oversight

TRAIN OPERATIONS: Opportunities Exist to Improve Private Railcar Management and Business Practices

Published by the Amtrak Office of the Inspector General on 2019-02-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

TRAIN OPERATIONS:
Opportunities Exist to Improve Private Railcar Management
and Business Practices




                                 OIG-A-2019-003 | February 6, 2019
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Memorandum
To:           Scot Naparstek
              Executive Vice President / Chief Operating Officer

              Swati Sharma
              Acting Executive Vice President / Chief Financial Officer

              Tim Griffin
              Executive Vice President / Chief Commercial & Marketing Officer

From:         Stephen Lord
              Assistant Inspector General, Audits

Date:         February 6, 2019

Subject:      Train Operations: Opportunities Exist to Improve Private Railcar Management
              and Business Practices (OIG-A-2019-003)

Since beginning operations in 1971, Amtrak (the company) has provided the owners of
private railcars the opportunity to couple and move their railcars with regularly
scheduled trains for a fee. As part of these movements, the company also provides
private railcar owners with ancillary services, such as short-term parking, car washes,
and waste tank services. In addition to movements, the company also provides long-
term parking and mechanical services. In fiscal year (FY) 2018, the company generated
about $3.7 million in revenue from private railcar services, including $2.8 million from
movements, $462,000 from long-term parking, and $392,000 from mechanical services.

In April 2018, the company made changes in response to concerns that these services
were interfering with its core mission of providing passenger rail services as safely,
punctually, and efficiently as possible. The company found that some private railcar
movements were negatively affecting the on-time performance of certain regularly
scheduled train routes. The company’s changes included limiting:
   •    movements of private railcar primarily to terminals where scheduled trains
        originate or terminate
   •    the addition or removal of private railcars to locations where the company can
        do so efficiently
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                               Amtrak Office of Inspector General
                      Train Operations: Opportunities Exist to Improve
                     Private Railcar Management and Business Practices
                               OIG-A-2019-003, February 6, 2019

    •   mechanical services to essential repairs of safety-related equipment while private
        railcars are in transit on company trains

Our objectives were to assess the extent to which the company is (1) identifying and
billing private railcar owners for the costs associated with movement and long-term
parking services and (2) effectively managing the program. Our audit focused on
movement and long-term parking services provided from FY 2015 through FY 2017, 1 as
well as overall management of the program through November 2018. We excluded
mechanical services from our scope after the company decided in April 2018 to
significantly reduce these services.

SUMMARY OF RESULTS
The company has opportunities to improve longstanding program management
weaknesses in its private railcar program. Many are fundamental—such as insufficient
controls to manage its costs and revenues, an absence of standard operating procedures,
and limited safety and parking guidelines. For example, the company has historically
not identified most of its costs for operating the private railcar program and services.
Thus, the company does not know the extent to which it is capturing these costs
through its pricing decisions. Additionally, weak program management practices have
led to lost revenue and missed opportunities to generate additional revenues, and they
also pose safety and liability risks for customers and employees.

The company has taken recent actions that begin to address some, but not all, of these
issues. However, additional program management improvements are needed—such as
adjusting prices to reflect fluctuating costs and demands—to better ensure the company
can make business decisions that align with its mandate to minimize federal subsidies.
Finally, in the absence of robust standard operating procedures and without fully
implementing and enforcing recent parking guidelines and permits, the company will
continue to face potential financial losses and safety and liability risks.

We recommend that the company take the following actions to improve management of
the program:
    •   Identify its costs to provide movements and long-term parking services.



1We selected these years because they allowed us to use the most complete data available during our
review.
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                      Train Operations: Opportunities Exist to Improve
                     Private Railcar Management and Business Practices
                               OIG-A-2019-003, February 6, 2019

    •   Factor these cost data into its pricing and program decisions.
    •   Establish a mechanism for providing regular financial and performance reports
        that management can monitor.
    •   Finalize and implement standard operating procedures.
    •   Develop and implement safety guidelines tailored to each company facility that
        provides private railcar parking.

In commenting on a draft of this report, the Executive Vice President / Chief Operating
Officer (COO) agreed with our recommendations to improve management of the
private railcar program. The COO identified specific actions the company plans to
complete by August 2019 to implement each of the recommendations. For
management’s complete response, see Appendix B.

