SECRECY NEWS
from the FAS Project on Government Secrecy
Volume 2018, Issue No. 60
October 9, 2018

Secrecy News Blog: https://fas.org/blogs/secrecy/

ACCOUNTING BOARD OKAYS DECEPTIVE BUDGET PRACTICES

Government agencies may remove or omit budget information from their public financial statements and may present expenditures that are associated with one budget line item as if they were associated with another line item in order to protect classified information, the Federal Accounting Standards Advisory Board concluded last week.

Under the newly approved standard, government agencies may "modify information required by other [financial] standards" in their public financial statements, omit otherwise required information, and misrepresent the actual spending amounts associated with specific line items so that classified information will not be disclosed. (Accurate and complete accounts are to be maintained separately so that they may be audited in a classified environment.)

See Classified Activities, Statement of Federal Financial Accounting Standards (SFFAS) 56, Federal Accounting Standards Advisory Board, October 2018.

The new policy was favored by national security agencies as a prudent security measure, but it was opposed by some government overseers and accountants.

Allowing unacknowledged modifications to public financial statements "jeopardizes the financial statements' usefulness and provides financial managers with an arbitrary method of reporting accounting information,” according to comments provided to the Board by the Department of Defense Office of Inspector General.

Properly classified information should be redacted, not misrepresented, said the accounting firm Kearney & Company. "Generally Accepted Accounting Principles (GAAP) should not be modified to limit reporting of classified activities. Rather, GAAP reporting should remain the same as other Federal entities and redacted for public release or remain classified."

The new policy, which extends deceptive budgeting practices that have long been employed in intelligence budgets, means that public budget documents must be viewed critically and with a new degree of skepticism.

A classified signals intelligence program dubbed "Vesper Lillet" that recently became the subject of a fraud indictment was ostensibly sponsored by the Department of Health and Human Services, but in reality it involved a joint effort of the National Reconnaissance Office and the National Security Agency.

See "Feds allege contracting fraud within secret Colorado spy warehouse" by Tom Roeder, The Gazette (Colorado Springs), October 5, 2018.

THE BELLS OF BALANGIGA, AND MORE FROM CRS

New and updated publications from the Congressional Research Service include the following.

Russian Compliance with the Intermediate Range Nuclear Forces (INF) Treaty: Background and Issues for Congress, updated October 5, 2018:

Defense Primer: The NDAA Process, CRS In Focus, updated October 3, 2018:

Chemical Facility Anti-Terrorism Standards, CRS In Focus, updated October 2, 2018:

Lebanon, updated October 5, 2018:

Iraq: Issues in the 115th Congress, updated October 4, 2018:

Argentina's Economic Crisis, CRS In Focus, October 2, 2018:

Mexico: Background and U.S. Relations, updated October 2, 2018:

Spain and Its Relations with the United States: In Brief, updated October 5, 2018:

Macedonia: Uncertainty after Referendum on Country's Name, CRS Insight, October 3, 2018:

Afghanistan: Legislation in the 115th Congress, October 3, 2018:

U.S.-South Korea (KORUS) FTA, CRS In Focus, updated September 28, 2018:

The Return of the Bells of Balangiga to the Republic of the Philippines, in Context, CRS In Focus, October 1, 2018:

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Secrecy News is written by Steven Aftergood and published by the Federation of American Scientists.

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