oversight

Financial Audit: Export-Import Bank's 1989 and 1988 Financial Statements

Published by the Government Accountability Office on 1990-07-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

 .---_--*-----.,    -.-- ~--


                               FINANCIAL AUDIT            -
 .Jdy      I!J!lO




                               Export-Import   Bank’s
                               1989and1988
                               Financial Statements


                                                 141825




-....                                            -
(;AO/‘AI’MI)-!WfN
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States

      B-197710

      July 19, 1990

      To the President of the Senate and the
      Speaker of the House of Representatives

      This report presents our opinion on the financial statements of the
      Export-Import Bank of the United States for the years ended Septem-
      ber 30,1989 and 1988, and our reports on the bank’s internal control
      structure and on its compliance with applicable laws and regulations.
      We conducted our examination pursuant to 31 U.S.C. 9105 and in accor-
      dance with generally accepted government auditing standards.

      Since fiscal year 1983, we have reported the need for the bank to reflect
      an allowance for possible losses associated with its portfolio of foreign
      loans and insurance and guarantee claims. The bank’s fiscal year 1989
      financial statements present for the first time an allowance for possible
      losses totaling $4.8 billion associated with its $12.1 billion foreign loans
      and claims portfolios. The bank’s 1988 financial statements included
      herein have been changed to show the losses associated with the impair-
      ment of the foreign loans and claims portfolios that occurred prior to
      fiscal year 1989. This change increased the bank’s accumulated deficit
      from $116 million to $3.4 billion at September 30, 1988.

      The bank’s reported $1.9 billion net loss in fiscal year 1989 was princi-
      pally due to the continued impairment of the bank’s foreign loans and
      claims portfolios. As a result of this loss, the bank’s accumulated deficit
      at September 30, 1989, was $5.3 billion.

      To assist the Congress in its oversight responsibilities for the bank, we
      believe the Congress needs to enact a recapitalization plan that restores
      the bank’s capital to a positive level, specifies a minimum capital level
      that the bank must maintain, and provides a mechanism for funding
      future losses due to the financing risks the bank must take in fulfilling
      its mission. This is consistent with the position we have taken in the
      past in congressional testimony.




      Page 1                                       GAO/AFMD-SO-80   Export-Import   Bank
                                                                    ,

B-197710




We are sending copies of this report to the Director of the Office of Man-
agement and Budget; the Secretary of the Treasury; the Chairmen of the
Senate Committee on Banking, Housing and Urban Affairs and the
House Committee on Banking, Finance and Urban Affairs; and the
Board of Directors of the Export-Import Bank of the United States.




Charles A. Bowsher
Comptroller General
of the United States




Page 2                                      GAO/AFMD-SO-80   Export-Import   Bank
Page 3   GAO/AFMD-90-80   Export-Import   Bank
Cmtents


Letter                                                                                             1

Opinion Letter                                                                                     6

Report on Internal                                                                                12
Control Structure
Report on Compliance                                                                              14
With Laws and
Regulations
Financial Statements                                                                              15
                       Statements of Financial Condition                                          15
                       Statements of Income and Changes in Retained Earnings                      16
                       Statements of Cash Flows                                                   17
                       Notes to Financial Statements                                              18




          Y            Abbreviation

                       FFB       Federal Financing Bank


                       Page 4                                   GAO/AFMD90-80   Export-Import   Bank
Page 5   GAO/AFMJl-9080   Export-Import   Bank
United States
General Accounting Office
Washington, D.C. 20648

Comptroller General
of the United States

B-197710

To the Board of Directors
Export-Import Bank of the United States

We have audited the accompanying statements of financial condition of
the Export-Import Bank of the United States as of September 30, 1989
and 1988, and the related statements of income and changes in retained
earnings and of cash flows for the years then ended. These financial
statements are the responsibility of the bank’s management. Our respon-
sibility is to express an opinion on these financial statements based on
our audits. In addition to this report on our audit of the bank’s fiscal
year 1989 and 1988 financial statements, we are reporting on our study
and evaluation of the bank’s internal control structure and compliance
with laws and regulations.

We conducted our audits in accordance with generally accepted govern-
ment auditing standards. Those standards require that we plan and per-
form the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. Audits include
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our report on the bank’s fiscal year 1988 financial statements (GAO/
AFMD-89-94), we expressed an opinion that those financial statements did
not fairly present the bank’s financial position, results of operations,
and cash flows in conformity with generally accepted accounting princi-
ples because of a material departure from such principles. Specifically,
the bank did not report in its fiscal year 1988 financial statements an
allowance for probable losses due to the uncollectibility of a portion of
the outstanding balance of loans, claims, and accrued interest receiv-
able. However, for the fiscal year ended September 30,1989, the bank
changed its policy and reported an allowance for loans and claims
receivable losses of $4.8 billion. Additionally, in fiscal year 1989, the
bank ceased accruing interest on loans with delinquent payments over
90 days past due, and wrote off previously accrued interest on these
loans. The bank’s fiscal year 1988 financial statements have been
restated to reflect the bank’s change in reporting an allowance for loans
and claims receivable losses and to conform with generally accepted
accounting principles. The accounting change for accrued interest
receivable was a change in an accounting estimate and recorded in fiscal
year 1989 and not restated for prior years. The restatement of the 1988


Page 6                                     GAO/APMD-90-80   Export-Import   Bank
  ,
                        B-197710




                        financial statements resulted in an allowance for loans and claims
                        receivable losses of $3.7 billion as of September 30, 1988. Accordingly,
                        our adverse opinion on the fiscal year 1988 financial statements has
                        been changed.

                        In our opinion, the financial statements referred to above present fairly,
                        in all material respects, the financial position of the Export-Import Bank
                        of the United States as of September 30, 1989 and 1988, and the results
                        of its operations and its cash flows for the years then ended in con-
                        formity with generally accepted accounting principles.

                        The following section provides supplementary comments on the bank’s
                        overall financial condition and outlook, which we believe will assist the
                        Congress in its oversight of the bank. The subsequent section explains
                        the need for recapitalizing the bank. We continue to maintain the posi-
                        tion we took in past testimony that recapitalization is necessary to
                        ensure that the bank can effectively fulfill its mission in the future. In
                        this section we also describe what we believe to be the essential ele-
                        ments of an effective recapitalization plan.


                        The bank’s mission, as outlined in the Export-Import Bank Act of 1945,
The Bank’s Financial    as amended, is to aid in financing and facilitating exports and imports of
Condition and Outlook   goods and services between the United States and foreign countries and
                        to promote and maintain American exports through fully competitive
                        financing programs. The act requires the bank to gain reasonable assur-
                        ance of repayment on loans, However, in carrying out its mission, the
                        bank sometimes assumes levels of financing risk not generally borne by
                        commercial banks. These risks have resulted in the bank incurring losses
                        due to loan credit quality and interest rate subsidies.

