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Fourth Quarterly Report on Cost-Savings Accrued by Amtrak Operational Reform

As mandated by Congress in the Conference Report accompanying the FY 2006 Appropriations Act for the Department of Transportation, we issued the fourth in a series of quarterly reports to the House and Senate Appropriations Committees providing an estimate of the savings accrued as a result of operational reforms instituted by Amtrak. Amtrak has achieved operational savings of $5.1 million through July 2006. This compares to the $3.8 million in savings we certified Amtrak had achieved through May 2006 in our July quarterly report. Amtrak has achieved $51.2 million in savings through July 2006 from all its FY 2006 operational reforms. These overall savings from reform contribute to Amtrak's current better than-expected financial performance. Through August, Amtrak's operating loss was $122 million below the year-to-date projected loss in the $586 million subsidy baseline. As such, barring any unexpected losses, Amtrak will achieve the required savings to operate within its FY 2006 appropriation. Amtrak estimates its financial performance will continue to improve and, as a result, expects to end FY 2006 with a $209 million cash balance. Also, Amtrak expects to add to this balance another $11 million from claims settlements. Looking toward FY 2007 and FY 2008, Amtrak will need to maintain progress in implementing operational reforms to continue to reduce its reliance on Federal operating subsidies. It will be necessary for Amtrak to move beyond the "low-hanging fruit" and begin to implement more difficult reforms in food and beverage service, sleeper car service, route restructuring, state payments, and labor contracts. Critical to Amtrak's ability to increase its efficiency and reduce unit costs will be the development of a managerial accounting system. Amtrak is developing a system that will replace its legacy activity-based Route Profitability System with one that will support both avoidable and full-cost methodologies and provide business-line and route level activity-based analysis. We are monitoring Amtrak's development of this system, both to help ensure it is well designed and to respond better to congressional direction that we report on the strengths and weaknesses of the system after it is implemented.