Classified Activities

FASAB Contact: Monica Valentine, valentinem@fasab.gov, 202-512-7362

Request for CommentDue DateWord Version of questions for RespondentsComment LettersFinal Pronouncements
Interpretation of Federal Financial Accounting Standards 56: Classified Activities (PDF)August 13, 2018N/AN/AN/A – Currently Under Due Process
Classified Activities (PDF)March 16, 2018Word Version of Questions for Respondents (Download)Comment LettersClassified Activities (PDF)

Project Objective:

In August 2016, the Department of Defense (DoD or the Department) identified several areas for the Federal Accounting Standards Advisory Board’s consideration where the application of general accepted accounting principles may result in the exposure of classified information. As the DoD was preparing to commence full-scope financial statement audits, it identified specific accounting standard requirements that could conflict with its responsibility to prevent the unauthorized disclosure of information in accordance with Executive Order (EO) 13526 of December 29, 2009, “Classified National Security Information.”

There are many federal departments and agencies engaged in classified activities such as those described above. In the recent past, information regarding the total amount budgeted for classified activities was not publicly disclosed. However, in the last decade, changes were made so that the topline budget numbers for such activities would be made available. Details remain classified including the amount of funding for particular components within the intelligence community and other departments or agencies. Disclosure of the funding details at lower levels of detail may harm the national security interests.

The affected departments and agencies thoroughly evaluated available options and determined that other options would not adequately resolve national security concerns. Based on input from stakeholders having national security expertise, the Board concluded that this Statement and future related Interpretations provide the optimal solution. This option would allow reporting entities to issue unclassified, publically available financial statements that comply with accounting standards. Without this Statement, there is a risk that reporting entities may need to classify their entire financial statements to comply with existing accounting standards which would likely result in the need to classify a large portion of the government-wide financial statements.

HISTORY OF BOARD DELIBERATIONS

August 29-30, 2018

The Board is continuing its deliberations on the draft classified Interpretation of Federal Financial Accounting Standards (SFFAS) 56: Classified Activities.

June 27-28, 2018

At the June 2018 meeting the Board unanimously approved the Statement of Federal Financial Accounting Standards (SFFAS) titled Classified Activities and the Classified Activities Interpretation exposure draft (ED). The Statement was submitted to the sponsors for the 90-day review period on July 5, 2018.

The proposed classified Interpretation of Federal Financial Accounting Standards (SFFAS) 56: Classified Activities would permit specific modifications to prevent the disclosure of classified information within unclassified general purpose federal financial reports (GPFFRs). Due to the classified nature of the proposal, the ED is only available to those individuals who have been designated as having a need to know and who hold the proper security clearances. The Board requested comments on the ED by August 13, 2018.

Issue Paper for June 27-28, 2018 – Tab F (PDF)

April 25-26, 2018

At the April 2018 meeting, the Board considered responses to the ED titled Classified Activities. The Board also reviewed staff’s analysis. A majority of respondents generally agreed with the proposal to permit component reporting entities to provide general purpose federal financial reports (GPFFRs) to the public by including limited modifications necessary to protect classified information from disclosure. This would allow financial presentation and disclosure to appropriately accommodate end user needs in a manner that does not impede national security.

Staff will provide a revised draft of the Statement at the June 2018 meeting.

Issue Paper for April 25-26, 2018 – Tab H & Attachments (PDF)

December 14, 2017

On December 14, 2017 the Board issued the proposed Statement of Federal Financial Accounting Standards (SFFAS) entitled Classified Activities.

The Board is proposing guidance to protect classified national security information or activities from unauthorized disclosure in a publically issued General Purpose Federal Financial Report. This proposal represents the first step in balancing the need for financial reports to be publicly available with the need to protect classified information from public disclosure.

This proposal would permit component reporting entities to provide GPFFR to the public by including limited modifications necessary to protect classified information from disclosure. This would allow financial presentation and disclosure to appropriately accommodate end user needs in a manner that does not impede national security.

The Board requests comments on the exposure draft by March 16, 2018, and encourages respondents to provide responses to all of the questions raised and the reasons for their positions. The exposure draft and the specific questions raised are available at the FASAB website in PDF and Word format, respectively (http://www.fasab.gov/documents-for-comment/).

October 25-26, 2017 Board Meeting

Issue Paper for October 25-26, 2017 – Tab C

August 30-31, 2017 Board Meeting

Issue Paper for August 30-31, 2017 – Tab C