                        To report the total costs of its various export financing programs, the
                        bank must identify when assets have become impaired and their value
                        reduced. In doing this, the bank must take into account all pertinent
                        information about each borrower’s financial condition and ability to
                        repay as well as the effects of any change or deterioration in the eco-
                        nomic and/or political conditions of the borrower’s country. Such con-
                        sideration of its entire portfolios of loans and claims receivable led the
                        bank to formally announce on January 4, 1990, that it was establishing
                        an allowance for losses of $4.8 billion on its $12.1 billion portfolio of
                        loans and claims receivable for the fiscal year ended September 30,
                        1989. This allowance equals approximately 40 percent of the bank’s
                        loans and claims portfolios as of September 30, 1989. The allowance is


                        Page 7                                       GAO/AFMD-90-80   Export-Import   Bank
B-197710




the bank’s estimate of the probable losses it has sustained because of the
impairment of its portfolios of loans and claims receivable.

In fiscal year 1989, the bank also reduced accrued interest receivable
and interest income on loans by over $271 million for repayment install-
ments that were overdue by more than 90 days and for which there
were no substantial efforts on the part of the borrowers to make pay-
ment. In the past, the bank had continued to accrue interest on a signifi-
cant number of nonperforming loans for which collection was doubtful,
resulting in an overstatement of interest income. Under this approach,
the bank would have recognized approximately $935 million in interest
income on loans in fiscal year 1989. As a result of reducing previously
accrued interest, the bank recognized $664 million in interest income on
loans in fiscal year 1989.

By disclosing an allowance for estimated losses on its loans and claims
receivable portfolios and reversing its previously accrued interest on
delinquent loans, the bank is more accurately reporting the costs of its
export financing activities and the impact of these costs on its financial
condition, Prior to restatement, the bank’s fiscal year 1988 financial
statements reflected an accumulated deficit of $116 million, the first
such deficit the bank ever reported. Restatement of the bank’s fiscal
year 1988 financial statements to account for the impairment of its for-
eign loans and claims receivable portfolios increased its reported deficit
to $3.4 billion. This change in the deficit indicates the extent to which
the costs of the bank’s programs had previously been understated. The
prospects for collecting the bank’s loans and claims receivable portfolios
continued to deteriorate in fiscal year 1989, requiring the bank to report
additional provisions for possible loan and claim losses totaling nearly
$1.1 billion. This contributed significantly to the $1.9 billion net loss the
bank incurred in fiscal year 1989 as well as further increasing the
bank’s accumulated deficit to approximately $5.3 billion.

In addition to its credit quality problems, the bank is also experiencing a
negative interest rate spread problem. In fulfilling its mission to promote
and maintain American exports, the bank frequently lends money at
lower interest rates than the rates at which it borrows from the Federal
Financing Bank (FFB). As of September 30, 1989, the weighted average
interest rate paid on the bank’s $11 .Obillion FFB debt exceeded the
weighted average interest rate received on loans in its loan portfolio by
approximately 2.3 percent. This is an improvement of 2.1 percent from
the negative interest rate spread of 4.4 percent that existed as of Sep-
tember 30, 1988.


Page8                                         GAO/AFMD-90~8OExporHmportBank
5197710




However, based on the loans in the bank’s loan portfolio at Septem-
ber 30,1989, the interest rate paid on the F+FB debt will continue to
exceed the interest earnings rate on the current loan portfolio through
fiscal year 1999. We estimate this negative interest rate spread will cost
approximately $821 million over the maturity period of the FFB debt.
This estimate is based on the difference in the weighted average interest
rates on the bank’s loan portfolio and on its borrowings as of Septem-
ber 30, 1989, through the maturity date of the borrowings, which is
fiscal year 1999.

As stated in our opinion on the bank’s 1988 and 1987 financial state-
ments, a one-time exposure fee that the bank began assessing in May
1987 to reduce the effects of negative spreads associated with new loans
should diminish these effects, but the exposure fee will not improve the
negative interest rate spread on most of the bank’s current portfolio.

The effects of the negative interest rate spread and the continued
impairment of the loans and claims receivable portfolios, as evidenced
by the increasing levels of delinquencies and the sizable allowance for
losses the bank has established, have adversely impacted the bank’s
cash and equity position. Cash and cash equivalents’ decreased in both
fiscal years 1989 and 1988, from an October 1, 1987, balance of
$694 million to a September 30, 1989, balance of $72 million. Loan dis-
bursements increased marginally over the 3-year period October 1,
 1986, to September 30, 1989, while repayments on loans decreased sub-
stantially due to delinquencies, from $3.6 billion in fiscal year 1987 to
$1.2 billion in fiscal year 1989.

The low level of loan repayments on the bank’s loan portfolio as a result
of the high level of delinquent loans and the negative interest rate
spread of the bank has had an adverse effect on the bank’s ability to
repay its debt to FFB. As a result, all of the bank’s loans from FFB that
matured in 1989 had to be refinanced with new debt from FFB. If this
trend continues in the future, not only will the bank be unable to retire
the debt, it will also become increasingly dependent on FFB borrowings
to pay its operating costs.

As of September 30, 1989, the bank’s accumulated deficit equaled $5.3
billion. As discussed in note 4, under the Export-Import Bank Act of

‘The bank defines cash equivalents as short-term, highly liquid investments with original maturities
of 3 months or less. This definition would include all of the bank’s investments in U.S. Treasury
securities as of September 30,198Q and 1988.



Page9                                                       GAO/AFMD-BO-80ExporthportBank
                        El97710




                        1946, as amended, the bank may have up to $6 billion in loans out-
                        standing at any one time with the Department of the Treasury. In addi-
                        tion, the bank has unlimited borrowing authority from FFB. Thus, the
                        bank can continue to operate regardless of its losses and deficit. How-
                        ever, the bank is now at a point where it is unable to repay its out-
                        standing FFB debt, as well as any additional borrowings needed to
                        refinance its debt and continue operations. Such borrowings result in FF’B
                        or the Department of the Treasury financing the bank’s losses.


                        We stated in previous testimony” that we believe the Congress should
The Need for a          implement a recapitalization plan for the Export-Import Bank. We con-
Comprehensive           tinue to hold the position that an effective recapitalization plan should
Recapitalization Plan   (1) restore the bank’s equity position to a positive level as measured by
                        generally accepted accounting principles and (2) provide a means for
                        ensuring that the bank maintains a minimum positive level of capital
                        despite any future losses it may incur in fulfilling its mission.

