Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing

In March 2006, (Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing, GAO-06-351, March 3, 2006) we identified a variety of weaknesses related to the Export-Import Bank's (Ex-Im) calculation of its support of small businesses. To improve the reliability of Ex-Im reporting on its direct support of small business, we recommended that it should improve the completeness, accuracy, and consistency of the data it maintains on its customers, especially with regard to their small business status. Ex-Im took two actions to implement this recommendation. First, it compared data in its participant files to the Dun and Bradstreet (a commercial information vendor) database. Ex-Im used this information to determine whether each participant is a small business and update its files accordingly. Second, it strengthened its internal controls related to designating companies as small businesses. This included requiring all data be entered into electronic participant files at the time a transaction is authorized and mandating a dual sign off on each small business designation.

In March 2006, (Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing, GAO-06-351) we reported that weaknesses existed in Export-Import Bank's system for estimating small business financing when the exporter is not immediately knowable. For example, we reported that for the $280 million of shipments under bank-held insurance policies, Export-Import Bank classified about $128 million (or nearly half) as shipments by companies whose small business status was "unknown". Export-Import Bank then excluded these shipments from its calculations. We recommended that Export-Import Bank improve its system for estimating the value and proportion of direct small business support for those transactions where the exporter is not known at the time Export-Import Bank authorizes the transaction. Following our recommendation, in June 2006, Export-Import Bank implemented "Ex-Im Online", which is an electronic interactive, web-based process that allows companies to transact with Export-Import Bank electronically. Two-thirds of shipment reports (which are used to estimate small business financing) are now submitted electronically. This has significantly reduced (to nearly zero) the amount of shipments by exporters whose small business status is "unknown", which appears to have increased the reliability of Export-Import Bank's small business financing estimates.

In March 2006, we reported on the Export-Import Bank's (Ex-Im) support of small businesses (GAO-06-351). Ex-Im is statutorily required to report on the number of its authorized transactions that directly benefit small business, but we found that Ex-Im's reported tally includes some transactions that do not benefit small business. We reported that despite not always being unable to determine whether the exporter is a small business when it authorizes the transaction, Ex-Im counted all credit guarantee facilities and bank-held insurance policies as directly benefiting small business. We expressed concern that while many of these transactions may directly benefit small business, they do not all directly benefit small business, as evidenced by the fact that Ex-Im's own estimate showed that about 20 percent of the value of bank-held insurance policies directly benefited small business. As a result, we recommended that Ex-Im more accurately determine and clearly report the number of transactions that directly benefit small business. In response, Ex-Im modified its calculation for determining whether specific transactions directly benefit small businesses. In fiscal year 2009, Ex-Im modified its calculations so that when the exporter and/or exporter/supplier are known at the time of authorization (such as when there is a sole exporter) Ex-Im determines whether or not they are a small business and flags the transaction accordingly.

In March 2006, (Export-Import Bank: Changes Would Improve the Reliability of Reporting on Small Business Financing) we identified a variety of weaknesses related to the Export-Import Bank's (Ex-Im) calculation of its support of small business. To improve the reliability of Ex-Im reporting on its direct support of small business, we recommended that it should have its external auditor audit its reported support of small business. In May 2006, Ex-Im reported that it has engaged its external auditor for internal controls to perform an independent audit of its direct support for small business results.