EXPORT-IMPORT 

BANK

Additional Analysis 

and Information Could 

Better Inform 

Congress on 

Exposure, Risk, and 

Resources

Report to Congressional Committees

May 2013

GAO-13-620

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-620, a report to 

congressional committees

May 2013

EXPORT-IMPORT BANK

Additional Analysis and Information Could Better 

Inform Congress on Exposure, Risk, and Resources

Why GAO Did This Study

Ex-Im helps U.S. firms export goods 

and services by providing a range of 

financial products. Following the 2007-

2009 financial crisis, increased 

demand resulted in rapid increases in 

Ex-Im’s portfolio and exposure. The 

Export-Import Bank Reauthorization 

Act of 2012 reauthorized Ex-Im 

through fiscal year 2014 and, as a 

condition of raising Ex-Im’s exposure 

limit in 2013, required Ex-Im to prepare 

a report with a business plan and 

analyses of key operational elements. 

The act also directed GAO to analyze 

the Business Plan. This report 

discusses the extent to which Ex-Im’s 

Business Plan and analyses (1) justify 

bank exposure limits; (2) evaluate the 

risk of loss associated with the 

increased exposure limit, changing 

composition of exposure, and 

compliance with congressional 

mandates; and (3) analyze the 

adequacy of Ex-Im resources to 

manage authorizations and comply 

with congressional mandates. GAO 

reviewed Ex-Im’s Business Plan, 

analyses, and other reports, and 

interviewed Ex-Im officials.

What GAO Recommends

Ex-Im should (1) adjust its forecasting 

model based on previous experience, 

(2) assess and report the sensitivity of 

the exposure forecast model to key 

assumptions and estimates, (3) 

routinely report the financial 

performance of subportfolios 

supporting congressional mandates, 

and (4) provide Congress with 

additional information on the resources 

associated with meeting mandated 

targets. Ex-Im concurred with our 

recommendations.

What GAO Found

While the Export-Import Bank (Ex-Im) Business Plan reported that Ex-Im’s 

exposure limits were appropriate, the forecasting process used to reach this 

conclusion has weaknesses. Congress increased the Ex-Im exposure limit—the 

limit on Ex-Im’s total aggregate outstanding amount of financing—to $120 billion

in 2012, with provisions for additional increases to $130 billion in 2013 and $140 

billion in 2014. Although Ex-Im’s forecast model is sensitive to key assumptions, 

GAO found that Ex-Im did not reassess these assumptions to reflect changing 

conditions or conduct sensitivity analyses to assess and report the range of 

potential outcomes. GAO used historical data in lieu of these assumptions and 

found that Ex-Im’s forecast of exposure could be higher than the limit set by 

Congress for 2014. GAO’s cost guidance calls for agencies’ assumptions and 

forecasts to be supported by historical data and experience, and a sensitivity 

analysis, which can assess the effect of changes in assumptions. Because Ex-Im 

has not taken these steps, the reliability of its forecasts is diminished. This is of 

particular concern because Ex-Im projects that its outstanding financing in the 

future will be closer to its exposure limit than it has been historically. 

Consequently, any forecast errors could result in the bank having to take actions, 

such as delaying financing for creditworthy projects, to avoid exceeding its limit.

The Business Plan provided limited analysis of Ex-Im’s risk of loss. First, Ex-Im 

did not provide some forecast data because of pending Office of Management 

and Budget (OMB) approval of key analyses. For example, Ex-Im did not include 

conclusions on Ex-Im’s overall risk of loss and risk by industry. Second, Ex-Im 

included only limited analysis to support its conclusions that changes in its 

portfolio—including subportfolios of transactions supporting congressional 

mandates for small business, sub-Saharan Africa, and renewable energy—would 

not affect its risk of loss. In addition, Ex-Im has not routinely analyzed or reported 

the risk rating and default rate of subportfolios that respond to these mandates, 

although their performance may differ from the overall portfolio. OMB and 

banking regulator guidance call for entities, including federal agencies, to be able 

to provide comprehensive information by subportfolio, product, and other 

financial performance metrics. By not routinely analyzing and reporting financial 

performance for mandated transactions, Ex-Im decreases its ability to evaluate 

such performance at the subportfolio level and inform Congress of related risks.

The Business Plan provided limited analysis of the adequacy of Ex-Im’s resources 

and ability to meet congressional mandates. From 2008 through 2012, Ex-Im’s 

administrative resources remained relatively flat as its portfolio grew. Ex-Im does 

not expect to meet its small business or renewable energy mandate targets in 2013 

or 2014. These mandate targets are fixed to a percentage of the dollar value of ExIm’s total authorizations. Although Ex-Im has dedicated resources to support these 

mandates, as Ex-Im authorizations have grown, the growth in mandate targets has 

outpaced Ex-Im’s increasing support. Ex-Im projects that the targets will continue 

to outpace its growth in support through 2014. Mandate transactions also are 

resource-intensive and Ex-Im’s ability to expand its renewable energy portfolio may 

be constrained by the size of the overall market. Communicating the effect of 

percentage-based targets on Ex-Im’s resources and ability to achieve its goals to 

external stakeholders, such as Congress, is consistent with federal internal control 

standards.

View GAO-13-620. For more information, 

contact Lawrance L. Evans, Jr. at (202) 512-

4802 or EvansL@gao.gov.
Page i GAO-13-620 Export-Import Bank

Letter 1 

Background 5

Forecasting Processes Ex-Im Used for Its Business Plan and Other 

Estimates Have Weaknesses 11

Business Plan’s Limited Risk Evaluation Suggests Opportunities for 

Additional Analyses 19

Ex-Im’s Business Plan’s Resource Analysis Was Limited and 

Growing Congressional Mandated Targets Challenge Bank 

Resources 27

Conclusions 39

Recommendations for Executive Action 40

Agency Comments and Our Evaluation 40

Appendix I Objectives, Scope, and Methodology 42

Appendix II Comments from the U.S. Export-Import Bank 46

Appendix III GAO Contact and Staff Acknowledgments 49

Tables

Table 1: Ex-Im Average Default Rates by Selected Subportfolio as 

of September 30, 2008, and 2012 23

Table 2: Ex-Im Weighted-Average Risk Ratings Overall and by 

Small Business, Sub-Saharan Africa, and Renewable 

Energy Subportfolios, Fiscal Years 2008 and 2012 25

Figures

Figure 1: Relationship of Ex-Im Authorizations, Repayments and 

Cancellations, and Exposure, Fiscal Years 2012 (Actual)-

2014 (Projected) 7

Figure 2: Ex-Im Annual Authorizations by Product Type, Fiscal 

Years 2008-2012 8

Figure 3: Ex-Im Exposure and Exposure Limit, Fiscal Years 2003-

2014 12

Figure 4: Ex-Im’s Estimated Authorizations, Fiscal Years 2008-2014 16

Contents 
Page ii GAO-13-620 Export-Import Bank

Figure 5: Range of Ex-Im 2013 and 2014 Exposure Forecasts Using 

Alternative Short-Term Percentage and Repayment Term 

Assumptions, Fiscal Years 2011-2014 18

Figure 6: Ex-Im Administrative Budget Requests and 

Authorizations, Fiscal Years 2008-2014 29

Figure 7: Ex-Im Small Business Mandate Requirement and Actual 

Small Business Authorizations, Fiscal Years 2008-2014 34

Figure 8: Ex-Im Renewable Energy Mandate Target and Actual 

Renewable Energy Authorizations, Fiscal Years 2008-2014 36

Abbreviations

Ex-Im U.S. Export-Import Bank

FTE full-time equivalent

IT information technology

OMB Office of Management and Budget

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Page 1 GAO-13-620 Export-Import Bank

441 G St. N.W.

Washington, DC 20548

May 30, 2013

The Honorable Tim Johnson

Chairman 

The Honorable Mike Crapo

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Jeb Hensarling

Chairman

The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

House of Representatives

The Export-Import Bank (Ex-Im) serves as the official export credit 

agency of the United States, providing a range of financial products for 

U.S. exporters and their customers to support the export of U.S. goods 

and services, thereby supporting U.S. jobs. Following the financial crisis 

of 2007-2009, increased demand for Ex-Im authorizations (caused by a 

retreat of private-sector lenders from the market) led to rapid increases in 

the size of Ex-Im’s portfolio and changes in its portfolio composition.1

While Ex-Im has been “self-sustaining” for appropriations purposes since 

fiscal year 2008—financing its operations from receipts collected from its 

customers—it must operate within the parameters and limits authorized 

by Congress, including congressional mandates that it support small 

business and promote sub-Saharan African and environmentally 

beneficial exports.2

The Export-Import Bank Reauthorization Act of 2012 (the Reauthorization 

Act) reauthorized the bank through 2014 and increased the limit on its 

total aggregate outstanding loans, guarantees, and insurance—the Ex-Im 

exposure limit—to $120 billion in 2012, and to $130 billion in 2013 and 

 

1

An authorization is an export financing transaction for which Ex-Im has granted credit 

approval.

2

All years in this report are federal fiscal years unless otherwise indicated.

 
 

Page 2 GAO-13-620 Export-Import Bank

$140 billion in 2014, if certain conditions are met.3 As one condition to 

increasing the exposure limit for 2013, the reauthorization required that 

Ex-Im submit a report by September 30, 2012, that included a business 

plan and analyses:

• estimating and justifying the appropriate exposure limit;

• estimating future growth by industry sector, product type, and key 

market;4

• analyzing the risk of loss from the estimated exposure limit by industry 

sector, product type, and key market;

• analyzing its ability to meet congressional mandates under the 

proposed exposure limit and the risk of loss associated with meeting 

those mandates;5 and

• analyzing the adequacy of its resources under the proposed exposure 

limit, including resources for required economic impact analyses.

In response to the congressional requirement, Ex-Im completed and 

submitted a report that, according to Ex-Im officials, generally relied on 

data from existing Ex-Im analyses. The reauthorization further directed 

GAO to analyze Ex-Im’s report.6

This report discusses the extent to which Ex-Im’s Business Plan and 

analyses (1) justify bank exposure limits; (2) evaluate Ex-Im’s risk of loss 

associated with the increased exposure limit, the changing composition of 

exposure, and compliance with congressional mandates; and (3) analyze 

 

3

Pub. L. No. 112-122, § 3, 126 Stat. 350, 351 (2012). Ex-Im’s exposure limit will be 

increased to $130 billion in 2013 and $140 billion in 2014 if certain statutory criteria are 

met.

4

Ex-Im identified nine key markets on which to focus: Brazil, Colombia, India, Indonesia, 

Mexico, Nigeria, South Africa, Turkey, and Vietnam. These countries were selected based 

on factors including the size of the export market for U.S. companies, projected economic 

growth, anticipated infrastructure demand, and need for Ex-Im financing. 

5 The law specified that the Business Plan address Ex-Im’s small business, sub-Saharan 

Africa, and carbon policy mandates. See Pub. L. No. 112-122, § 4. The carbon policy was 

not a congressional mandate; however, Ex-Im interpreted the carbon policy mandate in its 

Business Plan to refer to a congressional requirement that Ex-Im notify Congress of 

projects that will generate more greenhouse gases than bank-supported projects 

generated on average during the preceding 3 years. See Pub. L. No. 112-74, 125 Stat. 

1191 for the greenhouse gas notification requirement.

6

The act requires us to review and report on the Business Plan by June 1, 2013. Pub. L. 

No. 112-122 § 4(b).
 

Page 3 GAO-13-620 Export-Import Bank

the adequacy of Ex-Im resources to manage authorizations and comply 

with congressional mandates under the proposed exposure limits.

