EXIM is an independent executive branch agency and a wholly owned U.S. government corporation. EXIM is the official export credit agency (ECA) of the United States, and its mission is to support the export of U.S. goods and services, thereby supporting U.S. jobs. EXIM’s charter states that it should not compete with the private sector. Rather, EXIM’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. EXIM must operate within the parameters and limits authorized by law, including, for example, statutory mandates that it support small business and promote sub–Saharan African and environmentally beneficial exports. In addition, EXIM is authorized to provide financing on a competitive basis with other ECAs and must submit annual reports to Congress on its actions. EXIM operates under the leadership of a president who also serves as Chairman of EXIM’s Board of Directors. The board is structured to include five members. All positions are appointed for 4-year terms by the President of the United States with the advice and consent of the Senate. The board is responsible for adopting and amending bylaws for the proper management and functioning of EXIM. Furthermore, the board approves EXIM’s financing either directly or through delegated authority. On May 8, 2019, the Senate confirmed a new president and two other board members, ending the lack of a quorum needed to approve transactions over $10 million that had existed since July 20, 2015. EXIM’s organizational structure includes various offices and divisions operating under its president. The Office of Board Authorized Finance is subdivided into business divisions that are responsible for underwriting related to loans and loan guarantees, including processing applications, evaluating the compliance of transactions with credit and other policies, performing financial analyses, negotiating financing terms, coordinating and synthesizing input to credit recommendations from other divisions, and presenting credit recommendations for approvals. EXIM facilitates support for U.S. exports through three major products: (1) loans; (2) loan guarantees, which include working capital guarantees; and (3) export credit insurance. All EXIM obligations carry the full faith and credit of the U.S. government. Based on its mission to support U.S. employment, EXIM currently requires a certain amount of U.S. content for an export contract to receive EXIM financing. EXIM’s loans generally carry fixed-interest rate terms under the Arrangement on Officially Supported Export Credits negotiated among OECD members. EXIM’s loan guarantees cover loans disbursed by private lenders by committing to pay the lenders if the borrower defaults. Both loans and loan guarantees may be classified as short-, medium-, or long-term. From fiscal year 2008 to fiscal year 2017, EXIM was “self-financing” for budgetary purposes—financing its operations from receipts collected from its customers—and operating within the parameters and limits authorized by Congress. However, according to EXIM, because of the lack of quorum on the Board of Directors, in fiscal year 2018 it was unable to approve transactions over $10 million and, as a result, was not able to generate sufficient cash inflows to fully self-finance program and administrative costs. EXIM reported that when it is back to being fully operational, it plans to regain full self-financing status. See figure 1 for additional details on EXIM’s loans and loan guarantees. Short-term loans and loan guarantees: Short-term financing consists of all transactions with repayment terms of less than 1 year, while Working Capital Guarantee program short-term financing may be approved for a single loan or a revolving line of credit that can be renewed for up to 3 years. In general, if the financed eligible product contains at least 50 percent U.S. content, then the entire transaction value is eligible for a working capital guarantee. Generally, for working capital guarantees, EXIM guarantees 90 percent of the loan’s principal and interest if the borrower defaults. Therefore, the lender maintains the risk of the remaining 10 percent. EXIM’s payment of working capital claims is conditional upon transaction participants’ compliance with EXIM requirements such as underwriting policies, deadlines for filing claims, payment of premiums and fees, and submission of proper documentation. EXIM has reported that over 80 percent of its working capital guarantee transactions are approved by lenders with delegated authority, which means that commercial lenders approve the guaranteed loans in accordance with agreed- upon underwriting requirements without first obtaining EXIM approval. If a lender does not have delegated authority, EXIM performs its own underwriting procedures and approves the guaranteed loans. Medium- and long-term loans and loan guarantees: For medium- and long-term loan and loan guarantee transactions, EXIM provides up to 85 percent financing with the remaining 15 percent paid by the borrower or financed separately. The financing could be less than 85 percent depending on the U.S. content. EXIM’s medium- and long- term loan guarantees generally cover 100 percent of the financed amount if the borrower defaults. EXIM’s guarantee to the lender is transferable and unconditional, meaning