U.S. Export-Import Bank: Views on Inspector General Oversight
(06-SEP-01, GAO-01-1038R).
GAO has supported the creation of independent inspector general
(IG) offices in appropriate federal departments, agencies, and
entities through the Inspector General Act of 1978. Under the
act, the Export-Import Bank is not required to have IG offices
but must report its annual audit and investigative activity to
both the Office of Management and Budget and Congress. IG
oversight of the Export-Import Bank could be established in
several ways. First, the IG Act could be amended to establish an
IG appointed either by the President or by the Export-Import Bank
Chairman. Also, an already existing IG office could provide
independent audits and investigations of the bank. Finally, a
memorandum of understanding, which acts as a contract for outside
IG services and would not require an amendment to the IG Act,
could be created. In the final analysis, the placement of IGs in
specific agencies is a policy decision to be decided by Congress.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-1038R
ACCNO: A01750
TITLE: U.S. Export-Import Bank: Views on Inspector General
Oversight
DATE: 09/06/2001
SUBJECT: Agency evaluation
Auditing standards
Audits
Bank management
Inspectors general
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Testimony. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-01-1038R
GAO- 01- 1038R Export- Import Bank Oversight
United States General Accounting Office Washington, DC 20548
September 6, 2001 The Honorable Doug Bereuter Chairman The Honorable Bernard
Sanders Ranking Minority Member Subcommittee on International
Monetary Policy and Trade Committee on Financial Services House of
Representatives
Subject: U. S. Export- Import Bank: Views on Inspector General Oversight
This letter responds to your request that we provide our views on whether an
office of inspector general (IG) should be established at the Export- Import
Bank. To address this issue, we held discussions with the Export- Import
Bank?s Chairman, General Counsel, immediate past General Counsel, Chief
Financial Officer (CFO), Manager of the Portfolio Management and Review
Division, and the Director of the Internal Audit Group. We also compared the
budget resources of the Export- Import Bank with other federal departments,
agencies, and entities with and without IGs. In addition, we determined
whether other federal agencies that provide loans or loan guarantees have IG
offices and compared these agencies to the Export- Import Bank. We conducted
our review from May 2001 to August 2001 in accordance with generally
accepted government auditing standards.
We believe there should be sound independent audits of all significant
federal operations, activities, and offices. We have also supported the
creation of independent IG offices in appropriate federal departments,
agencies, and entities through provisions in the IG Act of 1978, Public Law
95- 452, as amended. For example, we supported the IG Act and the current
establishment of 29 IGs appointed by the President and confirmed by the
Senate in federal agencies and departments. These IGs have specific duties
and responsibilities for providing independent audits and investigations in
their departments and agencies. We also supported the creation of additional
IG offices through the IG Act amendments of 1988. These amendments
established IGs appointed by their respective entity heads in the designated
federal entities identified by the act. Currently, there are 28 designated
federal entity IGs 1 with duties and responsibilities similar to those of
IGs appointed by the President.
1 The provisions governing the Government Printing Office (GPO) IG are
essentially identical to those governing the IGs at the 27 designated
federal entities. For purposes of our study, we consider GPO to be a
designated federal entity (DFE) and refer to it as a DFE in this report.
GAO- 01- 1038R Export- Import Bank Oversight Page 2 We believe that all
significant federal programs and entities should be subject to
oversight by IGs. At the same time, we have some concern about creating and
maintaining small IG offices with limited resources that might not have the
ability to maintain the technical skills and expertise needed to provide
adequate oversight cost- effectively. In the final analysis, the
determination of whether to place IGs in specific agencies is a policy
decision to be decided by the Congress. As a result, we are providing
alternative approaches in this letter to achieve IG oversight at the Export-
Import Bank.
The Export- Import Bank is an export credit agency of the United States. The
ExportImport Bank?s mission is to match officially supported foreign
competition and fill financing gaps in order to maximize support for U. S.
exports and contribute to the promotion and maintenance of U. S. jobs. The
bank offers three main products: (1) working capital guarantees to help U.
