jurisdiction: US

text: b'NATIONAL RAILROAD PASSENGER CORPORATION\n Office of the Inspector General\n\n\n\n\n OCTOBER 1, 2007 \xe2\x80\x93 MARCH 31, 2008\n\n\n Semiannual Report\n to Congress\n\x0cCover Photo by Steve Carter: Amtrak Cascades, Tacoma, Washington\n\x0cNATIONAL RAILROAD PASSENGER CORPORATION\n\n Office of the Inspector General\n\n\n\n\n Semiannual Report\n to Congress\n\n\n\n\n REPORT NO. 37\n OCTOBER 1, 2007 \xe2\x80\x93 MARCH 31, 2008\n\x0c NATIONAL RAILROAD PASSENGER CORPORATION\n Office of the Inspector General, 10 G Street, NE, 3W-300, Washington, DC 20002-4285\n\n\n\n\nMay 30, 2008\n\nHonorable Donna McLean\nChairman\nAmtrak Board of Directors\n\nDear Madam Chairman:\n\nOn behalf of the Amtrak Office of Inspector General (OIG), I am pleased to present this Semiannual\nReport to Congress. The OIG Report highlights significant audits, evaluations, and investigations for\nthe six-month period ending March 31, 2008. During the reporting period, the OIG issued 15 audit\nreports that identified questioned costs of $398,896 and $6,390,505 in funds to be put to better use.\nThe OIG performed audits of Amtrak\xe2\x80\x99s procurement operations, including the need to purchase a\nlarger volume of concrete ties, and other operational expense areas, including payments to freight\nrailroads for their services, and Amtrak\xe2\x80\x99s overtime wages, among others.\n\nOIG investigators and special agents opened 69 new cases in the past six months and closed 62 cases;\n283 investigations remain active as of March 31. The OIG has obtained 12 criminal indictments,\nobtained eight criminal convictions/pleas, no declinations and 12 cases pending prosecutorial review.\nThe OIG\xe2\x80\x99s more significant casework included revenue protection and referring embezzlement cases\nto Amtrak management for disciplinary action.\n\nThe OIG Inspections and Evaluations group is continuing to facilitate initiatives to improve the effi-\nciency and effectiveness of the material supply chain in providing parts and materials for Rolling\nStock maintenance. In addition, Inspections and Evaluations has been evaluating the efficiency and\neffectiveness of Amtrak\xe2\x80\x99s Right\xe2\x80\x93of\xe2\x80\x93Way maintenance programs. As part of this effort, the OIG\nengaged a European consultant that has extensive experience evaluating the infrastructure mainte-\nnance programs of European Railroads.\n\nDuring this period, and as a part of evolution within the OIG community, the OIG created a new\ngroup, the Office of Management and Policy (OMP), to provide mission and administrative support\nservices by managing: budget formulation and execution; policy development; dissemination of OIG\ninformation, including the semi-annual report; human resources; executive resources; and OIG facili-\nties. OMP ensures performance quality and compliance with current and emerging legislation, and\n\x0cHonorable Donna McLean\nMay 30, 2008\nPage 2\n\n\n\n\nU.S. Government regulations, directives, and mandates. The office is the primary liaison with the\nGovernment Accountability Office, and other government departments and agencies. The office has\nassumed the responsibilities of the former OIG Counter-Terrorism and Intelligence Unit and will\nprovide security oversight and review of Amtrak\xe2\x80\x99s Office of Security Strategy and Special\nOperations.\n\nI want to report that the OIG meets the Internet website requirements called for by the Consolidated\nAppropriations Act of 2008 (Public Law 110-161). In addition, the OIG is in the process of making\nits Internet website generally consistent with the requirements of Section 13 of S. 2324 (the Inspector\nGeneral Reform Act of 2008) and Section 9 of H.R. 928 (the Improving Government Accountability\nAct), which are very similar. Once implemented, these improvements will significantly enhance the\nOIG\xe2\x80\x99s accessibility and responsiveness.\n\nI want to express my appreciation for the cooperation and support the OIG regularly receive from\nCongress and from you as our new Chairman. Finally, I want to recognize the extraordinary dedica-\ntion and professionalism of the OIG\xe2\x80\x99s staff, whose performance adds value to Amtrak and the\ntaxpayers who help support national rail passenger service.\n\nRespectfully,\n\n\n\n\nFred E. Weiderhold, Jr.\nInspector General\n\x0c\x0c Table of Contents\n\nInspector General Viewpoint Office of Inspections and Evaluations\nFY 2008 Mid-Year Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Significant Inspections and Evaluations\nAmtrak\xe2\x80\x99s Challenges and Opportunities . . . . . . . . . . . . . . . . . 1 Amtrak Mechanical Operations . . . . . . . . . . . . . . . . . . . 17\nSafety and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Operation RedBlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18\n Procurement and Material Supply Chain Management . . . 18\n Amtrak Right of Way Maintenance . . . . . . . . . . . . . . . . 18\n Amtrak Public Funding Review . . . . . . . . . . . . . . . . . . . 19\nAmtrak Profile\nAmtrak Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Human Capital Management . . . . . . . . . . . . . . . . . . . . . 19\n\n\nOffice of the Office of Management and Policy\nInspector General Profile Office of Management and Policy . . . . . . . . . . . . . . . . . . . . 20\nOffice of the Inspector General Profile . . . . . . . . . . . . . . . . . 4\n\n Other OIG Activities\nOffice of Audits Coordination with Independent Public Accountants . . . . . . 21\nSignificant Audits Team Mate Implementation . . . . . . . . . . . . . . . . . . . . . . . . . 21\n Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5\n Internal Operations Reviews . . . . . . . . . . . . . . . . . . . . . . . 6\n Self-Insured Health Care Plans . . . . . . . . . . . . . . . . . . . . . 7 Appendices\n Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Appendix 1. Audit Reports Issued with Questioned Costs . . 24\n Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Appendix 2. Audit Reports Issued with Funds\nManagement Responses More Than 180 Days Old to be Put to Better Use . . . . . . . . . . . . . . . . . . . 25\n for Which Corrective Action Has Not Been Completed . . . 9 Appendix 3. Detailed Listing of All Issued Audit Reports . . 26\nUnresolved Audit Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Appendix 4. Summary of Reports to President of Amtrak\nAudit Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Concerning Information or Assistance\n Unreasonably Refused or Not Provided . . . . . . 27\n Appendix 5. Review of Legislation and Regulations . . . . . . 28\nOffice of Investigations Appendix 6. Glossary of Audit Terms and Abbreviations . . 29\nCase Status of Investigations . . . . . . . . . . . . . . . . . . . . . . . . 11\nCase Handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11\nSources of Allegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11\n Reporting Requirements Index\n Reporting Requirements Index . . . . . . . . . . . . . . . . . . . . . . . 30\nHot Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11\nHotline Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11\nSignificant Investigations \xe2\x80\x94\n Embezzlement, Theft, Fraud, and Misappropriations . . 12\nClassification of Cases Opened During the Period . . . . . . . . 12\nRecommendations to Enhance Efficiency,\n Effectiveness and Cost Savings . . . . . . . . . . . . . . . . . . . . 15\nTime and Attendance Reviews . . . . . . . . . . . . . . . . . . . . . . . 16\nRevenue Protection Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16\n\x0c\x0c Inspector General Viewpoint\n\n FY 2008 MID-YEAR RESULTS AMTRAK\xe2\x80\x99S CHALLENGES AND\nAmtrak continues to benefit from a number of external economic\nfactors, including soaring fuel prices, a continuing deterioration\n OPPORTUNITIES\nin airline on-time performance and worsening customer service Amtrak is well-positioned to continue to make Incremental\nin that sector. Indeed, the cost of gasoline reached $3.29 per improvements in its overall performance for the next several\ngallon on March 31, up 26 percent over one year ago and 100 years, but there are risks to this upward trend depending upon\npercent over five years; airline delays affect more than 22 how well some key risk areas are managed.\npercent of aircraft departures and almost 26 percent of arrivals,\nthe industry\xe2\x80\x99s worst performance in the past decade. Amtrak has\ntaken advantage of these economic conditions and market oppor-\n With the mid-year results in, there are very real opportunities for\n REVENUE OPPORTUNITIES\ntunities: revenue yield per passenger mile has increased to $.28,\n Amtrak to continue to garner additional passenger revenue\nan improvement of almost 22 percent over the past four years.\n growth in FY 2008. Gasoline prices will continue to drive the\nThrough March 2008, Amtrak continues to experience business traveling public to consider lower-cost, more environmentally\nresults better than budget and revenue and ridership forecasts. friendly, travel decisions, especially with price forecasts\nAt mid-year, Amtrak has earned $1.169 billion in total revenue suggesting higher prices for the foreseeable future. Congestion\n($928 million in passenger related revenues); total revenue was and delays at major airports are taking their toll on the patience\n14.7 percent greater than over the same period in FY 2007, with of air travelers, with consumer complaints increasing by more\npassenger revenues up 13 percent. Total expenses were $1.047 than 61 percent during 2007.\nbillion. Amtrak\xe2\x80\x99s adjusted losses, before depreciation, were $220\n Amtrak\xe2\x80\x99s Acela revenues are up by more than $195 million, or\nmillion, $13 million more than last fiscal year.\n 20.3 percent, over the same period one year ago. Despite already\nTotal ridership for the year was 13.52 million, up 11.7 percent serving 56 percent of the combined airline-intercity passenger\nover the same period last year, with Acela being a major driver rail market between Washington, D.C., and New York City,\nof performance. Acela\xe2\x80\x99s overall performance, and the challenges Amtrak still has some excess capacity to meet customer demands\nto maintaining and improving upon FY 2008\xe2\x80\x99s results, is for additional rail services in the Northeast Corridor. Increased\ndiscussed below. Amtrak\xe2\x80\x99s other Northeast Corridor services, availability of Acela frequencies, and continued consistent and\nthe Regionals, posted a 14.6 percent increase in revenues, with a reliable on-time performance, will strengthen Acela\xe2\x80\x99s growing\n12.4 percent increase in ridership. dominance in the Northeast Corridor marketplace.\nAt the national level (excluding Northeast Corridor perfor-\nmance), ridership and revenue results have been generally\npositive. For Amtrak\xe2\x80\x99s long distance services, Amtrak is besting\nthe prior year in both revenue (+6.5 percent) and ridership (+7.8\npercent). Shorter distance state and regional corridors perfor-\nmance is also up, ridership being up 12.6 percent over the same\nperiod, and revenues are up 15.8 percent. There was some note-\nworthy growth with the Hoosier State service\n(Chicago-Indianapolis) posting a 31 percent ridership growth;\nthe Lincoln service (Chicago-St. Louis) posting a 28.3 gain; the\nCapitol Corridor Service (San Jose-Sacramento) posting a 13.6\npercent increase in ridership; and the Keystones (Philadelphia-\nHarrisburg) posting a 19.5 percent gain.\n\n Auto Train | Lorton, VA\n\n\n\n\n Inspector General Viewpoint 1\n\x0cWith respect to long-distance rail passenger services, the For example, Amtrak can prescribe a level of utility -- class of track\nDepartment of Transportation Office of Inspector General to permit high-speed operations -- for all sections of the Northeast\n(DOT-OIG) issued a report shortly after the end of this reporting Corridor track infrastructure. High speed is defined by the Federal\nperiod that estimates $98.5 million in financial benefits if Railroad Administration (FRA) are class 6, 7 and 8 tracks ranging\nAmtrak\xe2\x80\x99s long- distance services\xe2\x80\x99 on-time performance (OTP) is from 110 to 160 mph.\nimproved to 75 percent. Based upon a previous analysis by the\n Amtrak can categorize the incremental costs for maintaining track\nOIG, the DOT-OIG estimates of labor cost savings appear to be\n at Class 7 (125 mph) or Class 8 (160 mph), and can tie revenue\naggressive and the DOT-OIG estimates of incremental perfor-\n projections to scheduled performance. Other efforts can be oriented\nmance payments appears to be understated. In addition, the\n to major bridge and tunnel work, e.g. - to keep the useful life of an\nrevenue estimate is considerably higher than the estimate\n asset within 90 percent of its expected useful life before replace-\nproduced by Amtrak\xe2\x80\x99s revenue demand model.