that EXIM must pay submitted claims regardless of the cause of default. EXIM generally underwrites medium- and long-term loans and loan guarantees for $10 million and less, and EXIM officials with delegated authority approve the transactions. Further, EXIM has provided certain lenders delegated authority to underwrite and approve these guarantees. EXIM underwrites long-term loans and loan guarantees greater than $10 million, and its Board of Directors approves the transactions. As noted earlier, EXIM’s authority to approve transactions lapsed from July 1, 2015, to December 4, 2015. Further, from July 20, 2015 to May 8, 2019, EXIM’s Board of Directors lacked a quorum, and, as a result, EXIM was unable to approve transactions greater than $10 million. Consequently, EXIM’s annual authorizations for loans, loan guarantees, and export credit insurance decreased from about $20 billion in 2014 to about $3 billion in 2018, a decrease of about 83 percent. See figure 2 for EXIM’s total authorizations by type and length of term for 2014 through 2018. EXIM’s Manual describes EXIM’s underwriting policies and procedures for each of its products offered, including short-, medium-, and long-term loans and loan guarantees. The Manual describes the responsibilities of EXIM’s divisions (e.g., Transportation, Structured and Project Finance, or Working Capital Finance) involved in the underwriting process. EXIM’s Office of Board Authorized Finance is in the process of streamlining the Manual, which is over 1,400 pages. A goal of this process is to separate procedures from policies, thus allowing for policies and procedures to be continuously reviewed. An EXIM official told us that these steps should improve the agency’s efficiency, transparency, and accountability. The underwriting sections of the Manual are tentatively scheduled for review in 2019. EXIM loan officers perform the underwriting for loans and long-term loan guarantees. The underwriting of medium-term or working capital loans guaranteed by EXIM is performed by either EXIM loan officers or qualified lenders with delegated authority, which allows the lender to authorize a loan that EXIM guarantees in accordance with agreed-upon underwriting requirements without first obtaining EXIM approval. When the underwriting and credit decision is delegated to approved lenders, EXIM does not perform the underwriting procedures. EXIM’s underwriting process calls for thorough credit assessments by subject matter experts and loan officers. These assessments evaluate key transactional risks, such as the borrower’s industry, competitive position, operating performance, liquidity position, leverage, and ability to service debt obligations. Frequently, credit enhancements are included in the structure of long-term financing (often in the form of collateral) in order to decrease the risk of a borrower default but also to increase the recovery in the event of a default. A risk rating is assigned to the transaction based on this evaluation which, in turn, determines the transaction fee that a borrower pays and assists in establishing the level of loss reserves EXIM must set aside. The credit assessments undergo multiple levels of internal review. All transactions of EXIM carry some risk; however, transactions approved through delegated authority lenders potentially carry a higher level of inherent risk because third-party financial institutions make the decisions. To mitigate the risk, EXIM reviews medium-term transactions approved by delegated authority lenders before the transactions are executed to assure compliance with EXIM’s delegated authority lending policies. For working capital guarantee delegated authority, EXIM conducts periodic examinations of the lenders, reviewing ongoing transactions and lender compliance with the delegated authority program. The examinations are intended to identify lenders that are not satisfactorily managing the requirements of the delegated authority program. To mitigate the risk for its internal credit process, EXIM developed and documented underwriting processing steps from the time the application is received through the approval of the appropriate credit structure. These steps serve to (1) establish a framework for sound credit decisions, (2) communicate to EXIM employees the requirements governing the extension of credit, and (3) encourage documentation and the consistent application of EXIM’s credit policies and procedures. According to EXIM officials, the underwriting process also serves as EXIM’s primary method for preventing fraud because of the due diligence performed on the proposed transaction. Figure 3 summarizes EXIM’s underwriting process. Application intake. When an application is initially received, it is screened for basic completeness, follow-up on incomplete or unacceptable applications is performed, and it is assigned to a processing division. Application screening. After an application is determined to be complete, it is assigned to the applicable EXIM division that oversees the applicable type of project. For example, an application for the purchase of an aircraft would be assigned to the Transportation Division. Once assigned, a loan officer in that division is to assess the eligibility of the transaction. To ensure compliance with laws and