GAO-01-1038R Export-Import Bank Oversight

United States General Accounting Office

Washington, DC 20548

September 6, 2001

The Honorable Doug Bereuter

Chairman

The Honorable Bernard Sanders

Ranking Minority Member

Subcommittee on International

 Monetary Policy and Trade

Committee on Financial Services

House of Representatives

Subject: U.S. Export-Import Bank: Views on Inspector General Oversight

This letter responds to your request that we provide our views on whether an office

of inspector general (IG) should be established at the Export-Import Bank. To

address this issue, we held discussions with the Export-Import Bank’s Chairman,

General Counsel, immediate past General Counsel, Chief Financial Officer (CFO),

Manager of the Portfolio Management and Review Division, and the Director of the

Internal Audit Group. We also compared the budget resources of the Export-Import

Bank with other federal departments, agencies, and entities with and without IGs. In

addition, we determined whether other federal agencies that provide loans or loan

guarantees have IG offices and compared these agencies to the Export-Import Bank.

We conducted our review from May 2001 to August 2001 in accordance with generally

accepted government auditing standards.

We believe there should be sound independent audits of all significant federal

operations, activities, and offices. We have also supported the creation of

independent IG offices in appropriate federal departments, agencies, and entities

through provisions in the IG Act of 1978, Public Law 95-452, as amended. For

example, we supported the IG Act and the current establishment of 29 IGs appointed

by the President and confirmed by the Senate in federal agencies and departments.

These IGs have specific duties and responsibilities for providing independent audits

and investigations in their departments and agencies. We also supported the creation

of additional IG offices through the IG Act amendments of 1988. These amendments

established IGs appointed by their respective entity heads in the designated federal

entities identified by the act. Currently, there are 28 designated federal entity IGs1

with duties and responsibilities similar to those of IGs appointed by the President.

 1

The provisions governing the Government Printing Office (GPO) IG are essentially identical to those

governing the IGs at the 27 designated federal entities. For purposes of our study, we consider GPO to

be a designated federal entity (DFE) and refer to it as a DFE in this report.
Page 2 GAO-01-1038R Export-Import Bank Oversight

We believe that all significant federal programs and entities should be subject to

oversight by IGs. At the same time, we have some concern about creating and

maintaining small IG offices with limited resources that might not have

the ability to maintain the technical skills and expertise needed to provide adequate

oversight cost-effectively. In the final analysis, the determination of whether to place

IGs in specific agencies is a policy decision to be decided by the Congress. As a

result, we are providing alternative approaches in this letter to achieve IG oversight

at the Export-Import Bank.

The Export-Import Bank is an export credit agency of the United States. The ExportImport Bank’s mission is to match officially supported foreign competition and fill

financing gaps in order to maximize support for U.S. exports and contribute to the

promotion and maintenance of U.S. jobs. The bank offers three main products:

(1) working capital guarantees to help U.S. exporters obtain the funds to fulfill sales

orders or finance inventory and accounts receivable, (2) export credit insurance to

enable U.S. exporters to offer competitive credit terms to their foreign buyers and

cover the risk of nonpayment, and (3) direct loans or guarantees of commercial loans

to foreign buyers of U.S. goods and services in markets in which financing would

otherwise not be available. In fiscal year 2000, the bank had total portfolio exposure

of $61.6 billion; total budget authority of about $3.556 billion, which includes

$811 million in appropriations for administration and loan subsidies; $1.663 billion in

appropriations for re-estimates of loan subsidies; and $1.082 billion in spending

authority from offsetting collections.

The Export-Import Bank is a federal entity as defined by the IG Act. Under the act,

federal entities are not required to have IG offices but are required to report their

annual audit and investigative activity to both the Office of Management and Budget

(OMB) and to the Congress. Federal entities can obtain audits either from internal

audit staff or through contracts with independent public accountants and/or

agreements with IG offices in other federal agencies. Specifically, the Export-Import

Bank contracts for an annual financial statement audit2

 with an independent public

accountant as required by 31 U.S.C. Chapter 91 and receives additional audits of

administrative operations from its Internal Audit Group.

