Somehow the arguments that Amtrak is using accepted procedures seems mis guided. Note that the old monthly peerformance reports had several of out posters point out flaws. These reports have been severely reduced / discontinued leaving these posters to wonder what is happening ? We have to ask why ?. 1st order of business require Amtrak to start issuing those portions and add the suggested ones such as what are each of the allocated costs.
If one reads Fred Frailey’s Feb 2019 piece in Trains magazine, in context with this discussion, it’s somewhat thought provoking.
Where Randall O’Toole points out that Amtrak counts state subsidies on the shorter routes as “passenger revenue”…it comes clear that Amtrak is playing a shell game of sorts, trying to tell the story that it wants to tell…for reasons that aren’t all that hard to figure out.
IMO, it would be incredibly naive to assume that they are not being equally creative in how they allocate costs.
Most companies would include the state supported payments under other revenues or other income as a below the line item. But Amtrak is not violating any GAAP Principles by including it in operating revenues.
In its Comprehensive Statement of Operations, the state support payments are set out clearly under Total Revenues. The bottom line results are the same.
Outsiders make all kinds of assumptions about how an entity is accounting for its transactions. They don’t have any evidence for their assumptions and, most times are wrong. But people love to speculate, and there is no putting an end to it.
I agree. I only had three courses in accounting as an undergrad, so I really only know enough to realize that I don’t know very much. And to see that many of those outsiders who comment on Amtrak accounting practices haven’t a clue. Without internal access, a
And yet the people in this forum that take that exact position are doing what?
Commenting openly on Amtrak Financials and telling everyone else they are not qualified or do not have the experience or access. What does your psychology training tell you about that? lol. 
Apparently you misunderstood my remark, either because you have below average reading comprehension (unlikely) or because you enjoy distorting others’ comments, for reasons unknown.
E’hhhh? It’s the internet,. what else is it good for?[soapbox]
If one comes home after a hard day at work, and finds a cuff link under a freshly made bed, and you know the cuff link is not yours…is it all that unreasonable to speculate that whoever made the bed might know something about the cuff link’s origin? [:-^]
Perhaps if Amtrak was not so “clandestine” about it’s cost allocation methods, people would feel less inclined to speculate?
I understood it clearly for what it was. Another public justification to troll others that comment on Amtrak financials…I noticed your victim list is lengthening in this thread. I’m just snickering about all this.
To a considerable extent the arguments here have been due to two parallel but different ways of using the numbers. JPS1 is correct from an accounting perspective, since the overall numbers that Amtrak reports in summary form presumably balance. How they are distributed internally is irrelevant to the year end results of the company.
It is when they are used for other purposes that the problems arise. That internal distribution in most companies is not usually publicly available, nor is there any need for it as long as the shareholders are satisfied that the management and board are acting appropriately in the company’s interest.
We have a rather different situation with Amtrak. Here Amtrak is using selected internal numbers publicly to justify decisions that affect a mandated public service. It is not unreasonable in this case for the public (who are after all the “shareholders”) to ask for proof that those figures are reasonable. The limited information that is released, when scrutinised in detail, seems to raise questions about how the costs and revenues are allocated thus putting their credibility in question.
Consider your household. At year end you know your income and expenditures and can balance them off, and this is what JPS1 is talking about. Your vehicle is going to be one of the costs, perhaps divided into commuting, local errands and holiday and weekend excursions. Do you allocate the costs by mileage, or number of trips, weighted by which purpose, number of occupants, and so on? Do you include the costs of the house (heating, taxes, maintenance) using the square footage of the garage and driveway vs the house to develop the ratio? Any of these allocations will be arbitrary. By careful selection of the allocation criteria almost any result can be produced. Essentially it becomes indeed creative fiction.