To assess the extent to which Ex-Im’s Business Plan and analyses justify 

exposure limits, we reviewed Ex-Im’s Business Plan and methodology, 

the model Ex-Im used to forecast exposure, source data on 

authorizations, and met with Ex-Im officials. To assess the exposure 

model, we compared its projections of exposure and authorizations with 

actual results. To assess Ex-Im’s forecast of repayments, we compared 

Ex-Im’s assumptions with previous data on the share of short-term 

transactions in the Ex-Im portfolio and calculated Ex-Im’s exposure using 

alternative assumptions about short-term percentage and repayment 

terms. We assessed the procedures and assumptions Ex-Im used in its 

Business Plan forecast of exposure against GAO standards for 

developing estimates.7

To assess the extent to which Ex-Im’s Business Plan and analyses 

evaluate the risk of loss associated with Ex-Im’s increased exposure limit, 

the changing composition of exposure, and compliance with 

congressional mandates, we reviewed Ex-Im’s data and documentation—

including financial performance data, annual reports, and quarterly default 

rate reports—and previous GAO and Ex-Im Inspector General reports. To 

further examine Ex-Im’s risk of loss evaluation in the plan, we examined 

weighted-average risk ratings and default rate data for fiscal years 2008 

and 2012 that Ex-Im compiled for us at the subportfolio level, including by 

industry, product, key market, and congressional mandates. To assess 

the reliability of these data, we reviewed and checked them against 

previous Ex-Im reporting and consulted the data reviews conducted for 

another recent GAO report.8 We found the data to be sufficiently reliable 

for the purpose of providing context for the financial performance of the 

overall portfolio and subportfolios in each year. To evaluate Ex-Im’s risk 

management, we compared its risk management and analysis practices 

against federal banking regulator guidance on financial performance 

 

7

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

8

GAO, Export-Import Bank: Recent Growth Underscores Need for Continued 

Improvements in Risk Management, GAO-13-303 (Washington, D.C.: Mar. 28, 2013). 
 

Page 4 GAO-13-620 Export-Import Bank

reporting, Office of Management and Budget (OMB) guidance on federal 

credit programs, and GAO’s standards for internal control.9

To assess the extent to which Ex-Im’s Business Plan and analyses 

analyze the adequacy of Ex-Im resources to manage authorizations and 

comply with congressional mandates under the proposed exposure limits, 

we reviewed previous GAO and Ex-Im Inspector General reports. We 

also reviewed relevant Ex-Im documents, including Congressional Budget 

Justifications, annual reports, the Ex-Im charter, and other plans, 

performance reports, policies, and procedures. We found the data in 

these reports to be sufficiently reliable for the purposes of describing the 

growth of Ex-Im’s business, size of its workforce, and amount of 

administrative funds requested and appropriated. To assess the reliability 

of these data, we reviewed and checked them against previous Ex-Im 

reporting and consulted the data reviews conducted for another recent 

GAO report.10 We also reviewed relevant GAO and Ex-Im Inspector 

General reports and met with officials from Ex-Im and Ex-Im’s Office of 

Inspector General. We compared Ex-Im’s planning documents against 

criteria established by GAO, the Office of Personnel Management, and 

OMB.

We conducted this performance audit from November 2012 to May 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 

9

 See, Board of Governors of the Federal Reserve, Commercial Bank Examination 

Manual (Washington, D.C.: March 1994). The manual is updated twice a year. See, Office 

of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Board of 

Governors of the Federal Reserve, and Office of Thrift Supervision, Interagency Guidance 

on Asset Securitization Activities (Washington, D.C.: December 1999). See, Office of the 

Comptroller of the Currency, Asset Securitization: Comptroller’s Handbook (Washington, 

D.C.: November 1997). While Ex-Im is not bound by any of the guidance cited above, it 

faces challenges similar to regulated private financial institutions in managing risks. See, 

Office of Management and Budget, Circular No. A-129 Revised, Policies for Federal Credit 

Programs and Non-Tax Receivables (2000). See GAO, Standards for Internal Control in 

the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1, 1999); and 

Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: 

Aug. 1, 2001).

10GAO-13-303. 
 

Page 5 GAO-13-620 Export-Import Bank

Ex-Im is an independent agency operating under the Export-Import Bank 

Act of 1945, as amended. Its mission is to support the export of U.S. 

goods and services, thereby supporting U.S. jobs. Ex-Im’s charter states 

that it should not compete with the private sector. Rather, Ex-Im’s role is 

to assume the credit and country risks that the private sector is unable or 

unwilling to accept, while still maintaining a reasonable assurance of 

repayment. As a result, when private-sector lenders reduced the 

availability of their financing after the 2007-2009 financial crisis, demand 

for Ex-Im products correspondingly increased.

Ex-Im operates in several functional areas under the leadership of a 

chairman and president. Functional areas include the Small Business 

Group, Office of the Chief Financial Officer, Office of Resource 

Management, and Export Finance Group. The Export Finance Group is, 

in turn, subdivided into business units for certain types of transactions, 

such as Trade Finance, Transportation, Structured and Project Finance, 

and Renewable Energy.

Ex-Im offers a number of export financing products, including direct loans, 

loan guarantees, and export credit insurance. Ex-Im makes fixed-rate 

loans directly to international buyers of goods and services. These loans 

can be

• short-term (up to 1 year),

• medium-term (more than 1 year up to 7 years and less than $10 

million), or

• long-term (including transactions of more than 7 years or $10 million 

and higher and longer than 1 year).

Ex-Im also guarantees loans made by private lenders to international 

buyers of goods or services, committing to pay the lenders if the buyers 

default. Like direct loans, loan guarantees may be short-, medium-, or 

long-term. Additionally, Ex-Im provides export credit insurance products 

that protect the exporter from the risk of nonpayment by foreign buyers for 

commercial and political reasons. This allows U.S. exporters the ability to 

offer foreign purchasers the opportunity to make purchases on credit. 

Credit insurance policies can cover a single buyer or multiple buyers and 

be short- or medium-term. Ex-Im’s short-term insurance covers a wide 

range of goods, raw materials, spare parts, components, and most 

services on terms, in most cases, of up to 180 days. Medium-term 

insurance policies protect longer-term financing to international buyers of 

capital equipment or services, covering one or a series of shipments.

Background 

Ex-Im’s Functional Areas 

and Products
 

Page 6 GAO-13-620 Export-Import Bank

Ex-Im’s long-term products are often used to finance transportation 

projects, in project finance transactions, and for what Ex-Im calls 

“structured finance.” In dollar terms, transportation projects primarily 

support the purchase of aircraft. In project finance, Ex-Im lends to newly 

created project companies in foreign countries and looks to the project’s 

future cash flows as the source of repayment. Project finance 

transactions have repayment terms up to 14 years, and renewable energy 

transactions have repayment terms up to 18 years. In structured finance 

transactions, Ex-Im provides direct loans or loan guarantees to existing 

companies located overseas. Structured finance transactions generally 

have repayment terms of 10 years, but some transactions may have 

terms of 12 years.

Congress has limited the extent of potential losses to the government 

from Ex-Im transactions by placing a cap on Ex-Im’s total amount of 

outstanding loans, guarantees, and insurance—the exposure limit. In the 

May 30, 2012 reauthorization, Congress increased Ex-Im’s exposure limit 

to $120 billion, with provisions for additional increases to $130 billion in 

2013, and $140 billion in 2014.11 When Ex-Im authorizes additional loans, 

guarantees, and insurance, its exposure grows. When authorizations are 

repaid or cancelled, Ex-Im’s exposure is reduced (see fig. 1). To forecast 

its exposure for the September 2012 Business Plan, Ex-Im’s Office of the 

Chief Financial Officer used a model that took the bank’s July 2012 actual 

exposure, added the amount of authorizations forecast by Ex-Im’s 

business units, and subtracted the estimated amount of repayments and 

cancellations based on the forecast authorizations and assumptions 

about the portfolio composition. Ex-Im’s actual exposure at the end of 

2012 was $106.6 billion, and Ex-Im’s Business Plan forecasts exposure 

to increase to $120.2 billion at the end of 2013 and $134.9 billion at the 

end of 2014.

 

11 Pub. L. No. 112-122, § 3. 

Ex-Im’s Exposure and 

Portfolio Since 2008
 

Page 7 GAO-13-620 Export-Import Bank

Figure 1: Relationship of Ex-Im Authorizations, Repayments and Cancellations, and 

Exposure, Fiscal Years 2012 (Actual)-2014 (Projected)

a

The exposure limit was $120 billion at the end of fiscal year 2012 and $130 billion in fiscal year 2013.

Ex-Im’s annual authorizations have increased. Overall, in nominal dollars, 

annual Ex-Im authorizations rose from $14.4 billion in 2008 to $35.8 

billion in 2012 (see fig. 2). Annual authorizations for new project and 
 

Page 8 GAO-13-620 Export-Import Bank

structured finance transactions increased from $1.9 billion in 2008 to 

$12.6 billion in 2012—accounting for almost half of Ex-Im’s 2012 longterm authorizations. Aircraft-related authorizations grew from $5.7 billion 

in 2008 to $11.9 billion in 2012—an increase of about 110 percent—and 

accounted for about one-third of Ex-Im’s authorizations in 2012. While 

long-term authorizations make up the largest part of Ex-Im’s portfolio in 

dollar terms, more than 80 percent of Ex-Im transactions are short-term.12

Figure 2: Ex-Im Annual Authorizations by Product Type, Fiscal Years 2008-2012

 

12As of the end of 2012, the dollar amount of medium-term insurance transactions 

represented less than 1 percent of the dollar amount of Ex-Im’s active authorizations. 
 

Page 9 GAO-13-620 Export-Import Bank

While Ex-Im’s business is generally driven by demand for its services 

from exporters, Congress has also mandated that Ex-Im support specific 

objectives. The Reauthorization Act requires Ex-Im to analyze its ability to 

meet, and its risk of loss from complying with, three congressional 

mandates.13 Since the 1980s, Congress has required that Ex-Im make 

available a certain percentage of its total export financing each year for 

small business. In 2002, Congress increased the small business financing 

requirement from 10 to 20 percent. Congress further mandates that Ex-Im 

promote the expansion of its financial commitments in sub-Saharan Africa 

under Ex-Im’s loan, guarantee, and insurance programs. Finally, in its 

2012 appropriations, Congress directed that “not less than 10 percent of 

the aggregate loan, guarantee, and insurance authority available to [ExIm]... should be used for renewable energy technologies or end-use 

energy efficiency technologies,” to which we refer as the renewable 

energy mandate.

Ex-Im faces multiple risks when it extends export credit financing, 

including credit, political, market, concentration, foreign-currency, and 

operational risks. Ex-Im uses its resources to manage risks through (1) 

underwriting, (2) monitoring and restructuring, and (3) recovery of claims.

Underwriting: During underwriting, Ex-Im first uses its Country Limitation 

Schedule to determine whether it can provide financing for transactions in 

the country.14 If the transaction meets the requirements of the Country 

Limitation Schedule, Ex-Im reviews the transaction and assigns it a risk 

rating based on its assessment of the creditworthiness of the obligors and 

to establish whether there is a reasonable assurance of repayment.15 ExIm’s risk ratings range from 1 (least risky) to 11 (most risky). Ex-Im 

generally does not authorize transactions with risk ratings over 8.

Monitoring and Restructuring: Ex-Im updates the risk ratings of mediumand long-term transactions above $1 million at least annually to reflect 

any changes in credit risk. Ex-Im also may restructure individual 

 

13Pub. L. No. 112-122, § 4(a)(3). 