regulations, the loan officer is to obtain and assess various certifications from transaction participants. Loan officers are also required to submit the corporate and individual names and addresses of lenders, borrowers, guarantors, and other transaction participants to the EXIM Library. Library staff are then to conduct a Character, Reputational, and Transaction Integrity (CRTI) review—a procedure designed to provide a level of due diligence over various risks and to help prevent fraud by checking loan participants’ information against 28 databases. Risk assessment and due diligence. Once the transaction is considered minimally eligible for EXIM support, the loan officer is required to perform a series of due diligence activities to determine (1) whether the transaction provides a reasonable assurance of repayment, (2) any potential material issues regarding the transaction or the participants that would preclude EXIM support, and (3) the appropriate risk level and pricing for the transaction. As part of the financial evaluation of the transaction, the loan officer is required to obtain and analyze the borrower’s financial statements, credit reports or rating agency reports, financial projections, and other relevant information. As applicable, the loan officer is required to obtain input from other EXIM staff, such as attorneys or engineers, to conclude on the legal, technical, economic, or environmental risks of the transaction. Based on this due diligence, the loan officer is to assess the transaction for risk and assign an overall risk rating. This rating is used to calculate the exposure fee EXIM will charge the borrower for guaranteeing the transaction. Greater perceived risks result in higher fees. Credit structure. After the risk assessment and due diligence is performed, the loan officer determines the financing terms and conditions to be recommended. The loan officer is generally required to structure the transaction to include a security interest (collateral) in the financed goods or other assets of the borrower. If it is determined that collateral is not necessary, the loan officer is to document the explanation and mitigating factors (e.g., EXIM support is small relative to a borrower’s size). For all aircraft transactions, the loan officer is required to perform an assessment and loan-to-value analysis of the collateral, and the financing terms must include requirements for the borrower to maintain ownership and condition of the collateral. Credit decision. The loan officer is to document the due diligence in a credit or board memo, which includes the loan officer’s recommendation to approve or decline the transaction. These memos and applicable supporting documentation are then to be forwarded to the approving party. The credit memo applicable to working capital or medium-term transactions is to be provided to EXIM officials with individual delegated authority to approve transactions of $10 million and less. Board memos for long-term transactions or transactions greater than $10 million are to be provided to the EXIM Board of Directors for approval. From July 2015 to May 2019, EXIM lacked a quorum on its Board of Directors, and as a result, EXIM was unable to approve new transactions greater than $10 million. Government-wide guidance for federal agencies to follow for the management and operation of federal credit programs, such as loan and loan guarantee programs, include the following: OMB Circular A-129, Policies for Federal Credit Programs and Non- Tax Receivables, revised in January 2013, describes policies and procedures for designing and managing federal credit programs. The guidance addresses various standards for applicant screening, loan documentation, collateral requirements, determining and monitoring lender and servicer eligibility, and lender and borrower stake in full repayment. In addition, it details risk sharing practices that agencies should follow, such as ensuring that lenders and borrowers who participate in federal credit programs have a substantial stake in full repayment in accordance with the loan contract. Treasury’s Bureau of the Fiscal Service’s Managing Federal Receivables provides federal agencies with an overview of standards, guidance, and procedures for successful management of credit activities, including screening applicants for creditworthiness and financial responsibility, and managing, processing, evaluating and documenting loan applications and awards for loan assistance. Furthermore, it details how federal agencies should manage lenders and servicers that participate in federally insured guaranteed loan programs. We found that EXIM’s process for updating its underwriting policies and procedures was properly designed and implemented. