had been created solely for 

the purposes of tracking payments to the consortium. 
Appendix I

Methodology for Selecting Procurement 

Contract Files for Review

Page 147 GAO-06-145 Amtrak Management

number—indicates whether it is a blanket purchase order (B), which 

allows purchases to be made over a period of time, or a standard purchase 

order (S), which is used for one-time purchases.3

 

To assess the reliability of the procurement data Amtrak provided, we 

compared it with Amtrak audited financial statement data for fiscal years 

2002 and 2003 for the accounts we reviewed. (The expenditure data came 

from a different database.) We then asked Amtrak to reconcile differences 

that we identified between the two sets of accounts. Because Amtrak 

officials said this reconciliation had to be done manually and would take 

substantial time, data were reconciled for only 1 account—sales 

promotion. Consequently, we used the procurement expenditure data only 

to select a nonprobability sample of procurement contracts to review.

For each year and each account, we sorted the expenditure data by 

purchase order type and amount. For each account, we selected 2 to 10 

purchase orders within each type of order—blanket or standard—in order 

to obtain a mix of large, medium, and small dollar expenditures so that we 

could assess compliance with acquisition policies and procedures for 

contracts with significant dollar values, as well as for contracts of lesser 

values. 

We also noted that expenditures made under a given purchase order could 

be charged to more than one account. We only selected each contract once. 

However, for purposes of determining the extent of dollar coverage 

resulting from our selections, we included the expenditures under a given 

purchase order that were charged to another of the accounts within our 

scope (advertising, sales promotion, professional services, and consulting). 

According to Amtrak’s expenditure data, total blanket and standard 

purchase order expenditures for the four accounts within our scope was 

$114.3 million. The expenditures for the purchase orders we selected—

according to the same data—totaled $85.3 million in fiscal years 2002 and 

2003, or 75 percent of the total expenditures for these accounts. 

3

The expenditure data also included construction purchase orders, which we excluded 

because construction contracts were outside of the scope of our review.
Appendix I

Methodology for Selecting Procurement 

Contract Files for Review

Page 148 GAO-06-145 Amtrak Management

When we reviewed the contracts, we determined whether they were 

awarded competitively or noncompetitively4

 and assessed them for 

compliance with policies and procedures in effect at the time of the 

contract award, or the guidance in effect when a change to the contract 

was processed. For example, if a contract was awarded in 2002, we used 

guidance applicable at the time of the award. If a change to the contract 

occurred, for example, in 2003 or 2004, we applied the guidance in effect at 

that time. 

Finally, Amtrak could not locate any documentation for 4 of the contracts 

we selected. Instead, they provided printouts from the acquisition system. 

These printouts contained minimal information about the contract, such as 

the vendor name, amount of the award, and whether it was a competitive or 

noncompetitive award. Additionally, for another contract, one folder—out 

of three—was missing. We analyzed these contracts on the basis of the 

limited information available.

4

We define noncompetitive awards as those that Amtrak considered as either sole or single 

source. We obtained information as to whether a contract was a sole or single source award 

by review of documentation in the contract file and, if necessary, discussion with 

procurement department officials.
Page 149 GAO-06-145 Amtrak Management

Appendix II

Comments from the National Railroad 

Passenger Corporation ApendxiI

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.

See comment 1.

See comment 2.
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 150 GAO-06-145 Amtrak Management

See comment 3.

See comment 4.

See comment 5.
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 151 GAO-06-145 Amtrak Management

See comment 6.
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 152 GAO-06-145 Amtrak Management
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 153 GAO-06-145 Amtrak Management
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 154 GAO-06-145 Amtrak Management

The following are GAO’s comments on the National Railroad Passenger 

Corporation’s (Amtrak) letter dated September 2, 2005.

GAO Comments 1. Amtrak believes that there is no “silver bullet” for fixing its problems 

and that making steady incremental improvements is the best 

approach. These views do not appear to be consistent with the 

magnitude of changes discussed in Amtrak’s April 2005 strategic reform 

initiatives. This document—which was characterized by Amtrak as a 

dramatic departure from business as usual and would substantially 

change how Amtrak operates—outlines a number of structural, 

operating, and legislative changes that would, among other things, 

place a new focus on planning, budgeting, accounting, and reporting of 

financial activity and performance along Amtrak’s business lines and 

open to competition the market for virtually all functions and services 

of intercity passenger rail. We believe the strategic reform initiatives 

clearly acknowledge the substantial systemic problems facing Amtrak, 

including those discussed in this report, as well as the need for reform 

in how intercity passenger rail service is delivered. As previously 

discussed in this report, we encourage Amtrak’s president and 

management to work with the board of directors to ensure that the 

issues and challenges raised in the strategic reform initiatives are 

addressed.