                        As we stated in previous testimony, there are a number of options for
                        the recapitalization of the bank, including forgiving a portion of the
                        bank’s FFB debt or using appropriations or funds gained through capital
                        stock sales to the Department of the Treasury to pay off the FFB debt.
                        Maintaining the positive equity level resulting from recapitalization will
                        require capital infusions in any fiscal year in which (1) additional provi-
                        sions for possible loan and claim losses due to increased impairment of
                        the bank’s loan and claim portfolios and/or (2) the bank’s losses associ-
                        ated with interest rate subsidies reduce the bank’s capital below the
                        specified minimum level.

                        Such a recapitalization plan has many benefits. First, and most impor-
                        tantly, it would allow the Congress to monitor the costs the bank incurs
                        in performing its mission and to compare these costs with the benefits
                        gained by expanding U.S. export markets. Second, maintaining a min-
                        imum capital level will increase the bank’s international credibility.
                        Third, ensuring that the bank operates successfully in the future will
                        emphasize Congress’s long-standing commitment to expanding U.S.
                        export markets. Finally, an effective recapitalization plan will eliminate



                        “Recdpitalizin the Export-Im rt Bank of the IJS.: Why It Is Necessary; How It Can Be Achieved
                        (GAO/T-*FM%-88-Q statem% of Frederick D. Wolf, Director, Accounting and Financial Manage-
                        ment Division, before the Subcommittee on International Finance, Trade and Monetary Policy; Com-
                        mittee on Banking, Finance and Urban Affairs; House of Representatives; February 25, 1988.



                        Page 10                                                   GAO/AFMDSO-SO      Export-Import   Bank
\
        B19n10




        the need for the bank to finance its annual losses with borrowings from
        FF’EIor Treasury.




        Charles A. Bowsher
        Comptroller General
        of the United States

        March 30,199O




    Y




         Page 11
Fteporton InkmaIl Control Struc-twe


                  We have audited the financial statements of the Export-Import Bank of
                  the United States for the years ended September 30,1989 and 1988, and
                  have issued our opinion thereon. This report pertains only to our study
                  and evaluation of the bank’s internal control structure for the year
                  ended September 30,1989. The report on our study and evaluation of
                  the bank’s internal control structure for the year ended September 30,
                  1988, is presented in GAo/AFMD-89-94, dated July 25, 1989.

                  We conducted our audit in accordance with generally accepted govern-
                  ment auditing standards. Those standards require that we plan and per-
                  form the audit to obtain reasonable assurance about whether the
                  financial statements are free of material misstatement.

                  In planning and performing our audit of the financial statements of the
                  Export-Import Bank for the fiscal year ended September 30,1989, we
                  considered its internal control structure in order to determine our
                  auditing procedures for the purpose of expressing our opinion on the
                  financial statements and not to provide assurance on the internal con-
                  trol structure.

                  The bank’s management is responsible for establishing and maintaining
                  an internal control structure. In fulfilling this responsibility, estimates
                  and judgments by management are required to assess the expected bene-
                  fits and related costs of internal control structure policies and proce-
                  dures. The objectives of an internal control structure are to provide
                  management with reasonable, but not absolute, assurance that assets
                  are safeguarded against loss from unauthorized use or disposition and
                  that transactions are executed in accordance with generally accepted
                  accounting principles. Because of inherent limitations in any internal
                  control structure, errors or irregularities may nevertheless occur and
                  not be detected. Also, projection of any evaluation of the structure to
                  future periods is subject to the risk that procedures may become inade-
                  quate because of changes in conditions or that the effectiveness of the
                  design and operation of policies and procedures may deteriorate.

                  For purposes of this report, we have classified the bank’s significant
                  internal control structure policies and procedures into the following
                  categories:

              l   expenditures, which consists of the policies and procedures associated
                  with preparing and processing payroll and nonpayroll administrative
                  expenses;



                  Page 12                                     GAO/AFMD-9o-80   Export-Import   Bank
    Report on internal   Control   Structure




l   financial reporting, which consists of the policies and procedures associ-
    ated with processing accounting entries and preparing the bank’s annual
    financial statements;
l   insurance and guarantees, which consists of the policies and procedures
    associated with authorizing export insurance policies and guarantees,
    approving and paying insurance and guarantee claims, and recovering
    payments on insurance and guarantee claims;
l   loans, which consists of the policies and procedures associated with
    authorizing and disbursing loans, accruing interest on loans, and col-
    lecting loan repayments; and
l   treasury, which consists of the policies and procedures associated with
    disbursing and collecting cash, reconciling cash balances, investing cash,
    and managing debt.

    For all of the internal control structure categories listed above, we
    obtained an understanding of the design of the relevant policies and pro-
    cedures, determined whether they had been placed in operation, and
    assessed the associated control risk. We performed limited tests of con-
    trol procedures for all the categories. In addition, we performed audit
    tests to substantiate account balances associated with each control cate-
    gory. Such tests can serve to identify weaknesses in the internal control
    structure.

    Our consideration of the internal control structure would not necessarily
    disclose all matters in the internal control structure that might be mate-
    rial weaknesses. A material weakness is a reportable condition in which
    the design or operation of one or more of the specific internal control
    structure elements does not reduce to a relatively low level the risk that
    errors or irregularities in amounts that would be material in relation to
    the financial statements being audited may occur and not be detected
    within a timely period by employees in the normal course of performing
    their assigned functions. During our tests, however, we noted no matters
    involving the internal control structure and its operation that we con-
    sider to be material weaknesses as defined above.

    We did note certain matters involving the internal control structure and
    its operations that do not affect the fair presentation of the bank’s
    financial statements, but which nevertheless warrant management’s
    attention. We are reporting these other matters separately to the bank’s
    management.




    Page 13                                     GAO/-WOO       Export-Import   Bank
Report on ComplianceWith Laws
and Regulations

                 We have audited the financial statements of the Export-Import Bank of
                 the United States for the years ended September 30,1989 and 1988, and
                 have issued our opinion thereon. This report pertains only to our review
                 of the bank’s compliance with laws and regulations for the year ended
                 September 30,1989. Our report on the banks compliance with laws and
                 regulations for the year ended September 30, 1988, is presented in GAO/
                 AFMDW94,   dated July 25, 1989.

                 We conducted our audit in accordance with generally accepted govern-
                 ment auditing standards. Those standards require that we plan and per-
                 form the audit to obtain reasonable assurance about whether the
                 financial statements are free of material misstatement.