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel. Management should clearly document internal control in a manner that allows the documentation to be readily available and properly managed and maintained. Further, management should also implement control activities through policies and periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. Underwriting policies and procedures are documented in EXIM’s Manual, which consists of 26 chapters, covering various topics by product (e.g., long-term loans and loan guarantees) or process (e.g., application intake or credit structure). We found that the Manual provides EXIM’s divisions involved in the underwriting process with direction and guidance for making credit decisions and is to be updated at least annually, except for material changes, which are required to be incorporated as soon as possible. The Credit Policy Division (Credit Policy) maintains and manages the process for updating of the Manual and relies on EXIM’s divisions for additions, updates, and revisions to it. Credit Policy maintains an assignment list of the primary officer, the primary reviewer, and the Office of General Counsel (OGC) reviewer, who are responsible for each chapter in the Manual. Each year, the process calls for Credit Policy to send an email to the primary officer and two reviewers assigned to each chapter. This communication requests that the officer review the assigned chapters for any needed changes. After the assigned officer has reviewed the chapter, if there are no contemplated changes, the primary officer assigned to the chapter is required to notify Credit Policy of this determination by email with the concurrence of the respective primary and OGC reviewers. If changes are needed, the assigned officer is required to provide the updated chapter to Credit Policy by email with the concurrence of the primary and OGC reviewers. According to EXIM’s process, when material changes to the Manual are needed, the necessary revisions do not wait for the annual update. Instead, the responsible division is required to incorporate such changes into the applicable chapter(s) of the Manual and submit them to Credit Policy as soon as possible. EXIM officials stated that examples of material changes that would be addressed immediately include recommendations from oversight bodies, such as the EXIM OIG or GAO, and changes resulting from legislative actions, such as updates to EXIM’s charter or changes in compliance procedures related to sanctions. The underwriting policies and procedures in EXIM’s Manual for its loan and loan guarantee transactions were mostly consistent with OMB and Treasury guidance for managing federal credit programs. We evaluated these policies and procedures for (1) applicant screening, (2) loan documentation, (3) collateral requirements, (4) lender and servicer eligibility, and (5) risk sharing practices. As shown in table 1, EXIM’s underwriting policies and procedures for the loan and loan guarantee programs were consistent with 12 of 15 applicable standards for managing federal credit programs and were partially consistent with three. Three other standards were not applicable to EXIM’s underwriting. Applicant screening refers to determining an applicant’s eligibility and creditworthiness for a loan or loan guarantee. Federal guidance for applicant screening includes specific standards related to the applicant’s (1) program eligibility, (2) delinquency on federal debt, (3) creditworthiness, (4) delinquent child support, and (5) taxpayer identification number (TIN). As shown in table 2, EXIM’s underwriting policies and procedures were consistent with federal guidance for applicant screening. For all loan and loan guarantee applications, EXIM requires applicants to provide identifying information, such as name, address, phone number, and Dun & Bradstreet Data Universal Numbering System (DUNS) number. Applicants are also required to provide relevant financial information, such as income, assets, cash flows, liabilities, financial statements, and credit reports. EXIM’s underwriting process requires screening of applicants for eligibility, which is partly completed through the CRTI review. As part of the CRTI review, EXIM screens the corporate and individual names and addresses of lenders, borrowers, guarantors, and other transaction participants against 28 databases that include various U.S. government and international debarment and sanctions lists for red flags. If a match is identified, EXIM’s Credit Review and Compliance Division works with the loan officers to determine the legitimacy of the match and, as necessary, works with OGC to determine what additional due diligence measures may be required and whether to continue the underwriting process. In addition to the CRTI review process, loan officers must obtain and use credit reports to assess creditworthiness and identify whether transaction applicants are delinquent on federal tax or nontax debts, including judgment liens against property for a debt to the federal government, and are therefore not eligible to receive federal loans and loan guarantees. EXIM’s policies and procedures contain instructions to suspend application processing and contact OGC for further guidance upon finding federal debt delinquencies or other insufficient or negative information on applicant credit reports. Loan officers must document any issues encountered on applicant credit reports and explain why a transaction is creditworthy if they recommend it for approval. Lastly, OMB Circular A-129 requires agencies to obtain the TIN of all persons doing business with the agency. The working capital guarantee application form requests the TIN for transaction applicants, which an EXIM official stated are used to obtain applicant credit reports. EXIM does not require the TIN for medium- and