With $3.556 billion in fiscal year 2000 total budget authority, the Export-Import Bank

is the largest of the 55 federal entities not currently required to have an IG. (See

enclosure I.) The bank accounts for about 66 percent of the fiscal year 2000 total

budget authority available for these 55 federal entities. The relative size of its budget

resources makes it comparable to both departments and agencies with IGs appointed

by the President and with designated federal entities with IGs appointed by their

entity heads. (See enclosures II and III.) Enclosure II indicates that, when compared

to the 29 agencies with IGs appointed by the President, the bank’s fiscal year 2000

budget authority would be 24th. Enclosure III indicates that if the bank were

included as a designated federal entity, its budget authority for fiscal year 2000 would

be the fourth largest. Enclosure IV shows that of the 17 federal agencies or

 2

Audits of the Export-Import Bank’s financial statements do not include reviews of economy and

efficiency and the results of program effectiveness.
Page 3 GAO-01-1038R Export-Import Bank Oversight

corporations that provide loans and/or loan guarantees, the Export-Import Bank is

one of the two agencies without IG oversight.3

The Export-Import Bank Chairman and management staff do not object to having IG

oversight and support and recognize the value of independent audits. However, they

do question the need for establishing an IG office when provisions already exist for

independent financial audits and for an active Internal Audit Group. The CFO

explained that the loan approval and guarantee process does receive some outside

review. For example, the bank seeks the advice of the National Advisory Council on

International Monetary and Financial Policies for all credits over $30 million and

reports all activities above $100 million to the Congress.

There are several ways for obtaining IG oversight of the Export-Import Bank in order

to provide sound and independent audits and investigations of bank operations,

activities, and offices. Each approach has differing benefits and costs. For instance,

the IG Act could be amended to establish an IG appointed by either the President or

by the Export-Import Bank Chairman. Either option includes establishing a new IG

office to provide oversight of the Export-Import Bank and would therefore include

the costs associated with establishing and maintaining a new IG office. IGs

appointed by the President have been recognized by the Congress as having the

benefit of increased independence when compared to IGs appointed by their agency

heads.4

 In addition, under the IG Act, IGs appointed by the President are required to

be confirmed by the Senate.

Another alternative for providing IG audits and investigations at the Export-Import

Bank includes having an already established IG office provide independent audits and

investigations of the bank. This would not involve the expense of creating a new IG

office and could provide independent reviews of all bank operations, activities, and

offices necessary for adequate IG coverage. This alternative would also address the

Chairman’s concern about an additional office at the bank created by a new IG and

could be established through legislation designating an existing IG office to provide

oversight. For instance, the Overseas Private Investment Corporation (OPIC) is

subject to reviews, investigations, and inspections by the Agency for International

Development (AID) IG.

Another option for oversight is through a memorandum of understanding, which acts

as a contract for outside IG services and would not require an amendment to the IG

Act. However, the alternatives of having audit coverage provided by another IG

 3

The Presidio Trust, like the Export-Import Bank, has no IG oversight. The trust is a wholly owned

government corporation established by the Omnibus Parks and Public Lands Management Act of 1996,

Public Law 104-333, to manage, improve, maintain, and lease property in the Presidio of San Francisco.

4

Public Law 103-204, December 17, 1993, converted the Federal Deposit Insurance Corporation (FDIC)

IG from appointment by the head of FDIC to appointment by the President with Senate confirmation

to increase the independence of the IG. More recently, an amendment to the IG Act, Public Law 106-

422, November 1, 2000, converted the Tennessee Valley Authority (TVA) IG from appointment by the

head of TVA to appointment by the President with Senate confirmation to obtain increased IG

independence.
Page 4 GAO-01-1038R Export-Import Bank Oversight

rather than a new IG office at the Export-Import Bank could result in less audit

oversight due to competing priorities for IG audits outside the bank.

At the request of Congressman Dan Burton, we are currently reviewing the potential

impact of consolidating certain IG offices so that the oversight provided by an IG

could include more than one federal agency. We will provide you with a copy of this

report when it is completed.