BACKGROUND
Individuals and companies use private railcars for leisure travel and to operate
businesses by renting the railcars, hosting onboard events, and selling individual seats
or beds. When the company assumed responsibility for intercity passenger rail service
in 1971, it also assumed responsibility for the movement of private railcars that
predecessor railroads had provided. Since that time, the company has been the primary
provider of private railcar services in the United States. 2

The Rail Passenger Service Act of 1970 established the company as a for-profit
corporation. 3 The Passenger Rail Investment and Improvement Act of 2008 (PRIIA)
encourages the company to make agreements with the private sector, such as those with
private railcar operations, to minimize its federal operating subsidies. 4 PRIIA also
requires the company to implement modern accounting and reporting systems to track
the costs of each major activity in each route and line of business.



2 Some Class I railroads also offer intercity transport of private railcars although passengers do not
typically occupy private railcars while in transit with these railroads.
3 The Rail Passenger Service Act of 1970, Public Law 91-518; October 30, 1970.

4 Section 24101(d) of Title 49 of the U.S. Code states that “Amtrak is encouraged to make agreements with

the private sector and undertake initiatives...designed to maximize its revenues and minimize
Government subsidies” in order to carry out its statutory goal in Section 24101(c)(12) to maximize its
resources.
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                        Train Operations: Opportunities Exist to Improve
                       Private Railcar Management and Business Practices
                                 OIG-A-2019-003, February 6, 2019

The company’s Charter and Special Movements office—in the Transportation division
of the Operations department—manages private railcar movements and long-term
parking. Offices in the Commercial & Marketing and Finance departments are
responsible for pricing, billing, and collecting private railcar service charges. 5

The company provides two types of private railcar services:
    •    Movements and ancillary services. At the company’s discretion, private railcar
         owners can couple their railcars to regularly scheduled company trains at certain
         stations for transport across the company’s nationwide train route system. The
         company also provides ancillary services, including short-term parking,
         switching, 6 power, water, ice, septic, and car washing. In addition, the company
         provides mechanical services but recently limited these services to essential
         repairs of safety-related equipment while private railcars are in transit on
         company trains. Currently, the company is to charge $3.26 per mile to transport
         a private railcar. From FY 2015 through FY 2017, each regularly scheduled
         company route carried private railcars, except the Acela, Auto Train, and several
         state-supported routes. Ten routes transported 71 percent of the 3,431 private
         railcar movements in these three fiscal years, as shown in Figure 1.




5 The Product Development and Customer Experience office within the Commercial & Marketing
department is responsible for pricing private railcar services. The Finance department’s Financial
Planning & Analysis office is responsible for billing and its Controller’s office is responsible for collecting
private railcar service charges.
6 Switching services for private railcars include moving them to and from short- and long-term parking

and mechanical services within a rail yard or terminal and coupling or uncoupling them to and from
scheduled trains for movements.
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                          Amtrak Office of Inspector General
                 Train Operations: Opportunities Exist to Improve
                Private Railcar Management and Business Practices
                          OIG-A-2019-003, February 6, 2019

             Figure 1. Top 10 Amtrak Routes Transporting Private Railcars,
                               FY 2015 through FY 2017




Source: OIG analysis of company data from its Systems Application and Products (SAP) financial
system

•   Long-term parking. The company also provides long-term parking, including
    services such as power and switching, for railcars on company-owned or leased
    property. It charges $1,600 per month for this service. The five stations with the
    highest volume of long-term parking are shown in Figure 2.
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                     Train Operations: Opportunities Exist to Improve
                    Private Railcar Management and Business Practices
                              OIG-A-2019-003, February 6, 2019

     Figure 2. Top Five Long-term Parking Locations Used by Private Railcars,
                             FY 2015 through FY 2017




Source: OIG analysis of company SAP data and transactions

From FY 2015 through FY 2017, the company generated $13.9 million in revenues from
1,144 movement and 315 long-term parking transactions with private railcar owners,
based on company data, as shown in Figure 3.
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                               Amtrak Office of Inspector General
                      Train Operations: Opportunities Exist to Improve
                     Private Railcar Management and Business Practices
                               OIG-A-2019-003, February 6, 2019

       Figure 3. Private Railcar Services Provided and Revenues Generated,
                                FY 2015 through 2017