long-term applications. EXIM officials stated that applicants for medium- and long-term transactions are likely foreign entities and thus would not have federal TINs. However, all applications request the DUNS number which EXIM must use to perform the credit review and CRTI due diligence procedures. Federal guidance calls for the maintenance of loan files containing key information used in loan underwriting. As shown in table 3, EXIM’s underwriting policies and procedures were consistent with the federal guidance related to loan documentation. EXIM’s underwriting policies and procedures state that loan officers must maintain a loan file on the transaction applicant and other participants, which includes the completed application, credit bureau reports, credit analysis, certifications, verifications and other legal documents, and loan or service agreements with the debtor, as appropriate. EXIM’s process calls for obtaining debt collection certification statements for the working capital guarantee applications because the applicants are domestic entities. While the debt collection certification statement is not applicable for medium- and long-term applications, because the applicants are foreign entities, EXIM’s executed credit agreements and promissory notes define the terms of the transactions, including defaults and the remedies EXIM may take, such as declaring default and accelerating debt repayment, and pursuing restructuring or recovery actions, including possible litigation. Collateral refers to the assets used to secure a loan. For many types of loans, the government can reduce its risk of default and potential losses through well-managed collateral requirements. However, several of the collateral requirements contained in federal guidance relate specifically to real property. Since EXIM’s mission is to support U.S. exports, it does not finance real property and, accordingly, does not accept real property as the primary collateral. As a result, three of the four federal guidance standards were not applicable to EXIM’s underwriting. As shown in table 4, EXIM’s underwriting policies and procedures were consistent with the applicable federal guidance related to collateral. EXIM’s underwriting policies and procedures state that it should have a security interest in the financed export items. The loan officer and a transaction engineer will evaluate the export sales contracts, and this evaluation will be used as the assessment of collateral for the transaction. If using the financed export items as collateral is not possible, the loan officer should secure the EXIM financing with other assets owned by the primary source of repayment that are at least of comparable value to the financed items. Collateral that could be considered includes fixed assets, inventory, accounts receivable, or a third-party guarantee. While OMB Circular A-129 requires a real property appraisal and contains specific criteria defining acceptable appraisals, the standard was not applicable to EXIM’s loans and loan guarantees. According to EXIM officials, EXIM rarely takes real property as collateral because the primary collateral for EXIM’s transactions is the asset financed, and EXIM does not finance real property. Further, EXIM officials stated that the U.S. appraisal standards cannot be applied to foreign real property. However, if real property is taken as collateral, it would be as secondary or additional collateral. When EXIM accepts real property as additional collateral for a transaction, EXIM officials stated that an independent third-party appraisal in accordance with regional practices is obtained. Federal guidance calls for policies and procedures related to lender and servicer eligibility, monitoring, and recertification. As shown in table 5, EXIM’s policies and procedures were consistent with three and partially consistent with two of five federal standards for lender and servicer eligibility. OMB Circular A-129 calls for agencies to establish specific procedures to continuously review lender and servicer eligibility and decertify lenders and servicers that fail to meet the agency’s standards for continued participation. EXIM’s policies and procedures related to requirements for working capital guarantee delegated authority lenders were consistent with federal guidance. However, for medium-term delegated authority lenders, EXIM has not established documented policies and procedures for (1) determining their eligibility for continued participation in the program and (2) decertifying or taking other appropriate actions for those that do not meet compliance or eligibility standards. EXIM officials told us that currently EXIM has only three medium-term delegated authority lenders: two were renewed for continued participation and one became inactive in 2018. Further, according to EXIM officials, since 2009 only 2.3 percent of all medium- term guarantee authorizations have been delegated authority authorizations ($71 million out of $3.1 billion). EXIM reviews the performance of its primary medium-term lenders quarterly. In these reviews, EXIM officials evaluate the lenders’ portfolio performance, underwriting capabilities, and a set of qualitative factors. However, without documented policies and procedures for determining the eligibility of