Black Budget: Financial Accounts May Be “Modified” to Shield Classified Programs

By Steven Aftergood

In an apparent departure from “generally accepted accounting principles,” federal agencies will be permitted to publish financial statements that are altered so as to protect information on classified spending from disclosure.

The new policy was developed by the government’s Federal Accounting Standards Advisory Board (FASAB) in response to concerns raised by the Department of Defense and others that a rigorous audit of agency financial statements could lead to unauthorized disclosure of classified information.

In order to prevent disclosure of classified information in a public financial statement, FASAB said that agencies may amend or obscure certain spending information. “An entity may modify information required by other [accounting]standards if the effect of the modification does not change the net results of operations or net position.”

Agencies may also shift accounts around in a potentially misleading way. “A component reporting entity is allowed to be excluded from one reporting entity and consolidated into another reporting entity. The effect of the modifications may change the net results of operations and/or net position.” See Statement of Federal Financial Accounting Standards 56, FASAB, July 5, 2018 (final draft for sponsor review).

In response to an earlier draft of the new standard that was issued last December, most government agencies endorsed the move to permit modifying public financial statements.

“The protection of classified information and national security takes precedence over financial statements,” declared the Central Intelligence Agency in its comments (submitted discreetly under the guise of an “other government agency”).

“It is in the best interest of national security to allow for modification to the presentation of balances and reporting entity in the GPFFR [the publicly available General Purpose Federal Financial Report],” CIA wrote.

But in a sharply dissenting view, the Pentagon’s Office of Inspector General said the new approach was improper, unwise and unnecessary.

It “jeopardizes the financial statements’ usefulness and provides financial managers with an arbitrary method of reporting accounting information,” the DoD OIG said.

“We do not agree that incorporating summary-level dollar amounts in the overall statements will necessarily result in the release of classified information.”

“This proposed guidance is a major shift in Federal accounting guidance and, in our view, the potential impact is so expansive that it represents another comprehensive basis of accounting.”

“The Board should clarify whether this proposed standard, or subsequent Interpretations, could permit entities to record misstated amounts in the financial statements to mislead readers with the stated purpose of protecting classified information. We believe that no accounting guidance should allow this type of accounting entry.”

“We do not believe that… the Board’s proposed guidance would effectively protect classified information, comply with GAAP [generally accepted accounting principles], or serve the public interest,” the DoD OIG wrote.

The Kearney & Company accounting firm also objected, saying that it would be better to classify certain financial statements or redact classified spending than to misrepresent published information.

“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.”

If a published account is modified “so material activity is no longer accurately presented to the reader of financial statements, its usefulness to public users is limited and subject to misinterpretation.”

“This approach limits the value, usefulness, and benefits of financial statements as currently defined by GAAP. Financial statements of classified entities should remain classified or redacted like other classified documents before release to the public.”

“The integrity of current GAAP as it applies to all Federal entities should be retained,” Kearney said in its comments.

But the FASAB ultimately rejected those views.

“The Board determined that options other than those permitted in this Statement may not always adequately resolve national security concerns,” according to the final draft of the policy, which the Board provided to Secrecy News.

“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.”

In practice, the Board suggested, “Modifications may not be needed to prevent the disclosure of certain classified information. Therefore, this Statement permits, rather than requires, modifications on a case-by-case basis.”

The new accounting standard is expected to be approved by the FASAB sponsors — namely the Secretary of Treasury, the Comptroller General, and the Director of the Office of Management and Budget — by the end of a 90 day review period in October.

Last month, the FASAB issued a separate classified “Interpretation” of the new standard that addressed the policy’s implementation in detail. The contents of that document are not publicly known.

The topic of accounting for classified spending has been a challenging one for the Board, said Assistant Director Monica R. Valentine on Monday. “This is the first time we’ve had to deal with this sort of issue.”

Steven Aftergood directs the FAS Project on Government Secrecy. The Project works to reduce the scope of national security secrecy and to promote public access to government information.