14The Country Limitation Schedule specifies the types of transactions eligible for financing 

in each country and the conditions under which they are eligible.

15We use the term “obligor” to refer to entities that are contractually obligated to make 

payments to satisfy the terms of an Ex-Im export credit product.

Congressional Mandates 

for Ex-Im Support of 

Specific Businesses or 

Areas

Ex-Im’s Risks and Risk 

Management
 

Page 10 GAO-13-620 Export-Import Bank

transactions with credit weaknesses to help prevent defaults and increase 

recoveries on transactions that default.

Recovery of Claims: Ex-Im pays a claim when a loan that it has 

guaranteed or an insurance policy that it has issued defaults. Ex-Im tries 

to minimize losses on claims paid by pursuing recovery of the amount of 

claims it paid. For example, it can collect on the assets of the obligors or 

the collateral for a transaction.

Ex-Im uses a loss estimation model to estimate credit subsidy costs and 

loss reserves and allowances for these risks. Ex-Im annually updates its 

loss model, and the model is subsequently reviewed by OMB. The 

expected loss model calculates loss rates based on historical data (the 

default and loss history of prior loan guarantee and insurance 

transactions as well as variables that can be used to predict defaults and 

losses, such as transaction amount and length, obligor type, product type, 

and risk rating) and qualitative factors (minimum loss rate, global 

economic risk, and region, industry, and aircraft portfolio obligor 

concentration risk) to account for risks associated with the agency’s 

current portfolio. The model calculates a loss rate (the percentage loss 

that Ex-Im can expect for each dollar of export financing) for each Ex-Im 

risk rating and product type. The loss rates produced by the model are 

then used to estimate future cash flows (repayments, fees, recoveries, 

and claims) for the business Ex-Im expects in the upcoming year. As of 

December 31, 2012, Ex-Im reported a default rate for its active portfolio of 

0.34 percent.16

Ex-Im uses OMB’s credit subsidy calculator to determine the credit 

subsidy costs for existing transactions in its portfolio and projected future 

transactions based on its estimated future cash flows.17 These credit 

subsidy estimates are reported in the President’s budget. Ex-Im also uses 

 

16Ex-Im calculates the default rate as the sum of net claims paid on guarantees and 

insurance transactions and unpaid past due installments on loans divided by 

disbursements. Ex-Im defines its active portfolio as those transactions for which the 

maturity date has not been reached or that have reached maturity but are still within the 

time frame during which a claim can be submitted. 

17The credit subsidy calculator is the tool issued by OMB for agencies’ use to discount 

future cash flows and calculate credit subsidy costs. In accordance with the Federal Credit 

Reform Act of 1990, the discount rates in the OMB credit subsidy calculator are based on 

interest rates for U.S. Treasury securities.
 

Page 11 GAO-13-620 Export-Import Bank

the estimated future cash flows to calculate the loss reserves or 

allowances—financial reporting accounts for estimated losses—it needs 

for each new authorized transaction. Each year, Ex-Im adjusts this loss 

reserve or allowance amount for each transaction using updated 

estimates of future cash flows.

In addition to these existing procedures, in January 2013, Ex-Im 

completed a comprehensive revision of its policies and procedures 

manual that covers each stage of risk management. According to Ex-Im 

officials, Ex-Im also has been reviewing and responding to several 

recommendations on risk management from internal and external 

auditors, OMB, Ex-Im’s Inspector General, and GAO. Inspector General 

and GAO recommendations include performing and reporting of stress 

testing, retaining point-in-time historical data on credit performance, 

setting soft portfolio sublimits (informal thresholds for the portion of total 

exposure within different segments of the portfolio), and establishing a 

chief risk officer position.18

The Ex-Im Business Plan concluded that the exposure limits Congress 

placed on the bank in the Reauthorization Act were appropriate, but the 

exposure forecast model Ex-Im used to justify its conclusion relied on 

authorization forecasts and assumptions about repayments that have a 

degree of uncertainty that was not accounted for in Ex-Im’s forecast. 

Based on its estimates of authorizations and repayments, Ex-Im projects 

its exposure to rise to within $5.1 billion of its $140 billion limit by the end 

of 2014. Although this exposure is closer to its exposure limit than it has 

been at year-end in recent years, it supports Ex-Im’s conclusion that the 

congressional limits are appropriate. However, in developing its estimated 

authorizations for the Business Plan, Ex-Im used the same forecasting 

process it used for its recent budget estimates, which were between 11 

and 42 percent below actual authorizations. Ex-Im used the same 

assumptions about repayments as it used in previous years, but did not 

check these key assumptions against previous experience or report the 

sensitivity of the model to its assumptions. Alternative forecasts using 

authorizations and repayments estimated based on previous Ex-Im 

 

18Export-Import Bank of the United States, Office of the Inspector General, Report on 

Portfolio Risk and Loss Reserve Allocation Policies, OIG-INS-12-02 (Washington, D.C.: 

September 2012); and GAO-13-303. A stress test is a “what-if” scenario that is not a 

prediction of the expected outcome. 

Forecasting Processes 

Ex-Im Used for Its 

Business Plan and 

Other Estimates Have 

Weaknesses 
 

Page 12 GAO-13-620 Export-Import Bank

results produce exposure estimates that would be higher than Ex-Im’s 

limit for 2014, raising concerns about Ex-Im’s conclusion that its limits are 

appropriate.

Ex-Im’s Business Plan stated that the exposure limits for 2012, 2013, and 

2014 were appropriate and sufficient for the bank to satisfy anticipated 

demand for Ex-Im financing under current market conditions. Ex-Im 

forecast that its exposure in 2013 and 2014 would be below its limits by 

$9.8 and $5.1 billion, respectively, preserving a small buffer for Ex-Im to 

respond to market changes and unforeseen increases in demand, allow 

for variance in its estimates, and signal to U.S. exporters and foreign 

buyers that Ex-Im support would be available for credit-worthy projects. 

Ex-Im forecast that its year-end exposure would be $105.8 billion in 2012, 

$120.2 billion in 2013, and $134.9 billion in 2014, below the 

congressionally determined exposure limits of $120 billion, $130 billion, 

and $140 billion, respectively (see fig. 3).

Figure 3: Ex-Im Exposure and Exposure Limit, Fiscal Years 2003-2014

Ex-Im Projects 2014 

Exposure to be 

Approximately $5 Billion 

below Limit
 

Page 13 GAO-13-620 Export-Import Bank

The buffer between actual exposure and the exposure limit that Ex-Im’s 

Business Plan forecast for 2012, 2013, and 2014 is small in comparison 

with recent historical experience. Between 2003 and 2008, Ex-Im’s 

exposure hovered around $60 billion, well below its exposure limit. During 

the fiscal crisis in 2009, Ex-Im’s exposure began an upward trend, 

reducing the buffer between actual exposure and the exposure limit. By 

the end of 2011, Ex-Im’s exposure rose to 89 percent of its limit. At the 

end of 2012 Ex-Im’s exposure limit had increased to $120 billion, but ExIm’s exposure also increased and remained at 89 percent of the limit. ExIm’s Business Plan forecasts that further increases will bring exposure to 

92 percent of its limit at the end of 2013 and 96 percent at the end of 

2014. In dollars, Ex-Im forecasts that it will be $5.1 billion below its $140 

billion exposure limit at the end of 2014. According to Ex-Im, at the time of 

the exposure limit increase from $100 billion to $120 billion (on May 30, 

2012), Ex-Im was approaching its maximum permitted exposure and was 

monitoring its authorizations and repayments but not delaying any 

authorizations. Although Ex-Im did not have to take such measures at 

that time, if Ex-Im were to approach its exposure limit in the future, it 

might need to take actions such as delaying authorizations to prevent 

exceeding its exposure limit.

The accuracy of Ex-Im’s 2013 and 2014 exposure forecasts is uncertain, 

but the plan’s forecast underestimated Ex-Im’s 2012 exposure by about 

$900 million for the 2 months of 2012 remaining at the time it prepared 

the plan.19 Ex-Im prepared the plan’s 2012 year-end exposure estimate in 

August 2012. At that time, Ex-Im took its known exposure at the end of 

July 2012, $99 billion, and estimated the authorizations, repayments, and 

cancellations that would occur in August and September to determine the 

year-end 2012 exposure. Ex-Im forecast that $10 billion in additional 

authorizations in those months would be offset by $3.3 billion in 

repayments and cancellations—to result in an additional $6.7 billion in 

exposure in the next 2 months. However, by the end of September, ExIm’s actual exposure had increased by $7.6 billion, 13 percent higher.20

 

19As of the end of January 2013, Ex-Im reported actual exposure of $110.8 billion, $9.4 

billion below its Business Plan estimate of $120.2 billion for the year end in September 

and $19.2 billion below its congressionally authorized 2013 limit.

20Ex-Im’s overall exposure was approximately $106.6 billion at the end of September 

2012, $873 million higher than the Business Plan estimate of $105.8 billion Ex-Im made in 

August 2012.

A Number of Factors 

Affect the Accuracy of ExIm’s Exposure and 

Authorization Forecasts
 

Page 14 GAO-13-620 Export-Import Bank

Ex-Im’s authorization forecast for August and September was within 0.3 

percent of the actual authorizations in those 2 months, suggesting that 

the forecast error resulted from an overestimate of the repayments and 

cancellations that reduce exposure.

Ex-Im’s Business Plan forecast $38.4 billion in authorizations in 2013 and 

$42.7 billion in 2014, with 77 percent of the value of forecast 

authorizations consisting of long-term transactions including 

transportation and project and structured finance. According to Ex-Im’s 

Office of the Chief Financial Officer, Ex-Im used the same process to 

estimate authorizations for the Business Plan that it had used in previous 

years to estimate authorizations for its annual budget estimates. Ex-Im 

estimated long-term authorizations in the plan based on an analysis of its 

pipeline of in-house applications and expected applications, in which 

customers are in consultation with Ex-Im. For example, Ex-Im reviews 

aircraft production and delivery schedules to determine when financing for 

new aircraft is expected to be needed. Long-term transactions have a 

consultation and application period of between 6 months and 3 years. 

According to Ex-Im officials, the lead time for the largest project and 

structured finance transactions is generally at the upper end of this range, 

giving Ex-Im a more specific basis for its estimates within that time 

horizon. Ex-Im forecast the average size for individual long-term 

structured finance transactions in 2013 at $389 million, and $478 million 

in 2014. Individual transportation authorizations for aircraft included in the 

2013 and 2014 forecasts average approximately $266 and $203 million, 

respectively. The remaining 23 percent of Ex-Im’s forecast authorizations 

are short- and medium-term. Ex-Im estimated these based on information 

gathered from Ex-Im partner banks—as well as Ex-Im officials’ own sense 

of overall market trends. Ex-Im short- and medium-term transactions 

averaged approximately $2.2 million in 2012.

Ex-Im’s Business Plan asserts that the pipeline approach has been 

demonstrated to be the most effective forecasting methodology, but also 

notes that large swings in the amount of transportation and project and 

structured finance authorizations may occur due to fluctuations in overall 

market conditions or situations unique to the transaction. According to ExIm, it is less likely that authorizations for aircraft or larger project and 

structured finance authorizations would appear unexpectedly or not 

occur, but these transactions may be delayed and their amount may 

fluctuate. Smaller project and structured finance transactions and 

nonaircraft transportation authorizations may have shorter lead times of 

several months. Thus, they can be presented to Ex-Im and authorized 

within 2013 or 2014 without Ex-Im having been aware of them in August 
 

Page 15 GAO-13-620 Export-Import Bank

2012, when it prepared the Business Plan. Ex-Im’s short- and mediumterm transactions generally have shorter lead times than long-term 

transactions, increasing the uncertainty of Ex-Im’s forecast for these 

transactions in future years. However, because of their generally smaller 

size, it would take far more change in the number or size of these 

transactions to affect Ex-Im’s overall authorization or exposure estimates.