                 The management of the bank is responsible for compliance with laws
                 and regulations applicable to the bank. As part of obtaining reasonable
                 assurance as to whether the financial statements were free of material
                 misstatement, we selected and tested transactions and records to deter-
                 mine the bank’s compliance with certain provisions of the following
                 laws and regulations which, if not complied with, could have a material
                 effect on the bank’s financial statements. However, it should be noted
                 that our objective was not to provide an opinion on the overall compli-
                 ance with such provisions.

                 We tested compliance with

             l the Export-Import Bank Act of 1945 (12 U.S.C. 635 et seq.);
             . the Foreign Operations, Export Financing, and Related Programs Appro-
               priations Act, 1989 (Public Law 100-461, Title IV, 102 Stat. 2268-19-20);
             . the Government Corporation Control Act; and
             l the Prompt Payment Act (31 USC. 3902,3903, and 3905).

                 Because of the limited purpose for which our tests of compliance were
                 made, the laws and regulations tested did not cover all legal require-
                 ments with which the bank has to comply.

                 The results of our tests for fiscal year 1989 indicate that, with respect to
                 the items tested, the bank complied in all material respects with those
                 provisions of laws and regulations that could have a material effect on
                 the financial statements. With respect to transactions not tested,
                 nothing came to our attention that caused us to believe that the bank
                 had not complied, in all material respects, with those provisions.




                 Page 14                                      GAO/~9080      Export-Import   Bank
Fha3xcid Statements


Statements of Financial Condition

                                                        (Dollars   in Millions)
                                                                                           As of September 30,
                                                                                           1989            1988
                                                                                                            As
                                                                                                         Restated
                                          ASSETS
               Cash and cash equivalents                                              $       72.0            $       92.7
               Loans receivable,   net (Note 2)                                           6,229.l                 7,460-l
               Claims receivable,   net (Note 3)                                          1,113.2                 1,295.6
               Accrued interest   and fees receivable                                        270.4                   412.4
               Other assets                                                                   10.6
                     Total assets

                      LIABILITIES         AND STOCKHOLDERSEQUITY
               Borrowings      (Note 4)                                               $10,983.6               $10,957.6
               Claims payable       (Note 31                                               812.0                   428.1
               Accrued interest        payable                                              98.7                   101.1
               Other liabilities                                                            26.7                    48.2
                     Total liabilities                                                 11,921 . 0              11,535 . 6
               Commitments and contingencies       (Note              9)
               Capital     stock held by U.S. Treasury                                    l,ooo.o                l,ooo.o
               Unexpended appropriations      (Note 8)                                         72.9                  85.1
               Accumulated      deficit
                       Total stockholders  equity                                     +s%                     -i72i%x
                      Total liabilities            and stockholders
                        equity                                                        .j 7.695.3              $ 9.270-l


                                                      See accompanying       notes.




                                              Page 15                                                 GAO/AF’MD-90-80     Export-Import   Bank
                                                  Pinancial     Statements                                                                                 .




Statements of income and Change8 in Retained Earnings

                                                              (Dollars       in Millions)
                                                                                                        For the year      ended
                                                                                                           September      30,
                                                                                                         1989                 1988
                                                                                                                               As
                                                                                                                           Restated
             Interest      income
                Interest      on loans                                                              $      663.7          $      807.3
                Interest      on investments                                                                15.3                  40.2
                     Total    interest   income                                                            679.0                 847.5
             Interest      expense
                Interest     on borrowings                                                               1,262.6              1,353-s
                Other interest         expense (Note               61                                         9.6                  6.9
                     Total    interest     expense                                                       1,272 . 2            1,360.4
             Net interest          income                                                                 (593.2)               (512.91
             Provision      for      possible      losses         on loans          (Note     21           718.9                 256.4
             Provision      for      possible      losses         on claims          (Note     31          368.3                 132.6
             Net Interest          Income after          provisions           for     losses            (1,680.41               (901.91
             Non-interest   income
               Commitment fees                                                                                9.2                   9.3
               Exposure fees                                                                                  6.1                   8.6
               Insurance   premiums             and guarantee              fees                              46.7                  49.0
               Other income                                                                                     .8                    .9
                    Total non-interest               income                                                  62.8                  67.0
             Non-interest     expense
               Administrative      expenses                                                                 20.0                   19.4
               Claim loss expenses (recoveries)                                                            293.8                  (38.0)
               Other expenses                                                                               17.2                   32.4
                    Total non-interest      expense                                                        331.0                   13.8
              Net loss                                                                                  (1,948.61               (847.9)
              Accumulated    deficit     - beginning                 of the         year,
                 as previously       reported                                                             (116.4)                 311.8
              Adjustment    to reflect  cumulative                       effect      of
                  prior  period adjustments                                                                                   (2,813.91
              Accumulated    deficit            - beginning          of the         year,
                 as restated                                                                            (3,350.O)             (2,502.l)
              Accumulated         deficit       - end of the year                                   $(5,298.6)             s(3.350.0)
                                                       See accompanying                   notes.




                                                   Page 16                                                           GAO/AFMD-90-80        Export-Import   Bank




                                                                                          I
                                             Pinadd       Statementa




Statements of Cash Flows

                                                      (Dollars     in Millions)
                                                                                            For the year    ended
                                                                                               September    30,
                                                                                             1989               1988
                                                                                                                 As
                                                                                                             Restated
            CASH FLOWS FROM OPERATIONS
              Net loss                                                                 $(1,948.6)            $        (847.9)
              Adjustments     to reconcile   net loss to
                net cash provided:
                   Amortization     of unexpended appropriations                                ( -7)                   ( .7)
                   Provision    for possible    losses on loans                               718.9                    256.4
                   Provision    for possible    losses on claims                               368.3                   132.6
                                                                                             (862.1)                  (459.6)
                      Increase      in claims   receivable,    excluding
                          allowance     for possible    losses                               (185.9)                  (168.7)
                      Decrease in accrued interest           and fees
                          receivable                                                          142.0                    176.1
                      Decrease (increase)         in other assets                              (1.3)                    64.9
                      Increase      (decrease)    in claims payable                           383.9                    (22.9)
                      Decrease in accrued interest           payable                           (2.4)                    (12.5)
                      Increase      (decrease)    in other liabilities                         (21.5)
                          Net cash from operations                                           (547.3)                  (41;::)
            CASH FLOWS FROM INVESTING ACTIVITIES
              Loan disbursements                                                              (686.1)                  (511.6)
              Repayments of loans receivable                                                1,198.l                  1,821.7
                   Net cash from investing   activities                                        512.0                 1,310.l
            CASH FLOWS FROM FINANCING ACTIVITIES
              Repayments of Federal Financing         Bank
                Borrowings                                                                 (1,079.O)             (1,688.8)
              Borrowings    from the Federal Financing      Bank                            1,105.o                    183.0
              Unexpended appropriations      receipts
                  (disbursements)                                                              (11.4)                      7.6
                     Net cash from financing     activities                                     14.6             (
              Net decrease in cash and cash equivalents                                        (20.7)        +si%

            Cash     and cash equivalents        - beginning            of the year             92.7                   694.3
            Cash and cash equivalents            - end of the            year          s        72.0         392.7
            Supplemental   Disclosures        of Cash Flow Information:
              Cash paid during     the      year for interest   (net of
              amount capitalized)                                                      $ 1,274.6             $ 1,354.l
                                                                       See accompanying   notes.