S. exporters obtain the funds to fulfill sales orders or finance inventory
and accounts receivable, (2) export credit insurance to enable U. S.
exporters to offer competitive credit terms to their foreign buyers and
cover the risk of nonpayment, and (3) direct loans or guarantees of
commercial loans to foreign buyers of U. S. goods and services in markets in
which financing would otherwise not be available. In fiscal year 2000, the
bank had total portfolio exposure of $61.6 billion; total budget authority
of about $3.556 billion, which includes $811 million in appropriations for
administration and loan subsidies; $1.663 billion in appropriations for re-
estimates of loan subsidies; and $1.082 billion in spending authority from
offsetting collections.
The Export- Import Bank is a federal entity as defined by the IG Act. Under
the act, federal entities are not required to have IG offices but are
required to report their annual audit and investigative activity to both the
Office of Management and Budget (OMB) and to the Congress. Federal entities
can obtain audits either from internal audit staff or through contracts with
independent public accountants and/ or agreements with IG offices in other
federal agencies. Specifically, the Export- Import Bank contracts for an
annual financial statement audit 2 with an independent public accountant as
required by 31 U. S. C. Chapter 91 and receives additional audits of
administrative operations from its Internal Audit Group.
With $3.556 billion in fiscal year 2000 total budget authority, the Export-
Import Bank is the largest of the 55 federal entities not currently required
to have an IG. (See enclosure I.) The bank accounts for about 66 percent of
the fiscal year 2000 total budget authority available for these 55 federal
entities. The relative size of its budget resources makes it comparable to
both departments and agencies with IGs appointed by the President and with
designated federal entities with IGs appointed by their entity heads. (See
enclosures II and III.) Enclosure II indicates that, when compared to the 29
agencies with IGs appointed by the President, the bank?s fiscal year 2000
budget authority would be 24th. Enclosure III indicates that if the bank
were included as a designated federal entity, its budget authority for
fiscal year 2000 would be the fourth largest. Enclosure IV shows that of the
17 federal agencies or
2 Audits of the Export- Import Bank?s financial statements do not include
reviews of economy and efficiency and the results of program effectiveness.
GAO- 01- 1038R Export- Import Bank Oversight Page 3 corporations that
provide loans and/ or loan guarantees, the Export- Import Bank is
one of the two agencies without IG oversight. 3 The Export- Import Bank
Chairman and management staff do not object to having IG oversight and
support and recognize the value of independent audits. However, they do
question the need for establishing an IG office when provisions already
exist for independent financial audits and for an active Internal Audit
Group. The CFO explained that the loan approval and guarantee process does
receive some outside review. For example, the bank seeks the advice of the
National Advisory Council on International Monetary and Financial Policies
for all credits over $30 million and reports all activities above $100
million to the Congress.
There are several ways for obtaining IG oversight of the Export- Import Bank
in order to provide sound and independent audits and investigations of bank
operations, activities, and offices. Each approach has differing benefits
and costs. For instance, the IG Act could be amended to establish an IG
appointed by either the President or by the Export- Import Bank Chairman.
Either option includes establishing a new IG office to provide oversight of
the Export- Import Bank and would therefore include the costs associated
with establishing and maintaining a new IG office. IGs appointed by the
President have been recognized by the Congress as having the benefit of
increased independence when compared to IGs appointed by their agency heads.
4 In addition, under the IG Act, IGs appointed by the President are required
to be confirmed by the Senate.
Another alternative for providing IG audits and investigations at the
Export- Import Bank includes having an already established IG office provide
independent audits and investigations of the bank. This would not involve
the expense of creating a new IG office and could provide independent
reviews of all bank operations, activities, and offices necessary for
adequate IG coverage. This alternative would also address the Chairman?s
concern about an additional office at the bank created by a new IG and could
be established through legislation designating an existing IG office to
provide oversight. For instance, the Overseas Private Investment Corporation
(OPIC) is subject to reviews, investigations, and inspections by the Agency
for International Development (AID) IG.
Another option for oversight is through a memorandum of understanding, which
acts as a contract for outside IG services and would not require an
amendment to the IG Act. However, the alternatives of having audit coverage
provided by another IG
3 The Presidio Trust, like the Export- Import Bank, has no IG oversight. The
trust is a wholly owned government corporation established by the Omnibus
Parks and Public Lands Management Act of 1996, Public Law 104- 333, to
manage, improve, maintain, and lease property in the Presidio of San
Francisco.