2. Amtrak commented that it has recently taken a number of actions to 

better manage its food and beverage service, including reforming the 

delivery of food service and renegotiating its contract with Gate 

Gourmet (formerly called Dobbs International). Amtrak’s comments 

also stated that our draft report failed to mention or recognize the cost 

of labor associated with the food and beverage service. We agree that 

Amtrak has taken actions regarding its food and beverage service, and 

we encourage Amtrak to continue to seek ways to improve the 

management and controls over this service. Both our June 2005 

testimony before the Subcommittee on Railroads, House Committee on 

Transportation and Infrastructure, and our August 2005 report on 

Amtrak’s food and beverage service made recommendations for
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 155 GAO-06-145 Amtrak Management

improving this control.1 Both the testimony and report also 

acknowledge the labor costs associated with the food and beverage 

service. We agree with Amtrak that this is the single largest cost of this 

service. Because labor costs associated with the food and beverage 

service are a part of Amtrak’s overall labor cost structure, it was 

beyond the scope of our work in this report to analyze these specific 

costs. However, our June 2005 testimony indicated that a recent 

Amtrak Inspector General report suggested a way Amtrak could 

address its food and beverage labor costs.

3. Amtrak commented that it was in the process of implementing changes 

in the procurement area, many of which coincide with our 

recommendations. We commend Amtrak for recognizing areas for 

improvement in its procurement area and for making changes. 

However, we found numerous systemic problems with the procurement 

function that still need to be addressed. The recommendations 

contained in this report are designed to help Amtrak address these 

problems. 

4. Amtrak commented that it has identified the problems, “as only we 

can,” and has developed an approach that “works best for us.” Amtrak’s 

president also commented that the strategic planning mechanisms we 

recommend or that government agencies adopt may not be in line with 

those followed by Amtrak, but the goals are the same. Further, he states 

that while the process is important, results are what matter. We agree 

results matter, but, overall, results are not improving. Our report notes 

that both public and private organizations have long recognized that 

sound strategic planning mechanisms or “processes” are vital to chart a 

clear direction and mission, develop road maps for cost-effective 

operations based on this mission, and be held accountable for results. 

We believe the management tools Amtrak has adopted in recent years, 

while helpful, are focused too narrowly and insufficient to stem the 

operating losses the company is experiencing. We also believe adopting 

a systematic and organized strategic approach is necessary to achieve 

the results management and the public expect.

1

GAO, Amtrak: Management and Accountability Issues Contribute to Unprofitability of 

Food and Beverage Service, GAO-05-761T (Washington, D.C.: June 9, 2005); and Amtrak: 

Improved Management and Controls over Food and Beverage Service Needed, GAO-05-867

(Washington, D.C.: Aug. 24, 2005).
Appendix II

Comments from the National Railroad 

Passenger Corporation

Page 156 GAO-06-145 Amtrak Management

5. Amtrak commented that its financial performance has improved 

dramatically in recent years and that, among other things, it closes its 

books on time and reports monthly results faster than most other 

companies of its size. We agree that improvements have been made and 

that this is a step in the right direction. Our report recognizes these 

improvements. However, our work shows there continues to be 

substantive problems related to financial management at Amtrak. 

These problems include monthly performance reports that are not as 

useful as they could be and that contain financial data that are not 

reliable, and inadequate internal controls related to certain expenses. 

As we previously discussed, Amtrak will find it difficult to make sound 

business decisions and improve its efficiency and cost-effectiveness 

without addressing these problems.

6. Amtrak commented that, at times, our draft report seemed to be more 

concerned with the process for achieving results, rather than the actual 

results. We believe actual results are important and that the results are 

not satisfactory. Although improvements have been made, during the 

past 3 fiscal years, Amtrak’s operating losses have increased to over $1 

billion annually, and such losses are projected to increase about 40 

percent by 2009. In addition, we found systemic problems in all five 

areas we reviewed, and we found that Amtrak faces major challenges in 

instituting and improving its basic business systems. Amtrak’s recent 

improvements have likely quelled what would have been even higher 

losses, but the situation is still not under control. The 

recommendations contained in this report reflect sound and proven 

ways adopted by leading organizations to more efficiently and 

effectively manage Amtrak’s operations. We believe that not 

recognizing the value of these approaches and adapting them to 

Amtrak’s environment will continue to lead to suboptimal results.
Page 157 GAO-06-145 Amtrak Management

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact JayEtta Z. Hecker, Director, Physical Infrastructure Issues, (202) 512-2834, 

heckerj@gao.gov

Staff 

Acknowledgments

Acquisition and Sourcing 

Management Team

Carolyn Kirby

Applied Research and 

Methods/Center for Design, 

Methodology, and Analysis

SaraAnn Moessbauer

Financial Management and 

Assurance Team

Robert Martin, Director

Fred Evans

Irvin McMasters

Scott McNulty

Robert Owens

Office of General Counsel Edda Emmanuelli-Perez

Bert Japikse

Physical Infrastructure 

Team

Randall Williamson, Assistant Director

Colin Fallon

Lynn Filla-Clark

Gregory Hanna

Richard Jorgenson

Heather Krause

Stephanie Purcell
Appendix III

GAO Contact and Staff Acknowledgments

Page 158 GAO-06-145 Amtrak Management

Strategic Issues Team Elizabeth Curda

Sarah Veale

(544087)
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

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