The $52.6 billion “black budget” for fiscal 2013, obtained by The Washington Post from former intelligence contractor Edward Snowden, maps a bureaucratic and operational landscape that has never been subject to public scrutiny. Although the government has annually released its overall level of intelligence spending since 2007, it has not divulged how it uses the money or how it performs against the goals set by the president and Congress. (Gellman, Barton and Miller, Greg, U.S. spy network’s successes, failures and objectives detailed in ‘black budget’ summary, Washington Post (08/31/2013) available at https://cyber-peace.org/wp-content/uploads/2013/06/%E2%80%98Black-budget%E2%80%99-summary-details-U.S.pdf).

Table of Contents

I. The Strengths and Weaknesses of the Power of the Purse
II. What Is the Black Budget?
III. The Origins of the Black Budget
    A. Introducing the 1947 National Security Act
    B. Introducing the 1949 CIA Act
    C. Private Contractor Reporting Requirements
    D. Action Increasing Government Oversight of the Black Budget
IV. The Black Budget and the Constitution–Is it Legal?
V. About Us

February 7, 2018

I. The Strengths and Weaknesses of the Power of the Purse

When created, the Constitution handed the Power of the Purse to Congress and–by extension–the people that Congress represents. The thought was that the surest check on a government came through control of its finances. However, the strongest check is useless without both a means by which to wield it and the understanding of how and where to do so. This idea is the underpinnings of the Appropriations Clause and Statements and Accounts Clause of the Constitution. These elements of the Constitution are the means by which Congress, in theory, applies and guides the sword that is the Power of the Purse–arguably the strongest power of the people. (See The Appropriations Clause: A History of the Constitution’s (As of Yet) Underused Clause , available at https://constitution.solari.com/the-appropriations-clause-a-history-of-the-constitutions-as-of-yet-underused-clause/, citing Gary Kepplinger, The Heritage Guide to the Constitution: Appropriations Clause, available at http://www.heritage.org/constitution/#!/articles/1/essays/67/appropriations-clause.)

The Appropriations Clause requires Congress to give the say-so on government spending by appropriating funds for a project through legislative action, often including restrictions on how the funds are to be spent, before the Executive branch can spend money. The Statements and Accounts Clause requires the government to provide, from time to time, an accounting of how they spend your money. The idea is that this allows Congress, theoretically your representative in government, to control how and where money is spent. The reporting requirements give a more immediate accounting to the public of what was done with their taxes–at least this is the theory (see id. available at https://constitution.solari.com/the-appropriations-clause-a-history-of-the-constitutions-as-of-yet-underused-clause/).

Unfortunately, the reality is that there are quite a few loopholes and issues that undermine the value of the Appropriations Clause and often render the reporting requirements of the Statements and Accounts Clause virtually useless. Congress itself has nearly full control of what they consider appropriate under these two clauses. As we’ve discussed in previous articles, they often substantially undermine their Appropriations powers by writing virtual blank checks to the Executive. There are also quite a few statutes which have undermined the Appropriations powers by allowing the Executive branch and agencies greater freedom to shift around funds under Congress’ nose (see id.).

When it comes to the Statements and Accounts Clause, Congress has made valiant legislative efforts to improve the numerous flaws with their current accounting practices. However, a combination of a lack of enforcement mechanisms included in their legislation, failure to enforce through other means, and an extreme lack of effort on the parts of some executive agencies to comply with the accounting legislation (especially the Department of Defense and the Department of Housing and Urban Development) have rendered the lion’s share of government financial reporting virtually useless to the public and Congress’ decision making process. (See The U.S. Statutes Creating Modern Constitutional Financial Management and Reporting Requirements and the Government’s Failure to Follow Them, available at https://constitution.solari.com/the-u-s-statutes-creating-modern-constitutional-financial-management-and-reporting-requirements-and-the-governments-failure-to-follow-them/.)

These issues are ongoing and need close examination from both the public, local governments, and Congress itself. As it is, lapses in reporting have allowed for $21 trillion in unaccounted funds from just the DoD and HUD. That’s just accounting for the period between 1998 and 2015–an amount larger than the current national debt in under two decades (DoD and HUD Missing Money: Supporting Documentation, available at https://missingmoney.solari.com/dod-and-hud-missing-money-supporting-documentation/). There are wide reaching issues here, and each of them is incredibly important to the fiscal health of the U.S. and upholding the intent of the Constitution.

If $21 trillion can go missing in the sunshine, who knows how much goes missing when these reporting and appropriations provisions are loosened or removed? At the crossroads where all these Constitutional issues meet is appropriations for and fiscal reporting–or complete lack thereof–of programs such as the National Intelligence Program (NIP), the DoD’s Military Intelligence Program (MIP), and similar programs. The MIP is a program created in 2005 by the DoD and has all intelligence programs supporting the U.S. government under its umbrella. These programs, taken together, are colloquially known by the fairly theatrical term “the Black Budget.”