\n ment. In addition, a more complete inventory of major programs\nThe OIG continues to recommend that Amtrak concentrate its and projects, by asset type, should be maintained and shared with\nimprovement of on-time performance toward four of the long Congress and rail partners.\ndistance routes, specifically the Autotrain service, the Coast\nStarlight, the San Francisco Zephyr, and the New York-Florida\nSilver Services. The OIG has recommended in prior reports that\nAmtrak closely examine its long-distance business model for\n SAFETY & SECURITY\nsome routes.\n\n Amtrak\xe2\x80\x99s overall safety performance has been slowly improving,\n SAFETY\n\nApproximately 50 percent of Amtrak\xe2\x80\x99s operating expenses relate to but establishing a well-embedded safety culture in the railroad is\nEXPENSE CONTAINMENT\n\nemployee wages, salaries, and benefits. It follows that even small a difficult and long-term task. In fact, while Amtrak was recently\nimprovements in productivity, when applied across the entire awarded an E.H. Harriman Certificate of Commendation for\nsystem, can generate significant savings. With the recent settlement most improvement in employee safety among Class I railroads\nof long-standing labor negotiations with all of Amtrak\xe2\x80\x99s labor from 2006 to 2007, the OIG would like to see Amtrak look\nunions, Amtrak must find ways to accommodate the agreed upon beyond injury statistics alone, which are still less than optimal\nwage schedules. These settlements may add as much as $130 among major Class I railroads.\nmillion to Amtrak\xe2\x80\x99s annual operating expenses. Amtrak must, as\nrecommended by the Presidential Emergency Board (PEB) more\ncarefully consider and apply work rules to obtain greater efficiency During the reporting period, we created a new group, the Office\n SECURITY\nand effectiveness from its workforce. Amtrak must, as recom- of Management and Policy (OMP), to provide mission and\nmended by this Office, modify its approach to maintenance and administrative support services to the OIG by managing: budget\nupkeep of its rolling stock, rationalize the use of its major service formulation and execution; policy development; personnel secu-\nand inspection and back shop facilities, and be more attentive to rity; dissemination of OIG information; human resources; and\nrevenue enhancement opportunities. OIG facilities. OMP ensures performance quality and compli-\nWith respect to capital spending, much of Amtrak\xe2\x80\x99s capital budget ance with current and emerging legislation, and Government\ncontinues to be invested in restoring the \xe2\x80\x98state of good repair\xe2\x80\x99 to the regulations, directives, and mandates. The office is the primary\nNortheast Corridor. The OIG is in strong support of this initiative, liaison with the Government Accountability Office, and other\nbut we believe more work is required to lay out a more rigorous government departments and agencies. OMP has assumed the\nanalysis of return on capital invested. Amtrak needs to delineate responsibilities of the former OIG Counter-Terrorism and\nspecifically the results of these large investment programs and the Intelligence Unit, and will provide security oversight and review\nresulting impacts on revenue and expense reduction. of Amtrak\xe2\x80\x99s Office of Security Strategy and Special Operations\n (OSSSO).\n\n\n\n\n2 Inspector General Viewpoint\n\x0c Amtrak Profile\nAmtrak is The National Railroad Passenger Corporation incor-\nporated under the District of Columbia Business Corporation\nAct (D.C. Code \xc2\xa7 29-301 et seq.) in accordance with the provi-\nsions of the Rail Passenger Service Act of 1970 (Public Law\n91-518). Amtrak is currently governed by a seven-member\nReform Board established under the Amtrak Reform and\nAccountability Act of 1997 (P.L. 105-134; 49 U.S.C. \xc2\xa7 24302).\nThe company is operated and managed as a for-profit corpora-\ntion providing intercity rail passenger transportation as its\nprincipal business.\nCongress created Amtrak in 1970 to take over, and indepen-\ndently operate, the intercity rail passenger services. Prior to this\nAmerica\xe2\x80\x99s private freight companies ran passenger rail as\nrequired by Federal law. Those companies reported they had\noperated their passenger rail services without profit for a decade\nor more. With this in mind, when Amtrak began service on May\n1, 1971, Amtrak eliminated more than half of the rail passenger\nroutes then operated by the freight railroad companies.\nDuring Fiscal Year (FY) 2007 Amtrak carried approximately 26\n Coast Starlight | CA\n\n\nmillion passengers on up to 315 daily intercity trains over 21,100\ntrain miles serving 513 communities in forty-six states and three Amtrak employs about 18,400 persons, of whom about 16,000\nCanadian provinces. During the first half of FY2008, Amtrak are agreement-covered employees. These employees work in\nridership is up by more than 10 percent and ticket revenues are up on-board services, maintenance of way, police, station and reser-\nby more than 13 percent over the same period in FY2007. If vations services, and other support areas.\nAmtrak were an airline, it would rank as the nation\xe2\x80\x99s eighth largest\n Amtrak owns the right-of-way of more than 363 route miles in\ndomestic carrier in terms of passengers carried and employment,\n the Northeast Corridor (NEC; including Washington, DC-New\nand eleventh in terms of operating revenue ($2.1 billion).\n York City-Boston, Philadelphia-Harrisburg, and New Haven,\nIn terms of market-share, Amtrak serves 56 percent of the CT-Springfield, MA) and 97 miles in Michigan. Amtrak owns\ncombined airline-intercity rail market between Washington, 105 station facilities, and is responsible for the upkeep and main-\nD.C., and New York City. In addition, more than 800,000 tenance of an additional 181 station facilities and 411 platforms.\npeople commute every weekday on Amtrak infrastructure or on Amtrak owns 17 tunnels and 1,186 bridges. It owns most of the\nAmtrak-operated commuter trains around the country under maintenance and repair facilities for its fleet of about 2,600 cars\ncontracts with state and regional commuter authorities. and locomotives. Outside the NEC, Amtrak contracts with\n freight railroads for the right to operate over their tracks. The\n host freight railroads are responsible for the condition of their\n tracks and for the coordination of all railroad traffic.\n\n\n\n\n Amtrak Profile 3\n\x0c Office of the Inspector General Profile\nAmtrak\xe2\x80\x99s Office of the Inspector General (OIG) was established\nas a statutory entity in April 1989, in accordance with the 1988\namendments (P.L. 100-504) to the Inspector General Act of 1978\n(P.L. 95-452; 5 U.S.C. Appendix 3). The OIG is an independent\nand objective entity within Amtrak whose mission is to detect\nfraud, waste, and misconduct involving Amtrak\xe2\x80\x99s programs and\npersonnel, and to promote economy and efficiency in Amtrak\noperations.\nThe OIG investigates allegations of violations of criminal and\ncivil law, regulations, and ethical standards arising from the\nconduct of Amtrak employees in performing their work. The\nOIG audits and evaluates Amtrak operations and assists manage-\nment in promoting integrity, economy, efficiency, and\neffectiveness.\nTo accomplish these objectives, the OIG establishes policy for\naudits and investigations relating to all Amtrak programs and\noperations, and conducts, supervises and coordinates these\naudits and investigations. Further, the OIG reviews existing and Arizona\nproposed statutes, regulations and policies to evaluate their\neffect on economy and efficiency in the agency and on the inspections of Amtrak programs, providing assistance to\nprevention of fraud and abuse and recommends changes as managers in their efforts to determine the feasibility of new\nappropriate. initiatives and the effectiveness of existing operating methodolo-\nThe OIG consists of the following offices with specific gies. The evaluative process they utilize, whether requested or\nresponsibilities: mandated, consists of independent studies and analytical reviews\n that often serve as the cornerstone for strategies to improve\nThe Office of Audits is responsible for conducting independent program cost efficiency and effectiveness, management, and the\nreviews of Amtrak\xe2\x80\x99s internal controls; overseeing and assisting overall quality of service delivery throughout Amtrak.\naudits of Amtrak\xe2\x80\x99s financial statements; reviewing information\ntechnology programs and information security; providing The Office of Management and Policy (OMP) provides\naccounting counsel to, and oversight of, Finance Department mission and administrative support services to the OIG by\noperations; reviewing certain procurements and material acquisi- managing: budget formulation and execution; policy develop-\ntions for appropriateness of cost, pricing and compliance with ment; personnel security; dissemination of OIG information;\napplicable grant and/or contract terms and conditions; and, moni- human resources; and OIG facilities. OMP ensures performance\ntoring compliance with laws and regulations. quality and compliance with current and emerging Government\n regulations, directives, and mandates. The office is the primary\nThe Office of Investigations is responsible for investigating liaison with the Government Accountability Office, and other\nvarious types of fraud and abuse particularly allegations of financial government departments and agencies. OMP also has primary\nwrongdoings, kickbacks, construction irregularities, bribery, and responsibility for Amtrak\xe2\x80\x99s security oversight.\nfalse claims; performing reviews of Amtrak\xe2\x80\x99s safety and security\nprograms; recommending to the company better internal controls to The Office of Counter-Terrorism and Intelligence reported\nprevent fraud and abuse; and, reporting violations of law to the in previous reports has transitioned to Amtrak\xe2\x80\x99s Office of\nAttorney General and prosecutors. It is also charged with reviewing Security, Strategy, and Special Operations. Security oversight\nand safeguarding Amtrak\xe2\x80\x99s cash and credit card purchases for trans- responsibilities remain with the OIG and have been integrated\nportation and food services on board Amtrak trains. within the Office of Management and Policy.\n\nThe Office of Inspections and Evaluations is a hybrid unit There are eight OIG offices located in Washington, DC\nwhose staff have specialized skills in engineering, safety, (Headquarters), Baltimore, Wilmington, Philadelphia, New\nlabor/employee relations, mechanical maintenance operations, York, Boston, Chicago, and Los Angeles.\nstrategic planning, and finance. This group conducts targeted\n\n4 Office of Inspector General Profile\n\x0c Office of Audits\n The OIG recommended that the questioned costs be recovered in\n accordance with the terms of the contract. In response to the\n audit report, management agreed to present the audit findings in\n SIGNIFICANT AUDITS \xe2\x80\x94 CONTRACTS\n its attempt to recover the amount in question. In March 2008,\n management advised that Amtrak and RailPlan had reached a\nReview of RailPlan International, Inc.\n\n tentative agreement to settle the audit findings for a total amount\nContract S 050 07001, Change Order COR-001 \xe2\x80\x93\n\n of $143,152. A settlement letter has been forwarded to RailPlan\n$210,810 in questioned costs\n\n for signature.\nThe OIG completed a post award audit of a change order to a\nAudit Report 503-2006 \xe2\x80\x93 Issued 11/26/2007\n\n\ncontract with RailPlan International, Inc. (RailPlan) for the\npurchase of additional Amfleet I and II ADA and Unisex toilet\n State of Maine\xe2\x80\x99s \xe2\x80\x9cDowneaster\xe2\x80\x9d Train Service\n\nmodules and for the conversion of Horizon ADA and Unisex\n Contract Audit\n\ntoilet modules to Amfleet II modules. The audit objective was to\n Amtrak entered into a contract with the Northern New England\n Audit Report 305-2007 \xe2\x80\x93 Issued 12/19/07\n\ndetermine the accuracy and acceptability of $3,925,413 in\n Passenger Rail Authority (NNEPRA), an agency of the State of\nchange order costs billed by RailPlan.\n Maine, on December 2, 1996, for the purpose of providing inter-\nAs a result of the audit, the OIG identified a total of $210,810 in city rail passenger service between Portland, Maine and Boston,\nquestioned costs, which was primarily due to RailPlan\xe2\x80\x99s use of Massachusetts. The contract has a term of 20 years from the start\nPPIs that were not specific to the items or commodities subject to of the train service, which began on December 15, 2001.