- The Washington Times - Monday, May 31, 2010

When Amtrak assured Congress it was on a “glide path” to free itself of federal subsidies early last decade, a handful of top executives secretly had reason to know better. In fact, the rail service was on the verge of bankruptcy.

But Amtrak’s public assurances were based on far more than overly rosy financial projections.

A previously undisclosed seven-year investigation later uncovered serious accounting shenanigans inside Amtrak that kept federal officials, Congress and the public in the dark about the national rail service’s true finances, according to documents obtained by The Washington Times through the Freedom of Information Act.

No criminal charges were filed, but the activities were serious enough to warrant a federal grand jury and the involvement of the U.S. attorney’s office in Washington. The investigation was headed by Amtrak’s office of inspector general and the U.S. Postal Service Inspection Service.

What authorities ultimately unraveled was that two former Amtrak officials, in fiscal 2001, either booked false or incorrect accounting entries in Amtrak’s monthly financial statements or else failed to report the activities.

In turn, these same misleading accounting entries helped make Amtrak’s monthly financial results appear closer to budget than they really were. What’s more, the “inappropriate entries” were being made when Amtrak was sending monthly and quarterly financial reports to its own board of directors, the Department of Transportation, the Federal Railroad Administration and others, records show.

Amtrak spokeswoman Karina Romero said the accounting misstatements had been corrected and that several changes were made in the wake of the investigation, including the issuance of quarterly financial statements and the establishment of an audit committee.

“This was a serious breakdown in complying with basic financial reporting requirements that rendered interim unaudited financial statements unreliable,” Amtrak Inspector General Ted Alves said in a statement to The Times on Friday.

“The problems were detected before the end of the fiscal year and proper adjustments were made,” he said, adding that auditors were able to express a “clean opinion” on Amtrak’s financial statements.

Newly disclosed details about the investigation shed light on one of Amtrak’s most difficult financial periods.

As a member of the Amtrak Reform Council from 1999 to 2002, Wendell Cox recalls hearing repeated assurances from Amtrak that the rail service was managing its money well — followed, seemingly suddenly, with dire warnings that it was teetering on collapse.

“We had heard nothing but rosy statements,” Mr. Cox said. “Then, all of the sudden, everything just fell apart. And it was clear that something was very wrong and that we and the Congress had been grossly misled.”

There were similar concerns inside Amtrak at the time.

In May 2001, the Amtrak inspector general’s audit division got a tip that employees were “making numerous journal entries to the books to ‘hang up’ expenses on the balance sheet or to move revenue,” the records show.

At the time, Amtrak already was under heavy pressure to improve finances. The Amtrak Reform and Accountability Act of 1997 gave the national rail service until the end of 2003 to end its long-standing reliance on federal subsidies.

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