II. What Is the Black Budget?

Put simply, the Black Budget refers to the government budget set aside for secret operations such as military research projects, covert operations, and the like. Off the bat, this surely sounds like the realms of a Tom Clancy novel. The term was originally coined in a 2013 Washington Post article discussing a copy of the budget–leaked by Edward Snowden–for funds allocated to the CIA, NIP, MIP, and other spying projects (Gellman, Barton and Miller, Greg, “U.S. spy network’s successes, failures and objectives detailed in ‘black budget’ summary,” Washington Post (08/31/2013), available at https://cyber-peace.org/wp-content/uploads/2013/06/%E2%80%98Black-budget%E2%80%99-summary-details-U.S.pdf). However, the fundamental issues with this Black Budget deal with accounting and Constitutional issues. This is money with very little to no appropriations or reporting requirements as would normally be required by the Constitution.

The reasoning behind this is fairly obvious; there is a certain amount of logical need for confidentiality when it comes to covert operations, assets, and their funding. If not, we’d call them overt operations. However, this is no small amount of funds we are talking about. In 2015, the NIP requested a budget of $45.6B and the MIP requested $13.3B (Intelligence Budget Data, available at https://fas.org/irp/budget/). The final numbers for NIP and the MIP combined have floated around $70-$80B per year for the last decade (id.). That’s more than the entire GDP of Guatemala every single year (List of Countries by Projected GDP, available at http://statisticstimes.com/economy/countries-by-projected-gdp.php).

Just getting an exact total number for these budget requests can be a bit difficult; you can imagine how little there is on specifics within the budget requests. Very rarely, the name of a program is included within the copies of the budget requests provided to the public but certainly not the amount requested for the project–never mind any more specific breakdown of how funds are to be used (FY 2016 Budget Congressional Justification Book, available at https://fas.org/irp/budget/mip-fy2016.pdf (provided in response to a FOIA request).

A FOIA request is capable of receiving a copy of the unclassified portions of these Black Budget accountings. However, the emphasis in that sentence should be heavily on unclassified (id.). A 2016 FOIA request on the Black Budget responded with 178 pages with not a single number included within–not even the total amount requested. It is just page after page of blank charts (id.). The information within was all withheld pursuant to the FOIA exemptions for national security interests (5 U.S.C. § 552(b)(l)), the statutory exemption created to FOIA for unclassified technical data for space or military application (5 U.S.C. § 552(b)(3) referring to 10 U.S.C. § 130, available at https://www.law.cornell.edu/uscode/text/5/552b), and Executive Order 13526 (available at https://www.archives.gov/isoo/policy-documents/cnsi-eo.html), which is an Obama-era order on the handling of classified materials (FY 2016 Budget Congressional Justification Book, available at https://fas.org/irp/budget/mip-fy2016.pdf) Thus, the result is blank page on blank page prefaced with a short discussion of very general goals of the MIP (see id.).

The budget requests of the MIP are summarized in a nine volume Congressional Justification Book (FY 2016 Budget Congressional Justification Book, see id.). This includes general discussion of ongoing goals such as combating terrorism and counter-terrorism efforts (see id.). Access to the details of these reports is extremely limited, even within Congress itself. In general, any access whatsoever is generally limited to the House Permanent Select Committee on Intelligence (HPSCI) and the Senate Select Committee on Intelligence (SSCI) (see Rosenbach, Erin and Peritz, Aki, Congressional Oversight of the Intelligence Community, available at https://www.belfercenter.org/publication/congressional-oversight-intelligence-community).

The HPSCI is a 22 member committee made up of members of the House with at least one member each from the House Appropriations, Foreign Affairs, Armed Services, and Judiciary Committees. The SSCI is a 15 member affair usually consisting of 8 members of the majority party, 7 members of the minority party, and a standing spot for a member of the Senate versions of the above discussed House Committees. HPSCI looks at both the MIP and the NIP budgets. SSCI looks at NIP and the agencies it funds. This power has some overlap with the duties of a few other committees such as the Senate Armed Services Committee. The two committees also occasionally compete over their jurisdiction. What’s more, there is fairly consistent push and pull between the Executive and Legislative branches as to what an appropriate level of oversight should be (see id.).