Since the submittal of the plan in September 2012, the size of some ExIm forecast authorizations has fluctuated, as the plan noted could occur. 

Approximately 6 months after preparing the plan, in February 2013, Ex-Im 

management reviewed its 2013 authorization forecasts as part of its 

internal planning. As of March 28, 2013, Ex-Im reduced its 2013 estimate 

by $2.6 billion (6.9 percent) to $35.8 billion.21

Ex-Im reduced its 2013 transportation and structured finance 

authorizations but did not change other 2013 forecasts.22 Changes in ExIm’s forecast resulted from

• transactions no longer expected to be completed in 2013 (decrease of 

$5.7 billion),

• changes in the size of specific authorizations still forecast to occur 

(increase of $845 million), and

• new transactions not anticipated at the time of the August 2012 

Business Plan forecast (increase of $2.2 billion).

The forecast change in the total amount of authorizations in turn would 

affect Ex-Im’s forecast calculation of exposure. Using Ex-Im’s revised 

authorization estimate, the same model Ex-Im used to support its 

Business Plan forecast would now predict a reduction of $2.6 billion in 

exposure in 2013 and $1.6 billion in 2014.

 

21As of the end of January 2013, one-third of the way through fiscal year 2013, Ex-Im had 

authorized $10.9 billion, 28 percent of its Business Plan estimate and 31 percent of its 

revised estimate. At the same point in 2012, Ex-Im had authorized $7.1 billion—22 

percent of its forecast authorizations of $32 billion—but actual authorizations ultimately 

would total $36 billion.

22Ex-Im officials stated that Ex-Im made no change to its 2014 authorization forecast, but 

plans to assess again the 2014 forecast in approximately June 2013 as part of the 

development of its 2015 budget.
 

Page 16 GAO-13-620 Export-Import Bank

Ex-Im’s data on previous authorizations show that Ex-Im’s recent budget 

forecasts underestimated Ex-Im’s authorizations. Ex-Im’s 2012 budget 

estimate, submitted to Congress approximately 16 months before the end 

of that year, was 11 percent below the actual authorization figure. The 

2012 estimate was closer to the actual authorization figures than Ex-Im’s 

forecasts in 2009, 2010, and 2011, which were between 33 and 42 

percent below actual authorizations (see fig. 4).

Figure 4: Ex-Im’s Estimated Authorizations, Fiscal Years 2008-2014

Ex-Im’s Business Plan notes that few could have predicted the financial 

crisis of 2007-2009, which led to a significant contraction in commercial 

lending and a sharp increase in demand for Ex-Im financing. Likewise, 

the European sovereign debt crisis led in 2011 to a continued need for 

Ex-Im financing at levels higher than originally estimated. Ex-Im officials 

asserted that their improved 2012 forecast shows they have begun to 

better account for the changed economic environment. However, any 

difference in the amount of authorizations also would affect the forecast 

amount of Ex-Im’s exposure. For example, Ex-Im’s 2013 and 2014 

forecasts of exposure would increase if forecast authorizations were 

underestimated by the same 11 percentage points as for 2012. The same 

Ex-Im’s Recent Forecasts 

Underestimated Authorizations
 

Page 17 GAO-13-620 Export-Import Bank

forecasting model Ex-Im used to support its Business Plan forecast would 

now predict Ex-Im’s exposure to be $2.2 billion higher at the end of 2013, 

and $5.9 billion higher at the end of 2014. The estimated total exposure at 

the end of 2014 would be $140.8 billion, greater than Ex-Im’s $140 billion 

exposure limit for 2014.23

Ex-Im prepared the Business Plan exposure forecast in August 2012 

using the same model and assumptions about repayments that it had 

used in previous years. However, the model is sensitive to repayment 

assumptions and Ex-Im’s data no longer support the model’s assumption 

about the percentage of the portfolio that is short-term. To estimate the 

amount of repayments and cancellations that reduce Ex-Im exposure, ExIm made two key assumptions.

• Ex-Im assumed that 30 percent of authorizations each year were for 

short-term products that would be repaid within the year.

• Ex-Im assumed that the remaining nonshort-term authorizations 

would be repaid 10 percent at a time over 10 years.

According to the Ex-Im staff who prepared the analysis, the 30 percent 

and 10-year assumptions were used in previous years and not revised for 

the Business Plan forecast. However, from 2002 through 2012, the actual 

percentage of Ex-Im authorizations that were short-term ranged from 24 

to 37 percent, averaging 32 percent. These data were available to Ex-Im, 

but Ex-Im did not use them in its calculations. Furthermore, the 

percentage of Ex-Im’s portfolio that was short-term rapidly decreased in 

recent years—from 37 percent in 2010 to 31 percent in 2011 and to 25 

percent in 2012. The data included in Ex-Im’s authorization forecast 

spreadsheet indicate that Ex-Im would calculate short-term percentages 

of 22 percent in 2013 and 23 percent in 2014. Using Ex-Im’s actual and 

forecast percentages of short-term authorizations in Ex-Im’s model results 

in a forecast of $123 billion in exposure for 2013 and $142 billion—in 

excess of the $140 billion exposure limit—for 2014.

 

23Even with a shorter time horizon for the forecast, Ex-Im authorization estimates can vary 

from actual results. In August 2012, Ex-Im estimated that five structured finance 

transactions greater than $900 million in value would occur in 2013. Approximately 4 

months later, as of the end of December 2012, three of these had occurred, and their 

individual actual values differed from the August projection by between 9 and 11 percent.

Ex-Im Did Not Update or 

Assess the Assumptions of 

Its Repayment Forecast 

Model
 

Page 18 GAO-13-620 Export-Import Bank

While Ex-Im assumes that nonshort-term exposures would be repaid over 

10 years, the repayment terms for Ex-Im’s long-term products range from 

7 to 18 years. Assuming a 9-year average repayment term decreases ExIm’s exposure by approximately $1 billion at the end of 2014. Assuming 

an 11-year average repayment term increases the estimate by 

approximately $1 billion. In combination, varying the model’s assumptions 

about the percentage of short-term authorizations in Ex-Im’s portfolio 

(using a 30 percent assumption or actual historical data) and average 

repayment terms (9 or 11 years) results in a range of 2014 exposure 

estimates between $132 billion and $144 billion (see fig. 5).

Figure 5: Range of Ex-Im 2013 and 2014 Exposure Forecasts Using Alternative 

Short-Term Percentage and Repayment Term Assumptions, Fiscal Years 2011-2014

Although the authorization forecast is uncertain and key assumptions 

about repayments affect the results, Ex-Im did not conduct sensitivity 

analyses to assess and report the range of various outcomes. In addition, 

Ex-Im did not update its model or reassess its process for estimating 
 

Page 19 GAO-13-620 Export-Import Bank

authorizations in light of previous underestimates. GAO guidance for 

estimating costs states that assumptions should be realistic, valid, and 

backed up by historical data to minimize uncertainty and risk.24 Further, 

forecast models should be assessed against historical experience to 

check their validity. In addition, a sensitivity assessment should be 

conducted for all estimates to examine the effect of changing 

assumptions, and this assessment should be documented and presented 

to management. As a result of not addressing the uncertainty of 

authorization estimates and assumptions in its forecast model, the range 

of uncertainty of its exposure forecast shows that Ex-Im could have to 

take actions such as postponing planned authorizations to avoid 

exceeding its exposure limit.

Ex-Im’s support for its evaluation of risk of loss was limited in the 

Business Plan, with some forecast data not provided in the plan pending 

approval of key analyses by OMB. While Ex-Im concluded there would be 

no change to its risk of loss for its subportfolios by product type or relating 

to the small business, sub-Saharan Africa, and renewable energy 

mandates, it did not provide conclusions on the overall risk of loss or the 

risk of loss by industry or key market. Ex-Im also did not present data on 

historical performance in the Business Plan, although it reported 

performance data such as default rates in other reports. Additionally, ExIm does not routinely report the performance of its subportfolios relating 

to the small business, sub-Saharan Africa, and renewable energy 

mandates, although these mandates encourage Ex-Im to undertake 

transactions in these subportfolios and their performance differs from the 

overall Ex-Im portfolio.

According to Ex-Im, the deadline for the Business Plan limited its ability to 

provide more detailed information on its projected risk of loss. The loss 

rates Ex-Im annually updates are key to its estimation of its risk of loss. 

OMB did not approve Ex-Im’s model that calculates these loss rates until 

September 24, 2012, 6 days before the plan’s mandated completion date 

of September 30, 2012. Instead of providing detailed information on its 

projected risk of loss, Ex-Im’s Business Plan described the components 

of its risk-management program (underwriting, monitoring, claims, 

 

24GAO-09-3SP. 

Business Plan’s 

Limited Risk 

Evaluation Suggests 

Opportunities for 

Additional Analyses

Mandated Reporting 

Deadline Affected 

Comprehensiveness of the 

Business Plan
 

Page 20 GAO-13-620 Export-Import Bank

recovery, and loss reserves) and discussed the two elements it used to 

assess risks (risk ratings and portfolio concentration). Ex-Im’s Business 

Plan stated that the risk rating element includes (1) the distribution of 

risks among transactions such as how many are low-, medium-, or highrisk; and (2) the individual transactions’ risk rating, which is the most 

relevant factor in predicting losses, according to the plan. Ex-Im’s 

Business Plan included four portfolio concentration measures—(1) the 

portfolio share of its top 10 countries, (2) the portfolio share of its top 10 

obligors, (3) the distribution of its portfolio by geographic region, and (4) 

the distribution of its portfolio by industry.

Ex-Im’s risk analysis in its Business Plan was limited because it did not 

provide a conclusion on the overall risk of loss, or risk of loss by industry 

or key market under the new exposure limit. While the plan provided 

historical data on overall risk rating and portfolio concentration in 2008 

and 2012, such data did not reflect the projected changes of composition 

or the risks of Ex-Im’s subportfolios. Specifically, 

• Ex-Im did not project the overall risk of loss under the new exposure 

limit in future years, but instead referred to historical data showing that 

the overall portfolio risk rating improved between 2008 and 2012. For 

example, the overall risk rating improved from 4.23 in 2008 to 3.85 in 

the third quarter of 2012 (on Ex-Im’s scale of 1-11, 1 is the least 

risky).

• Ex-Im did not project changes in industry concentration or provide a 

conclusion on how such changes would affect its risk of loss. Instead, 

Ex-Im presented a comparison of the industry distribution of Ex-Im’s 

portfolio in 2008 and 2012 and stated that the concentration in some 

industries increased from 2008 to 2012 while others decreased. For 

example, the aircraft industry marginally increased its share of the 

portfolio. Ex-Im also asserted that its loss estimation model accounted 

for such changes to determine the appropriate amount of loss 

reserves.

• Ex-Im did not provide information in the plan on projected changes in 

exposure composition by key market or a conclusion on how such 

changes would impact risk of loss. Instead, the plan discussed 

changes in portfolio concentration by regions, top 10 countries, and 

top 10 obligors between 2008 and 2012. The plan also compared ExIm’s portfolio distribution by region in 2008 and 2012, rather than by 

countries Ex-Im identified as key markets.

Business Plan Risk Analysis 

Was Limited
 

Page 21 GAO-13-620 Export-Import Bank

• Ex-Im did conclude in the Business Plan that it expected a favorable 

impact on risk of loss from changes in product mix as it expected its 

portfolio to shift towards long-term products, which have the lowest 

loss rates, according to the plan. However, Ex-Im did not provide 

information on the composition of exposure by product after this shift.