                                             Page 17                                                    GAO/AJ?MD-!JW30          Export-Import   Bank
                                                                                                                                   .
                                                 Plnanelal   Statements




Notee to Flnanclal Statement8

                     1.   Summary of Significant                  Accounting       and Reporting   Policies

                     Enabling      Legislation          and Statutory          Limitations

                            The Export-Import         Bank of the United States (Eximbank)        is an
                     independent     corporate     agency of the United States,         which was first
                     organized     as a District       of Columbia    banking corporation     in 1934.
                     The primary     legislation       governing   its operations    consists   of the
                     Export-Import      Bank Act of 1945, as amended, and the Government
                     Corporation     Control     Act.
                                Under the Export-Import          Bank Act the Bank is limited             to $40
                     billion       of loans,     guarantees      and insurance      outstanding       at any one
                     time.        Guarantees     and insurance       are charged against         the $40 billion
                     limitation         at not less than 25 percent             of Eximbank's      contractual
                     liability,         with the provision        that the aggregate        amount of
                     guarantees         and insurance     so charged may not exceed $25 billion
                     outstanding         at any one time.         Thus, Eximbank's        contractual
                     commitments outstanding             at any one time could reach $58.75 billion,
                     consisting         of $25 billion      of guarantees        and insurance      outstanding,
                     resulting        in a $6.25 billion         charge against      the $40 billion
                     limitation,         and $33.75 billion         (additional     commitments)       charged at
                      100 percent        against    the limitation.
                     Statements       of Cash Flow
                            In November 1987, the Financial               Accounting      Standards    Board
                     issued Statement        No. 95, "Statement          of Cash Flows" (SFAS 95).            The
                     Bank elected        to adopt the provisions          of SFAS 95 for fiscal          year
                     1988 by presenting         the Statements        of Cash Flow in place of the
                     Statement     of Changes in Financial            Position.       For purposes of
                     implementing        SFAS 95, the Bank defined           cash equivalents        as short-
                     term highly     liquid     investments     with original         maturities     of three
                     months or less.         This definition        includes      all of the Bank's
                     invei3tmuii~S    iii U.6, ~a~aaeu~y     LswEisiae          at septcmber     30,  $999 and
                     1988.
                     Accrued      Interest        on Loans Receivable
                             Interest      is accrued on loans as it is earned.       Loans
                     receivable       delinquent      90 days or more are placed in a nonaccrual
                     status     unless they are well secured and significant          collections
                     have been received          during the past year.    Any accrued but unpaid
                     interest      previously     recorded on loans placed in a non-accrual
                     status     is reversed      against   current period interest  income.




                                                 Page   18                                              GAO/AFMD88-8OExPort-ImPortBank
-
                             Financial    Statement43




    Accounting   for    Capitalized          Interest
    on Rescheduled      Loans
             Frequently,        terms of rescheduling        agreements      require  that
    previously        accrued       interest    be added to the loan receivable          balance
     (capitalized).           When this occurs for loans in a non-accrual                status,
    the accrued interest               to be capitalized     is credited      to income at the
    time the interest             is capitalized.        Any reduction     in income and in
    the receivable           value which should be recorded            for such capitalized
    interest        is included        in the provision     and allowance       for possible
    loan losses,          respectively.
    Allowance  for     Possible          Loan and
    Claim Losses
           Eximbank recorded allowances            for loan and claim receivable
    losses for the first        time in fiscal          year 1989.      The allowance      for
    possible    loan and claim receivable             losses provides        for the risk of
    loss inherent       in the lending       process.       Providing     for such losses
    does not imply that any loans or claims will                    be written     off.    It
    recognizes      the fact that the prospects             of collection       of some of the
    Bank's loans and claims are sufficiently                   far into the future       that
    the value of the loans and claims              receivable       are impaired.       The
    allowance     is a general     allowance      available       to absorb loan and claim
    losses related        to the total     loan and claim portfolios.              The
    allowance     is increased     by provisions         charged to expense and
    decreased     by charge-offs,       net of recoveries.
            The establishment     of an allowance      for possible     loan and claim
    receivable     losses for fiscal       year 1989 was a change in accounting
    principle.       In accordance    with the provisions       of Accounting
    Principles     Board Opinion No. 20, the fiscal          year 1988 financial
    statements     have been restated       to reflect    the change.      The effect    of
    this change was to increase          the fiscal      ear 1988 net loss from it's
    previously     reported   level of $460.9 mil 'fI*ion to $847.9 million           as
    reported    in the fiscal     year 1988 comparative       financial     statements
    as restated.

    Loan Fees
           The Bank adopted effective        October 1, 1988, the provisions         of
    Statement    of Financial    Accounting    Standards    No. 91 "Accounting     for
    Nonrefundable     Fees and Costs Associated        with Originating     or
    Acquiring    Loans and Initial     Direct    Costs of Leases"       (SFAS 91).     As
    a result,    the risk related     exposure fee charged on loan
    disbursements     is recognized    as an adjustment      to the yield    over the
    life   of the loan.
           Commitment fees on Eximbank's    direct   loans,   which are
    generally   nonrefundable, are calculated      and recognized   monthly
    based on the commitment fee rate multiplied         by the undisbursed                 loan
    balance outstanding.
                                                        2




                             Page19
                                                                                                                4
                       Financial   Statements