An example of this is, as will be discussed in depth later, Section 502 of the National Security Act of 1947, which requires the Executive to “keep congressional intelligence committees fully and currently informed of all intelligence activities of the United States. . .” This is to ensure that the representatives of the people that are allowed to be involved in the Black Budget at least know what’s going on. However, the Executive branch has frequently interpreted this requirement as only requiring notice to the “Gang of Eight”–the Senate and House Majority and Minority Leaders, and the Chairs and ranking members of the House and Senate Intelligence Committees. This substantially limits Congress’ decision making ability. What’s more, the White House generally has final say on what is and isn’t confidential from the majority of Congress, even further limiting the ability of Congress as a whole to make informed appropriations of funds on behalf of the people (see id.).

After 9/11, Congress ostensibly changed its approach to intelligence oversight. Legislators looked at their previous interaction and determined to substantially increase their oversight capabilities. They removed the term limits on the above discussed committees in 2005 with the goal of allowing committee members to gather the experience necessary to understand the information they’re interacting with. They also sought to combine appropriations with program authorization in order to make the people dealing with intelligence issues as specialized as possible. To this effect, they made a House Appropriations Select Intelligence Oversight Panel comprising 10 House Appropriations Committee members and three people out of the HPSCI. However, overall there hasn’t been much action to create more comprehensive oversight and certainly no public oversight (see id.).

As mentioned above, it’s understandable that some of this doesn’t make it to the public at large. However, it’s important that it’s provided to Congress–the people’s representative–in a way that allows them to know what they’re offering money to and what of the funds are appropriate to disclose to the public. This is as opposed to a system where everything is confidential as a norm and Congress has very little idea what they’re appropriating funds for. As it is, Congress’ financial accountability branch–the Government Accountability Office–is not even allowed to audit intelligence activities (see Executive Order 12333, available at https://www.archives.gov/federal-register/codification/executive-order/12333.html#3.4). While there are advantages to the limited group of Congresspersons receiving briefings on intelligence budgets, there are also obvious negative issues with such a system.

Even in just the last few days, there have been concerns that the bill that ended the recent government shutdown included provisions allowing the Executive branch to fund covert action without Congressional oversight or going through the usual Congressional oversight committees. The provision is currently a subject of debate, with a potential amendment to remove the exception opposed by some in Congress. (See Kelly, Erin, “Spending Bill Limited Congress’ Oversight of Secret Intelligence Activities, Senators Say,” available at https://www.usatoday.com/story/news/politics/2018/01/23/senate-intel-leaders-say-bill-reopen-government-strips-them-power-gives-white-hgives-white-house-mor/1057919001/.) As it stands, this bill waives the later discussed (already very limited) reporting and appropriation requirements of the National Security Act. It’s not hard to see why it has raised more than a few eyebrows. Steps to change the language of the waiver were reportedly blocked in Congress. (See Nelson, Steven, “Provision in Shutdown-Ending Bill Stokes Fear of Oversight-Free Intelligence Spending,” available at http://www.washingtonexaminer.com/provision-in-shutdown-ending-bill-stokes-fear-of-oversight-free-intelligence-spending/article/2646894.)

With such a recent move towards limiting Congress’ and the people’s oversight in a situation already sparse on oversight, appropriations compliance, and reporting compliance, the time has never been better to ask, what is the Black Budget? How did it come to be? How does it work and, perhaps most importantly, how and why is it considered legal and constitutional?

III. The Origins of the Black Budget

The Black Budget is more of a media concept than a legal concept. However, the name is an easy way of referring to the budget, appropriation, and reporting loopholes created primarily by statute in the late ’40s through the National Security Act and the CIA Act. From there, the loopholes have been expanded and altered by statutes, executive orders, and policy changes–generally allowing even greater freedom to Black Budget issues. In more recent years, there have also been some limited moves granting greater oversight to the government. However, as mentioned above, just a few weeks back we’ve seen an enormous step backwards in the approach to the Black Budget (see id.). These changes are so fresh as to be very difficult to effectively discuss; there’s simply too much still up in the air. With this in mind, it’s best to start from the beginning–the National Security Act and CIA Act creating what we now discuss as the Black Budget.

A. Introducing the 1947 National Security Act

The National Security Act was, on its face, a move to combine the Department of War, Department of the Army, the Department of the Navy, as well as several other military departments and agencies under the power of the newly created position of the Secretary of Defense. The most notable of these Departments and agencies was perhaps the CIA—newly created by the National Security Act—the first peacetime intelligence agency the U.S. had ever organized. These were all incredibly important moves. However, buried in all these sweeping governmental changes were the seeds that would create the Black Budget as we know it today (see National Security Act of 1947, 50 U.S.C.3001, available at https://www.dni.gov/index.php/ic-legal-reference-book/national-security-act-of-1947).

