Trains Article on Amtrak's accounting

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Re: Trains Article on Amtrak's accounting

Postby Tadman » Thu Dec 27, 2018 3:01 pm

David Benton wrote:Great post ,Tadman. Only one thing I would query,my memory is That Warrington etc were responding to legislation, requiring Amtrak to achieve operational self sufficiency by a certain date. The date came, Warrington departed , and the "goal'' quietly went away. Certainly, Gunn would have none of it anyway.


Thanks. I agree that Downs and Warrington were working within that legislation. One thing that's interesting there - what would happen if they didn't follow that legislative mandate? You can't send them to jail, it's not a criminal activity. So you have to look at the chain of command. Managers are elected by the board, who is appointed by congress. The board can fire the managers that are not performing, and the congress can replace board members that don't have the guts to fire managers, but it's not a direct chain of command that can change direction tomorrow.
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Re: Trains Article on Amtrak's accounting

Postby Suburban Station » Fri Dec 28, 2018 2:18 pm

David Benton wrote:Great post ,Tadman. Only one thing I would query,my memory is That Warrington etc were responding to legislation, requiring Amtrak to achieve operational self sufficiency by a certain date. The date came, Warrington departed , and the "goal'' quietly went away. Certainly, Gunn would have none of it anyway.

Warrington played fast and loose with accounting rules and eventually had to mortgage penn station to meet payroll. Projects were rolled out without a haphazardly (Express) and gunn was brought in to clean up the mess. That said warrington was right on the acela.
In reading the article it is mostly smoke and mirrors. Is amtrak really allocating zero track maintenance costs to the acela? Seems unlikely. Most of the mistakes mentioned are minor, like snow removal in miami, used to undermine confidence in the overall financials without providing a smoking gun that would cover half a billion in losses. Long distance trains have good load factors because they are sized to demand which means cars are sidelined in winter months but anyone with a reasonable understanding of finances can see the employee customer ratio is extremely unfavorable. Airlines dont fly full service restaurants around the world for a reason...and last we forget amtrak is mandated to eliminate food losses by Congress.
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Re: Trains Article on Amtrak's accounting

Postby jp1822 » Fri Dec 28, 2018 11:29 pm

Warrington (and Downs) were trying to get expenses OFF the profit and loss statement and moved to the Balance Sheet so they could be capitalized. Then instead of taking the expense hit all in ONE year, they could spread out the cost/expense hit over many years (based on the capitalization policy that was adopted. I hate to use the word creative accounting, but this was a form of creative accounting.....they did write up th policy and rules for how they would treat this type of expense. Sometimes CFO’s and even auditors would just write up a “white paper” or narrative to justify accounting treatment and poof, it became believable and OK. But as Tasman and I have also mentioned - the audit firm has to be in agreement of this!!!!!!

Even cost -accounting, which is at the heart of some of Amtrak’s accounting, is an art because - HOW do you allocate all these different costs over the profit and loss statement - hence activity based accounting.....

Gunn did re-program a lot of Warrington and Downs’ creativity of moving things from the Profit and Loss Statement to the Balance Sheet.......but that was also after the bluff was called - glide path to self-sufficiency was NOT going to happen! And something can also look profitable that is also cash poor or even broke - hence the mortgaging of Penn Station and hocking nearly all the rail equipment on lease-back arrangements. OIG and Congress should have intervened when assets (real estate and passenger equipment) started to be put in financial jeopardy on paper with banks.....
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Re: Trains Article on Amtrak's accounting

Postby mtuandrew » Sat Dec 29, 2018 11:25 am

A Midwestern state’s 2015 privatization of equipment and food service on an Amtrak state-supported route ended when the private service provider sought increased subsidies after only 17 months.


Ouch, just spit in Indiana’s eye while you’re at it :wink:

Amtrak will obviously sell itself in a positive light, but this op-ed by VP Gardner (obviously vetted by Anderson too) speaks a lot of truth to the privatization mavens. I do wish he would have addressed LD service and particularly finances though, which has no proper comparison (a public corporation on private rails, running between 1/2 and 3x daily) except perhaps in Canada.
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Re: Trains Article on Amtrak's accounting

Postby Gilbert B Norman » Sat Dec 29, 2018 11:27 am

I'm still awaiting my January TRAINS so I can read the article. Clambake has said they will reship; what class of mail I know not.

But in the meantime, I think fellow CPA JP has set forth the limitations of both audited Financial Statements and any Responsibility System. Although Generally Accepted Auditing Standards (GAAS) has required greater review of Internal Control procedures, that review is mainly focused towards safeguarding assets, i.e. Tillie walking off with the Petty Cash box.
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Re: Trains Article on Amtrak's accounting

Postby Suburban Station » Sun Dec 30, 2018 11:18 am

mtuandrew wrote:
A Midwestern state’s 2015 privatization of equipment and food service on an Amtrak state-supported route ended when the private service provider sought increased subsidies after only 17 months.


