Management challenges abound, says Transportation IG

The Transportation Department faces significant budget and management challenges, especially within Amtrak and the Federal Aviation Administration, according to the department's inspector general.

In a report submitted to the Office of Management and Budget Monday, Transportation Inspector General Kenneth Mead outlined financial challenges at Amtrak and said while the system was "not sustainable at current funding levels," there will likely be no increase in federal funding for the agency. He also noted the declining aviation trust fund, which makes the FAA increasingly reliant on federal funds. Congress has required the inspector general to issue the management report annually since 1998.

The report also noted progress: While Transportation receives low marks for financial performance on the OMB's score card, it has taken large strides toward better financial management. "They have a lot of things in place that a lot of agencies don't have, like cost accounting," said Tabetha Mueller, spokeswoman for the House Government Reform Subcommittee on Government Efficiency and Financial Management. Cost accounting, she explained, would enable the agency to know what increased expenditures would run and how much specific programs would cost.

"It's probably more important even than getting a clean opinion," she added.

The report also focused on problems with the business structure of agencies. It criticized Amtrak for delays, large operating losses, and lack of capital investment and called for major changes in the way the agency is managed. It noted that Amtrak was unlikely to receive the $1.8 billion it requested for its fiscal 2005 budget, which is still being debated by Congress.

"Amtrak's management must find ways to reduce its need for operating subsidies," the report stated. It also urged immediate investment in capital improvements, such as bridges along the Northeast Corridor.

"With the resources we're given, we do the very best we can," said Cliff Black, director of media relations at Amtrak. He said Amtrak is in the process of making capital investments along the deteriorating Northeast Corridor, but will probably have to postpone some improvements if it does not receive the requested funding from Congress.

Black added that Amtrak would like to have a program similar to the highway and aviation trust funds, but he declined to specify how it would be funded. The highway and aviation trust funds are subsidized in part by gas taxes and airline ticket sales.

One problem for the FAA, however, is the aviation trust fund has been drying up, the report said, which makes the agency increasingly dependent on federal funds. David Barnes, Transportation's director of public affairs, explained that declining airline ticket prices are to blame.

Airlines are outsourcing more maintenance work, which Barnes said leads to less FAA oversight. Major airlines outsource 51 percent of their maintenance expenses, compared with 37 percent in 1996, says the report. FAA was recently recognized for strong management.

The report predicted several "emerging issues," including human resource challenges due to anticipated retirements and the increased need for Transportation to communicate with other agencies, including the Transportation Security Administration, Homeland Security Department and the EPA, on national security and environmental issues.

On OMB's score card, which rates agencies on their performance in categories designated by the President's Management Agenda, Transportation received a "green" rating, the highest, in all of the categories except for financial performance, in which it received a "red," the lowest score.
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