Accounting Authority Finalizes Policy for Withholding Classified Budget Numbers

It’s final. The Pentagon and other agencies whose programs draw from highly classified budgets may withhold certain numbers from standard-format financial statements, an accounting authority announced last week.

Following months of controversy and consultation with affected parties, the Federal Accounting Standards Advisory Board implemented a final version of a statement released in draft this summer that disappointed critics who sought total transparency on spending for sometimes-controversial secret programs.

In publishing the Oct. 4 final statement, advisory board chairman D. Scott Showalter called the board’s approach a “practical solution” for what are called General Purpose Federal Financial Reports “to accommodating user needs for federal financial reports in a manner that does not impede national security.”

As of their Sept. 30 statements, the statement will permit:

• An entity to modify information required by other standards if the effect of the modification does not change the net results of operations or net position;
• A component reporting entity to be excluded from one reporting entity and consolidated into another reporting entity, and the effect of the modification may change the net result of operations and/or net position; and,
• An entity may apply interpretations of this statement, that allow other modifications to information required by other standards, and the effect of the modifications may change the net results of operations and/or net position.

Stronger requirements for making numbers public were favored by such critics of the draft statement as the Defense Department Office of the Inspector General and the accounting firm Kearney & Co.

Steven Aftergood, the pro-transparency blogger for the Federation of American Scientists, criticized the final statement for extending “deceptive budgeting practices that have long been employed in intelligence budgets.” Its implementation, he said, “means that public budget documents must be viewed critically and with a new degree of skepticism.”