“I have reviewed the Rail Passengers Association report…”
“The author, who is not an accountant, did not have access to Amtrak’s books or any of the primary accounting source documents…”
“The author of the report has a Rail Passengers Association bias…”
Apparently I need to repeat myself: We have very detailed IG and GAO reports plus the Volpe report summarized by the RPA (as always, go the the source data for full detail). Those reports were made by accountants at OIG and Volpe National Transportation Systems Center, who DID have access to Amtrak’s books. Indeed Volpe was tasked with redesigning their cost accounting system.
As I said originally, the RPA report SUMMARIZED them, and I fully agree should be taken with a grain of salt where it veers into subjectivity (the “RPA assessment” bits). However a large portion of it provides objective facts from the OIG and Volpe reports, which I found useful and others will likely find more approachable than the densely-packed originals. Importantly, it also provides citations for that data. As always (I say again), go to the source data for full detail.
Some of those cites require creative Googling to track down, but this one’s a good start: https:
You do have to be careful with this analogy, even though you might get it to work in your post.
A C Corporation is not the same as a household. I can do things as head of a C Corporation that head of a household cannot in regards to credit, debt and financing. A lot of readers here think they can apply their own household analogies to the running of a C Corp. Roughly it works sometimes but the C Corp is a far more powerful entity with far more options open to it than a household has. So in most cases the household to C Corp analogy has holes in it.
Lets take financing for example. Just by issuing stock and selling it, I can obtain legal access to my personal 401k plan and anyone elses 401k plan as a source of no interest, no loan financing because the sale of stock represents an investment in a legal company which the 401k is investing into via purchase of the stock. Thats just one example that is 100% legal. You cannot do that as head of a household, S Corp, LLC, or Partnership. Must be a C Corp registered via a state. Now think about using that approach without ever having to visit a bank loan officer. Your stock does not have to be publicly traded or listed on the NYSE to do this. Can be ordinary private shares of C Corp stock. Suddenly you appear as a C Corp out of nowhere with a large cash account and zero debt…every bankers dream. I guarantee you at that point the banker does not give a crap about your business plan, your going to get a loan of some amount from them with no debate.
[quote user=“cx500”]
To a considerable extent the arguments here have been due to two parallel but different ways of using the numbers. JPS1 is correct from an accounting perspective, since the overall numbers that Amtrak reports in summary form presumably balance. How they are distributed internally is irrelevant to the year end results of the company.
It is when they are used for other purposes that the problems arise. That internal distribution in most companies is not usually publicly available, nor is there any need for it as long as the shareholders are satisfied that the management and board are acting appropriately in the company’s interest.
We have a rather different situation with Amtrak. Here Amtrak is using selected internal numbers publicly to justify decisions that affect a mandated public service. It is not unreasonable in this case for the public (who are after all the “shareholders”) to ask for proof that those figures are reasonable. The limited information that is released, when scrutinised in detail, seems to raise questions about how the costs and revenues are allocated thus putting their credibility in question.
Consider your household. At year end you know your income and expenditures and can balance them off, and this is what JPS1 is talking about. Your vehicle is going to be one of the costs, perhaps divided into commuting, local errands and holiday and weekend excursions. Do you allocate the costs by mileage, or number of trips, weighted by which purpose, number of occupants, and so on? Do you include the costs of the house (heating, taxes, maintenance) using the square footage of the garage and driveway vs the house to develop the ratio? Any of these allocations will be arbitrary. By careful selection of the allocation criteria almost any result can be produced. Essentially it becomes indeed creative fiction.
I think we need High Speed Rail to exist first in the United States. Otherwise, it is kind of like talking about the success or failure of Brightline prior to 2024.
Average speed on the NEC is still like 60 mph or something ridiculously low. The Midwest HSR project is still choking on red tape or just plain incompetence. California is probably a good 8-10 years away from completion. Dallas to Houston is still a pipe dream.
What I was getting at is that cost allocation is inherently subjective. In the case of a personal vehicle, the rule might be that it is necessary for that big 4-week vacation trip, and all the fixed costs (purchase, maintenance, licensing, insurance) are considered as part of the annual holiday expense. The rest of the year it also gets used 5 days a week for commuting, but the only assigned cost is fuel. That makes the aalternative of public transit seem quite expensive. On the other hand charge all the fixed costs to commuting, now driving to work becomes costly and the vacation becomes considerably more affordable.