Ex-Im concluded that its risk of loss associated with complying with the 

small business, sub-Saharan Africa, and renewable energy mandates 

under the new exposure limits would not increase. Specifically,

• Ex-Im concluded that there would be no increase to its risk of loss 

associated with complying with the small business mandate under the 

new exposure limit because a large share of Ex-Im’s small business 

transactions are short-term and highly diversified across industry 

sectors and geographic areas. In addition, Ex-Im shares the risks of 

some of these transactions with the originating banks and obtains 

collateral to secure the transactions.25

• Ex-Im concluded that there would be no increase to its risk of loss 

associated with complying with the sub-Saharan Africa mandate 

under the new exposure limit. Ex-Im’s rationale was that it primarily 

engages with profitable companies in growing sectors and wellmanaged African governments.26

• Ex-Im concluded that there would be no change to its risk of loss 

associated with complying with the renewable energy mandate. ExIm’s rationale was that its renewable energy transactions have default 

rates comparable to its long-term transactions, which have the lowest 

default rates, according to the plan.

 

25Ex-Im delegates authority to private lenders to underwrite working capital transactions, a 

type of short-term transaction.

26According to Ex-Im officials, some sub-Saharan African countries are rated by the 

Country Limitation Schedule as too risky for Ex-Im to offer export financing. However, 

because of the sub-Saharan Africa mandate, Ex-Im has devoted additional resources to 

assess the risk of a proposed transaction in a sub-Saharan African country that otherwise 

would be ineligible. Such reviews assess whether countervailing factors specific to the 

transaction would overcome the country risk and offer Ex-Im a reasonable assurance of 

repayment.

Business Plan Concluded That 

Compliance with Congressional 

Mandates Would Have No 

Effect on Risk Profile
 

Page 22 GAO-13-620 Export-Import Bank

While Ex-Im’s strategic plan states that the bank uses default rates to 

measure risk of loss, the Business Plan did not present any historical 

default rate data on Ex-Im’s subportfolios. Again limited by its lack of final 

projected loss rates at the time of the Business Plan, Ex-Im did not 

present any projected loss data in the Business Plan—for example, the 

estimated credit subsidy costs of its portfolio in the future years—to 

support its conclusions. However, Ex-Im does report some financial data 

on historical performance in some of its existing reports, which provide 

some insight into potential losses.27 These data include default rates by 

subportfolio of product, key market, and industry; loss reserves and 

allowances; and overall weighted-average risk ratings. Examples of such 

reports include Ex-Im’s annual reports, audited financial statements, 

default rate reports, and internal portfolio status reports.

To provide context for the Business Plan’s conclusions on risk of loss, we 

reviewed fiscal year-end financial data from Ex-Im’s active portfolio for 

2008 and 2012. Using Ex-Im’s default rate methodology, we calculated 

the average default rates for 2008 and 2012 based on subportfolio-level 

data Ex-Im compiled at our request. Table 1 shows that the default rates 

of the subportfolios were generally lower than the overall default rate as 

of September 30, 2012, with the exception of the subportfolios of 

medium-term products and transactions with only small business 

participants.

 

27The 2012 reauthorization act requires Ex-Im to submit a quarterly default rate report 

providing default rates by product, key market, and industry. See Pub. L. No. 112-122, §

6. In response to the congressional requirement, Ex-Im submitted its first default report on 

September 19, 2012.

Ex-Im Did Not Include Loss 

Data in the Business Plan, but 

Reports Some Historical 

Portfolio Performance in Other 

Documents
 

Page 23 GAO-13-620 Export-Import Bank

Table 1: Ex-Im Average Default Rates by Selected Subportfolio as of September 30, 2008, and 2012

Average default rate September 30, 2008d September 30, 2012d

Overall 1.1% 0.3%

Four major industriesa 0.8 0.1

Nine key markets 3.1 0.3

Long-term products 0.4 0.1

Medium-term productsb 17.5 7.6

Short-term products 0.4 0.2

Small business transactionsc 3.0 0.5

100% Small business transactionsc 1.4 1.1

Sub-Saharan Africa transactionsc 1.1 0.2

100% Sub-Saharan Africa transactionsc 1.2 0.2

Renewable energy transactions 0.0 0.0

Source: GAO analysis of Ex-Im data.

a

The four major industries are aircraft, manufacturing, oil and gas, and power projects. Ex-Im included 

these four industries and a fifth category (“all other”) in its annual reports from 2008 through 2012. We 

requested default rate data for industry sectors listed in the Business Plan. Ex-Im provided data only 

for these four industries because, according to Ex-Im officials, the exposure amounts of other 

industries are much smaller than those of the top four industries.

b

As of the end of 2012, the dollar amount of medium-term insurance transactions represented less 

than 1 percent of the dollar amount of Ex-Im’s active authorizations.

c

We refer to transactions with only small business participants as “100 percent small business 

transactions” and those with only sub-Saharan Africa participants as “100 percent sub-Saharan Africa 

transactions.” The designation “small business transactions” refers to Ex-Im transactions that may 

include small and other businesses. Similarly, Ex-Im has a multibuyer product where some of the 

buyers may be in sub-Saharan Africa and some may not. Ex-Im tracks defaults by transaction, not by 

participant; therefore, a default in a mixed transaction may not be attributable to its small business or 

sub-Saharan Africa components. Furthermore, for small business transactions, the counterparty that 

may default is not the small business. Thus, a default is not attributable to a particular small business, 

only to the counterparty that purchases the small business’s export.

d

As we previously reported, the default rate data showing a declining trend between 2008 and 2012 

may not be conclusive because Ex-Im’s portfolio at the end of 2012 contained a large volume of 

recent transactions that have not reached their peak default periods. Ex-Im also does not retain pointin-time historical data on credit performance to allow it to compare defaults of recent and seasoned 

transactions at comparable points in time. We recently made a recommendation to address this 

weakness, and Ex-Im concurred with the recommendation.

While Ex-Im’s average default rates overall and by subportfolio generally 

declined from 2008 to 2012, the declining trend may not be conclusive 

because Ex-Im’s portfolio at the end of 2012 contained a large volume of 

recent transactions that have not reached their peak default periods, as 
 

Page 24 GAO-13-620 Export-Import Bank

we recently reported.28 Recent transactions have had limited time to 

default and may not default until they are more seasoned. Further, Ex-Im 

does not retain point-in-time historical data on credit performance to allow 

it to compare defaults of recent and seasoned transactions at comparable 

points in time. We recently made a recommendation to address this 

weakness so that Ex-Im can conduct future analyses comparing the 

performance of its portfolio between years.29 Ex-Im concurred with this 

recommendation.

While Ex-Im included an assessment of the risk of loss associated with 

implementing the three congressional mandates in its Business Plan as 

required by the Reauthorization Act, Ex-Im missed the opportunity to 

present any risk rating data to support its risk evaluations, though this 

was not required. Again limited by its lack of final projected loss rates—

which are calculated using risk ratings of transactions as a key variable—

at the time of the Business Plan, Ex-Im did not present any projected risk 

rating data in the plan.

While the Business Plan did not include any risk rating data related to the 

three congressional mandates, to further examine Ex-Im’s conclusions on 

risk of loss associated with complying with the three mandates, we 

analyzed the weighted-average risk ratings for 2008 and 2012 related to 

these mandates as compiled by Ex-Im (see table 2). Our analysis shows 

that Ex-Im’s overall weighted-average risk rating declined between 2008 

and 2012. However, transactions related to these three mandates 

generally had higher weighted-average risk ratings than the overall 

weighted-average risk ratings for both years, except for transactions that 

partially support small businesses.

 

28GAO-13-303. 

29GAO-13-303. 

Ex-Im Has Not Routinely 

Reported Risk of Loss 

Related to Three 

Congressional Mandates

Business Plan Did Not Provide 

Risk Rating Data to Support Its 

Risk Conclusions on 

Congressional Mandates
 

Page 25 GAO-13-620 Export-Import Bank

Table 2: Ex-Im Weighted-Average Risk Ratings Overall and by Small Business, Sub-Saharan Africa, and Renewable Energy 

Subportfolios, Fiscal Years 2008 and 2012

Weighted-average risk ratinga Fiscal year 2008 Fiscal year 2012

Overall 4.25 3.66 

Small business transactionsb 4.10 3.40 

100% small business transactionsb 5.20 4.20 

Sub-Saharan Africa transactionsb 6.20 5.10 

100% Sub-Saharan Africa transactionsb 6.20 5.10 

Renewable energy transactions 5.30 4.20 

Source: GAO analysis of Ex-Im data.

a

Risk ratings range from 1 (least risky) to 11 (most risky).

b

We refer to transactions with only small business participants as “100 percent small business 

transactions” and those with only sub-Saharan Africa participants as “100 percent sub-Saharan Africa 

transactions.” The designation “small business transactions” refers to Ex-Im transactions that may 

include small and other businesses. Similarly, Ex-Im has a multibuyer product where some of the 

buyers may be in sub-Saharan Africa and some may not. Ex-Im tracks defaults by transaction, not by 

participant; therefore, a default in a mixed transaction may not be attributable to its small business or 

sub-Saharan Africa components. Furthermore, for small business transactions, the counterparty that 

may default is not the small business. Thus, a default is not attributable to a particular small business, 

only to the counterparty that purchases the small business’s export.

Ex-Im did not include risk ratings of transactions supporting the small 

business, sub-Saharan Africa, and renewable energy mandates in the 

Business Plan, and has not routinely reported the mandates’ performance 

(for example, default rates) at the subportfolio level. Ex-Im’s most recent 

strategic plan indicates that Ex-Im uses default rates as one of the 

metrics to measure risk performance. In addition, Ex-Im monitors default 

rates both internally and in quarterly default rate reports to Congress; 

however, Ex-Im does not include the default rates for transactions 

supporting these three congressional mandates in its reports. Ex-Im’s 

annual report documents the weighted-average risk rating of its overall 

portfolio, but does not provide further breakdown of the risk rating at the 

subportfolio level. Congress requires Ex-Im’s default rate reports to 

include default rates of its overall portfolio and by subportfolios of product 

type, industry sector, and key market.30 However, Ex-Im can analyze 

additional information about its subportfolios related to the three 

mandates. For example, according to Ex-Im, although it does not 

 

30 12 U.S.C. § 635g.

Ex-Im Could Improve 

Reporting of Risk of Loss 

Related to Three Congressional 

Mandates 
 

Page 26 GAO-13-620 Export-Import Bank

separately track the performance of the small business subportfolio, it 

tracks the performance of the working capital guarantee and short-term 

multibuyer insurance subportfolios, which are largely small business 

products and therefore serve as its proxy of the small business 

subportfolio. Similarly, Ex-Im does not track the performance of 

renewable energy transactions but has included them in the overall 

product category. Additionally, Ex-Im’s default rate report includes default 

rates broken out for countries in Africa, which can be used as a proxy for 

sub-Saharan Africa transactions.

Our analysis indicates that the performance of the subportfolios related to 

the three congressional mandates can vary from that of the overall 

portfolio. For instance, the higher risk ratings of the subportfolios suggest 

these transactions generally are more risky than Ex-Im’s overall portfolio. 

Although it is not required by Congress, Ex-Im is able to report financial 

performance information on subportfolios supporting the three mandates, 

such as default rates and risk ratings. Because Ex-Im does not currently 

report financial performance data related to these mandates, Ex-Im 

officials explained that the agency specifically developed new analyses to 

address our data requests for default rates and weighted-average risk 

ratings at the subportfolio level.

