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GAO: Ex-Im Doesn’t Properly Vet Loan Applicants

The Export-Import Bank lacks important procedures for verifying the eligibility of applicants for loan guarantees, according to a report released by the Government Accountability Office on Tuesday.

Ex-Im is required to act within certain parameters established by law, which includes “maintaining a reasonable assurance of repayment.” To assist with this, the federal government provides guidance on procedures it should follow to determine both risk and eligibility for loan guarantees. (RELATED: The Export Import Bank’s Dodgy Accounting)

However, after reviewing the bank’s Manual of underwriting procedures, GAO found that Ex-Im “did not include certain procedures that should be performed… to reasonably assure compliance with Ex-Im’s requirements and consistency with federal guidance prior to loan guarantee approval.”

One eligibility requirement is that applicants must not have any delinquent federal debt. Although Ex-Im asks applicants to disclose this, “Ex-Im’s Manual did not include procedures to verify the information.”

Federal guidance also requires agencies to “use credit reports as a screening tool.” While Ex-Im does have procedures for obtaining credit reports, the GAO estimates that “credit reports were not obtained…for 61 percent of medium- and long-term loan guarantees.” (RELATED: Ex-Im Exceeds Travel Budget by $3 Million)

Ex-Im officials explained that, “they did not always enforce the requirement to obtain credit reports because information in such reports could be stale or erroneous and did not heavily influence the overall eligibility determination.”

To be eligible for Ex-Im financing, applicants also “must meet Ex-Im’s content requirements intended to ensure that U.S. jobs benefit from Ex-Im programs.”

In December 2013, however, “the Ex-Im IG reported that only long-term loan guarantee transactions were subjected to procedures that could identify content-related discrepancies.” Moreover, the IG also said that, “because of the lack of verification efforts…Ex-Im has limited assurance that content requirements are met.” (RELATED: What is Ex-Im Chairman Fred Hochberg Hiding)

Adopting these procedures, the GAO concludes, “could help enhance the assessment of eligibility and the reasonable assurance of repayment…as well as help prevent fraud.”

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