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Audit slams VTrans railroad contracts

3.) Lease revenues and agreed-to performance requirements of leaseholders are not being verified, and VTrans has forgone $37,000 in interest stemming from late payments of monthly leases for state-owned track.

4.) The agency did not adequately follow up on past audits which reported $436,000 of questioned costs related to contracts with Vermont Railway.

For the project, auditors selected four contracts totaling $7.2 million dollars, approximately 44 percent of the total active rail construction and railway upgrade contracts during fiscal years 2007 and 2008.

All contracts were between VTrans and Vermont Railway and Green Mountain Railroad, two companies of the Vermont Rail System (VRS), a privately held, affiliated group of short-line rail transportation companies that operates in Vermont.

Auditors recommended that AOT strengthen and clarify the language within its rail agreements, improve the oversight of contracts, enforce penalties for violations of the terms and conditions of its contracts and lease agreements, and provide for better fiscal management of its contractors and service providers.

In its response to the report, the Agency of Transportation generally agreed with the report's recommendations and pledged to provide the State Auditor with quarterly status reports on corrective actions.

"VTrans already has put in place new business practices that correct some of the Auditor's concerns, and we certainly will make additional changes to rectify the remaining deficiencies," Dill said. "VTrans recently hired a new Rail Program Manager, and one of his top priorities is to improve our rail business operations."

The oversight of the railway network in Vermont is the responsibility of the Vermont Agency of Transportation Rail Program. Vermont's rail system consists of approximately 748 miles of track or rail right-of-way. The state owns approximately 427 miles, of which 305 miles are currently active. Ten railroad companies operate or have the rights to operate on the rail lines in Vermont.

For Fiscal Year 2009, the AOT total budget is $412.2 million. The Rail Section is allocated $16.8 million of this budget. The Rail Section currently has eight staff positions of a total of approximately 1,050 positions in the Agency.

The complete audit report is available at www.auditor.vermont.gov. Click on "Audits & Reports" and then "Special Audits" to access the new audit report.

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