Export-Import Bank:

Changes Would Improve the Reliability of Reporting on Small Business Financing

GAO-06-351: Published: Mar 3, 2006. Publicly Released: Mar 3, 2006.

Additional Materials:

Contact:

Loren Yager
(202) 512-4347
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Export-Import Bank (Ex-Im) provides loans, loan guarantees, and insurance to support U.S. exports. Its level of support for small business has been a long-standing issue of congressional interest. Most recently in 2002, Congress increased the proportion of financing Ex-Im must make available for small business to 20 percent. GAO examined legal and policy issues related to Ex-Im's small business financing. Specifically, GAO (1) analyzes Ex-Im's methodology for calculating its direct support of small business and the reliability of Ex-Im's data used in the methodology and (2) describes Ex-Im's legal interpretation of its obligations under the statutory 20 percent small business mandate.

While Ex-Im generally classifies companies' small business status correctly, weaknesses in its data systems and data limit its ability to accurately determine its small business financing. Ex-Im uses a combination of direct counts and estimates to calculate its small business financing, based on the authorized value of individual transactions. For most transactions, Ex-Im can identify the exporter and thus bases its determination of the small business financing share on whether the exporter qualifies as a small business. For other transactions, Ex-Im cannot identify the exporter at the time it authorizes the transaction and estimates the small business share based on shipment patterns in an earlier period. GAO determined that Ex-Im generally classifies companies' small business status correctly. However, GAO identified weaknesses in Ex-Im's process for calculating its small business support. For transactions where Ex-Im can identify the exporter, GAO found internal control weaknesses such as Ex-Im's data systems containing conflicting records for the same company. For transactions where Ex-Im cannot identify the exporter when it authorizes the transaction, a weakness is not including a large value of shipments in its calculations. GAO also determined that Ex-Im's reporting on the number of transactions--as opposed to the value of transactions--that directly benefit small business includes transactions that do not benefit small business. Prior to the enactment of credit reform legislation, Ex-Im interpreted the mandate as requiring it to make available for financing small business exports an amount equal to 10 percent of the aggregate principal amount of loans, guarantees and insurance specified by Congress for that fiscal year. Given changes in law including federal credit reform and the removal of specific financing authority limits, Ex-Im currently interprets its statutory small business financing mandate as requiring it to attempt to ensure that 20 percent of the authorized value of its transactions during a year directly benefits small business.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In March 2006, we reported on the Export-Import Bank's (Ex-Im) support of small businesses (GAO-06-351). Ex-Im is statutorily required to report on the number of its authorized transactions that directly benefit small business, but we found that Ex-Im's reported tally includes some transactions that do not benefit small business. We reported that despite not always being unable to determine whether the exporter is a small business when it authorizes the transaction, Ex-Im counted all credit guarantee facilities and bank-held insurance policies as directly benefiting small business. We expressed concern that while many of these transactions may directly benefit small business, they do not all directly benefit small business, as evidenced by the fact that Ex-Im's own estimate showed that about 20 percent of the value of bank-held insurance policies directly benefited small business. As a result, we recommended that Ex-Im more accurately determine and clearly report the number of transactions that directly benefit small business. In response, Ex-Im modified its calculation for determining whether specific transactions directly benefit small businesses. In fiscal year 2009, Ex-Im modified its calculations so that when the exporter and/or exporter/supplier are known at the time of authorization (such as when there is a sole exporter) Ex-Im determines whether or not they are a small business and flags the transaction accordingly.

    Recommendation: To improve the reliability of Ex-Im Bank reporting on its direct support for small business the Chairman of the Export-Import Bank should more accurately determine and clearly report the number of transactions that directly benefit small business.

    Agency Affected: Export-Import Bank of the United States

  2. Status: Closed - Implemented

    Comments: In March 2006, (Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing, GAO-06-351) we reported that weaknesses existed in Export-Import Bank's system for estimating small business financing when the exporter is not immediately knowable. For example, we reported that for the $280 million of shipments under bank-held insurance policies, Export-Import Bank classified about $128 million (or nearly half) as shipments by companies whose small business status was "unknown". Export-Import Bank then excluded these shipments from its calculations. We recommended that Export-Import Bank improve its system for estimating the value and proportion of direct small business support for those transactions where the exporter is not known at the time Export-Import Bank authorizes the transaction. Following our recommendation, in June 2006, Export-Import Bank implemented "Ex-Im Online", which is an electronic interactive, web-based process that allows companies to transact with Export-Import Bank electronically. Two-thirds of shipment reports (which are used to estimate small business financing) are now submitted electronically. This has significantly reduced (to nearly zero) the amount of shipments by exporters whose small business status is "unknown", which appears to have increased the reliability of Export-Import Bank's small business financing estimates.

    Recommendation: To improve the reliability of Ex-Im Bank reporting on its direct support for small business the Chairman of the Export-Import Bank should improve the system for estimating the value and proportion of direct small business support for those transactions where the exporter is not known at the time Ex-Im authorizes the transaction.

    Agency Affected: Export-Import Bank of the United States

  3. Status: Closed - Implemented

    Comments: In March 2006, (Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing, GAO-06-351, March 3, 2006) we identified a variety of weaknesses related to the Export-Import Bank's (Ex-Im) calculation of its support of small businesses. To improve the reliability of Ex-Im reporting on its direct support of small business, we recommended that it should improve the completeness, accuracy, and consistency of the data it maintains on its customers, especially with regard to their small business status. Ex-Im took two actions to implement this recommendation. First, it compared data in its participant files to the Dun and Bradstreet (a commercial information vendor) database. Ex-Im used this information to determine whether each participant is a small business and update its files accordingly. Second, it strengthened its internal controls related to designating companies as small businesses. This included requiring all data be entered into electronic participant files at the time a transaction is authorized and mandating a dual sign off on each small business designation.

    Recommendation: To improve the reliability of Ex-Im Bank reporting on its direct support for small business the Chairman of the Export-Import Bank should improve the completeness, accuracy, and consistency of the data Ex-Im maintains on its customers, especially with regard to their small business status.

    Agency Affected: Export-Import Bank of the United States

  4. Status: Closed - Implemented

    Comments: In March 2006, (Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing) we identified a variety of weaknesses related to the Export-Import Bank's (Ex-Im) calculation of its support of small business. To improve the reliability of Ex-Im reporting on its direct support of small business, we recommended that it should have its external auditor audit its reported support of small business. In May 2006, Ex-Im reported that it has engaged its external auditor for internal controls to perform an independent audit of its direct support for small business results.

    Recommendation: To improve the reliability of Ex-Im Bank reporting on its direct support for small business the Chairman of the Export-Import Bank should have its external auditor audit Ex-Im's annual legislatively-mandated reporting of its direct support for small business as a part of its review of Ex-Im's compliance with laws and regulations.

    Agency Affected: Export-Import Bank of the United States

 

Explore the full database of GAO's Open Recommendations »

Dec 11, 2014

Nov 20, 2014

Nov 19, 2014

Nov 7, 2014

Oct 14, 2014

Sep 22, 2014

Sep 16, 2014

Jul 28, 2014

Looking for more? Browse all our products here