Guarantee     and Insurance        Fees
        Fees under guarantee      and insurance    policies  are deferred    when
collected    and recorded    in a liability      account.   Deferred   fees are
recognized    as income on a straight        line basis over the life      of the
guarantee    and insurance     policies.
Claims    Payable
        Liabilities           for claims arising    from the bank's guarantee     and
insurance         activities,       and the related    estimated  losses and loss
adjustment         expenses,      are accrued based on historical       and
anticipated          loss experience.
Reclassifications
       The. Bank has reclassified    the presentation              of certain fiscal
year 1988 information      to conform with the fiscal               year 1989
presentation    format.
2.    Loans Receivable
        The Bank extends medium-term and long-term                 direct      loans to
foreign    buyers of U.S. exports           and intermediary       loans to fund
responsible      parties      that extend loans to foreign           buyers.       Loans
extended under the medium-term              loan program have repayment terms of
one to seven years,           while loans extended under the long-term                  loan
program have repayment terms in excess of seven years.                           Both the
medium-term      and long-term        loans cover up to 85 percent             of the U.S.
export value of shipped goods.                The Bank's direct       loans carry the
lowest fixed        interest     rate permitted    for the country         and term under
the "Arrangement          on Guidelines     for Officially      Supported        Export
Credits"    negotiated        among members of the Organization              for Economic
Cooperation      and Development         (OECD).   For intermediary          loans,
financing     institutions         engaged in the business        of making export
loans to buyers of U.S. exports               and unrelated     to the exporter           may
borrow from the Bank at less than the OECD interest                       rate to permit
the lender to charge the fixed OECD rate to the foreign                          buyer and
retain    an interest        spread for handling       the transaction.
        The Bank's loans receivable         as shown in the Statement of
Financial    Condition      are net of an allowance      for possible     loan
losses.     At September 30, 1989 and 1988, the allowance             for possible
loan losses equaled 33.6 percent            and 24.7 percent,    respectively,     of
the total    outstanding       loans receivable   balance.    The balance of
loans receivable,        net, at September 30, 1989 and 1988 consists          of
the following      (in millions):




                                                3




                       Page20                                                GAO/AFMD-90-80     Export-Import   Bank
*.

                               Flnanclsl   Statements




                                                                          September   30,
                                                                 1989             -      1988
     Total Loans                                            $9,3                      $9,905.3
     Less:   Allowance        for    possible
        loan losses                                             3,152.8                   2,445.2

     Loans Receivable-net

               The changes that occurred to the allowance      for loan                         losses     for
     fiscal      years 1989 and 1988 are as follows   (in mlillions):
                                                                          September   30,
                                                                 1989                   1988
     Balance,     as previously     reported                $                 -       8                -
     Ad justme.nt   for restatement                                                       2,190.6
     Balance at beginning         of year                       2,445.2                   2,190.6
     Provision     charged to expense                              718.9                     256.4
     Charge-Offs                                                   (16.8)                      (5.2)
     Less: Recoveries                                                   5.5                      3.4

     Balance      at end of year                            $31152.8
             The provision    for possible    loan losses is based on the Bank's
     evaluation     of the loan portfolio       taking into consideration        a
     variety    of factors,     including  repayment status    of loans, assessment
     of future    risks,    and worldwide   economic and political       conditions.
              From time to time Eximbank extends the repayment date and
     modifies      the interest      terms of some or all principal                 installments
     of a loan because the obligor               or country      has encountered           financial
     difficulty       and Directors      of the Bank have determined                that providing
     relief      in this manner will        enhance the ability          to collect          the loan.
     The outstanding         balances    related      to rescheduled        installments
     included      in loans receivable         as of September 30, 1989 and 1988 were
     $4,201.6 million         and $3,893.6       million,     respectively.           The
     rescheduled        loan installments        of principal      and interest          for fiscal
     year 1989 were $250.9 million               and $161.0 million,           respectively,         and
     for fiscal       year 1988 were $202.9 million              and $138.0 million,
     respectively.          The interest      rate on rescheduled           loans is generally
     a floating       rate of interest        which is 37.5 to 50.0 basis                points
     over the Bank's cost of funds.
           The amount  of undisbursed    commitments to debtors having
     rescheduled   debt outstanding   was $349.8 million  and $138.7 million
     as of September 30, 1989 and 1988, respectively.
     3.       Claims   Receivable
               Claims receivable  represent the outstanding     balance of claims
     paid      or pending payment which were submitted     to the Bank in its
                                                        4
     ii




                               Page21                                                          GAO/AFMD-90-(IOExport-ImportBank
                                                                                                              ,
                                                                                                                    ‘I,



                       Financial    Statements




capacity    as guarantor   and insurer    under the Bank's export guarantee
and insurance    programs.     Also included    in claims   receivable  is the
Bank's estimate     of expected recoveries      on claims for guaranteed      or
insured   events which have been or will        be incurred    but have not
been reported    to the Bank (IBNR).       Estimated    IBNR recoveries   are
equal to 100 percent      of the Bank's estimated       IBNR liability,   which
is included    in claims payable.
        The Bank's claims receivable       as shown in the Statement of
Financial    Condition     are net of an allowance    for possible    claim
losses.     At September 30, 1989 and 1988, the allowance          for possible
claim losses equaled 59.6 percent and 49.6 percent,            respectively,
of the total     outstanding     claims receivable  balance.     The balance of
claims receivable,       net, at September 30, 1989 and 1988 consists         of
the following     (in millions):
                                                                  September   30,
                                                           1989                 1988
Claims previously       paid       and
 unrecovered:
    Rescheduled                                          $1,232.3             $1,295.2
    Non-rescheduled                                          710.4                845.5
Claims filed      pending payment                           531.0                 158.0
Incurred    but not reported   (IBNR)
  estimated    recoveries                                   281.0                 270.1
Claims    receivable                                     $2,754.7             $2,568.8
Less:    Allowance     for     possible
    claim losses
Claims Receivable,           net
The changes that       occurred to the allowance for possible     claim
losses for fiscal       years 1989 and 1988 are as follows    (in millions):
                                                                  September   30,
                                                           1989                  1988
Balance,   as previously   reported                  $               -        s
Adjustment   for restatement                                                    1,140.6
Balance at beginning     of year                          1,273.2               1,140.6
Provision   charged to expense                               368.3                 132.6
Balance    at end of year
       The provision         for possible      claim losses is based on the Bank's
evaluation        of claims     receivable     taking  into consideration       a variety
of factors,        including      repayment status     of the claims,     assessment of
future     risks,     and worldwide       economic and political      conditions.       The
Bank, based on management's               judgement,   includes   in its allowance

                                                 5




                       Page 22                                                     GAO/AFMD-90-80   Export-Import         Bank
                                                                                              ..-
                            FinancialStatements




for possible   claim losses  an allowance                           for IBNR estimated
recoveries   equal to 50 percent of the                           IBNR estimated    receivable.
4.    Borrowings
        As of September 30, 1989, 70.7 percent       of the Bank's $10,983.6
million    long-term      debt owed to the Federal Financing   Bank (FFB),
has maturity      dates within    the next five years as indicated   below
(dollars     in millions):
                                                                            Weighted
                      Fiscal                                                Average
                    Years       of                     Amount               Rate on
                   Maturities                         Maturing             Maturities
                       1989                       $         -                 11.31%
                       1990                            1,638.8                11.30
                       1991                            1,281.g                11.06
                       1992                            1,433.5                10.68
                       1993                            1.713.9                10.57
                       1994                                                    9.61