the medium-term delegated authority lenders’ continued participation in the program and for decertifying such lenders, as appropriate, EXIM may allow lenders who are not qualified to underwrite transactions, thus increasing the risk for improper underwriting and defaults. EXIM officials stated that they are in the process of updating and enhancing the Manual and will include procedures for medium-term delegated authority lender reviews and the consequences of an unfavorable assessment. OMB Circular A-129 calls for lenders and borrowers who participate in federal credit programs to have a substantial stake in full repayment but also states that the level of guarantee should be no more than necessary to achieve program purposes. As shown in table 6, EXIM’s underwriting policies and procedures were generally consistent with the federal guidance related to certain risk sharing practices for lenders and borrowers to have a stake in full repayment and were partially consistent with the federal guidance related to periodic program reviews. Although OMB Circular A-129 calls for lenders who extend credit to have substantial stake in full repayment and bear at least 20 percent of any loss from a default, it also states that the level of guarantee should be no more than necessary to achieve program purposes. However, consistent with its charter, EXIM is authorized to provide terms that are competitive with those of other ECAs, such as up to 100 percent loan guarantee coverage. EXIM does not require lenders to bear 20 percent of the risk of default. For working capital guarantees, EXIM offers 90 percent guarantee coverage and lenders retain 10 percent risk. For medium- and long-term loan guarantees, EXIM provides up to 85 percent financing with the remaining 15 percent paid by the borrower or financed separately. EXIM financing could be less than 85 percent depending on the U.S. content. According to EXIM, guaranteeing 100 percent of the amount it finances permits it to explore capital markets and is more desirable to banks for large and long-term projects. As a result, the lender may not retain any risk of default in the transaction. According to an OECD official, guaranteeing 100 percent of the financed amount is consistent with other ECAs. For example, the ECAs of Canada, Germany, and the United Kingdom also provide guarantees up to 100 percent of the financed amount on certain products. OMB Circular A-129 states that borrowers should have equity interest in assets financed with credit assistance and substantial capital or equity at risk in their business. However, consistent with its charter, EXIM is authorized to provide terms that are competitive with those of other ECAs. EXIM does not specifically require borrowers to have an equity interest in the transaction or to contribute the minimum cash payment. EXIM’s policies and procedures state that in practice, buyers often secure alternative financing for the cash payment, which is permissible as long as the financing is not officially supported by EXIM or another U.S. government agency. EXIM officials noted that during the analysis of creditworthiness, loan officers examine supporting documents for the alternative financing to assure that it is not guaranteed by EXIM or another U.S. government agency. OMB Circular A-129 states that the agency should periodically review programs in which the government bears more than 80 percent of any loss. The review is intended to evaluate the extent to which credit programs achieve intended objectives and whether the private sector has become able to bear a greater share of the risk. EXIM officials stated that EXIM performs program reviews through annual budget justifications submitted to OMB and annual competitiveness reports submitted to Congress. EXIM officials also stated that there are established timelines for preparing these reviews that must be followed to ensure that EXIM meets deadlines for submitting its budget documentation and the June 30 deadline for the annual competitiveness report. In addition, EXIM employs a detailed summary of the products and terms that other countries’ official ECAs offer. However, EXIM does not have documented policies or procedures related to performing periodic program reviews. As a result, EXIM runs the risk that it will not effectively review its programs to determine whether the private sector could bear a greater share of the risk. EXIM’s Manual provides a framework for making credit decisions so that only qualified applicants that demonstrate reasonable assurance of repayment are provided loans or loan guarantees. This framework helps ensure consistent application of procedures for assessing an applicant’s creditworthiness and for overseeing certain delegated authority lenders. However, EXIM’s underwriting process could be improved by additional procedures. For example, the Manual did not address medium-term delegated authority lenders’ eligibility requirements for continued participation and decertification procedures for lenders who fail to meet agency’s standards. Further, EXIM has not documented its process for periodic program reviews to determine whether the private sector could bear a greater share of the risk. Improvements in these areas could help enhance the oversight of lenders and the