                            Movements and
                                                 Long-term Parking
            Fiscal Year         Ancillary                               Total $
                               $        Number      $         Number
              2015        $ 5,141,906      500 $     413,442      102 $ 5,555,348
              2016          3,650,549      330       490,623       98   4,141,172
              2017          3,713,212      314       469,376      115   4,182,588
                 Totals $ 12,505,667    1,144   $    1,373,441   315   $ 13,879,108
          Source: OIG analysis of company SAP data

PROGRAM MANAGEMENT WEAKNESSES CONTRIBUTED TO LOST
REVENUES AND SAFETY AND LIABILITY RISKS
We identified several weaknesses in the company’s management of its private railcar
program, including insufficient controls to manage its costs and revenues, an absence of
standard operating procedures, no financial and performance reporting, and limited
safety and parking guidelines. The company began taking actions to address some of
these weaknesses; however, unless it sustains these actions and fully addresses the
remaining weaknesses, the company will continue to miss opportunities to generate
revenues and to reduce its safety and liability risks.

The Company Does Not Know the Extent to Which Its Billing and
Pricing Cover Its Costs
The company has identified few costs of providing private railcar services; therefore, it
does not know the extent to which it is capturing these costs through its billing of
private railcar owners. In addition, unlike its regular train service, the company does
not adjust its prices to reflect changes in demand for private railcar services. As a result,
the company cannot assess the financial performance of the program and is missing
opportunities to generate additional revenues.

Most costs not identified. Until April 2018, the company had not identified any of the
costs it incurred for managing the private railcar program and providing movement
and long-term parking services. This is contrary to sound business practices, which
maintain that accurate, complete, and high-quality information is necessary to make
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                      Train Operations: Opportunities Exist to Improve
                     Private Railcar Management and Business Practices
                               OIG-A-2019-003, February 6, 2019

effective management decisions. 7 Since then, the company has identified some costs,
such as direct labor for the program manager and staff, and a few movement costs.
However, it has not identified other significant movement costs or any long-term
parking costs:

    •   Movements. From FY 2015 through FY 2017, the company averaged about
        381 private railcar movements each year, but it did not identify any of the costs
        of providing these services until the Chief Executive Officer (CEO) requested a
        detailed profit and loss statement for the private railcar program. In April 2018,
        the company responded to the CEO’s request with data on its direct labor costs
        for the four employees managing and processing private railcar owners’
        requests for services, as well as its labor costs for switching. However, because
        the company lacked reliable cost data, it had to use general operational
        assumptions to estimate other direct and indirect costs associated with
        transporting and switching private railcars.

        The company has resources available that it uses to calculate the costs of similar
        passenger services it provides, but it has not used these resources to calculate the
        costs of private railcar services. For example, the company developed a financial
        tool to calculate prices for its charters and special trains 8 based on the actual and
        allocated costs of services required to operate these trains. 9 This tool includes
        costs for labor, operating locomotives, switching, fuel, and other activities. The
        company incurs these same costs when providing private railcar services but has
        not used this tool to help identify these costs for the private railcar program. In
        addition, the company uses its cost accounting system to allocate costs and
        revenues for its regularly scheduled train routes and business activities, but it
        has not used this system to help estimate certain costs of providing private
        railcar services.




7 Committee of Sponsoring Organizations of the Treadway Commission (COSO), Internal Control—
Integrated Framework, May 2013.
8 Charter and special trains are non-regularly scheduled trains operated by the company.

9 The company’s cost accounting system—Amtrak Performance Tracking—estimates and reports fully

allocated costs and revenues for company routes and other business activities. Because multiple trains
may share costs such as management staff and stations operating costs, the company’s cost accounting
system provides the allocation of costs for all company trains and routes nationwide.
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                     Private Railcar Management and Business Practices
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     •   Long-term parking. The company has not identified any of the costs of providing
         long-term parking, which typically include power and switching.

Program officials told us that the company has not identified and accounted for the
costs of providing private railcar services for two reasons. First, it has historically taken
the position that it does not incur additional costs to move private railcars on scheduled
trains. Second, the program is relatively small compared to other activities the company
must manage. The Commercial & Marketing department official responsible for setting
prices for private railcar services told us he plans to begin working with Finance to
develop better cost data. However, until the company has more complete cost data, it
cannot assess the program’s financial performance.