4 Public Law 103- 204, December 17, 1993, converted the Federal Deposit
Insurance Corporation (FDIC) IG from appointment by the head of FDIC to
appointment by the President with Senate confirmation to increase the
independence of the IG. More recently, an amendment to the IG Act, Public
Law 106- 422, November 1, 2000, converted the Tennessee Valley Authority
(TVA) IG from appointment by the head of TVA to appointment by the President
with Senate confirmation to obtain increased IG independence.
GAO- 01- 1038R Export- Import Bank Oversight Page 4 rather than a new IG
office at the Export- Import Bank could result in less audit
oversight due to competing priorities for IG audits outside the bank. At the
request of Congressman Dan Burton, we are currently reviewing the potential
impact of consolidating certain IG offices so that the oversight provided by
an IG could include more than one federal agency. We will provide you with a
copy of this report when it is completed.
We obtained comments from the Export- Import Bank Chairman on this letter
and the enclosures. The Chairman generally agreed with the information in
the letter regarding efforts by the bank to address internal controls and
provided additional emphasis on the bank?s efforts in this area. However,
the Chairman disagreed with our presentation of the bank?s fiscal year 2000
budget authority and requested that we present only the discretionary budget
authority of $811 million because it would significantly change the
comparisons of the bank with other federal agencies.
We disagree that only the discretionary portion of the bank?s budget should
be reported. We used the $3.556 billion in total budget authority to be
consistent with the presentation of total budget authority for the other
entities listed. In addition, total budget authority shows the magnitude of
the budget subject to oversight by a potential IG or other audit
organization. Moreover, if the $811 million were used for comparison, the
Export- Import Bank would continue to be the largest federal entity without
an IG and would remain comparable to other agencies with IGs appointed
either by the President or agency heads. The Chairman also suggested that we
compare the FTEs of the bank to agencies with IGs appointed by the
President. We provided the FTE levels in the federal entities and designated
federal entities for information purposes only. We do not emphasize them for
comparison purposes due to the varying degrees to which agencies obtain
outside services that are not reflected in their FTE levels.
The Chairman also stated Export- Import Bank?s position that the Congress
should consider the OPIC model and the use of AID?s IG if the Congress
determines that the bank should have IG oversight. While our report does not
specifically recommend how oversight should be provided to the bank, we do
provide several alternatives for IG oversight that includes the use of the
IG from AID or another agency. Other clarifying comments by the Chairman
were incorporated into our letter as appropriate.
- - - - -
GAO- 01- 1038R Export- Import Bank Oversight Page 5 We are sending copies of
this letter to the Chairman of the Senate Committee on
Governmental Affairs, the Chairman of the House Committee on Government
Reform, the Chairman of the Export- Import Bank, the Director of the Office
of Management and Budget, the Vice Chair of the President?s Council on
Integrity and Efficiency, and the Vice Chair of the Executive Council on
Integrity and Efficiency. This letter will also be available on GAO?s home
page at http:// www. gao. gov. Please contact me at (202) 512- 2600 or by e-
mail at steinhoffj@ gao. gov, Jeanette Franzel at (202) 512- 9471 or by e-
mail at franzelj@ gao. gov, or Jackson Hufnagle at (202) 5129470 or by e-
mail at hufnaglej@ gao. gov if you or your staffs have any questions about
this letter and the enclosures.
