FASAB Standard 56 and the Authority of the Director of National Intelligence to Waive SEC Financial Reporting

By Mark Skidmore

The purpose of this report is to offer a clear explanation of how two financial reporting exemptions has de facto created a hidden system of finance that runs parallel to the official financial system that facilitates and governs interactions between the federal government and the private sector. Below, I present a discussion of national security waivers that exempt some businesses from standard financial reporting requirements laid out by the Security and Exchange Commission (SEC). I also summarize the recent adoption of Federal Accounting Standards Board (FASAB) Standard 56, which gives those with high level national security clearances the authority to modify government financial statements. I then discuss the implications of these to reporting exemptions for both the federal government and the financial system.

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