The Financial Condition of the Eximbank: Its Proposed Interest Matching Program and Alternative Funding Proposals

GAO testified on the Export-Import Bank's (Eximbank): (1) financial condition; (2) reporting practices; (3) proposed interest-matching program; and (4) congressional appropriations. GAO audited Eximbank financial statements and found that: (1) in fiscal year 1985, Eximbank will record an estimated net operating loss of $378 million; (2) Eximbank accounting practices have resulted in the reporting of artificially high amounts of retained earnings because Eximbank does not recognize loan losses; (3) the amount of problem loans is increasing while Eximbank retained earnings are dwindling; and (4) congressional policy decisions could be affected by Eximbank financial statements which do not accurately present its true financial condition. GAO also found that the proposed: (1) interest-matching program would be more costly to the government than direct loans; (2) shift to loan guarantees without changing the substance of the transactions would take the Eximbank lending activity out of the budget for the purpose of calculating the federal budget deficit; and (3) direct appropriation, which would also serve as the annual limitation on direct lending, has merit and should include a requirement that Eximbank recognize loan losses in its financial statements through the establishment of an appropriated loan loss review.