Jeffrey C. Steinhoff Managing Director Financial Management and Assurance
Enclosures
Enclosure I GAO- 01- 1038R Export- Import Bank Oversight Page 6
Federal Entities Not Required to Have IGs
(Dollars in millions)
FY 2000 actuals No. Federal entity Budget authority FTEs a
1 Export- Import Bank b $3,556 404 2 Farm Credit System Financial Assistance
Corporation 282 d 3 Overseas Private Investment Corporation c 273 192 4
Institute of Museum and Library Services 190 39 5 Presidio Trust 103 365 6
Federal Retirement Thrift Investment Board 102 94 7 Farm Credit System
Insurance Corporation 83 10 8 National Transportation Safety Board 82 421 9
Neighborhood Reinvestment Corporation 75 268 10 Armed Forces Retirement Home
70 753 11 National Gallery of Art - Smithsonian 67 768 12 Trade and
Development Agency 53 38 13 American Battle Monuments Commission 41 364 14
Federal Mediation and Conciliation Service 39 285 15 Offices of Independent
Counsel 34 d 16 John F. Kennedy Center for the Performing Arts - Smithsonian
34 46 17 U. S. Holocaust Memorial Council 33 251 18 Merit Systems Protection
Board 29 226 19 Selective Service System 24 156 20 Delta Regional Authority
20 d 21 Defense Nuclear Facilities Safety Board 17 94 22 African Development
Foundation 15 24 23 U. S. Institute of Peace 13 63 24 Woodrow Wilson
International Center for Scholars - Smithsonian 12 41 25 Court of Appeals
for Veterans Claims 11 79 26 National Mediation Board 10 45 27 Office of
Special Counsel 10 91 28 Commission on Civil Rights 9 75 29 Office of
Government Ethics 9 80 30 Chemical Safety and Hazard Investigation Board 8
26 31 Commission of Fine Arts 8 7 32 Inter- American Foundation 8 51 33
Occupational Safety and Health Review Commission 8 63 34 Office of Navajo
and Hopi Indian Relocation 8 66 35 State Justice Institute 7 d 36 Federal
Mine Safety and Health Review Commission 6 43 37 National Capital Planning
Commission 6 51 38 Architectural and Transportation Barriers Compliance
Board 5 30 39 Barry Goldwater Scholarship and Excellence in Education
Foundation 4 2 40 Harry S. Truman Scholarship Foundation 4 4 41 Morris K.
Udall Scholarship and Excellence in National
Environmental Policy Foundation 4 17
42 Advisory Council on Historic Preservation 3 36
Enclosure I GAO- 01- 1038R Export- Import Bank Oversight Page 7
(Dollars in millions)
FY 2000 actuals No. Federal entity Budget authority FTEs a
43 Committee for Purchase from People Who Are Blind or Severely Disabled
3 20 44 James Madison Memorial Fellowship Foundation 3 6 45 Japan- U. S.
Friendship Commission 3 4 46 Nuclear Waste Technical Review Board 3 14 47
America's Education Goals Panel (National Education Goals
Panel) 2 9 48 Federal Financial Institutions Examination Council Appraisal
Subcommittee 2 7
49 Institute of American Indian and Alaska Native Culture and Arts
Development
2 d 50 National Council on Disability 2 11 51 Christopher Columbus
Fellowship Foundation 1 1 52 Marine Mammal Commission 1 10 53 National
Commission on Libraries and Information Science 1 7 54 Commission for the
Preservation of America's Heritage Abroad 0.5 d 55 Postal Rate Commission
Not identified in the budget
Totals $5,398.5 5, 757
a Includes both direct and reimbursable full- time equivalents. b Export-
Import Bank's gross budget authority of $3. 556 billion includes $811
million in appropriations for administration and loan subsidies, $1.663
billion in appropriations for re- estimates of loan subsidies, and $1.082
billion in spending authority from offsetting collections.
c The Overseas Private Investment Corporation is subject to reviews,
investigations, and inspections by the Agency for International
Development's IG (22 U. S. C. 2199( e)). d FTEs are not reported.
Sources: Fiscal Year 2002 Budget of the United States Government and Public
Law 95- 452, as amended.
Enclosure II GAO- 01- 1038R Export- Import Bank Oversight Page 8
Comparison of Budget Authority of the Export- Import Bank and Federal
Agencies With IGs Appointed by the President
(Dollars in millions)
No. Departments/ agencies FY 2000 budget authority
1 Social Security Administration $ 444, 407 2 Department of Health and Human
Services 392,449 3 Department of the Treasury 392,273 4 Department of the
Treasury, IG for Tax Administration Included above 5 Department of Defense
(Military & Civilian) 327,615 6 Department of Agriculture 75,750 7
Department of Transportation 54,743 8 Office of Personnel Management 50,468
9 Department of Veterans Affairs 45,505 10 Department of Education 32,240 11
Department of Labor 30,736 12 Department of Housing and Urban Development
24,324 13 Department of Justice 18,679 14 General Services Administration
16,188 15 Department of Energy 15,324 16 National Aeronautics and Space
Administration 13,602 17 Department of Commerce 8,751 18 Department of the
Interior 8,394 19 Department of State 8,276 20 Environmental Protection
Agency 7,328 21 Tennessee Valley Authority a 6,558 22 Federal Deposit
Insurance Corporation 6, 144 23 Railroad Retirement Board 5,001
Export- Import Bank b 3,556 24 Federal Emergency Management Agency 3,331 25
Agency for International Development 2,751 26 Small Business Administration
900 27 Corporation for National and Community Service 676 28 Nuclear
Regulatory Commission 471 29 Central Intelligence Agency n/ a c
Total $1,996,440
a TVA's IG will be appointed by the President and confirmed by the Senate
under Public Law 106- 422, dated November 1, 2000. b Export- Import Bank's
total budget authority of $3. 556 billion includes $811 million in
appropriations for administration and loan subsidies, $1.663 billion in
appropriations for re- estimates of loan subsidies, and $1. 082 billion in
spending authority from offsetting collections.
