• Amtrak Accounting Practices

  • Discussion related to Amtrak also known as the National Railroad Passenger Corp.
Discussion related to Amtrak also known as the National Railroad Passenger Corp.

Moderators: GirlOnTheTrain, mtuandrew, Tadman

  by Arlington
 
...another Railway Age article in which Andrew Seldon wants us to believe him and not Ernst & Young and repeats the claim that Amtrak accounting is not GAAP,
https://www.railwayage.com/news/amtraks ... rtunities/
  by rcthompson04
 
Arlington wrote: Tue Oct 08, 2019 5:55 am ...another Railway Age article in which Andrew Seldon wants us to believe him and not Ernst & Young and repeats the claim that Amtrak accounting is not GAAP,
https://www.railwayage.com/news/amtraks ... rtunities/
Insert eye rolling emoji... this article is anecdotal evidence on top of anecdotal bits of information.
  by gokeefe
 
The thing about that article that really bothers me is doing yield analysis without access to the real data. I agree ... It's all anecdotal at best.
  by David Benton
 
There is a confusion between 2 issues.
I don't think anyone is suggesting Amtrak is not using correct accounting practices , as confirmed by the auditors.
The questioning is around the allocation of expenses between business units ( mainly the LD been saddled with more than its fair share of expenses because it is politically able to "wear" them.
When you look at over $ 100M of expenses against the train like the Empire Builder, then I think there is good reason to be skeptical. Again , not suggesting Amtrak is doing anything wrong , or that such practices don't also happen in many govt organisations , or even Businesses.
  by rcthompson04
 
David Benton wrote: Tue Oct 08, 2019 11:26 pm There is a confusion between 2 issues.
I don't think anyone is suggesting Amtrak is not using correct accounting practices , as confirmed by the auditors.
The questioning is around the allocation of expenses between business units ( mainly the LD been saddled with more than its fair share of expenses because it is politically able to "wear" them.
When you look at over $ 100M of expenses against the train like the Empire Builder, then I think there is good reason to be skeptical. Again , not suggesting Amtrak is doing anything wrong , or that such practices don't also happen in many govt organisations , or even Businesses.
Businesses often allocate costs the same way because it is nearly impossible to allocate some expenses on a granular level. The most common is allocation of IT expenses. Rarely are IT costs allocated down to the level of a mouse or keyboard. There might be a general cost for each employee's work station, but that is a generalized cost not really tied to what the employee does with it.

The level of detail they are demanding is not expected or proper under GAAP. People would be filling out paperwork all day if they did and be expected to know hundreds of cost centers. There are clear statements that the accounting is not in accordance with GAAP. If Railway Age feels so passionately about it, they should report the auditor to the appropriate regulator for review of their professional credentials.
  by Tadman
 
That's a good point. How do you properly allocate IT costs? Per ticket sold? Train mile traveled? Passenger-mile?

Ticket sold strikes me as a good idea, because most of the IT costs are in processing the sale. But we don't know that's how they do it. They might do it by train mile, which would make no sense but would help management support their claim that the LD is not profitable.

____

Another controversy is that the NEC has an operating profit, but this largely ignores the infrastructure costs. LD proponents argue that this actually supports LD's because BNSF or NS is footing the cost for most of the track under 49 or 3, while Amtrak/feds must support the track under Acela.

That makes sense until one considers that BNSF et al charge Amtrak far less than market rate for a 79mph track slot. At the end of the day it seems there is funny money accounting for track slots on either end of the business.
  by mtuandrew
 
The solution of course is to run more trains on LD routes :P which reduces the per-train and presumably the per-passenger cost of fixed facilities like stations and crew bases, with a more modest increase in operational cost. I also wonder if Amtrak is allocating the cost of the new Siemens Charger LD engines to the off-corridor trains exclusively, which would raise the loss for those routes.
  by Gilbert B Norman
 
Discussion here of Amtrak accounting relating to the latest Selden diatribe in Railway Age, shows to this Retired CPA a high level of understanding to both sides of the issue.