usefulness of program reviews. We are making the following two recommendations to EXIM: The Chief Operating Officer of EXIM should consider establishing documented policies and procedures for (1) determining medium-term delegated authority lenders’ eligibility for continued participation in EXIM’s programs and (2) decertifying or taking other appropriate actions for such lenders that do not meet compliance or eligibility standards. (Recommendation 1) The Chief Operating Officer of EXIM should establish documented policies and procedures for periodically reviewing credit programs in which the government bears more than 80 percent of any loss to determine whether private sector lenders should bear a greater share of the risk. (Recommendation 2) We provided a draft of this report to EXIM for review and comment. In written comments on a draft of this report, which are reproduced in appendix II, EXIM concurred with our two recommendations. EXIM also provided technical comments that we incorporated into the final report, as appropriate. In its written comments, EXIM described planned actions to address our recommendations. Specifically, EXIM stated that it will consider establishing documented policies and procedures for determining medium-term delegated authority lenders' eligibility for continued participation in EXIM's programs and decertifying or taking other appropriate actions for such lenders that do not meet compliance or eligibility standards. Further, EXIM will establish documented policies and procedures for periodically reviewing credit programs in which the government bears more than 80 percent of any loss to determine whether private sector lenders should bear a greater share of the risk. If implemented effectively, EXIM’s planned actions should address the intent of our recommendations. We are sending copies of this report to appropriate congressional committees, the Chairman of the Export-Import Bank, and the EXIM Inspector General. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3133 or dalkinj@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 key contributions to this report are listed in appendix III. Our objectives were to determine the extent to which Export-Import Bank’s (EXIM) (1) process for updating its underwriting policies and procedures is properly designed and implemented and (2) underwriting policies and procedures for loan and loan guarantee transactions are consistent with guidance for managing federal credit programs. To assess the extent to which EXIM’s process for updating its underwriting policies and procedures was properly designed and implemented, we reviewed EXIM’s policies and procedures for updating its Loan, Guarantee and Insurance Manual (Manual) and interviewed EXIM officials. We assessed EXIM’s process to determine whether it sufficiently communicated the procedures to be performed and documentation to be prepared and was consistent with Standards for Internal Control in the Federal Government. We did not evaluate EXIM’s compliance with its process for updating its underwriting policies and procedures or assess their operating effectiveness. To assess the extent to which EXIM’s underwriting policies and procedures for loan and loan guarantee transactions were consistent with guidance for managing federal credit programs, we reviewed relevant requirements and guidance, including the Office of Management and Budget’s (OMB) Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables, and the Department of the Treasury’s Bureau of the Fiscal Service’s Managing Federal Receivables: A Guide for Managing Loans and Administrative Debt. Specifically, we focused on OMB Circular A-129’s Section II (C)(1)(a) through (c), Section III (A)(1) through (3), and Section III (C)(1)(a) through (e)), which contain standards pertinent to risk management for loan and loan guarantee programs, including standards for (1) applicant screening (program eligibility, delinquency on federal debt, creditworthiness, delinquent child support, and taxpayer identification number); (2) loan documentation; (3) collateral (appraisal of real property, loan-to-value ratio, liquidation of real property collateral, and asset management standards and systems for real property disposal); (4) lender and servicer eligibility (participation criteria, review of eligibility, fees, decertification, and loan servicers); and (5) risk sharing practices (private lenders stake in full repayment, borrowers stake in full repayment, and program reviews). From the Bureau of the Fiscal Service’s Managing Federal Receivables, we identified key guidance related to credit extension (ch. 3) and management of guaranteed lenders and servicers (ch. 5). We reviewed EXIM’s policies and procedures related to underwriting for the loan and loan guarantee programs contained in its Manual and other documentation, such as its charter. We also discussed EXIM’s policies and procedures related to underwriting with EXIM officials. We compared EXIM’s underwriting processes to federal guidance for managing federal credit programs. As part of this comparison, we assessed whether policies and procedures included in EXIM’s Manual were consistent with federal guidance. However, because of EXIM’s limited lending authority during the period of our audit, we did not