\nescalation, namely fiberglass and steel. The contractor was\n NNEPRA had the responsibility for upgrading the rail lines for\nunable to support the material handling rate used and the higher\n the operation of intercity rail passenger service and providing\nG & A rate applied in its billings for conversion items.\n Amtrak with cab cars for use in the Service. Amtrak is respon-\nThe OIG recommended that the questioned costs be recovered in sible for providing locomotives, passenger coaches and food\naccordance with the terms of the contract. In response to the service cars, from its existing equipment pool, to accommodate\naudit report, management agreed to present the audit findings in four daily round trips between Portland and Boston.\nits attempt to recover the amount in question. In March 2008,\n The Downeaster Service recovers approximately 50 percent of\nmanagement advised that Amtrak and RailPlan had reached a\n its annual operating cost from ticket sales. The remaining 50\ntentative agreement to settle the audit findings for a total amount\n percent is recovered through a Grant from the Federal\nof $99,659. A settlement letter has been forwarded to RailPlan\n Government and the State of Maine. The federal grant, which is\nfor signature.\n aimed at reducing highway congestion and pollution, expires in\n September 2008. The State of Maine will assume full responsi-\n bility for assuming the cost of the service after that date.\nReview of RailPlan International, Inc.\n\n\n The purpose of OIG audit was to determine if, for calendar year\nContract S 064 90678, Change Orders COR-002\n\n\n 2006, Amtrak and NNEPRA were adhering to the terms and\nand COR-003.\n\n\n conditions of the contract; expenditures incurred were accurately\n$146,212 in questioned costs\n\n\nThe OIG completed a post award audit of two change orders to a reported; and, that Amtrak had an accounting system capable of\nAudit Report 504-2006 \xe2\x80\x93 Issued 11/26/2007\n\n\ncontract with RailPlan International, Inc. (RailPlan) for the tracking expenditures and receipt of ticket revenue for the\npurchase of deluxe dividing door partition assemblies and service.\nmirrors and additional Restroom modules that were previously\n The OIG\xe2\x80\x99s review determined that Amtrak and NNEPRA were,\npurchased under the Superliner Remanufacturing project. The\n and are, adhering to the terms and conditions of the contract and\naudit objective was to determine the accuracy and acceptability\n allowable costs were accurately accounted for during the period\nof $2,325,196 in change order costs billed by RailPlan.\n of OIG\xe2\x80\x99s review.\nAs a result of the audit, the OIG identified a total of $146,212 in\nquestioned costs. The questioned costs were primarily due to\nRailPlan\xe2\x80\x99s improper billing for G & A for the dividing doors and\nmirrors, which was unauthorized under the contract, and its use\nof inappropriate PPIs and PPI beginning period in its price esca-\nlation for the additional restroom modules.\n\n Office of Audits 5\n\x0c conditions, and agreed to terms and conditions must be adhered\n to and any change to the contract must be formalized in a change\n order and documented in the contract file.\n SIGNIFICANT AUDITS \xe2\x80\x93\n In addition, the OIG noted that 24% of the total number of\n INTERNAL OPERATIONS REVIEW\n concrete tie inventory issues for the period October 2006 through\n December 2006 indicated that the inventory transactions was not\n charged to the proper work element resulting in improper capital\nReview of Arnold Worldwide Advertising Expenses\n\n\nThe OIG performed a limited scope review of Arnold project costing. The OIG recommended and management\nAudit Report 206-2007 \xe2\x80\x93 Issued 10/17/07\n\n\nWorldwide Advertising to determine whether management agreed that Amtrak Engineering provide Store Attendants with\ncontrols were in place over the procurement and payment of accurate written notification when requesting inventory.\nadvertising, whether programs were approved and administered\n The OIG is reviewing other issues relating to the provision of\nin accordance with their advertising plan and if payments were\n concrete ties to Amtrak under the Rocla contract. A number of\nconsistent with the Agreement. Amtrak\xe2\x80\x99s expenditures to\n concrete ties have prematurely failed, well before their end of\nArnold Worldwide Advertising totaled approximately $18.9\n useful life. Further OIG reviews are planned for this contract.\nmillion in FY2006. The audit results disclosed that services\nwere rendered, and charges were adequately supported in accor-\ndance with the Agreement and that expenditures were properly\n Beech Grove Wreck Audit\n\nprocessed and approved.\n The OIG has completed a review of wreck repair work\n Audit Report 405-2007 \xe2\x80\x93 Issued 3/31/08\n\n\n completed during FY2007. The purpose of the review was to\n determine whether the Mechanical Department\xe2\x80\x99s cost control\nReview of Rocla Concrete Tie Inventory and Procurement\n\n environment accurately and properly captured and reported all\n$1.3 million funds that could have been put to better use\n\n costs associated with wrecked passenger cars repaired/rebuilt at\nAs a result of findings in a previous audit report (Report #226-\nAudit Report 218-2005 \xe2\x80\x93 Issued 03/20/08\n\n Beech Grove.\n2004), the OIG performed an audit on the inventory and\nprocurement process associated with concrete ties procured from The OIG found that Amtrak\xe2\x80\x99s Beech Grove Mechanical Facility\nRocla Concrete Tie, Inc. (Rocla). During FY2002 to FY2007 does not accurately and properly capture and report all costs\nAmtrak issued purchase orders to Rocla totaling approximately associated with wrecked passenger cars repaired/rebuilt at Beech\n$46 million. The OIG examined seven purchase orders for the Grove. The audit found that the lack of adequate timekeeping\nperiod October 2005 through December 2006. During the period controls and internal control weaknesses caused the labor costs\nreviewed, there was a June 2, 2003, Supplies Contract to be inaccurately captured and reported.\nAgreement and a subsequent Agreement dated April 21, 2006, in\nplace. The OIG noted that unit prices for five of the seven The OIG provided detailed recommendations to strengthen\npurchase orders reviewed did not agree with the contract unit internal controls and improvements to the timekeeping process\npricing set forth in the June 2, 2003, Supplies Contract to ensure greater effectiveness and efficiency of operations,\nAgreement. Based on the analysis, invoices were submitted that improve the reliability of financial reports, ensure compliance\nincluded surcharges which were applied to unit prices that with company policies and procedures, and avoid poor business\nalready contained an annual Producer\xe2\x80\x99s Price Index adjustment decisions based upon inaccurate data.\nresulting in an over billing of approximately $1.3 million.\nProcurement indicated that although not documented, changes\n Review of Amtrak Backshop, Beech Grove In-sourcing \xe2\x80\x93\n\nwere made to the agreement. Reference was noted in the vendor\n New Jersey Transit Overhauls\n\nfiles and in Amtrak staff summaries; however Procurement was\n The OIG completed a review of the Beech Grove in-sourcing\n Audit Report 215-2007 \xe2\x80\x93 Issued 03/26/08\n\nunable to provide documentation to support contract changes\nthat was signed by both parties. Absent a formal contract change process associated with the sale and overhaul of four P-40 loco-\n(change order) or documentation to support the change the OIG motives to New Jersey Transit (NJT) to determine whether\naudited against the signed Agreement and viewed the over Amtrak made a profit on the overhauls and that the in-sourcing\nbilling as extraordinary contract relief. activity was in accordance with corporate policies.\n\nThe OIG recommended and management agreed that manage- The OIG determined that Amtrak generated an average profit of\nment adhere to Amtrak\xe2\x80\x99s Procurement Manual by adequately $70,387 per locomotive overhaul after all costs were applied to\ndocumenting and formalizing changes to contract terms and the contract price and that Amtrak generated a net cash savings\n\n6 Office of Audits\n\x0cof $1,247,159 by satisfying the liens on the locomotives early via\na Special Purchase Option.\nThe audit revealed varying degrees of management noncompli-\nance with corporate insourcing policies. The audit found that\nmanagement did not properly route the Senior Staff Summary to\nall departments, specifically, the Chief Finance Office and the\nOIG for the required financial reviews and management failed to\nobtain force account insurance. The OIG found the overhaul\nprocedures commenced without an executed agreement on\nequipment neither party owned. Management agreed with the\nfindings.\n California Zephyr | Donner Pass, near Truckee, CA\n\n\nFurther, management released the equipment to NJT without the\ncontract stipulated acceptance and without receipt of the related Based on the review, the OIG recommended that the vendor\npayments. The OIG observed that the P-40 locomotive fleet in implement a process to provide adequate documentation to\nstorage at Bear, DE is not maintained in accordance with lien support the amount of ballast invoiced. And, the OIG recom-\nprovisions. mended that management perform a review of projects charged\n for ballast to ensure that charges are accurately entered; imple-\n ment a formal internal process to identify the contents of ballast\n rail cars to ensure proper credit from the vendor; and, ensure that\nReview of Unbilled Expenses for Rhode Island Contract\n\n\nIn January 2007, the OIG determined that Amtrak failed to personnel responsible for compiling data on internal reports\nAudit Report 204-2006B \xe2\x80\x93 Issued 03/26/08\n\n\ninvoice the State of Rhode Island an estimated $740,000 in reim- record the information accurately.\nbursable maintenance of way and conductor/flagmen force\naccount labor expenses. Based on the OIG\xe2\x80\x99s recommendation,\nmanagement performed a comprehensive study which identified\n$1,341,757 in unbilled labor expenses associated with force\n SIGNIFICANT AUDITS \xe2\x80\x93\naccounts. To date, Amtrak has received $315,296 in reimburse-\nments from the State of Rhode Island. The OIG reissued the\n SELF-INSURED HEALTH CARE PLANS\nJanuary 2007 audit report in March 2008 to update the results of\nthe audit.\n Review of Insurance (AmPlan) Claims for Commonly\n Abused Medical Billing Codes\nReview of Track Ballast Expenses Patterns indicative of abusive or fraudulent billing codes\nDiscrepancies and weak controls identified\n\n\n Amtrak administers a self-insured healthcare plan, AmPlan, for\n Audit Report 102-2006 \xe2\x80\x93 Issued 3/26/08\n\nThe OIG completed an audit of ballast expenses to determine the\nAudit Report Number 216-2007 \xe2\x80\x93 Issued 03/31/08\n\n\nadequacy and effectiveness of vendor invoicing, determine the its agreement-covered employees. Amtrak spends over $200\nvendor\xe2\x80\x99s process to account for rail cars that are returned to their million per year to cover healthcare expenditures for over 60,000\nquarry not completely empty, assess the adequacy of Amtrak\xe2\x80\x99s employees and their family members. The National Healthcare\nprocess for receiving and issuing ballast, and determine whether Anti-Fraud Association (NHCAA) estimated that at least 3\nor not Amtrak\xe2\x80\x99s projects are properly charged for ballast usage. percent of the nation\xe2\x80\x99s healthcare expenditures, or $51 billion, is\n lost to fraud. Other estimates by government and law enforce-\nThe review revealed inadequate documentation to support ment agencies place the loss as high as 10 percent of annual\nvendor invoicing; a lack of separation of duties in the charge-out expenditures, or $170 billion each year.\nprocess and an inadequate process to quantify the credits\nreceived by the vendor for ballast returned to the vendor\xe2\x80\x99s Medical billing fraud is committed by using certain billing codes\nquarry. The review noted discrepancies in internal reports asso- that are often abused or over utilized. The OIG performed a\nciated with the number of ballast rail cars utilized to transport review of the AmPlan claims to determine if there were any\nballast to a site. patterns indicative of abusive or fraudulent billing. The key\n findings of this review include instances of repetitive and\n abusive billing; unusually high volume of claims for a single-\n\n Office of Audits 7\n\x0cperson practice; and, instances where the highest level billing launched network service exploits to malicious codes spread\ncode was used to generate unusually high numbers of claims. through emails, spam, questionable websites, and file downloads.