Over at another site at which I now only read, their regulars enjoy saying how Amtrak accounting is non-GAAP compliant and is "fraudulent" (LD'are break even to profitable).

Let's consider Mr. Thompson's thoughts on the depths to which Responsibility Accounting is taken. It's a simple fact that when such a system in any entity is tsken the level of which RESLOC (Amtrak's term) to charge a new computer mouse to is simply cost ineffective. Sure, there are deficiencies such as Amtrak charging snow removal costs against stations in Florida, but is that the difference whether the Meteor and Star become profitable?

Uh, not likely.

I remember how on the MILW, Internal Audit was always taking issue with how the Mechanical Department was simply allocating Shop employees with pre allocated time sheets. I can recall at a conference (at which I was simply "wallpaper"), how the CMO told us that he would lose production efficiency if every time an Electrician moved from one locomotive to another, he had to stop and record such. In the end, it would simply be immaterial.

There is a fellow over at another site that knew Mr. Selden through Sunday School. He has noted how "Andy was the smartest kid in the room". Now if such be the case, it is time for him to recognize that LD's (Interregional seems to be his new buzzword) are simply hopeless losers and whatever "essential" transportation they provide can be provided more economically by other modes, and without interfering with the efficient movement of commerce.
  by ExCon90
 
Apparently there is a tipping point at which the cost of allocating exceeds any benefit achieved. Imagine legions of employees throughout a company diligently dividing their workday into 12-minute segments and carefully allocating each segment to the proper cost center: they'd spend more time doing that than on productive work*. I suppose a subjective decision has to be made as to when that tipping point is reached.
* I'm sure I've read of instances where that has actually been done.
  by JoeG
 
I have had several jobs where we were supposed to allocate our time into small intervals, often 6 minutes. What happened universally was that everyone just made up the numbers to add up to 8 hours a day. No one ever questioned the numbers except if you made a mistake and the numbers didn't add up to 8 hours. Then, in my college days I worked for a while at the main post office in NY. You got a ticket for each tray you sorted, and it wasn't hard to meet the quota. Some people had trouble meeting the quota. Usually they just swiped tickets and handed them in as their own. The most inept guys just took trays of unsorted mail and labeled them as sorted to some random destination. I suspect that went on enough so eventually management scrapped the system.
I guess the point of this is that overly onerous allocation systems will be evaded. A company needs an allocation system that will actually reflect reality. I would also suspect too many significant figures in any published allocation numbers.
  by rcthompson04
 
Gilbert B Norman wrote: Wed Oct 09, 2019 11:07 am Discussion here of Amtrak accounting relating to the latest Selden diatribe in Railway Age, shows to this Retired CPA a high level of understanding to both sides of the issue.

Over at another site at which I now only read, their regulars enjoy saying how Amtrak accounting is non-GAAP compliant and is "fraudulent" (LD'are break even to profitable).

Let's consider Mr. Thompson's thoughts on the depths to which Responsibility Accounting is taken. It's a simple fact that when such a system in any entity is tsken the level of which RESLOC (Amtrak's term) to charge a new computer mouse to is simply cost ineffective. Sure, there are deficiencies such as Amtrak charging snow removal costs against stations in Florida, but is that the difference whether the Meteor and Star become profitable?

Uh, not likely.

I remember how on the MILW, Internal Audit was always taking issue with how the Mechanical Department was simply allocating Shop employees with pre allocated time sheets. I can recall at a conference (at which I was simply "wallpaper"), how the CMO told us that he would lose production efficiency if every time an Electrician moved from one locomotive to another, he had to stop and record such. In the end, it would simply be immaterial.

