October 4th, 2018, was a busy news day. The fight over Brett Kavanuagh’s Supreme Court nomination dominated the cycle. The Trump White House received a supplemental FBI report it said cleared its would-be nominee of wrongdoing. Retired Justice John Paul Stevens meanwhile said Kavanaugh was compromised enough that he was “unable to sit as a judge.”
The only thing that did not make the news was an announcement by a little-known government body called the Federal Accounting Standards Advisory Board — FASAB — that essentially legalized secret national security spending. The new guidance, “SFFAS 56 – CLASSIFIED ACTIVITIES” permits government agencies to “modify” public financial statements and move expenditures from one line item to another. It also expressly allows federal agencies to refrain from telling taxpayers if and when public financial statements have been altered.
“From this point forward,” he says, “the federal government will keep two sets of books, one modified book for the public and one true book that is hidden.”
“It diminishes the credibility of all public budget documents,” he says.
I spent weeks trying to find a more harmless explanation for SFFAS 56, or at least one that did not amount to a rule that allows federal officials to fake public financial reports.
I couldn’t find one. This new accounting guideline really does mean what it appears to mean, and the details are more bizarre than the broad strokes.
The FASAB ruling adds a new and confusing wrinkle to what little we know about levels of spending in the intelligence community. Officially, the fiscal year 2019 appropriation is $81.1 billion, which breaks down to $59.9 billion for the National Intelligence Program, along with $21.2 billion for the Military Intelligence Program.
This made a few headlines, as Trump’s “black budget” request was described as the largest in history. However, as Aftergood notes, even the high FY ‘19 numbers do not include spending for “classified DoD operations and procurement.” Add now the possibility of future “modifications,” and the real answer for how big a share of national spending belongs to the intelligence community is probably “God only knows.”
Given that the intelligence budget number the government admits to is already larger than the annual defense budgets of all but two countries on earth (our own and China’s), it seems natural to ask: what are we getting ourselves into?
The story of openly secret budgets really began in 1949, with the passage of the Central Intelligence Agency Act. The law exempted the newly christened spy agency from public financial disclosure.
The CIA Act was a radical departure from the Constitution, which is clear about public accounting (emphasis mine):
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
The CIA Act created a blunt constitutional carve-out.
“The sums made available to the Agency may be expended without regard to the provisions of law and regulations relating to the expenditure of Government funds,” the law read. “For objects of a confidential, extraordinary, or emergency nature, such expenditures to be accounted for solely on the certificate of the Director…”
In other words, while other government agencies had to account for their expenses, the word of the CIA director was good enough when it came to what they’d spent and why.
No one much worried over this issue until the early Seventies. That’s when a series of scandals — from botched assassination attempts abroad to the discovery of legally proscribed domestic spying programs — invited closer scrutiny of the CIA. The most famous oversight effort came in the form of Idaho Senator Frank Church’s famed 1975 committee hearings scrutinizing America’s intelligence agencies.
At roughly the same time as the Church hearings, an insurance adjuster named William Richardson got fed up and filed suit against the U.S. government. Richardson wanted secret CIA budgets declared unconstitutional. He barely made the news (his suit was a page 8 blip in the New York Times).
Nonetheless, he went all the way to the Supreme Court, and by a thin margin (a 5-4 vote) the court ruled against Richardson, upholding the concept of secret budgets.