Transportation:

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

GAO-05-893R: Published: Jul 11, 2005. Publicly Released: Jul 11, 2005.

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On June 9, 2005, GAO testified before the Subcommittee on Railroads, House Committee on Transportation and Infrastructure at a hearing on "Amtrak Food and Beverage Operations." This letter responds to a Congressional request that we provide answers to questions for the record.

GAO found 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. 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 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. 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. 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 parties. 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. 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. 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.

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