Intercity Passenger Rail:

Amtrak Needs to Improve Its Accountability for Taxpayer Relief Act Funds

RCED/AIMD-00-78: Published: Feb 29, 2000. Publicly Released: Mar 6, 2000.

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Pursuant to a congressional request, GAO reviewed the National Railroad Passenger Corporation's (Amtrak) use of funds, focusing on: (1) how much Amtrak has spent in Taxpayer Relief Act (TRA) funds and what types of activities it has funded; (2) whether Amtrak has used TRA funds in accordance with the act; (3) what the roles of the Amtrak Reform Council and the Internal Revenue Service (IRS) have been in monitoring Amtrak's use of TRA funds; and (4) whether Amtrak fully reports its use of TRA funds.

GAO noted that: (1) through June 1999, Amtrak reported that it had spent about $1.3 billion of the $2.2 billion provided under the TRA act; (2) nearly two-thirds of TRA funds spent was for capital improvements, including nearly $400 million for Amtrak's high-speed rail program; (3) about one-third of these funds was spent for equipment maintenance expenses; (4) an additional $48 million was spent on servicing debt; (5) GAO reviewed 20 expenditures associated with all of Amtrak's TRA capital improvement projects; (6) GAO also reviewed 3 expenditures of TRA funds for reimbursement of expenditures that Amtrak incurred and paid before the passage of the act; (7) of the 23 Amtrak expenditures funded through the act that GAO reviewed, 18 were consistent with the act; (8) these 18 expenditures were reasonably related to the acquisition of capital improvements in intercity passenger rail service and were therefore eligible for TRA funding; (9) GAO could not determine whether 2 of the 23 expenditures were eligible under the act because it was unclear whether portions of the project to which they were charged were eligible for TRA funding; (10) GAO found that the 3 remaining expenditures were not eligible for TRA funds; (11) GAO determined that Amtrak improperly used $9 million in TRA funding for these 3 expenditures because it erroneously concluded that the act's restrictions did not apply to them; (12) in each of these 3 cases, Amtrak used TRA funds to reimburse itself for expenses that it had incurred and paid prior to the act; (13) Amtrak asked the IRS to determine whether these 5 expenditures are qualified for funding under the act; (14) the Council has not yet monitored Amtrak's use of TRA funds, and the IRS has not yet examined Amtrak's tax returns on the use of these funds; (15) the Council has not made quarterly reports to Congress on Amtrak's use of TRA funds, as required by the Amtrak Reform and Accountability Act of 1997; (16) Council officials stated that budget and staff constraints have limited the Council's ability to review Amtrak's use of TRA funds, and the Council chose not to undertake any examination of spending under the act while GAO was completing its review; (17) Amtrak's quarterly reports to the Council on its use of TRA funds do not fully disclose the extent to which Amtrak has used these funds for equipment maintenance; and (18) as a result, these reports are less useful than they could be in helping the Council comply with its responsibility to monitor the use of TRA funds.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: According to Amtrak, to date there have been no specific internal control reviews related to its use of Taxpayer Relief Act (TRA) funds. However, as part of the annual audit of Amtrak's financial statements, Amtrak's external auditor (KPMG), in 2000 and 2001, reviewed internal controls for Amtrak's overall use of capital funds, including funds provided by TRA. This review was designed to, among other things, ensure Amtrak's compliance with generally accepted accounting principles and to address general corporate concerns regarding proper capitalization of project expenditures. In response to KPMG's review, Amtrak has issued additional guidelines on the capitalization of project expenditures, and conducted multi-day project manager training sessions on expenditure capitalization issues. These actions meet the general intent of GAO's recommendation.

    Recommendation: To better ensure that TRA funds are spent in accordance with the act, the President of Amtrak should have the Corporation's Inspector General, in consultation with the Corporation's external auditor, review the adequacy of Amtrak's internal controls over TRA funds. If Amtrak finds that internal controls need to be strengthened, appropriate actions should be taken.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  2. Status: Closed - Implemented

    Comments: In February 2000, Amtrak's Inspector General engaged the Corporation's external auditor to review Amtrak's compliance with Taxpayer Relief Act (TRA) spending requirements, including identifying reimbursement of expenses incurred and paid prior to the act. This review focused on Amtrak's expenditure of about $200 million of TRA funds associated with Amtrak's fiscal year 1998 capital spending plan. In August 2000, the external auditor reported that, although it found some expenditures that did not appear to qualify for TRA funding based on project descriptions, the auditor did not find any expenditures paid prior to the act. In 2001, at the request of Amtrak, the Internal Revenue Service (IRS) also began an independent review of Amtrak's spending of TRA funds. In June 2002, IRS reported that, although it questioned about $170 million in TRA expenditures, Amtrak had spent more than the amount required on expenses that would be TRA qualified, and Amtrak therefore had fulfilled the requirements of the act. Both reviews meet the intent of this recommendation which was to determine whether Amtrak's spending of TRA funds was in accordance with the law.

    Recommendation: The President of Amtrak should direct the Corporation's Inspector General to determine whether Amtrak has used TRA funds to reimburse itself for other expenses incurred and paid prior to the act. The Inspector General should then refer any such expenditures to the Commissioner of Internal Revenue for a determination of the propriety of these reimbursements.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  3. Status: Closed - Implemented

    Comments: Beginning with the report for the quarter ending December 31, 1999, Amtrak began disclosing that Taxpayer Relief Act funds transferred to its general cash account and not used for capital improvements were instead considered reimbursements of equipment maintenance expenses. This disclosure is consistent with the intent of this recommendation.

    Recommendation: To ensure more accurate reporting on the use of TRA funds to the Council and the IRS, Amtrak should disclose in its quarterly reports to the Council when funds transferred to Amtrak's general cash account for capital improvement projects are instead applied to equipment maintenance expenses.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

 

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