\nIn each case, the OIG concluded that further investigation would The primary objective of the OIG review was to determine\nbe necessary to ascertain if the billings are in fact fraudulent. whether an effective system of network and operating system\n security was established to protect Amtrak\xe2\x80\x99s information\n resources. While Amtrak has improved security controls in\n some areas such as virus and spam control, and perimeter secu-\n SIGNIFICANT AUDITS \xe2\x80\x93 INVENTORY rity including firewall and intrusion detection, it still lacks\n sufficient security controls in many areas, well-documented poli-\n cies and procedures, and repeatable processes to mitigate and\n manage security risks. The OIG found the following exceptions\nReview of Cycle Inventory \xe2\x80\x93 Wilmington, DE, M/E Shop\n\n that require management attention:\nand Boulden, DE, Facility\n\n\nThe OIG conducted an observation of cycle inventory at the\nAudit Report 217-2007 \xe2\x80\x93 Issued 11/20/07\n\n Amtrak has not implemented a consistent, comprehensive,\nWilmington, DE, Shops and the Boulden, DE, Facility and found end-to-end information risk management security program\n \xe2\x96\xa0\n\nthat the inventories were generally taken in accordance with and framework to protect its information resources. Data and\ninstructions. Management agreed with and adequately addressed security classification has not been implemented to protect\nthe OIG\xe2\x80\x99s recommendations. sensitive and critical resources from loss, misuse, and unau-\n thorized access or modification.\n There are servers which do not comply with Amtrak\xe2\x80\x99s infor-\nReview of FY2007 Annual Maintenance of Way Inventory\n\n mation security policies, guidelines, and best practices, and\n \xe2\x96\xa0\nAt the request of Amtrak\xe2\x80\x99s external auditors, the OIG conducted\nAudit Report 213-2007 \xe2\x80\x93 Issued 12/19/07\n\n\ninventory observations at 15 Maintenance of Way (M/W) stores. therefore are vulnerable to attacks. Audit found outdated\nManagement reported a net variance for all 49 stores of -0.13 software, the latest service packs/security patches missing,\npercent and a gross variance of 4.62 percent. For the 15 stores unnecessary open ports and services, open shares containing\nobserved by the OIG, the FY 07 percentage dollar variances sensitive and confidential information, weak passwords, and\nwere 2.10 percent net and 2.74 percent gross. The FY 07 vari- an excessive number of administrator and shared accounts.\nances for the 15 stores observed was acceptable. To proactively guard against security attacks and breaches,\n Amtrak needs to improve its compliance monitoring, log\n \xe2\x96\xa0\nThe OIG found, however, that the trend of increasing M/W valu-\nation from $40,629,194 to $54,052,358, a 33.04 percent FY07 review, and enforcement of security policies.\nincrease; and, there was a decreasing inventory turnover from Effective technology controls have not been implemented to\n2.44 in FY2004 to 1.46 in FY2005 to 1.33 in FY2006 to 0.95 in protect business data stored on laptops and other roaming\n \xe2\x96\xa0\n\nFY2007. This trend continued into FY2007. devices.\n Amtrak does not require comprehensive background checks\n for IT contractors and employees. Current physical security\n \xe2\x96\xa0\n\n\n controls at Washington, DC, offices do not provide adequate\n safeguards.\n SIGNIFICANT AUDITS \xe2\x80\x93\n INFORMATION TECHNOLOGY\n Employees and contractors are not provided comprehensive\n information security orientation, training, and periodic\n \xe2\x96\xa0\n\n\n refresher education that effectively communicates Amtrak\xe2\x80\x99s\nInformation Security Review\n\n information security policies and practices.\nInformation security controls need improvement\n\n\nDue to the consolidation of the business units and information Management agreed with all of the OIG\xe2\x80\x99s findings and recom-\nAudit Report 107-2004 \xe2\x80\x93 Issued 3/31/08\n\n\ntechnology (IT) infrastructure, more business critical information mendations. The current Amtrak IT leadership has shown the\nis now centralized at Amtrak. Because of the various entry points serious commitment and urgency to appropriately address the\ninto Amtrak\xe2\x80\x99s systems, dependence on contactors, and limited long outstanding security weaknesses, and significantly improve\nresources committed to security administration, Amtrak\xe2\x80\x99s infor- Amtrak\xe2\x80\x99s security posture.\nmation resources are vulnerable to threats ranging from remotely\n\n8 Office of Audits\n\x0c MANAGEMENT RESPONSES MORE\n THAN 180 DAYS OLD FOR WHICH\n CORRECTIVE ACTION HAS NOT\n BEEN COMPLETED\n The OIG continues to monitor and follow up with management\n on corrective action measures. The following items were\n reported in previous semiannual reports and additional informa-\n tion is being reported.\n\n Coast Starlight | Pacific Coast\n Review of Union Pacific Corporations (UP) Billing\n Processes\n $144,659 Excess Billings Identified\n\n\n Effective January 1, 2000, The National Railroad Passenger\n Audit Report 407-2004 \xe2\x80\x93 Issued 03/07/2007\nAnalysis of Overtime Wages\n\n Corporation entered into an agreement with the Union Pacific\nStronger oversight required to control excessive overtime\n\n Railroad Company (UP), which consolidated the four previous\nAt present, 15 collective bargaining labor agreements govern\nAudit Report 105-2007 \xe2\x80\x93 Issued 1/9/08\n\n contracts for the Southern Pacific, the Union Pacific, the\nhow Amtrak workers are paid for overtime work. In calendar Southern Pacific Central States Line, and the Denver and Rio\nyear (CY) 2006, Amtrak incurred about $137 million or 16 Grande Western Railroads for intercity rail passenger operations\npercent in overtime wages out of a total of $851 million in wages on tracks and properties owned by UP. Under the agreement\npaid to about 18,500 agreement-covered employees. The OIG provisions, the UP bills Amtrak each month for specific services\nperformed a limited scope review of the overtime wages paid in and facilities for intercity rail passenger operations. The purpose\nCY2006 because of the inherent risk of fraud, waste and abuse. of the OIG audit was to determine the accuracy, reasonableness,\nThe primary objective of the OIG review was to analyze the and validity of the charges the UP billed Amtrak for selected\novertime wages of agreement-covered employees who earned items and to develop an audit adjustment claim if appropriate.\nmore than $100,000 in total wages during the calendar year The OIG audit from January 1, 2002, through December 31,\n2006. This total amounted to $7.5 million out of the $137 2003, and consisted of analyzing the UP\xe2\x80\x99s monthly billing costs,\nmillion in total overtime wages. records, payments, technical opinions, vendor invoices, Amtrak\nThe OIG found that the top five job titles of agreement covered delay reports, internal/external letters and memoranda, historical\nemployees earning over $100,000 were Engineer, Foreman, documentation of similar railroad billings, where available, and\nARASA Supervisor, Conductor, and Electric Tech/Specialist; other information, as deemed necessary.\nand top five locations were New York, Philadelphia, New The OIG recommended that management initiate a final settlement\nHaven, Boston, and Oakland districts. The OIG identified letter and that monies due Amtrak be collected. Management\ninstances of potential fraud, waste and abuse that require further verbally agreed, but has not provided a written response to this audit.\ninvestigation and action by management.\nThe OIG recommended that management review policies,\n Reviews of Southern Pacific Central States Line\n\nprocesses and practices for the assignment and distribution of\n Questioned costs not yet resolved\n\novertime and enhance controls over the approval of overtime.\nManagement agreed to take necessary action to address most of\n Audit Report 01-506 \xe2\x80\x93 Response 09/04/2001\n\nthe internal control weaknesses identified.\n Audit Report 01-507 \xe2\x80\x93 Response 09/04/2001\n Audit Report 01-508 \xe2\x80\x93 Response 10/12/2001\n\n\n Effective January 1, 2000, the four previous contracts Amtrak\n Audit Report 01-509 \xe2\x80\x93 Response 10/12/2001\n\n\n had with Southern Pacific Central State Line (SPCSL), Denver\n\n Office of Audits 9\n\x0cand Rio Grande Western Railroad Company, the Southern\nPacific Transportation Company, and the Union Pacific Railroad\nCompany were consolidated into one new contract with the\n UNRESOLVED AUDIT ISSUES\nUnion Pacific Railroad Company (UP). With the consolidation, Appendices 1 and 2 show the status of management decisions on\nthe UP became the railroad responsible for the negotiation and audit recommendations and dollar values of questioned costs,\nsettlement of the SPCSL audit findings. Since the issuance of unsupported cost, and funds to be put to better use.\nthe four SPCSL audit reports, the total questioned cost of\n Section 5(a)(10) of the Inspector General Act of 1978 (P.L. 95-\n$946,559 has been revised to $703,058.\n 452; 5 U.S.C. Appendix 3), requires \xe2\x80\x9ca summary of each audit\nThe OIG has presented to the UP the revised total through report issued before the commencement of the reporting period\nwritten correspondences and also at a meeting with the UP repre- for which no management decision has been made by the end of\nsentatives on February 27, 2008. The UP indicated that the reporting period.\xe2\x80\x9d Such reports are shown in Appendices 1\nnegotiations of the SPCSL questioned costs would begin after it and 2.\nhas had an opportunity to review all findings related to the audits\n In addition, 5 U.S.C. APP. 3 \xc2\xa7 5(a)(11) requires \xe2\x80\x9ca description\nof the previous contracts with the Southern Pacific Railroad and\n and explanation of the reasons for any significant revised\nthe Union Pacific Railroad.\n management decision made during the reporting period.\xe2\x80\x9d There\n were none during this reporting period. Finally, 5 U.S.C. APP.\n 3 \xc2\xa7 5(a)(12) requires \xe2\x80\x9cinformation concerning any significant\nMass Transit Products, Inc. \xe2\x80\x93\n\n management decision with which the Inspector General is in\nTermination for Default for Superliner I Overhaul\n\n disagreement.\xe2\x80\x9d No such decisions were made during this\nQuestioned Costs of $63,184\n\n reporting period.\nThe Procurement and Materials Management Department is still\nAudit Report 219-2005 \xe2\x80\x93 Response 01/25/2006\n\n\ninvolved in ongoing settlement negotiations with the contractor\nand their suppliers. The questioned costs are $63,184. The OIG\ncontinue to monitor the actions taken. AUDIT STATISTICS\nPhysical Inventory of ACELA High-Speed Rail Parts Status of Audit Projects\n Audits in progress at 10/1/07 43\nQuestioned Costs of $222,186\n\n Audit projects postponed or cancelled 2\nThe OIG assisted in counting the Acela Parts inventory that was\nAudit Report 215-2006 \xe2\x80\x93 Response 02/23/2007\n\n Audit projects started 19\nowned by the Bombardier/Alstom OEM consortium. Further,\nthe OIG performed and are currently assisting in a pricing Audit reports issued 15\nreview. Questioned costs were originally identified as $222,186; Audit projects in progress 3/31/08 45\nhowever, there are still under-priced items and items that have\nnot been entered into Amtrak\xe2\x80\x99s Accounting, Material and\nPurchasing System (AAMPS). The OIG will continue to\n Audit Findings\n Questioned costs $398,896\nmonitor.\n Unsupported costs $0\n Funds to be put to better use $6,390,505\n To tal $6,789,401\n\n\n\n\n10 Office of Audits\n\x0c Office of Investigations\n\n CASE STATUS OF INVESTIGATIONS HOTLINE\n 10/1/07 \xe2\x80\x93 3/31/08\n The fraud OIG HOTLINE program has continued to provide\n Total Open Cases as of 10/1/07 276\n employees or third parties an opportunity to report allegations of\n Closed Cases (62) fraud, waste, abuse, and other wrongdoing. Employees can access\n Opened Cases 69 the HOTLINE 24 hours a day by calling Amtrak Telephone\n System (ATS) number 728-3065 in Philadelphia and the toll free\n number (800) 468-5469 if outside Philadelphia. During working\n To tal Ong o i ng Cas es as o f 3 / 3 1 / 0 8 283\n\n hours from 9:00 a.m. to 4:30 p.m., the OIG answer callers on the\n HOTLINE system. During other hours or during those occasions\n when staff are away from the office, callers can leave a message\n on the HOTLINE answering machine.