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September 2007
Action:
Failure to collect
proper mileage allowance for privately owned rail
cars.
Railroads are required to compensate private owners
of railroad equipment because these private owners
are supplying a transportation instrumentality that
the railroads are legally required to furnish
themselves. This is done through mileage allowances,
which vary with many factors and the largest single
factor is value of the car furnished and perhaps the
degree of revenue utilization derived by the
railroads. These mileage allowances are paid by each
railroad directly to the specified agent or the
owner, and only for the miles traveled on each
railroad. Usually, if indeed not always, paid by the
railroads. But because of the possibility of
earnings on the same trip using connecting
railroads, the detailed reporting and auditing of
the real mileage earnings is a monumental task. With
this much effort involved, you can bet your bottom
dollar that errors are going to be made – and they
are! This is a ready-made opportunity for errors in
the actual miles traveled and actual dollars paid
for each car. The monitoring of these payments is
important and can easily be done by setting up a
standard computer program to cover the mileage and
the payments expected on the moves of each car.
Errors are then corrected with the reporting
railroad and a reconciliation of mileage and dollars
developed. Recoveries procedures may vary by the
different railroads, but the process is a tedious,
but profitable one if done correctly. If you have
not audited these payments, or do not know how to do
it, outside audit firms can perform this service for
a fee, usually at a percentage of the recoveries.
Special time limit for past-due recoveries is
applicable and may vary by railroad rules. I have
seen collections of as much as $600,000 of past due
claims for settlement errors on mileage earnings. So
watch this potential very carefully. It is always
amazing how many simple errors occur whenever high
volume billings are involved and recoveries are
overlooked. Logistics is the key responsible party,
along with others in “Team Group C”.
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