Congress directs that Ex-Im engage in transactions that support business 

activities fulfilling these three mandates while maintaining reasonable 

assurance of repayment.31 In addition, OMB guidance indicates that 

agencies should use comprehensive reports on the status of the credit 

financing portfolios to evaluate effectiveness and collect data for program 

performance measures such as default rates.32 Furthermore, federal 

banking regulator guidance suggests that banks should provide financial 

performance information by portfolio and specific product type to allow 

management to properly evaluate lending activities.33 For example, 

guidance from the Office of the Comptroller of the Currency and 

interagency guidance from federal banking regulators suggest that banks 

and other financial institutions should report performance information, 

 

3112 U.S.C. § 635 and Pub. L. No. 112-74, 125 Stat. 1191.

32OMB, Circular No. A-129 Revised.

33Board of Governors of the Federal Reserve, Commercial Bank Examination Manual 

(Washington, D.C.: March 1994). While Ex-Im is not bound by this guidance, it faces 

similar challenges to regulated private financial institutions in managing risks.
 

Page 27 GAO-13-620 Export-Import Bank

such as default rates, loss severity, and delinquencies, and compare their 

performance with expected performance on an overall and subportfolio 

level.34 Financial performance information on Ex-Im’s subportfolio can 

help inform Ex-Im’s risk evaluation and risk-management activities. 

Moreover, reporting financial performance information would be 

consistent with federal internal control standards, which indicate that 

communications with external parties, including Congress, should provide 

information that helps them better understand the risks facing the 

agency.35 By not routinely analyzing and reporting performance 

information on these congressionally mandated transactions, Ex-Im limits 

its ability to internally evaluate the performance and default rates of 

transactions it is specifically mandated to maintain, which in turn hinders 

reporting of such performance to Congress.

In the Business Plan, Ex-Im’s response to the reauthorization requirement 

to assess its resources was limited and further details were not included 

pending OMB review of Ex-Im’s 2014 budget request. From 2008 through 

2012, Ex-Im experienced rapid growth in authorizations while its staff and 

administrative budget level remained relatively flat. The Business Plan 

reports that Ex-Im’s resources are strained and cannot sustain the bank’s 

current level of activity or meet expected demand in coming years. 

Although the Business Plan does not give specific details about the 

resources needed to manage Ex-Im’s growing authorizations, other bank 

documents outline estimated resource requirements in more detail. While 

Ex-Im’s support for small business has grown and Ex-Im forecasts 

continuing increases, Ex-Im’s mandated target will require it to increase 

small business authorizations by $2.4 billion (39 percent) between 2012 

and 2014. The Business Plan reports that Ex-Im expects administrative 

resource constraints may prevent the bank from meeting its 

congressionally mandated target for small business export financing and 

lack of demand may prevent meeting the target for renewable energy 

export financing.

 

34Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Board 

of Governors of the Federal Reserve, and Office of Thrift Supervision, Interagency 

Guidance on Asset Securitization Activities; Office of the Comptroller of the Currency, 

Asset Securitization: Comptroller’s Handbook. While Ex-Im is not bound by either set of 

guidance, it faces similar challenges to regulated private financial institutions in managing 

risks.

35GAO/AIMD-00-21.3.1 and GAO-01-1008G. 

Ex-Im’s Business 

Plan’s Resource 

Analysis Was Limited 

and Growing 

Congressional 

Mandated Targets 

Challenge Bank 

Resources 
 

Page 28 GAO-13-620 Export-Import Bank

The Business Plan states that recent growth has strained Ex-Im’s 

resources, particularly its underwriting and monitoring staff. Although the 

bank has been able to manage the growth through increased operating 

efficiencies, its current resources cannot sustain the level of activity 

expected in coming years. According to Ex-Im officials, although 

additional information was available, Ex-Im’s response regarding its 

resource needs was limited in the Business Plan because Ex-Im’s 2014 

budget request had not yet been cleared by OMB at the time the plan was 

due to Congress.

Ex-Im data presented in other documents demonstrate that while 

authorizations and exposure grew, its administrative budget and staff 

level remained relatively flat. From 2008 through 2012, Ex-Im’s annual 

authorizations grew nearly 150 percent. Its administrative budget 

increased 15 percent, from $78 million in 2008 to $90 million in 2012 (see 

fig. 6). Over the same period, Ex-Im’s staff level, as measured by full-time 

equivalents (FTE), increased less than 11 percent, from 352 in 2008 to 

390 in 2012. In 2008, the ratio of authorizations to Ex-Im staff was $40.1 

million per employee. In 2012, the ratio was $90.9 million per employee. 

Ex-Im has requested additional administrative funds in recent years, but 

has not received the full amount of its requests.

Business Plan Reports 

That More Resources are 

Needed
 

Page 29 GAO-13-620 Export-Import Bank

Figure 6: Ex-Im Administrative Budget Requests and Authorizations, Fiscal Years 

2008-2014

According to Ex-Im officials, initially the increased business primarily 

affected Ex-Im’s underwriting function. However, as transactions 

complete the underwriting phase officials expect workloads to increase 

significantly in other areas, such as legal and monitoring. In March 2013, 

we reported that Ex-Im had taken steps to address workload challenges, 

but had not developed benchmarks for the level of business it can 

properly support with a given level of resources.36 We recommended that 

Ex-Im develop workload benchmarks, monitor workloads against these 

benchmarks, and develop controls to mitigate risk when workloads 

 

36GAO-13-303. 
 

Page 30 GAO-13-620 Export-Import Bank

approach or exceed these benchmarks. Ex-Im concurred with our 

recommendation.

Ex-Im does not track the time employees spend on particular tasks. Some 

Ex-Im divisions are primarily focused on specific transactions—such as 

small business or transportation—enabling Ex-Im to use the staff and 

administrative funds allotted to these divisions as a proxy indicator of the 

resources invested in these transactions. However, other Ex-Im divisions 

also devote resources to these transactions. For example, Ex-Im staff 

may spend time underwriting or monitoring various types of transactions 

in different portfolios. According to Ex-Im officials, systems that track 

costs more precisely are expensive to develop and require time-intensive 

data capture. Ex-Im was able to provide the number of direct FTEs that 

support some of its mandated activities, but did not quantify the FTEs 

supporting bankwide activities that also support the individual mandates.

The Business Plan did not discuss the bank’s ability to conduct economic 

impact assessments, as specifically mentioned in the reauthorization 

requirement. According to Ex-Im officials, details of the resources 

required for economic impact assessments were not included in the plan 

because Ex-Im was reviewing its economic impact methodology and 

drafting new guidelines and procedures at the time the plan was issued. 

However, Ex-Im officials stated that they considered the resources 

needed to conduct these assessments in the Business Plan’s 

assessment of resource needs, particularly for underwriting. Congress 

requires Ex-Im to consider the economic impact of its work and not to 

fund activities that will adversely affect U.S. industry.37 Ex-Im tests for 

adverse affects by performing an economic impact analysis. As we 

previously reported, Ex-Im uses a screening process to identify projects 

with the most potential to have an adverse economic impact, and then 

 

3712 U.S.C. § 635(e).

Ex-Im Plans to Hire an 

Additional Analyst to Perform 

Economic Impact Assessments
 

Page 31 GAO-13-620 Export-Import Bank

subjects the identified projects to a detailed analysis.38 According to Ex-Im 

officials, the bank currently has three staff members conducting economic 

impact analyses and plans to hire an additional employee to assist with 

these analyses because Ex-Im expects to conduct more large 

transactions that will likely require more economic impact assessments.

The Business Plan describes Ex-Im’s information technology (IT) systems 

as antiquated and inflexible, noting that some systems are more than 30 

years old. The plan also states that Ex-Im has begun a Total Enterprise 

Modernization project to address its IT issues, but notes that continued 

progress is contingent upon adequate funding. In January 2012, Ex-Im’s 

Inspector General found that Ex-Im’s IT infrastructure made it difficult for 

the bank to provide timely service, effectively manage and track its 

programs, measure progress, and increase productivity.39 The Inspector 

General also found that Ex-Im did not have practices to effectively 

manage its strategic planning, coordinate initiatives, and determine the 

best use of funds for improving IT support of its mission.

Ex-Im has been addressing the IT issues identified by the Inspector 

General. According to initial responses to the Inspector General, dated 

January 10, 2012, a series of processing system projects were underway. 

In addition, Ex-Im hired a contractor to evaluate its IT systems and 

provide recommendations. The contractor’s major recommendation was 

to replace Ex-Im’s financial management system. Ex-Im officials expect 

the new financial system be ready in October 2014.

Ex-Im also has been consolidating different forms into a simplified online 

form that will guide applicants through the application process and allow 

 

38GAO, Export-Import Bank: Improvements Needed in Assessment of Economic Impact, 

GAO-07-1071 (Washington, D.C.: Sept. 12, 2007). We reviewed Ex-Im’s economic impact 

assessment process and made recommendations for improving the identification and 

analysis of applications for economic impact and the transparency of the process. These 

recommendations included that Ex-Im clarify its procedures for conducting economic 

impact analyses, create specific methodological guidelines for staff analyzing applications 

for economic impact, and publish the final determinations on whether a project would have 

a positive or negative impact. Ex-Im generally concurred with these recommendations and 

has since issued new procedures and methodological guidelines for assessing economic 

impact.

39Export-Import Bank of the United States, Office of the Inspector General, Audit of 

Information Technology Support for Export-Import Bank’s Mission, OIG-AR-12-04 

(Washington D.C.: Jan. 24, 2012).

Projects to Address 

Information Technology 

Deficiencies are Underway 
 

Page 32 GAO-13-620 Export-Import Bank

them to sign forms, submit documents, and pay fees online. According to 

Ex-Im, a pilot form was demonstrated at Ex-Im’s annual conference in 

April 2013 but this project requires OMB approval, which Ex-Im expects 

by September 2013.

Finally, Ex-Im has been updating its systems to assign each customer a 

unique identifier recognized across all systems. In its September 2012 

update to the Inspector General on the status of IT improvements, Ex-Im 

projected full implementation by January 2013. However, in March 2013 

Ex-Im told us that this upgrade was being tested and was expected to go 

into operation by September 2013.

Congress has given Ex-Im explicit policy goals—which include specific 

targets for small business and environmentally beneficial exports—in 

addition to its general mandate to support domestic exports.40

Since the 1980s, Congress has required that Ex-Im make available a 

certain percentage of its export financing for small business.41 In 2002, 

Congress established several new requirements for Ex-Im relating to 

small business, including increasing the small business financing 

requirement from 10 to 20 percent of the total dollar value of Ex-Im’s 

annual authorizations. Related congressional directives have included 

requirements to create a small business division and define standards to 

measure the bank’s success in financing small businesses.

Ex-Im’s support for small businesses has increased 92 percent over the 

past 5 years, from $3.2 billion in 2008 to $6.1 billion in 2012. However, 

these recent increases have not kept pace with the rising amount—

caused by the increase in Ex-Im’s overall authorizations—needed to meet 

 

40For additional information on Ex-Im’s congressional mandates, see GAO, U.S. ExportImport Bank: Actions Needed to Promote Competitiveness and International Cooperation, 

GAO-12-294 (Washington, D.C.: Feb. 7, 2012).

41Ex-Im interprets the term “make available” as a target that the bank is expected to meet. 

For more information on Ex-Im support for small business, see GAO, Export-Import Bank: 

Performance Standards for Small Business Assistance Are in Place but Ex-Im Is in the 

Early Stages of Measuring Their Effectiveness, GAO-08-915 (Washington, D.C.: Jul. 17, 

2008).