\n CASE HANDLING\nThe OIG receives allegations from many sources, including People may write in confidentially to P.O. Box 76654,\nemployees, confidential informants, Congressional sources, Washington, DC 20013. The OIG received nine telephonic\nfederal agencies and third parties. Presently, The OIG are HOTLINE complaints during this reporting period, which is an\nhandling 283 investigations; in the last six months, the OIG increase from the previous reporting period. The majority of\nopened 69 cases and closed 62 cases. HOTLINE complaints received during this reporting period\n were made by anonymous sources and private citizens.\n\n SOURCES OF ALLEGATIONS\nAs set forth in the chart below, entitled \xe2\x80\x9cSources of Allegations,\xe2\x80\x9d\n HOTLINE STATISTICS\n 10/1/07 \xe2\x80\x93 3/31/08 Total\nemployees and anonymous referrals accounted for about 61\npercent of the allegations during this reporting period, with\nemployees being the source of 33 of the 69 allegations, or 48\n Hotline Complaints Received 9\n\npercent. All allegations are reviewed, screened and resources are\nallocated based upon, among other things, the seriousness of the\n Sources of Hotline Complaints\nallegations and potential harm to Amtrak or the public. Amtrak Employee 1\n Anonymous Source 7\n Confidential 1\n SOURCES OF ALLEGATIONS\n 10/1/07 \xe2\x80\x93 3/31/08\n Classification of Complaints\n Administrative Inquiry 5\n Referred by Audit 9 Criminal \xe2\x80\x93 Other 1\n False Time and Attendence 1\n Theft/Embezzlement 1\n Referred by Fed/State/Local\n Law Enforcement 4\n\n Private Citizen 1 Fraud 1\n\n Referred by Other OIG 1 Complaints Referred To:\n U.S. Congress 1 OI Field Offices 8\n Amtrak Police 1\n Other 2\n\n\n\n Amtrak Employee\n 33\n Confidential\n Informant 6\n\n\n Anonymous\n Source 9 Former\n Amtrak Employee 3\n\n\n Office of Investigations 11\n\x0c SIGNIFICANT INVESTIGATIONS \xe2\x80\x94 CLASSIFICATION OF CASES OPENED\n DURING THIS PERIOD\n 10/1/07 \xe2\x80\x93 3/31/08\n EMBEZZLEMENT, THEFT, FRAUD, AND\n MISAPPROPRIATIONS\nEmbezzlement sometimes involves falsification of records in Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20\n Ty pe Number\n\n\norder to conceal the theft. Embezzlers commonly steal relatively Other Criminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6\nsmall amounts repeatedly over a long period of time as was the Theft/Embezzlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8\nsituation in the case outlined below.\n False Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2\nIn connection with the OIG\xe2\x80\x99s investigation of a San Francisco False Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1\nstation agent who was indicted for embezzling nearly $250,000, False T&A Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2\non March 5, 2008, he pled guilty to violating 18 U.S.C. \xc2\xa7 666 \xe2\x80\x93\n Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4\ntheft concerning programs receiving federal funds. The station\nagent is scheduled to appear for sentencing in United States Abuse of Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4\nDistrict Court on June 11, 2008. He faces possible imprisonment, Mismanagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5\nas well as a fine and restitution. In addition to any punishment Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2\nwhich the Court imposes, the OIG is requesting that the Court\n Administrative Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . 6\norder forfeiture and full restitution of the embezzled funds.\n Other Non-Criminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9\nTheft and fraud is a problem which affects many organizations,\nregardless of size, location, or industry. Due to the nature of\nAmtrak\xe2\x80\x99s business, geographic dispersion, and the level of cash\n TOTAL 69\n\n\ntransactions, on-board trains and within stations, there are many\nareas at risk for embezzlement and/or theft of company assets. case, during this reporting period, ten (10) LSAs pleaded guilty\n in the Circuit Court of Cook County for violating Chapter 720,\nAmtrak has implemented certain procedures to assure time and Act 5, section 16-1-a (1)A of the Illinois Compiled Statutes,\ncost savings in its daily business. Despite its efforts, similar to 1999 as Amended, for failure to remit more than $44,632 in\nmany large organizations, there exists the potential for Amtrak Amtrak funds.\nemployees, vendors and others to exploit gaps in the system for\nfinancial gain. The negative impact to the organization\xe2\x80\x99s reputa- Eight of the former LSAs were sentenced to one year of court\ntion, employee morale, and the management-employee supervision, and two were sentenced to 18 months of court\nrelationship as a result of these unauthorized and potentially supervision. The court ordered restitution in the amount of\nillegal actions results in financial harm. $3,800, not including over $22,000 already recovered.\nIn addition to employee-related theft and fraud, the OIG has\nreason to investigate theft or fraud committed by passengers,\nvendors, consultants, and other outside parties. As a result, the OIG agents found that an employee in the payroll department\n PAYROLL FRAUD\n\nOIG spends considerable time and effort towards identifying and converted approximately $20,000 in Amtrak employee\naddressing these issues. Additional significant investigations unclaimed property, by using unauthorized checks made payable\nrelated to theft, fraud, misappropriations, or other criminal to a second Amtrak employee. As a result of OIG\xe2\x80\x99s investiga-\nactivity include the following: tion, management terminated both employees.\n\n\n\n In conjunction with the use and issuance of company vehicles,\nCHICAGO FOOD SERVICE EMPLOYEE MISUSE OF FUEL CREDIT CARDS\n\nIn a previously reported OIG investigation, the OIG discovered Amtrak issues fuel credit cards to be used for the sole purpose of\nMISAPPROPRIATIONS\n\ncollusion between a former Chicago Debriefing Office clerical purchasing fuel for Amtrak vehicles. While there are established\nemployee and several lead service attendants (LSAs), who failed corporate procedures for the management and control of fuel\nto remit Amtrak funds from on-board sales. With respect to this credit cards, the abuse of fuel credit cards continues to be\n reported. The following reflects an investigation in this area,\n12 Office of Investigations\n\x0cThe Amtrak OIG received an allegation from the General\nServices Administration (GSA) Office of Inspector General\n OIG agents received an allegation that an Amtrak Conductor had\n FAILURE TO SAFEGUARD COMPANY PROPERTY\nregarding suspicious credit card activity pertaining to an\n accrued $5,000 in phone charges for a company-issued cell phone.\nemployee-issued GSA Voyager Fuel Credit Card. The resulting\n It was discovered that the conductor reported that the phone had\ninvestigation found that the fuel credit card was used to purchase\n been lost or stolen subsequent to notification of the phone charges.\nmore than $565 worth of food for the employee\xe2\x80\x99s own consump-\n As a result, the conductor was charged in a company proceeding\ntion. As a result of the investigation, management counseled the\n with not safeguarding company property, received a three day\nemployee and required him to pay full restitution.\n suspension and, although there was no charge for the phone use,\n paid restitution for the phone accessories.\nMISUSE OF PROCUREMENT CHARGE CARDS\n\nThe Amtrak Procurement Charge Card Program has been\n(PCARDS)\n The OIG investigated an employee for removing scrap materials\n THEFT OF AMTRAK PROPERTY\n\ndesigned to support the purchase of low dollar business expense from Amtrak\xe2\x80\x99s 16th Street Yard in Chicago, Illinois, and\nitems in the most economical method possible. The PCard is collecting proceeds from the sale of the materials to a scrap yard.\ndesigned to be used for Amtrak business purchases only and is not The employee admitted to an OIG agent that the employee had\nto be used to purchase personal goods and services. Despite these removed various scrap materials from Amtrak property and\nrequirements, an OIG review identified violations in the use of retained the funds received from the sale of the items for his\nPCards, such as those illustrated in the following paragraphs. personal gain. The employee was administratively charged for\nOIG conducted an investigation into a Michigan engineering violating Amtrak\xe2\x80\x99s Standards of Excellence and subsequently\nclerk\xe2\x80\x99s unauthorized use of a PCard. OIG found that the clerk terminated.\nused the Amtrak PCard to purchase numerous items for personal\nuse, including tax preparation software and swimming pool\nsupplies totaling $2,222. OIG issued an Administrative Report It is Amtrak\xe2\x80\x99s policy to provide free and reduced-rate personal\n AMTRAK RAIL PASS ABUSE\n\nto Management, and the clerk was subsequently administratively travel transportation for its employees and their eligible depen-\ncharged and resigned from Amtrak. dents. If the Rail Pass is used fraudulently or inappropriately,\nThe OIG referred the matter to the Michigan State Police and the where an individual knowingly falsifies information or permits\nBerrien County Prosecutor\xe2\x80\x99s Office. On December 17, 2007, the the unauthorized use of pass privileges, the Corporation reserves\nclerk pleaded guilty to one count of embezzlement by an Agent the right to suspend or revoke Rail travel privileges.\nof Trust, MCL 750.174(4)(a), in the Fifth District court of the During this reporting period, an OIG investigation found that an\nState of Michigan, in Niles Michigan. The clerk was sentenced Amtrak Mechanical employee fraudulently obtained tickets for a\nto two years probation, and ordered to pay $2,222 in restitution friend using his assigned Rail Pass. The employee\xe2\x80\x99s actions\nto Amtrak. Amtrak has received the $2,222 restitution payment. resulted in a potential loss of about $600 in revenue to Amtrak.\nAnother Amtrak employee used her Amtrak assigned PCard, without The employee subsequently received a 30 day suspension as well\nauthorization and while on vacation, resulting in three unauthorized as lifetime loss of rail travel privileges for himself and his wife.\npurchases of a personal nature. As a result of the investigation, the\nemployee was found to be in violation of Amtrak\xe2\x80\x99s Standards of\nExcellence and terminated from Amtrak service.\n MISUSE OF EMPLOYEE RETIREMENT RECOGNITION\n\nThe OIG determined that an Amtrak Engineering Department Amtrak has established a policy to recognize Amtrak employees\n PROGRAM\n\nemployee had used the company PCard to purchase an electric for their years of service by presenting appropriate retirement\npower hammer for Amtrak-related work. However, the subse- mementos and hosting a departmental reception. Pursuant to\nquent investigation found that the employee took the power tool company policy, the cost of the reception should be less than $100.\nhome for use on a personal home project ultimately depriving\n During a routine OIG investigation on another issue, the OIG\nAmtrak of the use of that tool for about two months. As a result,\n discovered that during a three year period between 2004 and\nthe employee was counseled and the Engineering Department\xe2\x80\x99s\n 2007 this policy had been violated by exceeding the cap of $100\nunwritten policy allowing employees to take small tools home\n in the reception cost more than 30 times by various departments.\nwas discontinued.\n In one instance, an Amtrak department spent about $3,000 in\n\n Office of Investigations 13\n\x0cAmtrak funds for one retirement party. As a result of the OIG\xe2\x80\x99s\nfinding and report, Amtrak Human Resources Department is\n MAIL FRAUD COMMITTED BY FORMER AMTRAK\nreviewing, modifying, and updating this policy.\n In June 2007, the OIG was informed that an Amtrak employee\n EMPLOYEE\n\n was under investigation by the United States Postal Service for\n defrauding the National Academy of Sciences (NAS) of\nAs the result of an allegation from a confidential source, an OIG $1,231,108. At the time, the employee was working for Amtrak\nMISUSE OF CATERING CONTRACT\n\ninvestigation found that senior engineering management at an in the Reprographics Department in a similar capacity as he had\nAmtrak facility had allowed more than $4,000 to be spent in been with NAS. When this was brought to the attention of his\nexcess of the limits on a catering contract for safety luncheons. supervisors, the employee was terminated and his computer\nMore than $3,100 of this amount was spent unnecessarily for seized by OIG Agents. After a thorough OIG investigation, it\nmeals not consumed. In conjunction with the OIG findings, the was determined that the former employee did not continue his\ndivision engineer responsible for the facility received a Letter of fraudulent activity while in Amtrak employment.