We obtained comments from the Export-Import Bank Chairman on this letter and the

enclosures. The Chairman generally agreed with the information in the letter

regarding efforts by the bank to address internal controls and provided additional

emphasis on the bank’s efforts in this area. However, the Chairman disagreed with

our presentation of the bank’s fiscal year 2000 budget authority and requested that we

present only the discretionary budget authority of $811 million because it would

significantly change the comparisons of the bank with other federal agencies.

We disagree that only the discretionary portion of the bank’s budget should be

reported. We used the $3.556 billion in total budget authority to be consistent with

the presentation of total budget authority for the other entities listed. In addition,

total budget authority shows the magnitude of the budget subject to oversight by a

potential IG or other audit organization. Moreover, if the $811 million were used for

comparison, the Export-Import Bank would continue to be the largest federal entity

without an IG and would remain comparable to other agencies with IGs appointed

either by the President or agency heads. The Chairman also suggested that we

compare the FTEs of the bank to agencies with IGs appointed by the President. We

provided the FTE levels in the federal entities and designated federal entities for

information purposes only. We do not emphasize them for comparison purposes due

to the varying degrees to which agencies obtain outside services that are not reflected

in their FTE levels.

The Chairman also stated Export-Import Bank’s position that the Congress should

consider the OPIC model and the use of AID’s IG if the Congress determines that the

bank should have IG oversight. While our report does not specifically recommend

how oversight should be provided to the bank, we do provide several alternatives for

IG oversight that includes the use of the IG from AID or another agency. Other

clarifying comments by the Chairman were incorporated into our letter as

appropriate.

- - - - -
Page 5 GAO-01-1038R Export-Import Bank Oversight

We are sending copies of this letter to the Chairman of the Senate Committee on

Governmental Affairs, the Chairman of the House Committee on Government

Reform, the Chairman of the Export-Import Bank, the Director of the Office of

Management and Budget, the Vice Chair of the President’s Council on Integrity and

Efficiency, and the Vice Chair of the Executive Council on Integrity and Efficiency.

This letter will also be available on GAO’s home page at http://www.gao.gov. Please

contact me at (202) 512-2600 or by e-mail at steinhoffj@gao.gov, Jeanette Franzel at

(202) 512-9471 or by e-mail at franzelj@gao.gov, or Jackson Hufnagle at (202) 512-

9470 or by e-mail at hufnaglej@gao.gov if you or your staffs have any questions about

this letter and the enclosures.

Jeffrey C. Steinhoff

Managing Director

Financial Management and Assurance

Enclosures
Enclosure I

Page 6 GAO-01-1038R Export-Import Bank Oversight

Federal Entities Not Required to Have IGs

(Dollars in millions)