c Budget information not available. Sources: Fiscal Year 2002 Budget of the
United States Government - Appendix and Public Law 95- 452, as amended.
Enclosure III GAO- 01- 1038R Export- Import Bank Oversight Page 9
Comparison of Budget Authority of the Export- Import Bank and Designated
Federal Entities That Have IGs Appointed by the Agency Head
(Dollars in millions)
No. Federal entity Fiscal year 2000 budget authority Fiscal year 2000
actual FTEs a
1 United States Postal Service $68,293 848,353 2 Federal Communications
Commission 4,696 1,925 3 National Science Foundation 4, 086 1,200
Export- Import Bank b 3,556 404 4 National Railroad Passenger Corporation c
2,771 d 5 Pension Benefit Guaranty Corporation 2, 510 724 6 Government
Printing Office 892 3,139 7 National Credit Union Administration 823 991 8
Smithsonian Institution 546 4,973 9 Securities and Exchange Commission 378
2,841 10 National Archives and Records Administration 341 2,469 11
Corporation for Public Broadcasting 316 d 12 Legal Services Corporation 305
d 13 Equal Employment Opportunity Commission 284 2,852 14 Peace Corps 248
1,042 15 National Labor Relations Board 205 1,876 16 Federal Reserve Board
200 d 17 Federal Trade Commission 126 989 18 National Endowment for the
Humanities 118 174 19 National Endowment for the Arts 102 154 20 Appalachian
Regional Commission 66 10 21 Commodity Futures Trading Commission 63 556 22
Consumer Product Safety Commission 52 468 23 United States International
Trade Commission 44 357 24 Federal Election Commission 38 343 25 Farm Credit
Administration 36 287 26 Federal Labor Relations Authority 24 212 27 Federal
Housing Finance Board 19 108 28 Federal Maritime Commission 15 128
Totals $91,153 876,575
a Includes both direct and reimbursable FTEs. b Export- Import Bank's total
budget authority of $3. 556 billion includes $811 million in appropriations
for administration and loan subsidies, $1.663 billion in appropriations for
re- estimates of loan subsidies, and $1. 082 billion in spending authority
from offsetting collections.
c Budget authority amount for the National Railroad Passenger Corporation is
an estimate. d FTEs are not reported.
Sources: Fiscal Year 2002 Budget of the United States Government - Appendix
and Public Law 95- 452, as amended.
Enclosure IV GAO- 01- 1038R Export- Import Bank Oversight Page 10
IG Oversight of Federal Agencies That Provide Direct Loans and Loan
Guarantees
Federal agencies Direct loans Loan guarantees IG
Department of Agriculture X X X Department of Commerce X X X Department of
Defense X X X Department of Education X X X Department of Health and Human
Services X X Department of Housing and Urban Development X X Department of
the Interior X X X Department of State X X Department of Transportation X X
X Department of the Treasury X X Department of Veterans Affairs X X X Agency
for International Development X X Overseas Private Investment Corporation X
X X a Small Business Administration X X X Export- Import Bank of the United
States X X Federal Emergency Management Agency X X Presidio Trust X a The
Overseas Private Investment Corporation is subject to reviews,
investigations, and inspections by the Agency for International
Development's IG (22 U. S. C. 2199( e)).
Sources: Fiscal Year 2002 Budget of the United States Government - Federal
Credit Supplement and Public Law 95- 452, as amended.
Enclosure V GAO- 01- 1038R Export- Import Bank Oversight Page 11
Comments From the Export- Import Bank of the United States
Enclosure V GAO- 01- 1038R Export- Import Bank Oversight Page 12
Enclosure V GAO- 01- 1038R Export- Import Bank Oversight Page 13 (194050)
*** End of document. ***