Its mission is to support the export of U.S.  goods and services, thereby supporting U.S. jobs. The underwriting of  loans guaranteed by Ex-Im is performed by either Ex-Im loan officers or  qualified lenders with delegated authority, which allows a lender to  authorize a loan guaranteed by Ex-Im in accordance with agreed-upon  underwriting requirements without first obtaining Ex-Im approval. Underwriting Guidance Was Established, but It Did Not Reasonably Assure Consistent Implementation and Compliance with Certain Requirements

The Manual, which describes Ex-Im’s loan guarantee underwriting  procedures, provided a framework for Ex-Im officials to implement Ex- Im’s underwriting process requirements for loan guarantee transactions,  and Ex-Im implemented many key aspects of its underwriting process as  required by the Manual. Specifically, the  Manual did not include certain procedures that should be performed, or  sufficiently detailed instructions on how certain procedures should be  performed and documented, to reasonably assure compliance with Ex- Im’s requirements and consistency with federal guidance prior to loan  guarantee approval. Further, Ex-Im did not have mechanisms to verify  compliance with certain established procedures related to loan guarantee  transactions prior to approval. verify that transaction applicants are not delinquent on federal debt helps  assure applicant eligibility is consistent with federal guidance. However, the Manual did not  include detailed instructions for preparation and inclusion of all required  documents or analyses in a loan file prior to loan guarantee approval. However, this risk-based  approach for scheduling these examinations was not documented. While Ex-Im Has Taken Steps to Prevent, Detect, and Investigate Fraud, It Has Not Documented Its Overall Fraud Processes

While Ex-Im has taken steps to prevent, detect, and investigate fraud and  officials could describe the steps they use, Ex-Im has not documented its  overall fraud process, which is recommended by several authoritative  auditing and antifraud organizations as a key step in evaluating and  updating these processes. Detecting fraud is a potential outcome of the processes Ex-Im uses to  monitor guaranteed loans as well as the steps it uses in its claims and  recoveries process once a loan defaults. 7 for an overview of fraud  prevention processes.) Ex-Im’s CRC directly monitors loan guarantee transactions by  selecting and reviewing a random sample of loan guarantee  transactions for compliance with internal Ex-Im policies and  procedures and ensures that the transactions occurred as outlined in  the terms of the loans. Improvements in these areas could help enhance the  assessment of transaction participant eligibility and the reasonable  assurance of repayment and the oversight of lenders, as well as help  prevent fraud. Establish mechanisms to oversee compliance with Ex-Im’s existing  procedures, prior to loan guarantee approval, for (1) obtaining credit  reports for transaction borrowers or documenting why they were not  applicable; (2) documenting certain eligibility procedures, including the  Character, Reputational, and Transaction Integrity reviews for  medium- and long-term loan guarantee transactions, export item  eligibility, and country eligibility; and (3) documenting the analysis of  country exposure. Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine the extent to which the Export-Import  Bank of the United States (Ex-Im) (1) adequately designed and  implemented procedures to reasonably assure compliance with its  underwriting process requirements for loan guarantee transactions and  consistency with federal guidance and (2) adequately designed  procedures to prevent, detect, and investigate fraudulent applications for  loan guarantees. In addition, we reviewed Ex-Im’s Office of Inspector  General (IG) reports since 2009 related to underwriting issues, various  laws applicable to Ex-Im, and GAO reports related to Ex-Im. The results from our samples apply to the universe  of loan guarantees authorized from October 1, 2011, to March 31, 2013.
Why GAO Did This Study

Ex-Im serves as the official export credit agency of the United States, providing a range of financial products to support the export of U.S. goods and services. Following the 2007-2009 financial crisis, increased demand for Ex-Im support resulted in significant increases in Ex-Im's outstanding financial commitments and risk exposure, which heightened interest in ensuring that Ex-Im has procedures in place to minimize financial risks.
GAO was mandated by the Export-Import Bank Reauthorization Act of 2012 to review the extent to which Ex-Im (1) adequately designed and implemented procedures to reasonably assure compliance with its underwriting process requirements for loan guarantee transactions and consistency with federal guidance and (2) adequately designed procedures to prevent, detect, and investigate fraudulent applications for loan guarantees. To address these objectives, GAO (1) reviewed Ex-Im's relevant procedures and federal guidance; (2) conducted tests on statistically random samples of loan guarantees authorized between October 1, 2011, and March 31, 2013; and (3) interviewed Ex-Im officials.

What GAO Found

The Export-Import Bank's (Ex-Im) Loan, Guarantee, and Insurance Manual (Manual) describes Ex-Im's underwriting procedures and generally provides loan officers with a framework to implement its underwriting process requirements for loan guarantee transactions. GAO's review of a statistical sample of loan guarantees indicated that Ex-Im implemented many key aspects of the underwriting process as required by the Manual. However, the Manual did not (1) include certain procedures or sufficiently detailed instructions to verify compliance with Ex-Im's requirements and consistency with federal guidance, such as a procedure to verify that loan guarantee transaction applicants did not have delinquent federal debt; (2) include instructions for loan officers to use credit reports and for the inclusion of all required documents and analyses in the loan file prior to approval; and (3) call for assessments of collateral, as required by federal guidance, for certain loan guarantee transactions prior to approval. Further, Ex-Im did not have mechanisms to verify compliance with certain established procedures, including documenting certain loan guarantee eligibility procedures. In addition, Ex-Im's current risk-based approach for scheduling examinations to monitor lenders with delegated authority to approve guaranteed loans was not documented. Improvements in these areas help enhance the assessment of transaction participant eligibility and the reasonable assurance of repayment, as well as help prevent fraud.
While Ex-Im has processes to prevent, detect, and investigate fraud, Ex-Im has not documented its overall processes for doing so. Such documentation is recommended by several authoritative auditing and antifraud organizations as a key step in evaluating and updating these processes. The processes Ex-Im used to prevent and detect fraud were part of its underwriting and monitoring of loan guarantees. A number of divisions within Ex-Im, as well as lenders, played a role in preventing fraudulent applications from being approved and monitoring activity that could help detect potential fraud. If a guaranteed loan defaults and an indicator of fraud existed, staff would work with Ex-Im's Office of Inspector General to leverage its investigative resources to pursue involved parties.

What GAO Recommends

GAO is making a number of recommendations to Ex-Im to enhance its loan guarantee underwriting process with additional procedures for ensuring compliance with Ex-Im and federal requirements, as well as for documenting fraud processes. In commenting on GAO's draft report, Ex-Im concurred with GAO's recommendations.