\nInstruction, the assistant division engineer received a Letter of\nReprimand, oversight was tightened and department-wide The former employee pleaded guilty in the United States District\nspending guidelines were strengthened. Court of the District of Columbia to one count of Mail Fraud and\n one count of Aiding and Abetting. On January 18, 2008, the\n former employee was sentenced to serve concurrently 41 months\n for mail fraud and 36 months for Causing an Act to be Done and\nThe OIG worked jointly with the Amtrak Police Department was ordered to pay $1,231,108 in restitution to NAS.\nMISUSE OF PASSENGER LAPTOP\n\n(APD) in locating an Amtrak employee who may have taken,\nand was ultimately in possession of, a passenger\xe2\x80\x99s laptop\nmissing from a train in Washington, D.C. An OIG special agent\n UNAUTHORIZED RAILROAD RETIREMENT BOARD\nlocated the employee, an assistant conductor. Upon questioning\nby the APD, the employee admitted to using the laptop for The Railroad Retirement Board (RRB) is an independent entity\n BENEFITS\n\npersonal use. Subsequently the laptop was returned to the in the executive branch of the Federal Government. The RRB\xe2\x80\x99s\npassenger by the APD, and the employee was terminated for primary function is to administer comprehensive retirement-\nviolating Amtrak\xe2\x80\x99s Standards of Excellence. survivor and unemployment-sickness benefit programs for the\n Nation\xe2\x80\x99s railroad workers and their families. Abuse of these\n benefits is not uncommon. The following two examples illus-\n trate these types of abuse.\nCITIZENS VICTIMIZED BY CONFIDENCE MAN POSING\n\nIn August 2006, three District of Columbia citizens reported they The OIG received an allegation from, and worked jointly with,\nAS AMTRAK EMPLOYEE\n\nhad been victimized by a confidence man representing himself as the RRB Office of Inspector General in researching and\nan Amtrak night supervisor in search of people to work as coach providing information towards the sentencing of a former\ncleaners on the midnight shift. The confidence man told the citi- Amtrak employee for more than $250,000 in Railroad\nzens they had to pay $140 each for uniforms and shoes. Once the Retirement and Veteran\xe2\x80\x99s Administration survivor benefits\nperpetrator received the requested money from the victims, at fraud. As a result the joint investigations the former employee\neither the Ivy City facility or Union Station in Washington, D.C., was indicted for theft of government funds. He was sentenced to\nhe would escape through a restricted entry door. Working along three years supervised probation and required to pay $132,968 in\nwith the APD, OIG agents were able to identify the suspect who restitution to RRB as well as $136,948 restitution to the Veterans\nwas subsequently arrested and charged with attempted fraud. Administration.\n\nOIG Agents were able to obtain the cooperation of two victims As the result of an allegation and the subsequent OIG investiga-\nwho positively identified the suspect. OIG Agents subsequently tion, it was revealed that an Amtrak LSA had submitted\nsought and obtained an arrest warrant. In December 2007, the fraudulent medical documentation in support of an on-the job\nsuspect plead guilty in the District of Columbia to Theft II and injury. During the interview phase of the investigation, the LSA\nreceived a sentence of 120 days in jail, and was ordered to pay indicated he had obtained blank copies of a doctor\xe2\x80\x99s letterhead\nfull restitution to the victims. and completed the medical documentation, including the applic-\n able doctors\xe2\x80\x99 signatures, resulting in the receipt of over $7,000 of\n Railroad Retirement funds. As a result of these actions, the LSA\n was terminated from Amtrak on February 6, 2008.\n\n14 Office of Investigations\n\x0cThe OIG received an allegation that a New England station\nMISUSE OF LEAVE OF ABSENCE\n\nmanager had mishandled the Transportation Communications\nUnion (TCU) Leave of Absence (LOA) Rule, which allows 30\ncalendar days or less leave of absence for personal reasons upon\napproval of the employing officer. The subsequent investigation\nrevealed two TCU employees had been permitted extended\nperiods of leave, beyond the 30 days allowed, in order to serve jail\nsentences related to Driving Under the Influence (DUI) charges.\nIn addition, the manager had paid one of the employees several\ndays of sick leave in conjunction with the LOA knowing full well\nthat the absence was not sick related. As a result the manager was\nplaced on 120 days of probation.\nIn conjunction with the above investigation related to medical\nfraud, the OIG discovered another employee had submitted docu-\nments for personal gain to Human Resources in which he had\nforged his supervisor\xe2\x80\x99s signature in an attempt to misrepresent his\n Empire Builder | Glacier National Park\n\n\nabsence as one of personal injury rather than incarceration. As a\nresult of OIG\xe2\x80\x99s findings, the employee was terminated. once been used the equipment itself was not operable. As a result\n of the OIG findings, management advised the OIG that corrective\n action would be taken in the way of streamlining the two afore-\n RECOMMENDATIONS TO ENHANCE mentioned entities and installing a viable card key system.\n\n EFFICIENCY, EFFECTIVENESS AND\n The OIG received an allegation that Engineering Department\n PURCHASE OF PRODUCTION EQUIPMENT\n COST SAVINGS\n Management was circumventing the procurement policies and\nAn important function of the OIG is providing information and procedures in the purchase of production equipment. While the\nrecommendations to management and officials to improve the subsequent investigation revealed that Engineering Management\ncompany\xe2\x80\x99s efficiency and effectiveness. During this reporting had complied with procurement policies and procedures, the\nperiod, OIG investigations have led to recommendations, OIG made a recommendation that all capital expenditures should\nconcerning quality improvement to which management gener- be recorded and reported in accordance with Federal\nally responded positively and implemented, for the most part, as Government standards and Amtrak Corporate policies and\ndetailed in the examples below: procedures. Engineering Management agreed with the recom-\n mendation and informed the OIG that a separate work element\n number, assigned to each piece of equipment being overhauled\n to ensure all capital expenditures associated with the equipment\nDuring the review of an anonymous correspondence regarding\nWORK REDUNDANCY AND TIME RECORDING\n overhaul, will be accurately recorded and reported.\ninequitable distribution of overtime involving certain Sunnyside\nYard (SSYD) agreement personnel, which was not sustained,\nOIG discovered two areas of concern. One such concern\ncentered on \xe2\x80\x9cwork redundancy,\xe2\x80\x9d and the other on employee The OIG investigated an allegation indicating conductors and\n OVERTIME DOCUMENTATION\n\n\xe2\x80\x9ctime recording.\xe2\x80\x9d engineers working at SSYD were receiving overtime monies that\n they were not entitled to receive. Although the subsequent\nThe work redundancy issue involved two separate entities within\n investigation did not substantiate the allegation, the OIG found\nthe Mechanical Department at SSYD essentially performing the\n deficiencies within the process being used to approve and docu-\nsame function. The time reporting issue involved employees\n ment overtime. As a result of an OIG Management Referral\nusing a manual sign-in/out log to record their work hours rather\n identifying these concerns, management took the appropriate\nthan an automated card key system. While a card key system had\n action to correct these oversights.\n\n Office of Investigations 15\n\x0c Amtrak provides food and beverage service on board trains to\n RPU INITIATED TRAIN SERVICE REVIEWS\n TIME AND ATTENDANCE REVIEWS\n millions of passengers each year through sales conducted on\nAmtrak\xe2\x80\x99s success depends on using available resources in an\n board trains in caf\xc3\xa9 cars and dining cars, provided on select\nefficient and productive manner, including their most valuable\n trains. These sales generate millions of dollars in revenue each\nresource, Amtrak employees. Therefore, it is important for\n year as well as providing opportunity for revenue abuse by\nemployees to report to work on time and perform their duties\n dishonest employees.\nduring their assigned hours, including those designated for over-\ntime. Falsification of timecards, incomplete or inaccurate During this reporting period, RPU analyzed the applicable\ntimecards and the failure of employees to adhere to Amtrak\xe2\x80\x99s support documents for on board food and beverage sales for 189\nattendance policy not only results in a cost to the corporation and trains for 59 various LSAs. The completed reviews resulted in\nemployee morale; but, ultimately affects productivity and in 11 administrative referrals consisting of various findings\nsome cases safety and reliability. covering theft and fraud to failure to follow procedures. At the\n completion of this reporting period, discipline had been\nThe OIG receives and investigates allegations regarding time\n assessed, based on the RPU referrals, for six LSAs with disci-\nand attendance issues in an effort to assist in addressing and\n pline consisting of counseling and remedial training.\npreventing time and attendance fraud. The OIG refers most time\nand attendance issues to management for its analysis and action, The success of this program, which began in 2003, as well as\nwith the OIG monitoring management\xe2\x80\x99s actions. The following increased controls and accountability on the LSA remittance\nis illustrative of OIG time and attendance investigations which process has been indicated through the gradual decrease of\nthe OIG conducted during this reporting period. viable candidates for review as well as significant findings.\nThe OIG received an allegation that an Amtrak foreman\nroutinely reported to work late and suffered no consequences for\nthe late arrivals due to her position within the company. Upon\nconducting an investigation, OIG agents determined that the\n PROSECUTIVE REFERRALS\n 10/1/07 \xe2\x80\x93 3/31/08\nforeman worked for another railroad from 4 p.m. until midnight\nand had been arriving to work late as a result of the commute\ntime between the two jobs, rather than the personal reasons given\n Referral s U. S. Atto rney Lo cal / State To tal\n\n\nto management.\n Criminal Cases\n Indictments 0 12 12\nAlthough Amtrak employees may hold a second job, according\n Convictions/Pleas 3 5 8\nto Amtrak policy employees are not allowed to hold a position\nwith another railroad or transportation competitor. As a result of Pending* 0 12 12\ncharges that the employees had violated Amtrak\xe2\x80\x99s policies for Declinations 0 0 0\nTrust and Honesty Standard in the Standards of Excellence, the\nemployee admitted that she was not honest in her explanations to\nsupervisors to receive consideration for her late arrivals and was\n Civil Cases\n Suits Filed 0 0 0\nultimately demoted.\n Settled 0 0 0\n Pending 0 0 0\n To tal Ci v i l and Cri mi nal 32\n REVENUE PROTECTION UNIT\n *Some of these will be reflected under pending civil cases because these\nThe Revenue Protection Unit (RPU) provides pivotal support in matters are being handled by the United States Attorney\xe2\x80\x99s office in parallel\n proceedings. In cases where there have been convictions or pleas, we may be\nconnection with OIG\xe2\x80\x99s efforts to detect and deter theft, fraud and awaiting sentencing, restitution, or other resolutions.\nabuse. Staffed with three management positions and a pool of\npart-time Revenue Protection Consultants, working on an as\nneeded basis nationwide, RPU focuses primarily on revenue-\nprotection activities and provides critical guidance and support\nin the strengthening of management accountabilities and respon-\nsibilities as well as internal controls.\n16 Office of Investigations\n\x0c Office of Inspections and Evaluations\n\n The OIG continues to facilitate and support the establishment of\n Equipment Reliability Improvements\n\n\n teams dedicated to conducting Root Cause Analyses into recur-\n ring equipment failures. The teams that have been established\n have made significant contributions to the improvements in reli-\n ability of both the Acela trainsets and the high horsepower\n locomotives. Efforts to improve on these initial successes and\n expand to other fleets of equipment are on-going.