There is a fellow over at another site that knew Mr. Selden through Sunday School. He has noted how "Andy was the smartest kid in the room". Now if such be the case, it is time for him to recognize that LD's (Interregional seems to be his new buzzword) are simply hopeless losers and whatever "essential" transportation they provide can be provided more economically by other modes, and without interfering with the efficient movement of commerce.
There are some costs that likely go the other way in the case of snow removal in Miami. I would imagine Harrisburg does not need year round landscaping, which Miami almost certainly would need. I wonder if Harrisburg has such an allocation.
  by Tadman
 
JoeG wrote: Wed Oct 09, 2019 8:11 pm I have had several jobs where we were supposed to allocate our time into small intervals, often 6 minutes. What happened universally was that everyone just made up the numbers to add up to 8 hours a day. No one ever questioned the numbers except if you made a mistake and the numbers didn't add up to 8 hours. Then, in my college days I worked for a while at the main post office in NY. You got a ticket for each tray you sorted, and it wasn't hard to meet the quota. Some people had trouble meeting the quota. Usually they just swiped tickets and handed them in as their own. The most inept guys just took trays of unsorted mail and labeled them as sorted to some random destination. I suspect that went on enough so eventually management scrapped the system.
I guess the point of this is that overly onerous allocation systems will be evaded. A company needs an allocation system that will actually reflect reality. I would also suspect too many significant figures in any published allocation numbers.
Totally agreed.

I know a lot of lawyers (I am one but do not practice) and they do not allocate their time by 6 or 15 minutes, more like by the hour. Ergo, if they call their wife or hit the bathroom, it's on someone's tab. When I worked at a factory in college, it was much like the postal example above. I need to allocate 8 hours of my day... well I walked past projects 1, 3, 7, 24, and 14, so that goes on my time sheet. We all knew it was bunkos and so did management, but it was a "pick your battles" situation and as long as one project wasn't totally out of whack, nobody got in trouble. Problem was when one 40 hour project turned into 200 hours, the big boss was on the floor asking who screwed up, and let him see the rework. "uh, there is none, we just kept shovelling hours to project 24 cos we're idiots"...

Which leads back to Amtrak: It's good that they're keeping track of operating profits. But it would be really nice to know the real cost of running a 79mph slot with hourly stops, not just the "we do it because we have to" rate that BN gives Amtrak. It would also be nice to know the real cost of running an Acela or NER. It could take a long time and there are probably three different ways to do it.

For example, because the NEC would still run with or without Acela, should any NEC costs below-rail go to Acela? They'd sure still run regionals and NJT, and did for 30 years before Acela showed up. I'm not advocating this line of logic, just pointing out that it is there and could be argued, leading to a long process that likely not everybody is happy with.
  by eolesen
 
Tadman wrote: Wed Oct 09, 2019 9:23 am That's a good point. How do you properly allocate IT costs? Per ticket sold? Train mile traveled? Passenger-mile?

Ticket sold strikes me as a good idea, because most of the IT costs are in processing the sale. But we don't know that's how they do it. They might do it by train mile, which would make no sense but would help management support their claim that the LD is not profitable.
Allocation model for airline IT depends on the system.

Core selling systems like the website, ticketing, inventory control, availability to offline systems are usually measured on a per transaction cost.

Systems required to support each departure (onboard wifi, boarding control) are costed out based on passengers boarded because you could have a one to many relationship depending on how many trains a single traveler was taking.

Core operations management systems like flight planning, fuel, and weight/balance are per departure because again it's tied to the movement and not the number of passengers onboard.
  by east point
 
Had much thought about reservations costs. On line costs would seem to be same for any single leg trip. Where it gets complicated is how long a potential passenger takes for him to complete the transaction. Then you have the persons htat need or have to contact an agent to complete a reservation or modify it. A smart system could average the time spent for each route and use that number for allocating IT for that train.
Station costs are of course different.
  by Arlington
 
People--staff & maintenance costs are the only *cost* large enough to swing routes in/out of profitability via scale per passenger.

Right of way costs for LDs are significant (in the $200m/yr -$400m/yr if I remember correctly), but all indications are that this is a fair price or even a bargain. The problem is that if you double the number of LDS the right-of-way costs would double getting you no economies of scale.

Equipment costs also double if you were to double the LDs.

The problem for the LDS is that lack of demand keeps them from being scaled profitably.

Doubling frequencies would double every major cost (station costs along the route are minor) but revenues would almost certainly less than double--increasing losses.