While the Export-Import Bank (EXIM) celebrated the recent confirmation of its president and two members of its board of directors, the Government Accountability Office (GAO) released a troubling report concerning EXIM potentially providing billions of dollars in loans and financing to companies improperly. GAO found EXIM failed to use a federal database available to all government agencies free of charge to identify companies that have delinquent federal debt. Consequently, EXIM may have provided financing to ineligible companies and increased it’s susceptibility to fraud.
EXIM told GAO that it had no records indicating that any financial transactions had halted due to delinquent federal debt which GAO explains is because EXIM fails to use a readily available federal database. The General Services Administration administers the System for Award Management (SAM) database and allows agencies to manually search SAM data “for the purpose of detecting whether the entity potentially has delinquent federal debt” and “to request batches of SAM registration data free of charge.”
When GAO suggested using SAM to check for delinquent federal debt, EXIM responded that it was not worth the time and effort. GAO’s report countered that there is no indication that using the SAM is more time-consuming than the agency’s current procedures. Further, GAO criticized EXIM’s use of self-reporting in their financing programs: “relying on applicants to self-report adverse actions on their applications, instead of verifying such information, could cause an agency to miss opportunities to develop a more-complete picture of the applicants.”
GAO ran a sample of EXIM data in the SAM database for 2014 to 2016 and found $1.7 billion in authorization value given to 32 U.S.-based companies that may have been delinquent on federal debt during the month the transactions were authorized. The value and number of companies rose to $4.1 billion and 97 U.S.-based companies when considering the transaction maturity period. When GAO showed EXIM their SAM data results, EXIM officials “expressed concern that these results could imply that EXIM is doing business with applicants or participants with delinquent federal debt.”
To be clear, this does not mean all the companies and transactions identified by GAO were ineligible for EXIM financing, but the fact that EXIM had not been checking this data before shows that the agency needs stronger controls, stricter oversight, and structural reforms. This is why Cause of Action Institute submitted a Freedom of Information Act request to EXIM on May 24, 2019, to investigate how the agency is addressing the findings and recommendations from the GAO report.
This lack of due diligence by EXIM should concern every taxpayer considering GAO concluded in a previous July 2018 report that EXIM “approached fraud risk management on a fragmented, reactive basis, and its anti-fraud activities have not been marshalled into the kind of comprehensive, strategic fraud risk management regime envisioned by GAO’s Fraud Risk Framework and its leading practices.” GAO refers to the July 2018 recommendations in the 2019 report concluding, “because it remains unclear whether EXIM’s actions fully respond to the recommendations of our July 2018 report, we will continue to monitor EXIM’s progress in fully assessing its fraud risks.”
Taxpayers should not be forced to fund an agency whose mission is to provide financing to politically connected companies at the expense of competitors, small business owners, and taxpayers. Hopefully, they won’t for much longer as EXIM’s authorization expires in September. If EXIM is reauthorized, the work done by GAO shows that significant reforms are needed to lower EXIM’s susceptibility to fraud and ensure taxpayers are adequately protected. As one EXIM employee interviewed by GAO aptly stated in the July 2018 report, “[m]ore due diligence should be required in order to qualify for the U.S. government’s support.”
Kevin Schmidt is Director of Investigations for Cause of Action Institute. You can follow him on Twitter @KevinSchmidt8
Read more of CoA Institute’s work on EXIM:
May 9, 2019: CoA Calls on IG to Investigate Use of Government Owned Vehicles at EXIM Bank
August 8, 2018: GAO Finds Ex-Im Bank Lacks Comprehensive Fraud Prevention: CoA Renews Push to Abolish
August 2, 2017: It’s Time to End Ex-Im Bank’s Taxpayer Subsidized Corporate Welfare
June 24, 2015: Top Export-Import Bank Official Deleted His Text Messages After We Asked For Them