\n Mechanical Maintenance Facility Rationalization and\n\n\n Recommendations in the OIG report on Mechanical\n Process Improvement\n\n\n Maintenance Operations addressed rationalizing Amtrak\xe2\x80\x99s main-\n tenance facilities and streamlining Amtrak\xe2\x80\x99s maintenance\n processes. These recommendations are in various stages of\n implementation.\n One of the improvement efforts that the OIG is heavily involved\n Pennsylvanian | Amish Farmland, PA\n\n\n in is the movement of all P42 diesel locomotive maintenance to\n Chicago. Through consolidation and the implementation of a\n new, streamlined maintenance philosophy, the OIG estimates\n that maintenance costs can be reduced more than $5 million per\n SIGNIFICANT INSPECTIONS &\n EVALUATIONS year. To assist with this initiative, the OIG has engaged a full-\n time consultant with considerable experience with diesel\n locomotive maintenance operations to work with and advise\n Amtrak\xe2\x80\x99s Mechanical Department.\nAMTRAK MECHANICAL OPERATIONS \xe2\x80\x93\n\n This consolidation should be complete before the end of the\nOIG CONTINUING TO HELP WITH IMPLEMENTATION\n\n fiscal year. In addition to this specific effort, the OIG is also\nOF PREVIOUS RECOMMENDATIONS.\n providing advice and assistance with other initiatives as part of\nIn September 2005, the OIG issued report E-05-04, which\nReport E-05-04 \xe2\x80\x93 Issued 9/6/2005\n\n teams established to improve the efficiency and/or effectiveness\nresulted from a year-long system-wide review of Amtrak\xe2\x80\x99s of the maintenance operation.\nMechanical Maintenance Operations. In this report, the OIG\nrecommended that Amtrak adopt a more modern maintenance\nphilosophy based on Reliability-Centered Maintenance (RCM).\n Locomotive Camera Installations \xe2\x80\x93 OIG-initiated project\n\nAn RCM-based program requires that all maintenance activities\n expected to show significant reduction in settlement costs\n The OIG is facilitating a project with the Mechanical\nbe supported by sound technical and economic justifications. Department for the installation of 30 cab-mounted locomotive\nThe OIG\xe2\x80\x99s report recommended specific actions that Amtrak video cameras. Freight railroads have shown that these types of\nshould take to transition to RCM and to make the operations cameras have made a huge difference in their ability to defend\nmore efficient. For the past two and a half years the OIG has themselves in claims involving grade-crossing accidents, thereby\nbeen working with the Mechanical Department to help them significantly reducing settlement costs and court awards from\nimplement the OIG recommendations. these types of lawsuits. This OIG initiated, limited-scope project\n is intended to provide experience with the cameras to allow\n Amtrak to collect lessons learned and update its technical speci-\nAlthough day to day administration of this initiative is now fications. Plans are being prepared for the installation of\nImplementation of Reliability-Centered Maintenance\n\n\nunder the Chief Operating Officer (COO), the OIG remains cameras on the remainder of Amtrak\xe2\x80\x99s diesel and cab car fleet in\nengaged in an oversight role to help facilitate progress. The OIG FY 2009. The installation on the Acela trainsets and the electric\nhas performed additional analysis, resulting in recommendations locomotives is planned to follow in FY 2010.\nto help Amtrak overcome implementation challenges and help\ninsure that benefits are achieved.\n Office of Inspections and Evaluations 17\n\x0c in the future. This report should be published during the next\n reporting period.\nOPERATION REDBLOCK\n\n As part of this effort, the OIG questioned whether Amtrak was\nOperation RedBlock \xe2\x80\x93 Program should be held account-\n\n getting the proper credit for components returned to inventory after\nable for demonstrating results\n\n bench testing. Based on the OIG\xe2\x80\x99s inquiry, Amtrak determined\nThe Operation RedBlock (ORB) concept began at Amtrak in that Alstom was overcharging Amtrak by approximately $500,000\nReport E-08-01 \xe2\x80\x93 Issued 03/04/2008\n\n\n1987 as a labor-developed, management-supported program to a month. The total amount of the credit owed is still being calcu-\npromote the awareness and education of drug and alcohol use in lated and will be reported in the next semiannual report.\nthe workplace through union-led volunteer prevention commit-\ntees. This OIG evaluation focused on how well the program was\nperforming in achieving results and meeting goals. As part of At the request of the Vice President of Procurement, the OIG is\n Mechanical Supply Chain Effectiveness\n\nthe OIG\xe2\x80\x99s evaluation, the OIG benchmarked Amtrak\xe2\x80\x99s ORB sponsoring and helping to facilitate an initiative to improve the\nprogram to similar programs in the other Class 1 railroads. efficiency and effectiveness of the material supply chain in\n providing parts and materials for Rolling Stock maintenance.\nThe OIG\xe2\x80\x99s report contains seven findings with fourteen recom-\n Cross functional teams have been established to evaluate current\nmendations to improve the overall effectiveness and efficiency\n practices in demand planning, supplier management, order\nof the program. While the ORB program provides a valued\n fulfillment and warranty management.\nservice for employees and the company through its employee\nprevention committees working together on substance-abuse Facilitated by industry experts from the Thomas Group, the\nissues, the OIG found it difficult to evaluate the overall effec- teams are reviewing current processes and revising them to more\ntiveness of the current ORB program. For example, the program align with industry best practices. The OIG anticipates contin-\ndoes not measure itself against performance goals or develop uing in this facilitation role until the end of the fiscal year and\nmeaningful reports to allow for identification of trends and then producing a report that documents the overall results.\nemerging issues.\nThe OIG found that the program receives minimal oversight at\nthe corporate level and lacks adequate financial oversight at the\n AMTRAK\xe2\x80\x99S RIGHT-OF-WAY MAINTENANCE \xe2\x80\x93\n\nlocal committee level. The OIG found that neither the current\n PERFORMANCE AND COSTS BENCHMARKED\norganizational structure nor some of the current practices opti-\n The OIG is continuing to evaluate the efficiency and effective-\n AGAINST EUROPEAN RAILROADS\nmally support the long-term rehabilitative interests of the\nindividual employees and the company. ness of Amtrak\xe2\x80\x99s Right\xe2\x80\x93of\xe2\x80\x93Way maintenance programs. As part\n of this effort, the OIG engaged a European consultant that has\n extensive experience evaluating the infrastructure maintenance\n programs of European railroads. The results show that Amtrak\xe2\x80\x99s\n infrastructure performance is in line with comparable European\nPROCUREMENT AND MATERIAL SUPPLY CHAIN\n\n railroads, but Amtrak\xe2\x80\x99s costs are somewhat higher. This is\nMANAGEMENT \xe2\x80\x93 OIG FACILITATING IMPROVEMENTS\n\n partially attributable to the fact that the average age of Amtrak\xe2\x80\x99s\nThe OIG continues its efforts in facilitating improvements and\nAlstom Parts Contract\n\n infrastructure is significantly older than the average age of the\nresolving shortfalls identified in the OIG initial evaluation of the railroad infrastructure in Europe and confirms that a backlog of\nAcela Parts Contract. As reported previously, Amtrak entered maintenance exists in Amtrak\xe2\x80\x99s Northeast Corridor to be able to\ninto a contract with Alstom TLS in 2006 to supply and manage achieve a state-of-good-repair.\nthe parts inventory for the Acela trainsets. This contract has an\nestimated value of close to $200 million over the five-year term. The benchmarking exercise has also identified areas of opportu-\n nity for Amtrak to improve its performance and efficiency where it\nBased on the value of the contract and the importance of the is feasible to adopt the best practices of the European railroads.\ncontract to the success of Amtrak\xe2\x80\x99s premium Acela service, the The OIG is continuing to work with Amtrak\xe2\x80\x99s Engineering\nOIG continues to work with Amtrak\xe2\x80\x99s Mechanical, Procurement Department and its European consultant to identify the specific\nand Information Technology departments to ensure that Amtrak best practices that can be adopted in each of Amtrak\xe2\x80\x99s infrastruc-\nadequately measures and monitors the contractor\xe2\x80\x99s performance. ture maintenance programs. The OIG plans on issuing a formal\nThe OIG is in the process of developing a \xe2\x80\x9clessons learned\xe2\x80\x9d report on this ongoing evaluation during the next reporting period.\nreport as a guide for Amtrak to use in managing similar contracts\n\n18 Office of Inspections and Evaluations\n\x0cAMTRAK\xe2\x80\x99S PUBLIC FUNDING LEVELS \xe2\x80\x93 COMPARISON HUMAN CAPITAL MANAGEMENT \xe2\x80\x93 EVALUATION\n\nWhenever comparisons are made between Amtrak and European The OIG recently initiated an evaluation to determine how effec-\nTO EUROPEAN RAILROADS INITIATED\n\npassenger railroads, a discussion typically ensues around tively and efficiently Amtrak manages its human capital.\nEuropean railroads\xe2\x80\x99 claims of profitability. As a follow-on effort Amtrak is facing numerous human capital challenges in\nto OIG\xe2\x80\x99s work benchmarking Amtrak\xe2\x80\x99s right-of-way mainte- attracting and retaining a world-class, diverse workforce. These\nnance against European railroads, the OIG asked the European challenges include: increased competition for skills within the\nconsultant to provide Amtrak information on the amount of railroad community, private industry, and government sectors;\npublic funding provided to European railroads. The OIG\xe2\x80\x99s intent and, an increase in attrition from retirements projected over the\nis to compare Amtrak\xe2\x80\x99s level of public funding to the level of next five years.\nfunding provided to European Railroads and to test their claims\n The evaluation will examine how Amtrak identifies its\nof profitability.\n manpower needs and then recruits, hires, develops and retains\nAfter examining a representative sample of European passenger manpower, with the skills needed, to accomplish Amtrak\xe2\x80\x99s\ntrain operations over a multi-year period, The OIG found that: mission and achieve Amtrak\xe2\x80\x99s strategic goals. As part of the\n data gathering effort, the OIG has already conducted more than\n When all revenues and expenses for the entire passenger train 80 interviews with both management and human capital profes-\n system are taken into consideration, all of the European\n\xe2\x96\xa0\n\n sionals throughout the company. The OIG will submit the\n passenger train operations the OIG studied operate at a finan- formal report early in 2009.\n cial loss and consequently require significant public\n subsidies. And,\n The average annual subsidies for European passenger train\n operations are much higher than those for comparable Amtrak\n\xe2\x96\xa0\n\n\n services.\nThis report has been posted on the OIG website.\n\n\n\n\n Office of Inspections and Evaluations 19\n\x0c Office of Management and Policy\n\n OIG ESTABLISHES OFFICE OF\n MANAGEMENT AND POLICY AND\n ASSUMES SECURITY OVERSIGHT\n RESPONSIBILITIES\nDuring this reporting period, the OIG established the Office of\nManagement and Policy. This unit is responsible for providing\nmission and administrative support services to the OIG by\nmanaging: budget formulation and execution; policy develop-\nment; personnel security; dissemination of OIG information;\nhuman resources; and OIG facilities. OMP ensures perfor-\nmance quality and compliance with current and emerging\nGovernment regulations, directives, and mandates. The office\nis the primary liaison with the Government Accountability\nOffice, and other government departments and agencies. It is\nalso responsible for security oversight of Amtrak\xe2\x80\x99s OSSSO and Chicago, IL\nAmtrak police programs.\n\nOFFICE OF COUNTER-TERRORISM AND\nINTELLIGENCE\nAs noted in previous semiannual reports the Office of Counter-\nTerrorism and Intelligence transitioned from an oversight entity\nand assumed expanded responsibilities to Amtrak\xe2\x80\x99s Office of\nSecurity, Strategy and Special Operations. The OIG retained the\nresponsibility for security oversight under the Office of\nManagement and Policy.