Increased Demand for 

Export Financing Has 

Driven Mandated Targets 

Higher

Despite Large Projected 

Increases, Ex-Im Projects It 

Will Not Meet Small Business 

Mandate
 

Page 33 GAO-13-620 Export-Import Bank

the 20 percent mandate. Ex-Im projects in its Business Plan that it will be 

challenged to meet the 20 percent mandate in 2013 or 2014 because the 

dollar amount of its overall growth will continue outpacing its small 

business activity. The 20 percent target equaled $4.9 billion in small 

business authorizations in 2010, the last year in which Ex-Im met the 

requirement. Based on Ex-Im’s projected authorizations, the 20 percent 

target will equal $8.5 billion in 2014. Therefore, to meet this mandate, ExIm will need to increase small business authorizations even further, by 

$3.6 billion (73 percent) in 4 years. This is also an increase of $2.4 billion 

(39 percent) from its 2012 small business authorizations (see fig. 7). 

Small business authorizations accounted for less than 20 percent of the 

dollar amount of Ex-Im’s total authorizations in 2011 and 2012. However, 

measured in number of transactions, 87 percent of all authorizations 

approved by Ex-Im since 2008 directly supported small business exports.

Ex-Im expects to increase its small business authorizations by $1.4 billion 

(22 percent) to approximately $7.7 billion between 2013 and 2014. Ex-Im 

achieved a similar increase in 2011, but saw a more modest increase of 

1.4 percent in 2012 and projects a 2.5 percent increase in 2013. 

According to the Business Plan’s forecast, Ex-Im expects its total 

authorizations to exceed $42 billion in 2014, which would raise its small 

business mandate to $8.5 billion. Even if Ex-Im’s small business 

authorizations increase as expected in 2014, the bank still would fall short 

of its mandated target by more than $800 million.
 

Page 34 GAO-13-620 Export-Import Bank

Figure 7: Ex-Im Small Business Mandate Requirement and Actual Small Business 

Authorizations, Fiscal Years 2008-2014

In addition to the rising target amount, Ex-Im officials noted that limited 

resources will affect its ability to meet the small business mandate. ExIm’s 2013 Congressional Budget Justification stated that achieving its 

forecast increase in small business transactions was contingent on an 

additional $14 million for administrative expenses. Ex-Im planned to use 

$7 million of the additional administrative funds it requested to support 

small business outreach and underwriting abilities. However, Ex-Im did 

not receive this increase.

According to Ex-Im officials, processing small business transactions and 

bringing in new small business customers is resource intensive. 

Originating, underwriting, and servicing for small business deals requires 

more effort than other transactions because small businesses tend to 

have less exporting experience than larger businesses. Ex-Im’s Business 

Plan notes that small business transactions were approximately $1.8 

million on average but required more of Ex-Im’s resources than other 

transactions. For each $1 billion of nonsmall-business authorizations—an 

Resources Constrain Ex-Im’s 

Ability to Meet Small Business 

Mandate
 

Page 35 GAO-13-620 Export-Import Bank

amount sometimes achieved with a single Project Finance transaction—

Ex-Im must generate $200 million in small business authorizations (about 

122 transactions) to meet its small business mandate.

According to Ex-Im officials, 65 of its 390 FTEs are in the Small Business 

Group and directly support the bank’s efforts to meet its small business 

mandate target. Six additional FTEs from other divisions devote 50 

percent of their time to small business transactions. Ex-Im also recently 

launched several new small business products and opened four new 

regional offices to support small business exporters.42 The Business Plan 

states that Ex-Im has about 25 field staff in 13 offices to support small 

businesses. Ex-Im also started a series of small business forums and 

webinars to assist exporters in understanding how the bank’s various 

products could help increase sales. Small business transactions are also 

supported by dedicated IT resources. For example, Ex-Im has added a 

small-business portal to its website, which includes step-by-step 

assistance to exporters, videos, stories about the success of other 

exporters, and contact information for nearby Ex-Im Export finance 

managers.

Since 1992, Congress has directed Ex-Im to report on its financing of 

environmentally beneficial exports.43 In recent years, Congress has 

provided a 10 percent financing target for environmentally beneficial 

exports, and in 2009 it directed that the target be specifically for two 

subcategories of environmentally beneficial exports—renewable energy 

or energy efficient end-use technologies.

Despite a recent increase in its renewable energy authorizations, Ex-Im’s 

Business Plan indicates that it does not anticipate sufficient market 

demand to allow the bank to provide enough renewable energy 

authorizations to meet the target of 10 percent of its overall authorizations 

and still meet its requirement for reasonable assurance of repayment. ExIm’s support for renewable energy exports grew from $30 million in 2008 

 

42In 2012, Ex-Im opened regional Export Finance Centers in Atlanta, Georgia; 

Minneapolis, Minnesota; and Seattle, Washington. Ex-Im opened an additional center in 

Detroit, Michigan, in January 2013.

43For additional information on Ex-Im support for renewable energy and environmentally 

beneficial exports, see GAO, Export-Import Bank: Reaching New Targets for 

Environmentally Beneficial Exports Presents Major Challenges for Bank, GAO-10-682

(Washington, D.C.: Jul. 14, 2010).

Size of the Renewable Energy 

Export Market May Constrain 

Ex-Im’s Ability to Meet 

Mandate Target 
 

Page 36 GAO-13-620 Export-Import Bank

to $721 million in 2011 and is forecast to reach $1.1 billion in 2014. 

Although Ex-Im’s renewable energy authorizations generally increased 

since 2008, they have remained less than 3 percent of Ex-Im’s overall 

authorizations. Based on Ex-Im’s projected total authorizations for 2013 

and 2014, Ex-Im would have to authorize $3.8 billion in renewable energy 

financing in 2013 and $4.3 billion in 2014 to meet the 10 percent target

(see fig. 8).

Figure 8: Ex-Im Renewable Energy Mandate Target and Actual Renewable Energy 

Authorizations, Fiscal Years 2008-2014

Ex-Im officials stated that additional administrative resources would not 

enable it to meet its renewable energy target, as its inability to meet the 

target results from a lack of demand for renewable energy export 

financing. Seven bank employees are directly involved in meeting Ex-Im’s 

renewable energy target, six in the Office of Renewable Energy and one 

in the Structured Finance Group. However, Ex-Im officials noted that a 
 

Page 37 GAO-13-620 Export-Import Bank

2010 Department of Commerce report estimated the value of all U.S. 

renewable energy exports at $2 billion in 2009.44 Thus, if the bank had 

financed every U.S. renewable energy export that year, it still could not 

have met its renewable energy target.

For both small business and renewable energy transactions, the 

mandated authorization target is tied to total authorizations, which 

increase or decrease based on factors unrelated to Ex-Im’s performance 

in support of small business or renewable energy. OMB guidance directs 

agency leaders to set ambitious, yet realistic goals that reflect careful 

analysis of associated challenges and the agency’s capacity and 

priorities.45 Communicating this information to external stakeholders, such 

as Congress, that may have a significant impact on the agency achieving 

its goals is also consistent with federal internal control standards.

In addition to resources supporting renewable energy transactions, Ex-Im 

devotes resources to implementing its carbon policy, which was put in 

place in 2010, and developed in response to a lawsuit challenging ExIm’s compliance with provisions of the National Environmental Policy 

Act.46 The carbon policy (1) promotes renewable energy exports where 

carbon dioxide emission levels are very low to zero, (2) establishes a 

$250 million facility to promote renewable energy, and (3) calls for 

increased transparency in the tracking and reporting of carbon dioxide 

 

44 Department of Commerce/National Export Initiative, Trade Promotion Coordinating 

Committee, Renewable Energy and Energy Efficiency Export Initiative (Washington, D.C.: 

December 2010).

45OMB, Circular No. A–11 Revised, Preparation, Submission, and Execution of the 

Budget (August 2012).

46In 2002, Ex-Im’s energy financing, specifically its financing for fossil fuel projects, was 

the subject of a lawsuit brought against the bank and the Overseas Private Investment 

Corporation by environmental nongovernmental organizations and four U.S. cities. Friends 

of the Earth, Inc., et al. v. Spinelli, et al. (Civ. No. 02-4106, N.D. Cal.) The lawsuit asserted 

that Ex-Im and the Overseas Private Investment Corporation provided assistance for fossil 

fuel projects that caused greenhouse gas emissions without complying with provisions of 

the National Environmental Policy Act requiring assessments of their projects’ impacts on 

the U.S. environment resulting from their emissions. The lawsuit was settled in 2009 with 

Ex-Im agreeing to develop and implement a carbon policy for Ex-Im’s financing; provide 

the Board of Directors with additional information about carbon dioxide emissions 

associated with potential fossil fuel transactions; and take a leadership role in 

consideration of climate change issues, promoting emissions mitigation measures within 

the Organisation for Economic Cooperation and Development and among export credit 

agencies.
 

Page 38 GAO-13-620 Export-Import Bank

emissions. Although Ex-Im’s carbon policy was not mandated by

Congress, the Business Plan notes that 2012 appropriations language 

requires Ex-Im to notify Congress of projects that will generate more 

greenhouse gases than bank-supported projects generated on average 

during the preceding 3 years.47 The Business Plan also states that Ex-Im 

may exceed this threshold as its level of activity increases. Ex-Im has 

three environmental engineers who directly support compliance with the 

carbon policy. Additionally, the vice president of Ex-Im’s Environmental 

and Engineering Division and another employee responsible for legal 

policy spend 20 and 50 percent of their time, respectively, on carbon 

policy-related activities.

The sub-Saharan Africa mandate does not have quantifiable targets. This 

mandate requires Ex-Im, in consultation with the Secretary of Commerce 

and the Trade Promotion Coordinating Committee, to promote the 

expansion of its financial commitments in sub-Saharan Africa, establish 

an advisory committee to assist with the implementation of policies and 

programs to support this expansion, and report to Congress on efforts to 

improve relations with relevant regional institutions and coordinate with 

U.S. agencies pursuant to the African Growth and Opportunity Act.48 Two 

employees from Ex-Im’s Office of African Development are directly 

involved in meeting the requirements of the sub-Saharan Africa mandate 

and half of the duties of an Ex-Im vice chairman are also related to this 

mandate.

Ex-Im reports that it has met the requirements of this mandate and 

expects to continue to meet this mandate. Ex-Im’s efforts to meet this 

mandate include: establishing an advisory committee to assist the Board 

of Directors in meeting Ex-Im’s sub-Saharan Africa mandate; and creating 

a $100 million Africa Initiative to make insurance available for exports to 

sub-Saharan African countries that otherwise would not be eligible for ExIm support. From 2008 to 2012, Ex-Im’s authorizations supporting the 

sub-Saharan Africa mandate increased from $575.5 million to $1.5 billion, 

and are projected to decline to about $1 billion in 2013 before increasing 

again to approximately $1.8 billion in 2014.

 

47This directive is in the House conference report to the Consolidated Appropriations Act. 

2012. H. Rep. No. 112-331, Title VI (112th cong.).

4812 U.S.C. § 635(b)(9).

Ex-Im Expects to Meet Its SubSaharan Africa Mandate
 

Page 39 GAO-13-620 Export-Import Bank

Ex-Im has experienced enormous growth in its authorizations and 

exposure in recent years, challenging its ability to plan for and manage its 

portfolio. While Ex-Im may not have been able to anticipate the effect of 

events like the 2007-2009 financial crisis on its portfolio, the bank also 

has not reacted to the changed environment and taken steps to account 

for the uncertainty of its authorization forecasts and reassess its exposure 

forecast model and assumptions. These assumptions and forecasts 

should be supported by historical data and experience. In addition, a 

sensitivity assessment of the effect of these assumptions should be 

presented to management.

