Ex-Im Needs More Complete Forecasting Methods Or it Puts Financing At Risk, Says GAO Report
The Export-Import Bank’s business plan does not adequately forecast the total outstanding amount of bank financing or the Bank’s risk of loss -- faults that could lead to the Bank delaying funding for worthy projects or misinforming Congress about its risks, a May 30 study from the Government Accountability Office said. GAO analyzed Ex-Im’s business plan per a requirement in the 2012 Congressional reauthorization of the Bank. In that reauthorization, Congress increased Ex-Im’s exposure limit, which is the limit on the bank’s total aggregate outstanding amount of financing. GAO found the model Ex-Im uses to predict this limit does not factor in changing conditions or a range of potential outcomes.
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GAO used historical data to predict Ex-Im’s exposure limit, and found it could actually be higher than the limit set by Congress for 2014. Ex-Im’s inadequate forecasting method is “of particular concern because Ex-Im projects that its outstanding financing in the future will be closer to its exposure limit than it has been historically,” GAO said. The report also found Ex-Im does not analyze its overall risk of loss and risk by industry -- including the specific risks for each sub-portfolio, like renewable energy or Sub-Saharan Africa -- in its business plan. “By not routinely analyzing and reporting financial performance for mandated transactions, Ex-Im decreases its ability to evaluate such performance at the sub-portfolio level and inform Congress of related risks,” the report said. Ex-Im’s renewable energy financing is another issue, GAO said. Renewable energy financing was a Congressional mandate placed on Ex-Im; while the Bank has dedicated resources for such mandates, the target goals for mandates have grown faster than Ex-Im’s actual funding, GAO said.
To fix these errors, GAO recommended Ex-Im should adjust its forecasting model to include historical data, routinely report financial performance of sub-portfolios and provide Congress with additional information on resources associated with meeting mandated targets.