                   1995 - 1999


        FFB borrowings,     with an outstanding        balance of $7,578.1
million     as of September 30, 1989, include            a provision     for
prepayment penalties.          The remaining      borrowings     of $3,405.5 million
as of September 30, 1989, have note terms that state the notes may
be prepaid      without  penalty   upon consent of FFB and Treasury.
However, Treasury       has not consented       to prepayments       without penalty.
The penalty      amount  is equal to the difference           between the present
value    of the future     cash payments of the debt based on its
contractual      terms and the present       value of the debt payments
computed using the then current           FFB lending      rate.
        Eximbank has authority          under its authorizing       legislation       to
borrow directly        from the U.S. Treasury       and to have up to $6 billion
of such borrowings         outstanding.       The Bank avails     itself      of this
authority     for its short-term         needs on a daily     basis at a 91-day
Treasury    bill    rate.     Excess cash is also used to reduce these
borrowings       on a daily    basis.     The bank did not have borrowings
outstanding       owed to Treasury       at September 30, 1989 and 1988.
5.   Interest       Subsidies
       In fulfilling       its mission    to aid                   in financing      and facilitating
exports   of U.S. goods and services           to                  foreign    countries    and to
provide   U.S. exporters        with financing                     which is competitive         with
that provided        by foreign    governments                   to their     exporters,    the Bank
                                                        6




                            Page23                                                        GAO/AFMD-90.80Export-ImportBank
                                                                                                          I
                                                                                                                “I




                         Financial Statements




frequently  lends money at interest    rates lower than its cost                     of
borrowings.    This results in a negative    interest rate spread
between the Bank's loans and its borrowings.
        The weighted average interest        rate for the Bank's foreign          loan
portfolio    at September 30, 1989, equaled 8.92 percent,              while the
weighted    average interest       rate on the Bank's FFB borrowings          equaled
11.31 percent,      resulting    in a negative     interest   rate spread of 2.39
percent.     The cost associated        with the negative     interest   rate
spread at September 30, 1989, which is appropriately                 not reflected
in these financial        statements,    is estimated     to be approximately
$821 million     based on the maturity       period of the FFB debt.
6.   Related     Party    Transactions
      The Bank's statements   reflect the results   of contractual
agreements with the Foreign Credit    Insurance   Association    (FCIA),
and with the Private   Export Funding Corporation     (PEFCO).
        FCIA is an association        of primary      insurance    companies.
Eximbank issues export credit            insurance      in cooperation      with FCIA.
Under a contractual       agreement,       Eximbank reinsures         all of the
commercial     risks and, in addition,          insures     all political      risks,
covers any operational          expenses in excess of premiums, and has a
majority    on the FCIA Board of Directors.               Under the contractual
agreement with Eximbank, FCIA markets and administers                     the insurance
policies,    including    billing     and collecting        premiums, processing      and
paying claims,       and pursuing     recovery     on claims.
        Premiums written        and earned by FCIA for fiscal             years 1989 and
1988 were $8.4 million           and $13.3 million,         respectively,      for
commercial      risks,    and $18.0 million          and $15.2 million,
respectively,        for political       risks,     for a total   of $26.4 million        and
$28.5 million.          FCIA's general       and administrative         expenses were
$12.5 million       and $12.4 million           for those years.        Premium revenues,
net of expenses,         are ceded to Eximbank.           Eximbank recognizes         the
net premium revenues generated               by the insurance        program over the
life    of the insurance        polices.        The net amounts that are due from
FCIA to Eximbank as of September 30, 1989 and 1988 were $4.5
million     and $3.3 million,         respectively.       These receivables        are
included      in other assets.
         PEFCO is an organization          owned by private       sector banks and
industrial      companies which makes fixed           interest     rate loans to
foreign     borrowers     when such loans are not available              from
traditional       private   sector lenders       on competitive       terms.   PEFCO has
agreements with Eximbank which,              for specified      fees, provide    that
Eximbank will         (1) guarantee    the due and punctual         payment of
principal      and interest      on all export loans made by PEFCO, (2)
guarantee     the due and punctual          payment of interest         on PEFCO long-
term debt obligations          when requested       by PEFCO, (3) hold a $50
million     short-term     revolving     credit   line at the disposal        of PEFCO,
                                                7




                         Page 24                                             GAO/AFMD-M-80      Export-Import        Bank
    \
c


                                Financial   Statements




        (4) protect    PEFCO against   movements in interest     rates adversely
        affecting   the spread between PEFCO's fixed      rate loan commitments to
        borrowers   and the eventual    cost of funding   such commitments (PEFCO
        has waived such protection      with respect to all fixed      rate loan
        commitments heretofore      made and which may be made through
        September 30, 1990), and (5) retain       a broad measure of supervision
        over PEFCO's major financial       management decisions.
                 In a separate       agreement consummated in fiscal              year 1980,
        Eximbank and PEFCO agreed to share in providing                       a total   of $1,350
        million      of U.S. export financing           at fixed     rates of interest.
        Eximbank's       share of the total          was $251 million       and PEFCO's share
        was $1,099 million.            Eximbank serviced         PEFCO's share of these loans
        for PEFCO, and guaranteed               PEFCO's contractual         interest    rate on
        these loans.         The rate charged by PEFCO and guaranteed                 by Eximbank
        includes       a return    to PEFCO of 0.35 percent.             Eximbank disbursed
        funds under the total            loan commitment to the borrowers,              including
        PEFCO's portion,         and was subsequently          reimbursed      by PEFCO. The
        Bank recorded disbursements               for PEFCO's portion         of the loan
        commitments        in a receivable        account included       in other assets and
        reduced this account when reimbursements                    were received     from PEFCO.
        PEFCO reimbursed         Eximbank $97.0 million           in August 1988 for the
        final     disbursement       made under this agreement.             When Eximbank
        receives      a payment related         to these loans from the debtor,              it
        remits PEFCO's portion             of the payment on the date it is received.
        Should interest         received     on the loan be less than interest               due
        PEFCO under the terms of the guarantee,                   Eximbank charges its other
        interest      expense for the shortfall.              During fiscal       year 1989, $8.9
        million      of the Bank's $9.6 million            charged to other interest
        expense was attributable             to loans covered under this guarantee
        agreement.        In comparison,        in fiscal     year 1988, $6.2 million           of the
        Bank's $6.9 million           charged to other interest            expense was due to
        loans covered under the guarantee                 agreement.
        7.   Pensions     and Accrued        Annual      Leave
                Virtually        all of Eximbank's         employees are covered by either
        the Civil        Service     Retirement      System (CSRS) or the Federal Employees
        Retirement        system (FERS).          For CSRS employees,         Eximbank withholds     a
        portion      of their       base earnings.         Their contribution       is then matched
        by Eximbank and the sum is transferred                    to the Civil      Service
        Retirement        Fund, from which the CSRS employees will                  receive
        retirement        benefits.        For FERS employees,         Eximbank withholds,       in
        addition      to social       security     withholdings,       a portion    of their    base
        earnings.         Eximbank contributes            an amount proportional        to their
        base earnings          toward retirement,          and in addition       a scaled   amount
        toward each individual              FERS Employee's       Thrift    Savings Plan,
        depending        upon his/her       level    of savings.       The FERS employees will
        receive      retirement       benefits     from the Federal Employees Retirement
        System, Social           Security     System and, from the Thrift           Savings Plan,
        deposits      that have accumulated             in their    accounts.