\n\n\n\n\n20 Office of Management and Policy\n\x0c Other OIG Activities\n\n COORDINATION WITH INDEPENDENT TEAM MATE IMPLEMENTATION\n PUBLIC ACCOUNTANTS OIG SECURE SUBNET AND TEAMMATE UPGRADED\nSection 805(1) of the Rail Passenger Service Act of 1970 (Public\n As reported earlier, Amtrak OIG has successfully implemented\n (PHASE III)\nLaw 91-518; 49 U.S.C. \xc2\xa7 24315(d)) requires Amtrak to have its\nfinancial statements audited annually by an independent certified a secure subnet and TeamMate application to take advantage of\npublic accountant in accordance with generally accepted electronic work papers, and automate the audit processes. All\nauditing standards. In January 2008, Amtrak\xe2\x80\x99s independent offices are now actively using TeamMate, and all new audit\ncertified public accountant, KPMG LLP, the U.S. member firm projects are created electronically.\nof KPMG International, a Swiss cooperative, reported that During this semi-annual period, the OIG started the Phase III to\nAmtrak\xe2\x80\x99s Consolidated Financial Statements present fairly, in all upgrade the secure subnet and TeamMate. The OIG success-\nmaterial respects, Amtrak\xe2\x80\x99s financial position as of September fully upgraded the TeamMate software to version 8.1.3, and\n30, 2006, and September 30, 2007, and results of it operations updated the protocol document and library to reflect the changes\nand cash flows for the years then ended in conformity with U.S. as a result of software upgrade and the lessons learned from\ngenerally accepted accounting principles. using the application for over a year.\nAs part of the annual audit process, the OIG informs the external The OIG implemented 360 degree reporting to generate audit\nauditors on the scope of the ongoing audit activities being programs and audit reports. The OIG infrastructure improve-\nconducted by the OIG, and continues to coordinate significant ments included the successful implementation of the test\naudit issues with Amtrak management and the external auditors, environment, improved configuration management using the\nas necessary. Ecora Auditor Professional software, and hardening of internal\n firewall by reviewing and tightening the firewall rules. In near\n future, the OIG will bring all of the OIG servers in full compli-\n ance with the SANS best practice and enterprise standards.\n\n\n\n\n Other OIG Activities 21\n\x0c\x0cNATIONAL RAILROAD PASSENGER CORPORATION\n\n Office of the Inspector General\n\n\n\n\n Appendices\n\x0c Appendix 1\n\n INSPECTOR GENERAL AUDIT REPORTS ISSUED WITH QUESTIONED COSTS\n 10/1/07 \xe2\x80\x93 3/31/08\n Number Questioned Costs Unsupported Costs\n A. For which no management decision\n has been made by the commencement\n of the reporting period. 2 $871,275 $277,348\n B. Reports issued during the\n reporting period. 4 $398,896 $0\n\n Subtotals (A + B) 6 $1,665,826 $277, 348\n\n LESS\n C. For which a management decision\n was made during the reporting period. 4\n (i) dollar value of recommendations\n that were agreed to by management. $842,996 $68,780\n (ii) dollar value of recommendations\n that were not agreed to by management. $282,516 $208,568\n\n D. For which no management decision\n has been made by the end of the\n reporting period. 2 $540,314 $0\n\n\n\n\n24 Appendix 1\n\x0c Appendix 2\n\nINSPECTOR GENERAL AUDIT REPORTS ISSUED WITH FUNDS TO BE PUT TO BETTER\nUSE\n10/1/07 \xe2\x80\x93 3/31/08\n Number Dollar Value\nA. For which no management decision\n has been made by the commencement\n of the reporting period. 0 $0\nB. Reports issued during the\n reporting period. 3 $6,390,505\n\nSubtotals (A+B) 3 $6,390,505\n\nLESS\nC. For which a management decision\n was made during the reporting period. 2 $0\n (i) dollar value of recommendations\n that were agreed to by management. $5,090,505\n (ii) dollar value of recommendations\n that were not agreed to by management. $0\n\nD. For which no management decision\n has been made by the end of the\n reporting period. 1 $1,300,000\n\n\n\n\n Appendix 2 25\n\x0c Appendix 3\n\n OFFICE OF THE INSPECTOR GENERAL DETAILED LISTING\n OF ALL ISSUED AUDIT REPORTS\n 10/1/07 \xe2\x80\x93 3/31/08\n Date Report Questioned Unsupported Funds to be Put\n Issued Number Report Title Costs Costs to Better Use\n 10/17/07 204-2007 East Side Access Project \xe2\x80\x93 Labor Review $41,874 $0 $0\n\n 10/17/07 206-2007 Arnold Worldwide Advertising - Expenses $0 $0 $0\n\n 11/20/07 217-2007 Cycle Inventory \xe2\x80\x93 Boulden & Wilmington, DE $0 $0 $0\n\n 11/26/07 503-2006 RailPlan International, Inc $210,810 $0 $0\n COR 001 to Contract #S 050 07001\n\n 11/26/07 504-2006 RailPlan International, Inc COR-002/COR-003 $146,212 $0 $0\n to Contract #S 064 90678\n\n 12/19/07 213-2007 Observation of FY07 Annual MW Inventory $0 $0 $0\n\n 12/19/07 305-2007 Downeaster Train Service Contract $0 $0 $0\n\n 01/09/08 105-2007 Analysis of Overtime Wages $0 $0 $3,748,758\n\n 3/26/08 204-2006B New England Division Conductor/ $0 $0 $1,341,747\n Flagman-Reissued\n\n 3/20/08 218-2005 Rocla Concrete Ties $0 $0 $1,300,000\n\n 3/26/08 102-2006 Commonly Abused Medical Billing Codes $0 $0 $0\n\n 3/31/08 107-2004 Information Security Review $0 $0 $0\n\n 3/31/08 217-2006 Ballast $0 $0 $0\n\n 3/31/08 405-2007 BEE Wreck Audit $0 $0 $0\n\n\n\n\n26 Appendix 3\n\x0c Appendix 4\n\nOFFICE OF THE INSPECTOR GENERAL\nSUMMARY OF REPORTS TO PRESIDENT OF AMTRAK\nCONCERNING INFORMATION OR ASSISTANCE\nUNREASONABLY REFUSED OR NOT PROVIDED\n10/1/07 \xe2\x80\x93 3/31/08\n\nNothing to report for this period.\n\n\n\n\n Appendix 4 27\n\x0c Appendix 5\n\n OFFICE OF THE INSPECTOR GENERAL\n REVIEW OF LEGISLATION AND REGULATIONS\n 10/1/07 \xe2\x80\x93 3/31/08\n Section (4)a of the Inspector General Act of 1978, as amended, provides that the Inspector General shall \xe2\x80\x9c\xe2\x80\xa6review existing and\n proposed legislation and regulations relating to programs and operations of such establishment and to make recommendations in the\n semiannual reports \xe2\x80\xa6 concerning the impact of such legislation or regulations on the economy and efficiency in the administration of\n programs and operations administered or financed by such establishment or the prevention and detection of fraud and abuse in such\n programs and operations...\xe2\x80\x9d\n Furthermore, Section 4(a) also states that it is the duty and responsibility of the Inspector General \xe2\x80\x9cto recommend policies for, and to\n conduct, supervise, or coordinate relationships between such establishment and other Federal agencies, State and local governmental\n agencies, and nongovernmental entities with respect to (A) all matters relating to the promotion of economy and efficiency in the\n administration of, or the prevention and detection of fraud and abuse in, programs and operations administered or financed by such\n establishment, or (B) the identification and prosecution of participants in such fraud or abuse\xe2\x80\xa6\xe2\x80\x9d\n In order to enhance the OIG\xe2\x80\x99s ability to meet these Section (4)a, responsibilities, we created a new group, the Office of Management and\n Policy (OMP), to ensure compliance with current and emerging legislation, and Government regulations, directives, and mandates. The\n office is the primary liaison with the Government Accountability Office, and other government departments and agencies. In addition,\n the OIG has an agreement with Amtrak\xe2\x80\x99s Government and Public Affairs Department that allows the OIG to review and comment on the\n company\xe2\x80\x99s annual grant and legislative request, and other legislative and regulatory concerns of the company. Existing legislation and\n regulations are also reviewed, as necessary, as a part of every audit and investigation.\n During the period covered by this report the OIG continued to cooperate with and monitor Congressional efforts to draft and enact Amtrak\n reauthorization legislation, as well as legislation intended to update the Inspector General Act. This period has also been the first where\n specific funding has been made available by appropriations for the OIG to conduct its mission. In addition, after the reporting period, the\n House Transportation and Infrastructure Committee reported legislation, H.R.6003 (the Passenger Rail Investment and Improvement Act\n of 2008), which would authorize a separate line item for the OIG. This line item authority and appropriations, together with the IG Act\n reforms proposed in S. 2324 (the Inspector General Reform Act of 2008) and H.R. 928 (the Improving Government Accountability Act)\n will significantly strengthen the independence, effectiveness and accountability of the OIG.\n\n\n\n\n28 Appendix 5\n\x0c Appendix 6\n\nGLOSSARY OF AUDIT TERMS AND ABBREVIATIONS\nThe terms the OIG use in reporting audit statistics are defined below:\n A cost or expenditure of funds for an intended purpose that is unnecessary, unreasonable, or an\n alleged violation of Amtrak\xe2\x80\x99s corporate policy or procedure.\nQues ti o ned Co s t\n\n\n A cost that is not supported by adequate documentation at the time of the audit.\nFunds To Be Put To Better Us e Funds identified in an audit that could be used more effectively by taking greater efficiency\nUns uppo rted Co s t\n\n\n measures.\n Management\xe2\x80\x99s evaluation of our audit finding and its final decision concerning agreement or non-\n agreement with our recommendation.\nManag ement Deci s i o n\n\n\nAbbreviations/acronyms used in the text are defined below:\nAAMPS Amtrak\xe2\x80\x99s Accounting, Material NHCAA National Health Care Anti-Fraud\n and Purchasing System Association\nARASA The American Rail and Airway NJT New Jersey Transit\n Supervisors Association NNEPRA Northern New England Passenger Rail\nADA Americans with Disabilities Act Authority\nAmtrak National Railroad Passenger Corporation NRPC National Railroad Passenger Corporation\nAPD Amtrak Police Department (Amtrak)\nAPP Appendix OEM Original Equipment Manufacturer\nATS Amtrak Telephone System OIG Office of Inspector General\nCOR Change Order ORB Operation RedBlock\nCY Current Year OSSSO Office of Security, Strategy and Special\nDOT-OIG Department of Transportation, Office of the Operations\n Inspector General PCard Procurement Charge Card\nDUI Driving Under the Influence P.L. Public Law\nFRA Federal Railroad Administration PPI Producer\xe2\x80\x99s Price Index\nFY Fiscal Year RCM Reliability Centered Management\nG&A General and Administrative RPU Revenue Protection Unit\nIT Information Technology RRB Rail Retirement Board\nLOA Leave of Absence SPCSL Southern Pacific Central State Line\nLSA Lead Service Attendant SSYD Sunnyside Yard\nM/E Maintenance of Equipment T&A Time and Attendance\nMPH Miles Per Hour TCU Transportation Communication Union\nM/W Maintenance of Way UP Union Pacific\nNAS National Academy of Science U.S.C. United States Code\nNEC Northeast Corridor\n\n\n\n\n Appendix 6 29\n\x0c Reporting Requirements Index\n\n INDEX OF REPORTING REQUIREMENTS PURSUANT\n TO THE INSPECTOR GENERAL ACT AMENDMENTS OF 1988 (P.L. 100-504)\n Topic Reporting Requirements Page\n Section 4(a)(2) Review of Legislation and Regulations 28\n Section 5(a)(1) Significant Problems, Abuses, and Deficiencies 5, 9, 12-15, 17-19\n Section 5(a)(2) Recommendations for Corrective Action to Significant Problems 5, 9, 12-15, 17-19\n Section 5(a)(3) Previous Reports\xe2\x80\x99 Recommendations for Which Corrective Action\n Has Not Been Completed 10\n Section 5(a)(4) Matters Referred to Prosecutive Authorities 16\n Section 5(a)(5) Information or Assistance Refused or Not Provided 27\n Section 5(a)(6) Audit Reports Issued in This Reporting Period 26\n Section 5(a)(7) Summary of Significant Reports 5, 9, 12-15, 17-19\n Section 5(a)(8) Audit Reports with Questioned Costs 2, 4\n Section 5(a)(9) Audit Reports with Recommendations That Funds Be Put to Better Use 25\n Section 5(a)(10) Previous Audit Reports Issued with No Management Decision Made by\n End of This Reporting Period 9, 10\n Section 5(a)(11) Significant Revised Management Decisions 9, 10\n Section 5(a)(12) Significant Management Decisions with Which the OIG is in Disagreement 9, 10\n\n\n\n\n30 Reporting Requirements Index\n\x0cStop Fraud, Waste, Mismanagement, and Abuse\n\nWho pays? You pay. Act like it\xe2\x80\x99s your money\xe2\x80\xa6 it is!\nTell Us About It\nMaybe you are aware of fraud, waste, mismanagement, or some other type of abuse at Amtrak.\nAmtrak\xe2\x80\x99s Office of Inspector General has a toll free hotline number for you to call. You can also write to us.\nWe will keep your identity confidential. If you prefer, you can remain anonymous. You are protected by law from reprisal by your\nemployer.\n\nCall the hotline:\nNationwide (800) 468-5469\nPhiladelphia (215) 349-3065\n ATS 728-3065\n\nWrite to us:\nInspector General\nP.O. Box 76654\nWashington, DC 20013-6654\n\n\n\n\nNational Railroad Passenger Corporation\nOffice of Inspector General\n(800) 468-5469\n\x0c National Railroad Passenger Corporation\n Office of the Inspector General\n10 G Street, NE, Suite 3W-300, NE, Washington, DC 20002-4285\n\n\n\n Amtrak is a registered service mark of the National Railroad Passenger Corporation.\n\x0c'