verify EXIM’s compliance with its underwriting policies and procedures or assess their operating effectiveness. In areas where we found EXIM’s policies and procedures to be consistent with federal guidance, there may still be opportunities to improve operating effectiveness. Further, guidance for managing federal credit programs includes additional requirements not related to underwriting, which we did not assess. In addition, we reviewed EXIM’s Office of Inspector General (OIG) reports since 2014 related to underwriting issues, various laws applicable to EXIM, and GAO reports related to EXIM. We also reviewed EXIM’s annual reports and competitiveness reports. We also discussed EXIM underwriting process with EXIM OIG officials and export credit financing and risk sharing practices with an official from the Organisation for Economic Co-operation and Development. We conducted this performance audit from January 2017 to May 2019 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. In addition to the contact named above, Marcia Carlsen (Assistant Director), Dragan Matic (Analyst in Charge), Sarah Lisk, Erika Szatmari, and Jingxiong Wu made key contributions to this report.

Summary: EXIM serves as the official export credit agency of the United States, providing a range of financial products to support the export of U.S. goods and services. Following the 2007–2009 financial crisis, demand for EXIM support increased. However, from July 2015 to May 2019, EXIM lacked a quorum on its Board of Directors and, as a result, was unable to approve medium- and long-term transactions greater than $10 million. The Export-Import Bank Reauthorization Act of 2012 includes a provision for GAO to evaluate EXIM's underwriting process. This report discusses the extent to which EXIM's (1) process for updating its underwriting policies and procedures is properly designed and implemented and (2) underwriting policies and procedures for loan and loan guarantee transactions are consistent with guidance for managing federal credit programs. To address these objectives, GAO evaluated EXIM's underwriting policies and procedures against federal guidance and discussed the underwriting process with EXIM officials. GAO found that Export-Import Bank's (EXIM) process for updating its underwriting policies and procedures was properly designed and implemented. EXIM's Loan, Guarantee and Insurance Manual (Manual) describes EXIM's underwriting policies and procedures for its short-, medium-, and long-term loans and loan guarantees. The Manual describes the responsibilities of divisions and loan officers involved in the underwriting process and is required to be updated at least annually, except for material changes (e.g., changes resulting from legislative actions or compliance with sanctions), which are required to be made as soon as possible. EXIM has initiated a process to streamline the Manual, which consists of over 1,400 pages, by separating the policies and procedures, thus allowing for continuous reviews. The underwriting sections of the Manual are tentatively scheduled for review in 2019. The primary guidance for designing and managing federal credit programs is Office of Management and Budget Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables . GAO found that EXIM‘s policies and procedures were consistent with three of five areas of federal guidance; two areas related to lender and servicer eligibility and risk sharing practices were partially consistent with federal guidance. Applicant screening. EXIM's policies and procedures were consistent with guidance in that they require applicants to provide relevant financial information and assessments of applicant eligibility and creditworthiness. Loan documentation. EXIM's process was consistent with guidance in that it requires the preparation of loan files, which include the application, credit reports, and related analyses, as well as collateral documentation and loan agreements. Collateral requirements. EXIM's process was consistent with guidance in that it requires a security interest in the financed export items. Lender and servicer eligibility. EXIM established eligibility and decertification procedures for short-term delegated authority lenders that were consistent with guidance. However, it did not establish similar procedures for medium-term delegated authority lenders. Risk sharing practices. EXIM's process was generally consistent with guidance in that EXIM provides loan guarantee terms that officials stated were necessary to achieve program purposes. However, federal guidance also calls for an agency to periodically review programs in which the government bears more than 80 percent of any loss. While EXIM prepares various program reviews, it has not developed procedures to help ensure that its risk sharing practices are routinely reviewed. Without enhancements to its policies and procedures, EXIM may allow lenders that are not qualified to underwrite transactions and runs the risk that it will not effectively review its programs. GAO is making two recommendations to enhance EXIM's policies and procedures related to (1) the use of medium-term delegated authority lenders and (2) periodic program reviews. EXIM concurred with GAO's recommendations and described actions planned to address them.