Extent of billing for costs unknown. Because the company has not identified most of
its costs for providing private railcar services, it also does not know the extent to which
it is billing for these costs. For many years the company has been billing owners for its
services based on prices included in its tariff that governs the movement of private
railcars. However, the company could not identify the basis it used to originally set
these prices or increase them in subsequent years. Beginning in October 2014, the
company increased its prices annually by applying the Association of American
Railroads (AAR) 10 annual inflation index for rail operations to the existing prices.
However, company costs were not a pricing factor. The company continued using this
inflation index until it revised its prices in May 2018. It revised prices again in
November 2018 to be effective January 1, 2019. In making these two recent price
increases, the company considered the cost estimates provided to the CEO in
April 2018. However, these estimates did not include some important cost components
such as the costs of operating locomotives and switching.

Missed opportunities to generate additional revenue. The company does not adjust its
prices based on changes in demand for private railcar services although it does adjust
its prices for regular train service. As a result, the company has missed opportunities to
generate additional revenue when demand for its private railcar services increases, as
shown in the following examples:
     •   Movements. The company charges the same prices for mileage across every
         route, year-round, without adjusting its prices for shifting seasonal or regional
         demand, which it does for its regularly scheduled trains. Conversely, private

10AAR indexes measure changes in railroad inflation—for example, changes in the price level of inputs to
railroads operations, such as labor, fuel, and operating expenses.
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                   Train Operations: Opportunities Exist to Improve
                  Private Railcar Management and Business Practices
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       railcar owners who operate charter businesses take advantage of public interest
       in major events to run additional, high-priced trips for passengers that provide
       large revenue potential for owners. For example, the company sees a large
       increase in movements to New Orleans during the jazz festival in late April—
       51 percent more than the average monthly trips—but it does not change the
       prices it charges private railcar owners to reflect the increased demand. In one
       example, the company charged a private railcar owner its regular prices during
       the festival, which totaled $17,326. In contrast, the owner charged customers
       prices as high as $5,990 per bedroom—potentially grossing up to $59,900 at full
       capacity.

   •   Short-term parking. The company charges the same prices year-round for short-
       term parking at most stations, without considering shifting demand for its
       services. For example, Washington Union Station experiences an increase in
       demand for short-term parking during the city’s annual Cherry Blossom Festival,
       and private railcar owners advertise proximity to the National Mall as a key
       feature of the trip. Nevertheless, the company charged owners its standard price
       of $137 per night to park a railcar at Union Station. This is in contrast to several
       hotels near the National Mall, for example, that increased their prices on average
       from a standard price of $301 per night per room to $478 during the festival—a
       59 percent increase—due to the high demand for lodging.

   •   Ancillary services. The company’s prices for ancillary services—such as water,
       power, and ice—also do not reflect demand. The company provides these
       ancillary services for free, even though almost all private railcar owners request
       them. A senior management official told us that the company does not charge for
       these services because of the administrative burden of tracking each time the
       company provides them. However, this is contrary to the business practices that
       the company uses for pricing its charters and special trains, which factors in
       charges for these ancillary services.

The Company Did Not Establish Standard Operating Procedures or
Monitor Program Results
For most of the program’s history, the company did not require or ensure that staff
establish standard operating procedures consistent with effective program management
standards. The lack of these procedures led to revenue losses. Specifically, program staff
did not charge published prices consistently and did not charge at all for some
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                   Train Operations: Opportunities Exist to Improve
                  Private Railcar Management and Business Practices
                            OIG-A-2019-003, February 6, 2019

movements and ancillary services. For example, we reviewed a random sample of
3 percent of the company’s private railcar transactions from FY 2015 through FY 2017
and found that as a result of inconsistent billing practices, the company lost $46,100 in
revenue. In addition, program officials noted that Operations field staff may not have
reported any services they unilaterally provided to private railcar owners in addition to
those approved in the owners’ original request, such as power and switching.
Furthermore, program officials did not require or ensure that staff generate or monitor
regular financial and performance reports, such as profit and loss statements and
summaries of private railcar activities and transactions. Without this information,
program managers cannot effectively manage and oversee the financial performance
and operations of the program.

Limited Guidelines Pose Safety and Liability Risks
Until April 2018, the company did not have parking guidelines or permits to help
ensure safety for short- and long-term parking of private railcars at company facilities.
Company officials told us that the absence of guidelines and parking permits with
enforceable provisions posed safety and liability risks for the company such as the
following:
   •   A third-party contractor was seriously injured performing electrical work
       without the company’s permission on a private railcar while parked at a
       company railyard.
   •   Private railcar owners in Los Angeles performed unauthorized maintenance and
       repairs of private railcars, used company facilities for unauthorized filming
       purposes, and allowed private railcar passengers to cross live tracks.