Furthermore, Ex-Im is a demand-driven institution, but Congress has 

placed specific requirements on the bank’s portfolio to support small 

business, sub-Saharan Africa, and renewable energy. The risk profile of 

transactions supporting the three mandates differs from the bank’s overall 

risk profile, but Ex-Im has not routinely documented the risk effect of 

these mandates for its own management or for Congress. Reporting such 

information would be consistent with OMB and federal banking regulator 

guidance as well as federal internal control standards.

In addition, the Reauthorization Act and appropriations language reflect 

important national priorities and congressional interest in supporting small 

businesses and promoting renewable energy. However, because these 

requirements are linked directly to the bank’s total authorizations, the 

targets are volatile—subject to fluctuation caused by changes in overall 

demand for export financing. Recently, the bank’s growth has created 

growing targets that could lead the bank to devote an increasing portion 

of its limited staff and resources to activities that are particularly time- and 

resource-intensive, such as small business authorizations, or set goals 

that may not be achievable in the current market, such as providing a set 

amount of renewable energy financing that is higher than the demand. 

OMB criteria indicate that agency targets should be ambitious, yet 

realistic, and reflect careful analysis, factors affecting outcomes, and 

agency capacity and priorities. It is important to communicate the effect of 

these mandated targets on Ex-Im operations to external stakeholders, 

such as Congress, and the potential impacts percentage-based targets 

may have on the agency’s resources and ability to achieve its goals.

Conclusions 
 

Page 40 GAO-13-620 Export-Import Bank

To provide Congress with the appropriate information necessary to make 

decisions on Ex-Im’s exposure limits and targets, we recommend that the 

Chairman of the Export-Import Bank of the United States take the 

following four actions:

To improve the accuracy of its forecasts of exposure and authorizations, 

Ex-Im should

• compare previous forecasts and key assumptions to actual results 

and adjust its forecast models to incorporate previous experience; and

• assess the sensitivity of the exposure forecast model to key 

assumptions and authorization estimates and identify and report the 

range of forecasts based on this analysis.

To help Congress and Ex-Im management understand the performance 

and risk associated with its subportfolios of transactions supporting the 

small business, sub-Saharan Africa, and renewable energy mandates, 

Ex-Im should routinely report financial performance information, including 

the default rate and risk rating, of these transactions at the subportfolio 

level.

To better inform Congress of the issues associated with meeting each of 

the bank’s percentage-based mandated targets, Ex-Im should provide 

Congress with additional information on the resources associated with 

meeting the mandated targets.

We provided a draft of this report to Ex-Im for comment. Ex-Im concurred 

with all of our recommendations, and stated that it would incorporate our 

recommendations into preparation of subsequent reports for Congress. 

Ex-Im further clarified that it would never exceed the exposure limit set by 

Congress. Ex-Im stated that it monitors exposure on a monthly basis and 

if necessary on a daily basis and would put in place the necessary 

processes and procedures to prevent exceeding the limit. We did not 

intend to imply that Ex-Im would exceed its limit, but rather that not 

accounting for forecast uncertainty could lead to Ex-Im having to take 

such steps to avoid exceeding the limit. We slightly modified the language 

in the summary of our key findings to clarify this point.

We are sending copies of this report to appropriate congressional 

committees and the Chairman of the U.S. Export-Import Bank. The report 

is also available at no charge on the GAO website at http://www.gao.gov.

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 41 GAO-13-620 Export-Import Bank

If you or your staff have any questions about this report, please contact 

me at (202) 512-4802 or evansl@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix III.

Lawrance L. Evans, Jr.

Director, Financial Markets and Community Investment
Appendix I: Objectives, Scope, and 

Methodology

Page 42 GAO-13-620 Export-Import Bank

Our objectives were to examine the extent to which the Business Plan 

and analyses of the Export-Import Bank (Ex-Im): (1) justify bank exposure 

limits; (2) evaluate Ex-Im’s risk of loss associated with the increased 

exposure limit, the changing composition of exposure, and compliance 

with congressional mandates; and (3) analyze the adequacy of Ex-Im 

resources to manage authorizations and comply with congressional 

mandates under the proposed exposure limits. For all objectives, we 

reviewed and analyzed Ex-Im’s response in the Business Plan.

To assess the extent to which Ex-Im’s Business Plan and analyses justify 

exposure limits, we reviewed the spreadsheet model Ex-Im used to 

forecast exposure, and the source data on authorizations and repayments 

Ex-Im entered into the model. We met initially with Ex-Im staff who 

prepared the spreadsheet model to review the Ex-Im spreadsheet to 

understand its structure and formulas. We then received a copy of the 

model and reviewed it independently. Following our independent review, 

we met a second time to discuss more detailed questions about the 

structure, data, and assumptions contained in the model. To assess the 

reliability of the exposure model, we compared its August 2012 

projections of what exposure would be at the end of September 2012 with 

the actual results in Ex-Im’s annual report. To understand the 

development of the source data on authorizations used in the model, we 

met individually with Ex-Im officials from its various business units who 

prepared the estimates. To assess Ex-Im’s methods and data in follow-up 

to these meetings, we requested and reviewed additional written detail on 

the methodology used for the authorization estimates and source data for 

individual estimates of long-term authorizations. We reviewed these 

source data to determine the forecast timing and average size of the 

estimates, and checked the forecast authorization size against the actual 

authorization size for authorizations that occurred through March 2013. 

To assess the performance of Ex-Im’s authorization forecast procedures, 

we compared previous years’ projections with actual results. We 

additionally reviewed Ex-Im’s revised authorization estimates, compared 

the original and revised estimates, and assessed the effect of the revised 

estimates on Ex-Im’s exposure projection by inputting the revised 

authorization estimates into Ex-Im’s spreadsheet model. To assess ExIm’s forecast of repayments, we compared the assumption Ex-Im used in 

the spreadsheet to previous data on the short-term percentage of the ExIm portfolio. We then calculated Ex-Im’s exposure under alternative 

scenarios based on these previous actual percentages and alternative 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-13-620 Export-Import Bank

assumptions about repayment terms. Finally, we assessed the 

procedures and assumptions Ex-Im used in its Business Plan forecast of 

exposure against GAO criteria for developing estimates.1

To assess the extent to which Ex-Im’s Business Plan and analyses 

evaluate the risk of loss associated with Ex-Im’s increased exposure limit, 

the changing composition of exposure, and compliance with 

congressional mandates, we reviewed agency data and documentation—

including Ex-Im’s financial performance data, annual reports, and 

quarterly default rate reports. We also reviewed relevant GAO and Ex-Im 

Inspector General reports and interviewed Ex-Im officials responsible for 

risk evaluation. To further examine Ex-Im’s risk of loss evaluation in the 

Business Plan, we examined weighted-average risk ratings from fiscal 

years 2008 to 2012 that Ex-Im compiled at our request for subportfolios 

supporting congressional small business, sub-Saharan Africa, and 

renewable energy mandates. We compared these subportfolio risk ratings 

to Ex-Im’s overall portfolio risk ratings for 2008 and 2012. In addition, we 

examined default rate data compiled at our request by Ex-Im for these 

subportfolios and calculated fiscal year-end default rates for Ex-Im’s 

subportfolios for 2008 and 2012. We compared these default rate data to 

Ex-Im’s overall portfolio default rate for 2008 and 2012. To assess the 

reliability of these data, we reviewed and checked them against previous 

Ex-Im reporting. Additionally, we consulted the data review prepared for 

another recent GAO report on Ex-Im.2 We found the data to be sufficiently 

reliable for the purposes of providing context for the financial performance 

of overall portfolio and subportfolios in each fiscal year. To evaluate ExIm’s risk management, we compared its risk management and analysis 

practices against federal banking regulator guidance on financial 

 

1

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

2 GAO, Export-Import Bank: Recent Growth Underscores Need for Continued 

Improvements in Risk Management, GAO-13-303 (Washington, D.C.: Mar. 28, 2013).
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-13-620 Export-Import Bank

performance reporting, Office of Management and Budget guidance on 

federal credit programs, and our standards for internal control.3

To assess the extent to which Ex-Im’s Business Plan and analyses 

analyze the adequacy of Ex-Im resources to manage authorizations and 

comply with congressional mandates under the proposed exposure limits, 

we reviewed Ex-Im responses to previous GAO and Inspector General 

audit reports. We also reviewed relevant Ex-Im documents, including the 

Ex-Im Charter, 2010-2015 Strategic Plan, Small Business Reports, 

Government Performance and Results Act Performance Reports, Ex-Im’s 

carbon policy and environmental procedures, Ex-Im’s economic impact 

procedures and methodological guidelines, Congressional Budget 

Justifications, annual reports, 2009-2012 Human Capital Plan, draft 2013-

2015 Human Capital Plan, and Ex-Im’s workforce and full-time equivalent 

data. To assess the reliability of these data, we reviewed and checked 

them against previous Ex-Im reporting. Additionally, we consulted the 

data review prepared for another recent GAO report on Ex-Im.4 We found 

these data to be sufficiently reliable for the purposes of describing the 

growth of Ex-Im’s business, size of its workforce, and amount of 

administrative funds requested and received from Congress. We also 

reviewed relevant GAO, Congressional Research Service, and Ex-Im 

Inspector General reports and met with officials from Ex-Im and Ex-Im’s 

Office of Inspector General. We compared Ex-Im’s planning documents 

 

3 See Board of Governors of the Federal Reserve, Commercial Bank Examination Manual

(Washington, D.C.: March 1994). See Office of the Comptroller of the Currency, Federal 

Deposit Insurance Corporation, Board of Governors of the Federal Reserve, and Office of 

Thrift Supervision, Interagency Guidance on Asset Securitization Activities (Washington, 

D.C.: December 1999). See Office of the Comptroller of the Currency, Asset 

Securitization: Comptroller’s Handbook (Washington, D.C.: November 1997). While Ex-Im 

is not bound by any of the guidance cited above, it faces challenges similar to regulated 

private financial institutions in managing risks. See also Office of Management and 

Budget, Circular No. A-129 Revised, Policies for Federal Credit Programs and Non-Tax 

Receivables (2000). See GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999) and Internal Control 

Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: August 2001).

4 GAO-13-303. 
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-13-620 Export-Import Bank

against criteria established by GAO, the Office of Personnel 

Management, and the Office of Management and Budget.5

We conducted this performance audit from November 2012 to May 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 

5

GAO/AIMD-00-21.3.1; GAO-01-1008G; Office of Management and Budget Circular No. 

A-129; and Office of Personnel Management, Workforce Planning Model (Washington, 

D.C.: 2005), accessed at http://www.opm.gov/policy-data-oversight/human-capitalmanagement/reference-materials/strategic-alignment/workforceplanning.pdf 
Appendix II: Comments from the U.S. ExportImport Bank

Page 46 GAO-13-620 Export-Import Bank

Appendix II: Comments from the U.S. ExportImport Bank
Appendix II: Comments from the U.S. ExportImport Bank

Page 47 GAO-13-620 Export-Import Bank
Appendix II: Comments from the U.S. ExportImport Bank

Page 48 GAO-13-620 Export-Import Bank
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 49 GAO-13-620 Export-Import Bank

Lawrance L. Evans, Jr. (202) 512-4802 or EvansL@gao.gov

In addition to the contact named above, Juan Gobel, Assistant Director; 

Joshua Akery; Anna Chung; Martin De Alteriis; Risto Laboski; Grace Lui; 

Yesook Merrill; Barbara Roesmann; and Michael Simon made key 

contributions to this report. Jena Sinkfield provided technical assistance.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(320956)
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