FY 2000 actuals

No. Federal entity Budget authority FTEsa

1 Export-Import Bankb $3,556 404

2 Farm Credit System Financial Assistance Corporation 282 d

3 Overseas Private Investment Corporationc 273 192

4 Institute of Museum and Library Services 190 39

5 Presidio Trust 103 365

6 Federal Retirement Thrift Investment Board 102 94

7 Farm Credit System Insurance Corporation 83 10

8 National Transportation Safety Board 82 421

9 Neighborhood Reinvestment Corporation 75 268

10 Armed Forces Retirement Home 70 753

11 National Gallery of Art – Smithsonian 67 768

12 Trade and Development Agency 53 38

13 American Battle Monuments Commission 41 364

14 Federal Mediation and Conciliation Service 39 285

15 Offices of Independent Counsel 34 d

16 John F. Kennedy Center for the Performing Arts - Smithsonian 34 46

17 U.S. Holocaust Memorial Council 33 251

18 Merit Systems Protection Board 29 226

19 Selective Service System 24 156

20 Delta Regional Authority 20 d

21 Defense Nuclear Facilities Safety Board 17 94

22 African Development Foundation 15 24

23 U.S. Institute of Peace 13 63

24 Woodrow Wilson International Center for Scholars - Smithsonian 12 41

25 Court of Appeals for Veterans Claims 11 79

26 National Mediation Board 10 45

27 Office of Special Counsel 10 91

28 Commission on Civil Rights 9 75

29 Office of Government Ethics 9 80

30 Chemical Safety and Hazard Investigation Board 8 26

31 Commission of Fine Arts 8 7

32 Inter-American Foundation 8 51

33 Occupational Safety and Health Review Commission 8 63

34 Office of Navajo and Hopi Indian Relocation 8 66

35 State Justice Institute 7 d

36 Federal Mine Safety and Health Review Commission 6 43

37 National Capital Planning Commission 6 51

38 Architectural and Transportation Barriers Compliance Board 5 30

39 Barry Goldwater Scholarship and Excellence in Education

Foundation

4 2

40 Harry S. Truman Scholarship Foundation 4 4

41 Morris K. Udall Scholarship and Excellence in National

Environmental Policy Foundation

4 17

42 Advisory Council on Historic Preservation 3 36
Enclosure I

Page 7 GAO-01-1038R Export-Import Bank Oversight

(Dollars in millions)

FY 2000 actuals

No. Federal entity Budget authority FTEsa

43 Committee for Purchase from People Who Are Blind or Severely

Disabled

3 20

44 James Madison Memorial Fellowship Foundation 3 6

45 Japan-U.S. Friendship Commission 3 4

46 Nuclear Waste Technical Review Board 3 14

47 America's Education Goals Panel (National Education Goals

Panel)

2 9

48 Federal Financial Institutions Examination Council Appraisal

Subcommittee

2 7

49 Institute of American Indian and Alaska Native Culture and Arts

Development

2 d

50 National Council on Disability 2 11

51 Christopher Columbus Fellowship Foundation 1 1

52 Marine Mammal Commission 1 10

53 National Commission on Libraries and Information Science 1 7

54 Commission for the Preservation of America's Heritage Abroad 0.5 d

55 Postal Rate Commission Not identified in the budget

Totals $5,398.5 5,757

a

Includes both direct and reimbursable full-time equivalents.

b

Export-Import Bank's gross budget authority of $3.556 billion includes $811 million in appropriations for administration and

loan subsidies, $1.663 billion in appropriations for re-estimates of loan subsidies, and $1.082 billion in spending authority from

offsetting collections.

c

The Overseas Private Investment Corporation is subject to reviews, investigations, and inspections by the Agency for

International Development's IG (22 U.S.C. 2199(e)).

d

FTEs are not reported.

Sources: Fiscal Year 2002 Budget of the United States Government and Public Law 95-452, as amended.
Enclosure II

Page 8 GAO-01-1038R Export-Import Bank Oversight

Comparison of Budget Authority of the Export-Import Bank and

Federal Agencies With IGs Appointed by the President

(Dollars in millions)

No. Departments/agencies FY 2000 budget authority

1 Social Security Administration $ 444,407

2 Department of Health and Human Services 392,449

3 Department of the Treasury 392,273

4 Department of the Treasury, IG for Tax Administration Included above

5 Department of Defense (Military & Civilian) 327,615

6 Department of Agriculture 75,750

7 Department of Transportation 54,743

8 Office of Personnel Management 50,468

9 Department of Veterans Affairs 45,505

10 Department of Education 32,240

11 Department of Labor 30,736

12 Department of Housing and Urban Development 24,324

13 Department of Justice 18,679

14 General Services Administration 16,188

15 Department of Energy 15,324

16 National Aeronautics and Space Administration 13,602

17 Department of Commerce 8,751

18 Department of the Interior 8,394

19 Department of State 8,276

20 Environmental Protection Agency 7,328

21 Tennessee Valley Authority a 6,558

22 Federal Deposit Insurance Corporation 6,144

23 Railroad Retirement Board 5,001

Export-Import Bankb3,556

24 Federal Emergency Management Agency 3,331

25 Agency for International Development 2,751

26 Small Business Administration 900

27 Corporation for National and Community Service 676

28 Nuclear Regulatory Commission 471

29 Central Intelligence Agency n/ac

Total $1,996,440

a

TVA's IG will be appointed by the President and confirmed by the Senate under Public Law 106-422, dated November 1,

2000.

b

Export-Import Bank's total budget authority of $3.556 billion includes $811 million in appropriations for administration and loan

subsidies, $1.663 billion in appropriations for re-estimates of loan subsidies, and $1.082 billion in spending authority from

offsetting collections.

c

Budget information not available.