Former Pentagon official calls for big UFO reveal after secret investigation

Source: Wtop


NORTHERN VIRGINIA — If evidence proving that extraterrestrials visited Earth has been squirreled away behind locked doors in Nevada, a former Pentagon official is calling for a big reveal.

“Show it to the National Academy of Sciences. Don’t hide it. Show it! We’ve been waiting for it! We’ve been waiting for it forever,” retired Air Force Col. David Shea said, raising his voice. “But so far, that hasn’t happened, and I don’t know why.”

Shea, 80, was the Air Force’s press spokesman on UFOs at the Pentagon from 1967 to 1971. He considers himself an “agnostic” when it comes to whether some unidentified flying objects are ships piloted by intelligent beings from faraway worlds.

“I would believe if I saw some evidence that showed we were visited by alien spacecraft, but there hasn’t been evidence to my mind of such,” he said in an interview at his Northern Virginia home.

In 1969, Shea wrote the news release that announced the end of Project Blue Book, an Air Force investigation of more than 12,000 UFO reports.

It concluded that there was no threat to national security, no sign of advanced technology and no evidence that UFOs are extraterrestrial.

And with that, it appeared to the public that the government had washed its hands of UFOs.

But in December, almost 50 years after Project Blue Book ended, came explosive news.

The New York Times reported that Bigelow Aerospace had been storing material recovered from “unidentified aerial phenomena” in its buildings in Las Vegas as part of a secret Pentagon UFO investigation project called the Advanced Aerospace Threat Identification Program (AATIP).

Shea was not surprised by news of the project’s existence, but he thinks if more people were aware of the government’s history with UFOs, they would better understand why, in his opinion, the government should not get involved again.

“The UFOs never seem to go away,” he said.

Government investigations and scientific studies

What is considered the modern UFO era began as Americans’ Cold War fears of the Soviet Union were heating up.

In 1947, a veteran pilot flying near Mt. Rainier in Washington reported seeing nine strange objects flying in formation at incredible speeds.

The sighting made national news, and the same year, the Air Force (still the Army Air Forces at the time) began investigating — with intelligence officers in charge — reports of UFOs.

“They really weren’t sure what was going on. But by the end of ’49 they quickly became convinced that there was no threat, and there was no visitation, there was no advanced technology, and that was a good time to get out of the business, but they didn’t,” Shea said.

The work went on under several code names including “Project Sign,” “Project Grudge” and “Project Blue Book.”

Scientists were asked to evaluate if the work should continue, first by the CIA in 1952 and then by the Air Force in 1966.

The latter study was led by physicist Edward Condon of the University of Colorado. “He concluded that the continuation of Project Blue Book is of dubious value,” said Shea.

In all, Project Blue Book examined 12,618 sightings reported between 1952 and 1969. Over 5 percent of those sightings — 701 — remain unidentified. “Does that mean they were spacecraft from another civilization? No, not necessarily. It just means there was not enough data to verify what they were. So that’s the problem,” Shea said.

Interestingly, “Project Blue Book” is the name of a new drama series that will begin airing this winter on the History Channel.

“It would appear that it will be more fiction than fact,” Shea said after reviewing promotional materials.

The History Channel describes the series as “based on the true, top-secret investigations into Unidentified Flying Objects (UFOs) and related phenomena conducted by the United States Air Force.” It also says a central figure in the series, Dr. J. Allen Hynek, “is recruited by the U.S. Air Force to spearhead a clandestine operation called Project Blue Book.”

Shea said that Project Blue Book investigations were never top secret, and that in real life, Hynek was hired by the Air Force as a special consultant on UFOs, not to “spearhead” Project Blue Book.

Missteps and misunderstandings

Shea is a public relations pro who spent 29 years with the Air Force and another 20-plus years working for Hughes Aircraft and, later, Raytheon. To complete his master’s degree in mass communication from the University of Denver in 1972, he wrote his thesis about how, from a PR perspective, the Air Force handled reports of unidentified flying objects.