Ouch, just spit in Indiana’s eye while you’re at it :wink:

Amtrak will obviously sell itself in a positive light, but this op-ed by VP Gardner (obviously vetted by Anderson too) speaks a lot of truth to the privatization mavens. I do wish he would have addressed LD service and particularly finances though, which has no proper comparison (a public corporation on private rails, running between 1/2 and 3x daily) except perhaps in Canada.

ultimately it comes down to money. whether Amtrak or some private entity runs it, the system requires a great deal more capital investment than it receives. The national network is even more capital starved than the NEC and requires several times the amount the NEC requires and that is going to be the case regardless of who operates the trains. If long distance ran on time and with better average speeds they would lose dramatically less money per passenger. many short distance routes would hardly require operating subsidies at all. in my view, claiming Amtrak is cooking the books and somehow misstating the losses on the long distance network is counterproductive. when trains can't be counted on to be on time you have fewer passengers, more staff, and require more equipment to provide the same amount of service..and that doesn't take into account actually improving the service.
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Re: Trains Article on Amtrak's accounting

Postby BmSmall14 » Mon Jan 07, 2019 4:00 pm

On Amtrak trains that I’ve been over the last couple of days, I have heard Amtrak employees mentioning that Anderson is out come April. If this is true could this be a parting of the ways due to 1) the questionable handling of accounting and finances 2) alienating the long distance people and the private car people 3) wasn’t getting the results the board expectations or 4) Amtrak is to difficult of a job for a guy who can be retired and doesn’t need to deal with these headaches?
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Re: Trains Article on Amtrak's accounting

Postby eolesen » Mon Jan 07, 2019 8:00 pm

Sounds more like some wishful thinking on the part of line employees. I'd be surprised if his employment agreement was for less than three years, but Amtrak doesn't have to file those like a publicly traded company would.
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Re: Trains Article on Amtrak's accounting

Postby Rockingham Racer » Mon Jan 07, 2019 8:04 pm

eolesen wrote:Sounds more like some wishful thinking on the part of line employees. I'd be surprised if his employment agreement was for less than three years, but Amtrak doesn't have to file those like a publicly traded company would.


Doesn't mean he wouldn't take a buyout, would it?
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Re: Trains Article on Amtrak's accounting

Postby BandA » Tue Jan 08, 2019 3:32 am

If they buy out his contract then they have to pay twice. Unless they can find a dollar man.
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Re: Trains Article on Amtrak's accounting

Postby benboston » Tue Jan 08, 2019 4:53 am

Unpopular opinion, he's not doing too bad. I don't disagree that long-distance trains need some sort of fix. We need higher frequencies for them to make financial sense because Amtrak was set up as a passenger service that makes a profit. If it doesn't make a profit that means that either there's poor management, not untrue, but not the cause of this one, or that there's horrible ridership because of how infrequent and unreliable routes are. I think that Amtrak needs to create shorter routes which have higher frequencies, allowing for cross-country travel for those who want (or need) to partake in it, but also so that it doesn't drag down the rest of the network. If I'm someone who lives on the NEC I should pay the price on my ticket of subsidizing the ticket of someone on an LD route, that isn't my responsibility. Either Amtrak needs to make all routes profitable or the unprofitable routes should remain under a separate organization (an LD company) and the profitable routes stay under Amtrak. This allows for more competitive pricing on the NEC.

Feel free to disagree,
Ben
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Re: Trains Article on Amtrak's accounting

Postby Suburban Station » Tue Jan 08, 2019 9:02 am

benboston wrote:Unpopular opinion, he's not doing too bad. I don't disagree that long-distance trains need some sort of fix. We need higher frequencies for them to make financial sense because Amtrak was set up as a passenger service that makes a profit. If it doesn't make a profit that means that either there's poor management, not untrue, but not the cause of this one, or that there's horrible ridership because of how infrequent and unreliable routes are. I think that Amtrak needs to create shorter routes which have higher frequencies, allowing for cross-country travel for those who want (or need) to partake in it, but also so that it doesn't drag down the rest of the network. If I'm someone who lives on the NEC I should pay the price on my ticket of subsidizing the ticket of someone on an LD route, that isn't my responsibility. Either Amtrak needs to make all routes profitable or the unprofitable routes should remain under a separate organization (an LD company) and the profitable routes stay under Amtrak. This allows for more competitive pricing on the NEC.

Feel free to disagree,
Ben

they're all unprofitable to some extent, this is a point that the article obscures by hyperventilating and making nonsensical claims about GAAP and other things. the NEC requires large capital subsidies but it isn't Amtrak misleading, uncle sam prefers to provide capital than operating subsidies (and I've venture to say this is typical of government in general). that being said, the federal government does not allow amtrak to run short distance routes at a loss which means the development of a short distance network is now dependent on states...it's not clear to me whether Amtrak is allowed to expend capital on short distance routes provided the operating portion is picked up by a state. lastly, the ability to generate an operating profit is, in large part, reliant on the ability to invest capital in the service. FAST Act legislation does not allow for NEC money to be spent on the National Network (or vice versa). the problem is that the National Network budget needs to be several times larger than the NEC budget and it is not.
I agree that Anderson is not as bad as many make him out to be. his airline people haven't shown themselves to be more competent at selling seats but overall many of the changes are necessary if not popular. I think the mgmt buyout was probably a worse way to accomplish a staff reduction than targeted layoffs but that is hardly unique to amtrak and let's not forget, it was boardman who made amtrak unsafe.
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