Sources: Fiscal Year 2002 Budget of the United States Government – Appendix and Public Law 95-452, as amended.
Enclosure III

Page 9 GAO-01-1038R Export-Import Bank Oversight

Comparison of Budget Authority of the Export-Import Bank and

Designated Federal Entities That Have IGs Appointed by the Agency Head

(Dollars in millions)

No. Federal entity Fiscal year 2000

budget authority

Fiscal year 2000

 actual FTEsa

1 United States Postal Service $68,293 848,353

2 Federal Communications Commission 4,696 1,925

3 National Science Foundation 4,086 1,200

Export-Import Bankb3,556 404

4 National Railroad Passenger Corporationc 2,771 d

5 Pension Benefit Guaranty Corporation 2,510 724

6 Government Printing Office 892 3,139

7 National Credit Union Administration 823 991

8 Smithsonian Institution 546 4,973

9 Securities and Exchange Commission 378 2,841

10 National Archives and Records Administration 341 2,469

11 Corporation for Public Broadcasting 316 d

12 Legal Services Corporation 305 d

13 Equal Employment Opportunity Commission 284 2,852

14 Peace Corps 248 1,042

15 National Labor Relations Board 205 1,876

16 Federal Reserve Board 200 d

17 Federal Trade Commission 126 989

18 National Endowment for the Humanities 118 174

19 National Endowment for the Arts 102 154

20 Appalachian Regional Commission 66 10

21 Commodity Futures Trading Commission 63 556

22 Consumer Product Safety Commission 52 468

23 United States International Trade Commission 44 357

24 Federal Election Commission 38 343

25 Farm Credit Administration 36 287

26 Federal Labor Relations Authority 24 212

27 Federal Housing Finance Board 19 108

28 Federal Maritime Commission 15 128

Totals $91,153 876,575

a

Includes both direct and reimbursable FTEs.

b

Export-Import Bank's total budget authority of $3.556 billion includes $811 million in appropriations for administration and loan

subsidies, $1.663 billion in appropriations for re-estimates of loan subsidies, and $1.082 billion in spending authority from

offsetting collections.

c

Budget authority amount for the National Railroad Passenger Corporation is an estimate.

d

FTEs are not reported.

Sources: Fiscal Year 2002 Budget of the United States Government – Appendix and Public Law 95-452, as amended.
Enclosure IV

Page 10 GAO-01-1038R Export-Import Bank Oversight

IG Oversight of Federal Agencies That Provide

Direct Loans and Loan Guarantees

Federal agencies Direct loans Loan guarantees IG

Department of Agriculture X X X

Department of Commerce X X X

Department of Defense X X X

Department of Education X X X

Department of Health and Human Services X X

Department of Housing and Urban Development X X

Department of the Interior X X X

Department of State X X

Department of Transportation X X X

Department of the Treasury X X

Department of Veterans Affairs X X X

Agency for International Development X X

Overseas Private Investment Corporation X X Xa

Small Business Administration X X X

Export-Import Bank of the United States X X

Federal Emergency Management Agency X X

Presidio Trust X

a

The Overseas Private Investment Corporation is subject to reviews, investigations, and inspections by the Agency for

International Development's IG (22 U.S.C. 2199(e)).

Sources: Fiscal Year 2002 Budget of the United States Government - Federal Credit Supplement and Public Law 95-452, as

amended.
Enclosure V

Page 11 GAO-01-1038R Export-Import Bank Oversight

Comments From the Export-Import Bank of the United States
Enclosure V

Page 12 GAO-01-1038R Export-Import Bank Oversight
Enclosure V

Page 13 GAO-01-1038R Export-Import Bank Oversight

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