Classified Activities
FASAB Contact: Monica Valentine, valentinem@fasab.gov, 202-512-7350
| Request for Comment | Due Date | Word Version of questions for Respondents | Comment Letters | Final Pronouncements |
|---|---|---|---|---|
| Interpretation of Federal Financial Accounting Standards 56: Classified Activities (PDF) | August 13, 2018 | N/A | N/A | Interpretation of Federal Financial Accounting Standards 8: An Interpretation of Statement of Federal Financial Accounting Standards 56, Classified Activities (PDF) |
| Classified Activities (PDF) | March 16, 2018 | Word Version of Questions for Respondents (Download) | Comment Letters | Classified 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
March 15, 2019
On March 15, 2019, FASAB issued Interpretation of Federal Financial Accounting Standards 8: An Interpretation of Statement of Federal Financial Accounting Standards (SFFAS) 56, Classified Activities.
The objective of SFFAS 56 is to balance the need for financial reports to be publicly available with the need to prevent the disclosure of classified national security information or activities in publicly issued General Purpose Federal Financial Reports (GPFFRs). SFFAS 56 allows financial presentation and disclosure to accommodate user needs in a manner that does not impede national security.
SFFAS 56 permits modifications that do not affect net results of operations or net position. In addition, SFFAS 56 allows 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 results of operations and/or net position.
Further, Interpretations of SFFAS 56, which may themselves contain classified information, will address the requirements of this and other standards and permit other modifications when needed to prevent the disclosure of classified information. Modifications permitted by SFFAS 56 and future Interpretations may affect the net results of operations and/or net position of those entities applying the Interpretations. Interpretation 8 is the first classified interpretation of SFFAS 56 that allows modifications to information required by other standards, and the effect of the modifications may change the net results of operations and/or net position.
Interpretation 8 provides a decision chart illustrating the Board’s intended implementation of the Interpretation. The Interpretation does not relieve reporting entities from their requirements and responsibilities to comply with other accounting standards in the appropriate classified environment as it relates to non-public records and reports. This illustration is non authoritative and depicts the process described in the Interpretation. The Interpretation 8 decision chart is available at
https://fasab.gov/projects/active-projects/classified-activities/.
Interpretation 8 will be maintained by FASAB. Due to the classified nature of Interpretation 8, contact FASAB to arrange access to Interpretation 8 as needed.
December 19-20, 2018
FASAB unanimously approved Interpretation of Federal Financial Accounting Standards 8: An Interpretation of Statement of Federal Financial Accounting Standards 56, Classified Activities. The Interpretation has been submitted to the sponsors for the 45-day review period.
The classified interpretation 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 interpretation, the document will only be made available to those individuals who have been designated as having a need to know and who hold the proper clearances.
October 24-25, 2018
On October 4, 2018, FASAB issued SFFAS 56 titled Classified Activities. SFFAS 56 balances the need for financial reports to be publicly available with the need to prevent the disclosure of classified national security information or activities in publicly issued General Purpose Federal Financial Reports (GPFFRs).
This Statement permits
- 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 results 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.
SFFAS 56 is available at http://www.fasab.gov/accounting-standards/.
The Board is continuing its deliberations on the draft classified Interpretation of Federal Financial Accounting Standards (SFFAS) 56: Classified Activities.
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