This is the accessible text file for GAO report number GAO-05-893R 
entitled 'Questions for the Record Related to Amtrak's Food and 
Beverage Service' which was released on July 13, 2005.

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

July 11, 2005:

The Honorable Don Young:
Committee on Transportation and Infrastructure:
House of Representatives:

Subject: Questions for the Record Related to Amtrak's Food and Beverage 

On June 9, 2005, I testified before the Subcommittee on Railroads at a 
hearing on "Amtrak Food and Beverage Operations."[Footnote 1] This 
letter responds to your request that I provide answers to questions for 
the record. The questions, along with my responses, follow.

1. Amtrak stated that it has used its Office of Inspector General to 
audit Amtrak's food and beverage operations and that GAO did not 
recognize this fact. Why does GAO think that additional information is 
useful to supplement the Inspector General's food and beverage report 
on Amtrak's food and beverage operations?

In our testimony, we stated that Amtrak has not required the food and 
beverage contractor to submit the contractually required and 
independently audited annual report of budget variances for key line 
items. An audit of such a report could detect improper payments to the 
contractor. We also stated that Amtrak has never had an audit conducted 
of the discounts and rebates credited to it by Gate Gourmet 
International, even though such an audit is allowed under their 
contract. An audit of the purchase data could determine whether the 
contractor is appropriately passing along applicable rebates and 
discounts to Amtrak.

Amtrak's statement that we did not recognize that the Office of 
Inspector General (OIG) has been used to audit the food and beverage 
operations is inaccurate. In the course of our work, we reviewed OIG 
reports on certain aspects of Amtrak's food and beverage operations. 
However, we do not believe that the past work of the OIG should be 
viewed by Amtrak as a substitute for a comprehensive internal control 
program. Internal control should be a continuous built-in component of 
operations that, among other things, considers the results of audits 
and ensures prompt resolution. This is especially critical in an 
operational area where Amtrak is losing considerable money. In 
addition, upon reviewing the OIG's work we found that:

certain scope limitations existed. For example, the Amtrak OIG noted in 
its report on the food and beverage contract to Amtrak management that 
its work in this area has been limited due to the contractor's failure 
to provide certain requested information and documentation.

2. Amtrak maintains that food and beverage product rebates go directly 
to Amtrak and not through Gate Gourmet. Has Amtrak implemented 
processes to ensure that it is getting all of the discounts and rebates 
on food and beverage items purchased by Gate Gourmet for Amtrak?

Amtrak has not implemented processes to ensure that rebates and 
discounts received directly from suppliers or indirectly through its 
contractor are accurate and complete. As Amtrak officials explained, 
the majority of rebates are received directly from suppliers. However, 
no formal procedures have been established to review and verify the 
amount of rebates and discounts actually received from the suppliers or 
to determine whether there are other rebates and discounts that Amtrak 
may be entitled to receive from the contractor. Although the contract 
allowed Amtrak to audit the contractor's allocations of rebates and 
discounts, Amtrak never required such an audit and never required that 
the contractor certify that all discounts due to Amtrak were credited 
to its account.

3. Amtrak maintains that it closely monitors food and beverage purchase 
prices charged to Amtrak by Gate Gourmet - on a daily basis. Why does 
GAO believe that Amtrak does not adequately monitor its purchase price 
information for food and beverage items purchased by Gate Gourmet?

According to Amtrak's senior director of food and beverage services, 
price reports are distributed to each of its commissaries on a daily 
basis. These daily reports list the quantity, unit size, cost and last 
prior purchase of the previous day's purchases. However, Amtrak has not 
established procedures to ensure that all of the daily report reviews 
are conducted timely and in a consistent manner, that errors or other 
issues that are identified are documented and tracked, and that 
corrective actions taken are documented to ensure completion. In 
addition, these daily price reports are limited to detecting errors or 
unacceptable purchase prices after the goods are received. More 
preventive control procedures, such as the monitoring of order prices 
could assist in avoiding the varying range in unit prices we found in 
purchase order and payment data. Furthermore, Amtrak has not enforced 
key contract provisions, such as requiring an independently audited 
annual report, auditing the amount of rebates received from the 
contractor, and creating contractor performance standards, which has 
weakened its ability to prevent and detect improper payments for food 
and beverage services.

4. Amtrak says that it did not pay the prices GAO cites in its 
statement for Heineken beer and that the prices paid for strip steak 
were paid only for two emergency purchases in the retail market. How 
does GAO respond to this and what evidence does GAO have that Amtrak 
did pay these prices?

Based on information provided to us by Amtrak on June 29, 2005, it 
appears that Amtrak (1) received and paid for 10 half-kegs of Heineken 
beer ($94.50 per half-keg) and not 10 cases of 12 ounce bottles of 
Heineken beer ($3.93 per bottle) as we testified based on information 
then available to us; and (2) Amtrak received and paid as high as $7.58 
per 10 ounce portion for strip steak that was not documented as an 
emergency purchase.