                                                         8




                                Page 25                                                GAO/MMD-90-80Export-Import Bank
                         Financial   Statemente




       Total Eximbank (employer)        matching contributions       to the Civil
Service    Retirement    System    and Federal Employees Retirement        System
for all    employees,    included    in administrative    expenses,    were
approximately      $1,044,000     and $938,000 for fiscal      years ended
September 30, 1989 and 1988, respectively.
        Although     Eximbank funds a portion         of pension benefits          under
the Civil      Service    and Federal employees Retirement               System relating
to its employees and makes the necessary                  payroll     withholdings     from
them, Bximbank does not account for the assets of the Civil                         Service
and Federal Employees Retirement              Systems nor does it have actuarial
data with respect         to accumulated      plan benefits        or the unfunded
pension liability         relative    to its employees.           These amounts are
reported      by the Office       of Personnel    Management for the Retirement
Systems     and are not allocated         to the individual         employers.      The
Office     of Personnel      Management also accounts           for all health      and
life    insurance     programs for retired        federal     employees.
       Eximbank's   liability          to employees for accrued annual leave,
included    in other liabilities,           was $1,056,000  at September 30, 1989
and $950,000 at September              30, 1988.
8.   Appropriations        from the       U.S.        Treasury
       For fiscal      year 1988, Congress authorized       an appropriation    of
up to $110 million         for a "War Chest" for the purpose of making
grants   and to reimburse       the Bank for interest     rate subsidies     in
connection    with loans made available        by the Bank to support U.S.
export sales,       with the proviso    that any authorization      of "War
Chest" funds would reduce the amount available              to the Bank in
fiscal   year 1988 for authorizing         new loans.   Of the $110 million,
$7.6 million      in appropriated    funds was received       by the Bank in
fiscal   year 1988.
        As of September      30, 1988, the balance of unexpended "War
Chest" appropriations          from fiscal      year 1988 and prior         years was
$85.0 million.         During fiscal       year 1989, disbursements           of $11.4
million     for grants     were made from these funds.               In addition,      $0.7
million     representing     the difference        between the Bank's standard
interest      rate and the lower rate authorized             for some loans as a
grant equivalent,        was credited       to income.      This reduced the balance
of unexpended appropriations             to $72.9 million        as of September 30,
1989.     Of this balance,         $36.2 million      is specifically       available      for
future    grant disbursements          and $36.7 million       is specifically
available      to reimburse      the Bank for interest         rate subsidies        in
connection       with the five loans under the program with authorized
interest      rates which are lower than the Bank's standard                   interest
rate.     The Bank had $60.0 million            outstanding      on total     commitments
of $139.1 million        at September 30, 1989, for the five loans with
interest      rate subsidies       as a grant equivalent.


                                                  9




                        Page28                                                  GAO/AFMDBO-I(OExport-ImportBank
         5

    ,b

*
                                     PinancialStatementa




                   For fiscal    year 1989, Eximbank was authorized                  to receive "War
             Chest" appropriations     up to $110 million,     however,              since no War
             Chest grante were authorized     by the bank in fiscal                  year 1989, none
             of the fiscal    year 1989 appropriation      was received.
             9.   Commitments        and Contingencies
                     At September 30, 1989, Eximbank's    outstanding receivables,
             guarantees     and insurance, and their   impact on the Bank's statutory
             limits     (see Note 1) for such purposes are as follows    (dollars  in
             millions):
                                                                                           Statutory
                                                             Amount                        Authority
                                                         Outstanding                           Used
             Outstanding    Loans                        $ 9,381.g                         $ 9,381.g
             Ondisbursed    Loans                          1,925.0                           1,925.0
             Estimated    Recoveries       on
                Disbursed   Claims                         1,942.7                            1,942.7
             Guarantees                                    5,381-l                            1,345.3
             Insurance                                     8,190.8                            2,047.7
             Committed     Balance                                                         $16,642,6

                      Limitations       on the amount of loans,             and guarantees     and
             insurance        which may be committed by Eximbank in any given year are
             established         each year by legislation            enacted by Congress.          For
             fiscal      year 1989, Eximbank's            loan limitation         was $718.8 million.
             Guarantee        and insurance        authorization      limitations      were $17,901.0
             million.         Actual    fiscal     year 1989 loan authorizations             were $718.8
             million.         Guarantee and insurance            authorizations       were $5,602.5
             million.         For fiscal       year 1988, Eximbank was limited             to $692.9
             million      of new loan authorizations              and war chest grants,          and
             $13,405.5        million     of new guarantee        and insurance       commitments.
             Eximbank authorized             $685.3 million       of loans and $7.6 million           in war
             chest grants,           and authorized       $5,734.6    million      of guarantees     and
             insurance        in fiscal      year 1988.
                   Since its inception,     Eximbank's     Charter  has been periodically
             renewed by Congress.       The Charter    currently   expires on
             September 30, 1992.
                     The Bank has no capital        leases.     Operating    lease arrangements
             are renewable annually.           These leases consist       primarily      of rental
             of the office     space and EDP equipment.            Office  space is leased from
             General Services      Administration       through the Public        Buildings    Fund.
             The lease expenses,        included    in administrative      expenses, were $2.4
             million     and $2.5 million      for fiscal     years 1989 and 1988,
             respectively.

                                                           10

             *




                                     Page27                                                 GAO/AFIMDSO-SOExport-ImportBank
                                                                                                      .

                       Financial   Statements




          As of the end of fiscal           year 1989, the Bank was named in
several      legal actions,       virtually     all involving      claims under the
guarantee       and insurance       programs.      Currently,    it is not possible     to
predict      the eventual     outcome of the various          actions.     However, it
is management's opinion            that these claims will          not result    in
liabilities       to such an extent that they will             materially     affect the
Bank's financial        position.




                                                11




                       Page 28                                              GAO/APMD-90-80   Export-Import   Bank