In April 2018, the company developed parking guidelines for one facility and began
requiring private railcar owners to acknowledge receipt of the guidelines. In addition,
owners must sign parking permits requiring them to adhere to the guidelines.
Company officials stated that the intent of the guidelines and permits is to help mitigate
safety and liability risks by holding private railcar owners accountable for their actions.
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                    Train Operations: Opportunities Exist to Improve
                   Private Railcar Management and Business Practices
                             OIG-A-2019-003, February 6, 2019

The Company Has Begun to Take Actions to Address Some, But Not
All, Program Management Weaknesses Identified
Beginning in April 2018, during our review, the company initiated a number of actions
to address some, but not all, of the program management weaknesses that we
identified, including the following:

   •   Standard operating procedures. The company developed an initial set of
       standard operating procedures that address the responsibilities of the private
       railcar program staff. However, these procedures do not require the program to
       collect and report financial or performance data and do not include procedures
       for managing long-term parking. In addition, the procedures do not require
       Operations field staff to report any services they provide to private railcar
       owners in addition to those approved in the original request for services.

   •   Safety manual. The company drafted a safety manual for private railcar owners
       to abide by while in transit. However, as of January 28, 2019, the company had
       not yet finalized the manual.

   •   Guidelines for parking safety. The company established safety guidelines for
       private railcar owners parked at the Los Angeles railyard, which has the largest
       capacity for parking. The program manager stated that the company plans to
       establish these guidelines at other facilities; however, as of January 28, 2019, it
       had not done so.

   •   Long-term parking permits. The company began requiring private railcar
       owners to sign long-term parking permits that require owners to comply with all
       company rules, regulations, and directives.

   •   Other program changes. In November 2018, the company announced a number
       of other changes that became effective January 1, 2019, including (1) requiring a
       temporary permit for private railcar inspectors to enter and perform work on
       company property and (2) initiating a new process for disciplining private railcar
       owners who violate company terms and conditions for parking and movements.

In January 2018, the company appointed a new program manager for the private railcar
program who initiated many of these actions. However, in October 2018, the company
reassigned him and has not yet replaced him, which could compromise the company’s
ability to continue and sustain its efforts to improve the management of the program.
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                   Train Operations: Opportunities Exist to Improve
                  Private Railcar Management and Business Practices
                            OIG-A-2019-003, February 6, 2019

CONCLUSIONS
The company has taken recent actions to improve the management of its private railcar
program. However, the company cannot accurately assess and make informed
decisions about the program’s performance until it has better information on the
program’s costs, uses the information to inform its pricing decisions, and regularly
monitors these costs. Further, in the absence of standard operating procedures and
without fully implementing and enforcing safety guidelines and parking permits, the
company will continue to face potential financial losses and safety and liability risks to
its customers and employees.

RECOMMENDATIONS
To provide more effective governance and business practices for the program, we
recommend that the company take the following actions:

   1. The Executive Vice President / Chief Financial Officer direct the Vice President of
      Financial Planning and Analysis, in coordination with relevant Operations
      managers, to identify the costs of providing movement and long-term parking
      services, using such means as the company’s financial tool for charter and special
      trains and its cost accounting system.
   2. The Executive Vice President / Chief Commercial & Marketing Officer direct the
      Vice President for Product Development and Customer Experience, in
      coordination with relevant Operations managers, to factor these cost data into
      decisions on setting or adjusting prices for private railcar services.
   3. The Executive Vice President / Chief Operating Officer direct the Vice President
      for Transportation to take the following steps:
              a. Establish and begin to monitor regular financial and performance
                 reporting, including a profit and loss statement and summaries of
                 movements and long-term parking activities and transactions.
              b. Finalize and ensure implementation of standard operating procedures
                 for the program, including for billing and providing long-term
                 parking, and oversee staff implementation of the procedures.
              c. Develop and ensure implementation of guidelines and parking
                 permits for private railcar owners for all short- and long-term parking
                 facilities.
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                             Amtrak Office of Inspector General
                    Train Operations: Opportunities Exist to Improve
                   Private Railcar Management and Business Practices
                             OIG-A-2019-003, February 6, 2019