Overall the cost is the same, and “accounting” is satisfied because the rules (which ever ones are chosen) have been followed. However, two rather different conclusions can been drawn based on the same overall figures. Because allocation is inherently somewhat arbitrary, it can be chosen to yield a desired outcome should there be a hidden agenda. And because of that arbitrary nature, the allocation rules are open to debate and challenge. The accounting side will use the allocations as defined by senior management, so are just bystanders crunching the numbers to keep everything legal.
Yes, the above is simplistic and few would actually break the cost of car ownership into defined categories. Indeed most probably lump it into general household operating costs. I have a vehicle, it costs money (some years more than others), but because it is there I use it without caring much about accounting for it. Whether it is to the grocery store or trackside for some train watching, in my mind the trip is “free” apart from maybe a gas fill.
I think trying to parse Amtrak’s cost accounting is a fools errand.
None of this has anything to do with the real cost of running the trains. Perhaps, if Amtrak shed big chunks of their network, it would be possible to re-engineer their staff processes and system fixed costs. Perhaps, Amtrak should be charged the real cost the frt RRs bear to host their trains. Perhaps, perhaps, perhaps…
Costing tools are almost never “what-if” tools when you are talking about large changes and the costs Amtrak pays aren’t even the actual costs they are incurring. It’s pretty clear that the frt roads are subsidizing the LD trains and Amtrak is subsidizing NEC commuter roads. That nobody can come up with a perfect solution for doing this doesn’t change the real costs a whit. It’s just swivelling the lounge chair seats.
At the end of the day, it doesn’t matter. It only matters that Amtrak tries to do the best with what it has.
If Amtrak is secretly trying to kill off the LD trains, well, then, they are just as bad at that as they are at running them well. It’s been a whole year and not one train is dead.
Arguing about their cost accounting and trying to read a “secret plot” into is about as dumb as arguing if you like EMD or GE locomotives more.
+1 Of course we can all agree about ALcos. [^o)]
Well, now that the concept of “stranded assets” has been brought up, I suppose Amtrak could eliminate the LD routes and still cook up some creative means to retire their share of overhead without passing those charges along to the coveted short distance operations. [}:)]
I have argued the case for the LDs many timrs. But the bottom line is that Federal eupport for Amtrak goes out the window, and the States will have to pick up the tab for corridor and short-distancd subsidies. Possibly retaining an Amtrak for economies of scale but podsibly regional autorities for local control.
After reading the article, I’m going to chime in here with some education and experience from the accouting and finance side. I feel that the author displayed a lack of knowledge on the subject that resulted in some curious arguments.
I’ll answer from my base of knowledge as an MBA with degrees in finance and economics (built on a dream of running a railroad [:D]), before going to work for a large tech manufacturer that allocated its campus costs to factories, and later working as a consultant to universities that used the responsibility center allocation methods.
Starting from the basics, accouting and finance are different animals. Accounting is the act of dutifully recording the past. The key things to track are who (Dept. or Cost Center), what (which account) and when. The household analogy is which checking account spent money on what thing (groceries, utilities, etc.). Corporate Finance, meanwhile, is all about the future performance of the firm and identifying ways to improve. I prefer to think of it as the creative half, and no, we are not accountants.
The accountants keep a log of every transaction, called a General Ledger. If we viewed the GL summarized into a financial statement by Dept, we will see massive variances between departments. If each LD train carries its own Dept number (likely), then you would see a profit or loss for that train based on its direct costs. This is one of the key arguments in the article. The finance folks will look at that and note that there are a ton of indirect costs for things like marketing, operations, depreciation and management that ought to be included. This is where the allocations are born.
Next, we can get into the allocation methods. The first thing to remember is that every allocation is a ‘balloon squeeze’ as one of my mentors put it. You are not adding costs (inflating the balloon), but simp
Very informative post. Welcome on board.