Alaska Railroad:

Federal Role Should End; Some Management Problems Remain

CED-82-9: Published: Feb 25, 1982. Publicly Released: Feb 25, 1982.

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Because of pervasive weaknesses in the management of the Alaska Railroad and recent congressional interest, GAO re-examined the question of the Railroad's ownership.

The major factors supporting the Federal Government's ownership role in the Alaska Railroad, such as national defense needs, Alaska's territorial status, extensive Federal land ownership, and Federal responsibility for economic development, have all changed considerably since the Railroad's construction. Federal ownership of the Railroad now conflicts with or inhibits actions needed to improve its profitability. Development of other transportation modes has made the Railroad one of several acceptable transportation alternatives rather than the only practical source in the area which it serves. Military defense of some sections of the Railroad would also be impossible. If the Railroad's land was transferred from Federal ownership, it would no longer be subject to claims by Native corporations to Government lands. Also, as a Federal agency, the Railroad has been limited in its ability to fully exploit business opportunities due to personnel management restraints and difficulty in obtaining capital for expansion. There have been many serious problems in the Railroad's management, including many financial and control weaknesses, inadequate marketing efforts and cost information on which to base marketing decisions, and unreasonably low rental rates for Railroad property leased to other parties. Railroad management has attempted to correct most of the financial and control weaknesses and has improved its rental rate policy; however, management's efforts have not been completely effective. An effective internal audit and review function for the Railroad has not been instituted.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: When we determine what steps the Congress has taken, we will provide updated information.

    Matter: Congress should enact legislation leading to termination of the Federal Government's ownership and operation of the Alaska Railroad.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: On July 12, 1984, the Department of Transportation announced that the state of Alaska had agreed to purchase the Alaska Railroad from the federal government. Thus, this recommendation no longer applies because ownership of the railroad will be transferred to the state of Alaska in January 1985.

    Recommendation: The Secretary of Transportation should institute a plan for periodic, independent financial audits of the Alaska Railroad's operations as well as other comprehensive audits necessary to identify and follow up on management problems.

    Agency Affected: Department of Transportation

 

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