MANAGEMENT COMMENTS AND OIG ANALYSIS
In commenting on a draft of this report, the company’s Executive Vice President / COO
agreed with our recommendations and identified actions the company is taking or
plans to take to address the intent of our recommendations, as well as the planned
completion dates for these actions. The company’s planned actions are summarized
below:
   •   Recommendation 1: Management agreed with our recommendation to identify
       the costs of providing movement and long-term parking services. Management
       stated that a team of representatives from the Finance, Operations, and
       Commercial & Marketing departments will catalogue company activities related
       to private railcar movements and parking. The team will then use the company’s
       financial tools and cost accounting system to assign costs to each of these
       activities. The target completion date for these actions is March 31, 2019.

   •   Recommendation 2: Management agreed with our recommendation to factor
       cost data into decisions on setting or adjusting prices for private railcar services.
       Management stated that the company will use the results of its costing analysis
       to confirm that the pricing for each private railcar activity exceeds both the direct
       and fully allocated costs of performing that activity. The company will provide
       private railcar customers a minimum of 60 days’ notice for any price increases.
       Its next planned increases are expected no later than October 1, 2019, with notice
       no later than August 1, 2019.

   •   Recommendation 3a: Management agreed with our recommendation to
       establish and monitor regular financial and performance reporting, including a
       profit and loss statement, movement summaries, and long-term parking
       activities and transactions. Management stated that the senior manager for
       private railcars will provide monthly movement and revenue tracker reports to
       the Finance, Operations, and Commercial & Marketing departments. It also
       stated that Finance will develop a profit and loss statement using the private
       railcar cost analysis. The target completion date for these actions is June 30, 2019.
       Although management has identified planned actions to establish regular
       financial and performance reporting, it has not identified any specific actions for
       monitoring these reports. Accordingly, we believe the company should designate
       a senior-level accountable official—charged with the authority to provide
       effective oversight—to perform this task.
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                Train Operations: Opportunities Exist to Improve
               Private Railcar Management and Business Practices
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•   Recommendation 3b: Management agreed with our recommendation to finalize
    and ensure implementation of standard operating procedures for the private
    railcar program. Management stated it will implement standard operating
    procedures to ensure that all activities are reported and tracked. The target
    completion date for these actions is June 30, 2019.

•   Recommendation 3c: Management agreed with our recommendation to develop
    and ensure implementation of guidelines and parking permits for all private
    railcar parking facilities. Management stated that it drafted a safety manual to
    provide guidance to private railcar owners while on Amtrak property and will
    make the manual public once the Operations department has approved it. The
    target completion date for these actions is June 30, 2019.

For management’s complete response, see Appendix B.
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                               OIG-A-2019-003, February 6, 2019

                                          APPENDIX A

                         Objective, Scope, and Methodology
Our objectives were to assess the extent to which the company (1) is identifying and
billing private railcar owners for the costs associated with movement and long-term
parking services and (2) is effectively managing the program. Our audit focused on
movement and long-term parking services the company provided from FY 2015
through FY 2017, 11 as well as its overall management of the program through
November 2018. We performed our audit work from November 2017 through
November 2018 in Wilmington, Delaware; Philadelphia, Pennsylvania; Washington,
D.C.; and Los Angeles, California.

To assess the extent to which the company identifies and bills private railcar owners for
the costs of services it provides, we interviewed company personnel in the Operations,
Commercial & Marketing, and Finance departments to understand the services the
company provides to private railcar owners, the related costs, and the company’s
process for billing and pricing for these services. To assess the extent to which the
company identifies these costs and the basis for its prices, we also reviewed available
cost and price data for these services and company analyses of these data. To determine
whether the company is billing for the services it provides and their costs we selected a
sample of private railcar movement transactions from FY 2015 through FY 2017 (35 of
1,144 transactions, about 3 percent) and compared those to the company’s eTrax
database 12 and its SAP financial system.