“The story of the Air Force and UFOs is essentially a tale of a credibility gap wider than the Grand Canyon,” Shea wrote. “During its more-than-20-year history of investigating flying saucers, the Air Force has been accused of almost every conceivable sin, and had been guilty of most.”

In the 1940s and ’50s, UFO sightings that got press attention would prompt a quick explanation from the Air Force. “In those early days, any explanation of a sensational case seemed preferable to the Air Force than simply saying, ‘We don’t know at this point, the case is still under investigation,’” wrote Shea.

And because Air Force intelligence was kept in charge of the investigations, Shea said, there was unnecessary secrecy. “You know the intelligence people won’t tell their mother anything. They keep things close to the vest,” he said.

Of course, the Air Force’s actions led to questions and skepticism.

“What was initially an intelligence matter quickly evolved into a PR problem of the greatest magnitude,” Shea wrote. “The Air Force, ignoring public opinion on the subject, failed to communicate its conviction that UFOs were no cause for alarm and consequently was unable to convince the American public that what it was saying about UFOs was true. As a result the Air Force’s integrity and credibility as a fighting force was seriously questioned.”

Asked if, to his knowledge, the government covered up evidence of alien visitation in the past, Shea answered: “Absolutely not. It would be impossible to do so in our environment of leakers and whistleblowers.”

In its defense, Shea points out that the Air Force was placed in the impossible position of trying to prove that aliens are not whizzing around above Earth. “You can’t prove that something doesn’t exist. Why doesn’t the other guy prove that it does exist?” he said.

He also thinks the Air Force has been misunderstood. “The Air Force has never said that UFOs aren’t spacecraft from another civilization. What the Air Force has said is that there’s no convincing evidence that they present a threat, or they advance scientific knowledge, or that they are alien spacecraft. Convincing evidence is the key, and that’s what we don’t have,” said Shea.

What evidence would convince him that extraterrestrials have visited this planet?

“It would be great if an alien were to knock on the door of 1600 Pennsylvania Ave., but I don’t expect that to happen,” Shea said. “I would be convinced of extraterrestrial visitation should someone or some organization present to the National Academy of Sciences an ET piece of hardware that the NAS declares not of earthly origin.”

Should investigations continue?

Despite what he called “exhaustive” investigations and studies of UFOs, Shea said, the government has come up with nothing. “No eureka moment. No threat. No advanced technology. No alien spacecraft,” he said.

According to the Department of Defense, AATIP ended in 2012, but journalist Leslie Kean reports there’s evidence that the program is continuing without federal funding.

Shea doesn’t think that’s a good idea. “Why would the government want to do that again?” He asked. “We’ve been there, done that.”

Some argue that UFOs determined by Project Blue Book to be unexplained should be reinvestigated. “I submit it wouldn’t reveal anything new. There’s not enough data there to analyze and determine causes,” said Shea.

Regarding videos of UFOs apparently taken from military planes and reportedly studied as part of AATIP, Shea said: “What did they see? Who knows what they saw? Am I impugning their integrity? No. Not at all. They saw something, but we don’t know what it is, and we don’t have the evidence to suggest what it may be. So again, it comes back to the word ‘evidence.’”

Just because a military pilot spots or chases a UFO doesn’t mean the unidentified object should be considered a threat to national security, said Shea. “I would say we would be concerned if they were fired upon. We would be concerned if they started bombing our bases. None of that has happened, so whatever they’re seeing doesn’t seem to be hostile in nature. Not to worry, is what I would say.”

To The Stars Academy of Arts & Science — a public benefit corporation co-founded by musician Tom DeLonge and launched last year — is pursuing its own UFO research. It includes several former government higher-ups and is accepting money from investors.

“More power to them, I think they’re on a wild ghost chase. But I think we need to have some interest in that,” said Shea. “If they come up with something that the government hasn’t, great.”

Asked if he’s ever seen a UFO, Shea said no.

“You’d think with all my interest or experience in this, a friendly visitor would come visit me. Hasn’t happened,” Shea said, laughing.

Video produced by Ginger Whitaker.