Foreign Aid:

Overseas Private Investment Corporation's Management of Loans

NSIAD-88-161: Published: May 6, 1988. Publicly Released: May 6, 1988.

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Pursuant to a congressional request, GAO reviewed: (1) the Overseas Private Investment Corporation's (OPIC) loan approval, monitoring, and documentation procedures; and (2) OPIC actions on a loan it made to a Costa Rican corporation.

GAO found that OPIC: (1) as of March 31, 1988, had 75 active loans, with an outstanding balance of $48 million; (2) had 30 loans in delinquent status, accounting for $5.1 million in principal; (3) reviewed credit risk, technical expertise, management capability, marketing potential, collateral, development, U.S. foreign policy, and domestic benefits when assessing loan applications; (4) did not always adequately consider borrowers' financial performance; (5) generally kept well-organized and complete documentation on loans; (6) lacked policy guidance for assessing the impact of domestic benefits against credit risk; (7) did not perform an independent review of its loan approval and monitoring process; and (8) is implementing several recommendations a management consulting firm made regarding loan management, credit risk policy formulation, credit analysis support, loan approval, and post-disbursement oversight. GAO also found that OPIC: (1) determined that the Costa Rica loan was in default; (2) initiated foreclosure proceedings; (3) referred information regarding possible fraud by the borrowers to the Department of Justice; and (4) is attempting to locate potential purchasers for the mortgaged land.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Post-disbursement oversight for the OPIC loan program was assigned to the Credit Review Officer, who reports directly to the Treasurer. The preapproval process for OPIC loans remains with the Managing Director of the Independent Credit Review Group.

    Recommendation: The President, OPIC, should take steps to separate the post-disbursement oversight function from the preapproval process to ensure that objectivity is attained in managing the loan program.

    Agency Affected: Overseas Private Investment Corporation

 

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