To assess the extent to which the company is effectively managing the private railcar
program, we reviewed and analyzed the company’s policies and procedures governing
the program, including its operating and billing procedures. We also interviewed
company officials accountable for the oversight, management, and operations of the
private railcar program in the Operations and Finance departments to assess their
specific roles and responsibilities in implementing the policies and procedures. In
addition, we visited facilities in Los Angeles, California, and Washington, D.C., to
interview company personnel managing and providing private railcar services at these
locations and to observe the types of private railcar movement and short- and long-term


11 We selected these years because they allowed us to use the most complete data available during our
review.
12 eTrax contains financial and operational data on private railcar movement transactions.
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                            OIG-A-2019-003, February 6, 2019

parking services provided. To better understand the industry in general, we conducted
research of the private railcar industry and interviewed officials from private railcar
associations.

We conducted this performance audit in accordance with generally accepted
governmental auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.

Internal Controls
We reviewed the company’s policies and procedures to assess whether the company
had efficient and effective management controls over its movement and parking
services for private railcars. Specifically, we reviewed its policies and procedures for
identifying and billing for the costs of these services, managing customers’ requests for
services, and scheduling and providing the services. We also interviewed managers,
supervisors, and staff in the Operations department’s Charter and Special Movements
office and the Finance department to determine how they implemented these policies
and procedures. We did not review the program’s overall system of controls and
procedures.

Computer-Processed Data
To determine the scope, volume, and revenue of the company’s private railcar services,
we used data from the company’s eTrax database and SAP. To assess the accuracy and
reliability of these data, we interviewed company managers, performed tests and
analyses, and traced the data to source documents, including the company’s records of
customer requests, approved requests, and bills for private railcar movements from
FY 2015 through FY 2017. Based on these analyses, we determined that the data were
sufficiently reliable for the purposes of our audit.

Prior Audit Reports
We identified no prior audit reports related to the company’s private railcar program.
                                                    18
          Amtrak Office of Inspector General
 Train Operations: Opportunities Exist to Improve
Private Railcar Management and Business Practices
          OIG-A-2019-003, February 6, 2019

                APPENDIX B

         Management Comments
                                                    19
          Amtrak Office of Inspector General
 Train Operations: Opportunities Exist to Improve
Private Railcar Management and Business Practices
          OIG-A-2019-003, February 6, 2019
                                                    20
          Amtrak Office of Inspector General
 Train Operations: Opportunities Exist to Improve
Private Railcar Management and Business Practices
          OIG-A-2019-003, February 6, 2019
                                                                       21
                        Amtrak Office of Inspector General
               Train Operations: Opportunities Exist to Improve
              Private Railcar Management and Business Practices
                        OIG-A-2019-003, February 6, 2019

                              APPENDIX C

                     Acronyms and Abbreviations
AAR            Association of American Railroads

CEO            Chief Executive Officer

COO            Chief Operating Officer

COSO           Committee of Sponsoring Organizations of the
               Treadway Commission

FY             fiscal year

OIG            Amtrak Office of Inspector General

PRIIA          Passenger Rail Investment and Improvement Act of 2008

SAP            Systems Applications and Products

the company    Amtrak
                                                                      22
                            Amtrak Office of Inspector General
                   Train Operations: Opportunities Exist to Improve
                  Private Railcar Management and Business Practices
                            OIG-A-2019-003, February 6, 2019

                                     APPENDIX D

                                   OIG Team Members
Eileen Larence, Deputy Assistant Inspector General, Audits

David P. Bixler, Senior Director

Amber Keyser, Audit Manager

Andrew Mollohan, Auditor

Clare Shepherd, Auditor

Alison O’Neill, Communications Analyst
      OIG MISSION AND CONTACT INFORMATION
                                Mission
The Amtrak OIG’s mission is to provide independent, objective oversight
of Amtrak’s programs and operations through audits and investigations
focused on recommending improvements to Amtrak’s economy, efficiency,
and effectiveness; preventing and detecting fraud, waste, and abuse; and
providing Congress, Amtrak management, and Amtrak’s Board of
Directors with timely information about problems and deficiencies relating
to Amtrak’s programs and operations.



           Obtaining Copies of Reports and Testimony
              Available at our website www.amtrakoig.gov



                Reporting Fraud, Waste, and Abuse
        Report suspicious or illegal activities to the OIG Hotline
                      www.amtrakoig.gov/hotline
                                    or
                              800-468-5469



                         Contact Information
                              Stephen Lord
                   Assistant Inspector General Audits
                            Mail: Amtrak OIG
                         10 G Street NE, 3W-300
                         Washington, D.C. 20002
                           Phone: 202-906-4600
                   Email: Stephen.Lord@amtrakoig.gov