Purchase order and payment support provided to us by Amtrak's 
contractor in March 2005 with copies of all such documentation provided 
to Amtrak concurrently show that Amtrak ordered 12 ounce bottles of 
Heineken beer and received and paid $3.93 per bottle for the beer. 
However, based on information Amtrak provided to us after our June 9, 
2005 testimony it appears that Amtrak paid $945 to purchase 10 half- 
kegs of Heineken beer, rather than 10 cases as indicated on the 
original documentation provided to us and to Amtrak officials by the 
contractor. While we provided Amtrak the Heineken beer purchase example 
14 days before the hearing and discussed the Heineken beer purchase in 
considerable detail with Amtrak officials before the testimony, it was 
not until over a month after the example was provided to Amtrak and 
twenty days after the testimony that we received the additional 
documentation that supports Amtrak's assertion regarding a data entry 
error and subsequent correction. In addition, Amtrak officials 
testified that the strip steak examples were "emergency purchases." 
However, following our request for documentation to support this claim 
an Amtrak official told us on June 29, 2005 that documentation to 
support the assertion that these were emergency purchases does not 
exist. The establishment of internal control procedures that ensure the 
documentation of the identification and correction of errors and 
approval for emergency purchases would ensure that adequate 
documentation is readily available for review by internal and external 

5. Amtrak maintains that its food and beverage revenues cover the costs 
of food and beverage service. However, GAO and Amtrak's Inspector 
General state that Amtrak loses about $2 for every $1 on food and 
beverage operations. How does GAO explain the difference?

The information provided by GAO and the Amtrak OIG included the labor 
costs for Amtrak employees on-board the trains delivering the food and 
beverages. These costs totaled more than $256 million for the 3-year 
period fiscal years 2002 through 2004. For fiscal years 2002 through 
2004, Amtrak's food and beverage expenses, including Amtrak employee 
labor cost, totaled about $487 million while Amtrak's food and beverage 
service earned about $243 million in revenue. This means that Amtrak 
spent about $2 to earn $1 in food and beverage revenue. Section 
24305(c)(4) of title 49, United States Code provides that Amtrak may 
provide food and beverage services on its trains only if revenues from 
the services each year at least equal the cost of providing the 
services. What is to be included as cost is not defined. During the 
testimony, the Amtrak witness explained that their understanding of 
this provision was that the cost to be considered included only the 
cost of the food and commissary operations. Hence, Amtrak did not 
consider the Amtrak employee labor costs of providing the on-board 
service in their analysis of the food and beverage operations.

6. Amtrak noted that its food and beverage expenditures per passenger 
and its food costs have decreased as its ridership has increased. How 
have Amtrak's total costs for food and beverage service changed in 
relation to Amtrak's recent increases in both ridership and passenger 
revenue miles?

Amtrak's total food and beverage expenditures decreased per rider by 
7.7 percent and decreased per passenger revenue mile by 1.9 percent 
from fiscal year 2002 to fiscal year 2004.[Footnote 2] However, due to 
reductions in Amtrak's food and beverage revenues, Amtrak's profit/loss 
results per passenger and per passenger revenue mile on trains with 
food and beverage service are mixed. While Amtrak reduced its food and 
beverage loss per passenger by 3.5 percent from fiscal year 2002 to 
2004, its food and beverage loss increased per passenger revenue mile 
by 2.4 percent over the same period.

7. Amtrak has called GAO's evaluation process, especially how GAO 
solicited and used Amtrak's comments on the draft version of its 
testimony, into question. What is GAO's process for soliciting and 
utilizing outside comments on its testimony? Did GAO deviate from those 
processes in creating its June 9 testimony to this Committee? If so, 
why did GAO deviate from those processes?

It is GAO's policy to obtain the views of agency officials for GAO 
testimony statements that are based on either new or ongoing work to 
validate the accuracy of the data gathered and obtain the agency's 
views on the implications that flow from that data. The comments can be 
obtained either orally, via teleconference or in person, or in written 
form. The amount of time available for agency comments is determined on 
a facts-and-circumstances basis, considering a number of variables 
including the timing needs of the requester.

GAO did not deviate from these processes in preparation for the June 9 
testimony. GAO sent a draft of its testimony statement to Amtrak for 
their comments on June 6 and held a three-hour teleconference with 
senior Amtrak officials on June 7 to obtain their comments. 
Subsequently, we made changes to our statement based on the oral 
comments we received. Prior to the hearing, we asked Amtrak to provide 
evidence on their food and beverage operations to support their 
assertion that our facts - which were based on Amtrak and contractor 
documents - were incorrect. However, even though Amtrak made statements 
during the hearing based on additional documentation, they chose not to 
share that documentation with us until 20 days after the hearing.


[1] GAO, Amtrak: Management and Accountability Issues Contribute to 
Unprofitability of Food and Beverage Service, GAO-05-761T (Washington, 
D.C.: Jun. 9, 2005).

[2] While these calculations used total Amtrak riders and total Amtrak 
passenger revenue miles, not all Amtrak trains have food and beverage 
service. The trend for revenues and expenditures per rider for Amtrak's 
total ridership on trains with food and beverage service followed the 
same pattern as the statistics cited above for ridership on all Amtrak