The National Security Act provided the groundwork for intelligence reporting and appropriations rules for years to come. Up until the recent changes from the bill ending the government shutdown, they were the baseline over which the Executive and Legislative branches argued over exactly what was constitutionally required in terms of reporting and appropriations for the Black Budget (see Rosenbach, Erin and Peritz, Aki, Congressional Oversight of the Intelligence Community).

As we’ve discussed in our previous articles, the courts have repeatedly deferred to Congress to set its own reporting standards. Whatever they say is appropriate is usually taken as meeting the Constitutional standards for the Statements and Accounts Clause–although there remains the issue that Congress still needs to enforce its own standards. The National Security Act was Congress setting the groundwork for what sort of reporting would be required for Black Budget spending (seeThe Appropriations Clause: A History of the Constitution’s (As of Yet) Underused Clause, available at https://constitution.solari.com/the-appropriations-clause-a-history-of-the-constitutions-as-of-yet-underused-clause/).

Under the National Security Act, all that was required is annual reports of “expenditures, work, and accomplishments” to “congressional intelligence committees, the Committee on Appropriations of the Senate, and the Committee on Appropriations of the House of Representatives” (see National Security Act of 1947, 50 U.S.C. 3001). As you might imagine, this is a standard allowing a tremendous amount of leeway as to the specificity of reporting required by the fairly vague terms of “expenditures, work, and accomplishments.” It also creates the above discussed push and pull between the Executive and Legislative branches of who exactly needs to be informed of Black Budget spending. Certainly the public can be left out under this standard, as well as the bulk of Congress. However, there remains the question discussed above of whether this requires reporting to the Gang of Eight or a full report to the entirety of both House and Senate intelligence committees, as well as all members of the House and Senate Appropriations Committees (see Rosenbach, Erin and Peritz, Aki, Congressional Oversight of the Intelligence Community).

Speaking of the Appropriations Clause, the National Security Act also allowed for reprogramming of funds within the National Intelligence Program, or to other agencies “for the development and fielding of systems of common concern related to the collection, processing, analysis, exploitation, and dissemination of intelligence information; or . . to address critical gaps in intelligence information sharing or access capabilities” (see National Security Act of 1947, 50 U.S.C. 3001). This can be done “with the approval of the Director of the Office of Management and Budget [the OMB]; and after consultation with the heads of departments containing [affected] agencies or organizations within the intelligence community . . . and, in the case of the [CIA], after consultation with the Director of the [CIA]” (id.). Reprogramming funds is a fairly common thing to see in agency funding provisions, allowing agencies to shift money originally allotted for one thing to something not contemplated at the time funds were appropriated by Congress. The idea behind it is that it allows for the reality of requiring a certain amount of flexibility in the use of funds in order to keep government humming along smoothly without constant bottlenecks (Reprogramming and Transfer Authority, at p. 17, available at https://www.loc.gov/rr/frd/Military_Law/pdf/FLD_2013_Ch12.pdf).

However, when Congress allows for reprogramming, it has effectively given away a portion of the Appropriations Clause power of the people–a real Constitutional issue if a somewhat necessary one. (See The Appropriations Clause: A History of the Constitution’s (As of Yet) Underused Clause , available at https://constitution.solari.com/the-appropriations-clause-a-history-of-the-constitutions-as-of-yet-underused-clause/.)

Even with this in mind, the National Security Act allowed for lesser notice to or approval from Congress (as the OMB is an Executive agency) and a level of flexibility in moving funds (especially between different agencies) nearly no other reprogramming rules had ever granted. This allowed greater freedom from Congressional appropriations rules than had ever existed before–the origins of the Black Budget.

That being said, the National Security Act did have certain restrictions. Covered agencies, such as the CIA, had to follow existing procedures applicable to reprogramming notifications, and had to submit a report to appropriate committees as discussed above. Funds could only be reprogrammed or transferred if “transferred to an activity that is a higher priority intelligence activity” (National Security Act of 1947, 50 U.S.C. 3001) or “the transfer or reprogramming supports an emergent need, improves program effectiveness, or increases efficiency” (id.). However, one notable issue with that standard is that it generally leaves agencies free to justify the reprogramming after the fact, asking forgiveness instead of permission. It is also a fairly subjective standard, especially when the majority of the details of the programs and actions are known to a very small circle other than those making the reprogramming decisions.

One other limitation on Black Budget reprogramming under the National Security Act was the amount of reprogramming that could be done without approval. The total amounts in a fiscal year had to be “less than $150,000,000, and less than 5 percent of amounts available to a department or agency under the National Intelligence Program,” without “the concurrence of the head of the department involved” (id.). For reference, that is about the equivalent of $1.7B in today’s dollars (see Dollar Times available at https://www.dollartimes.com/inflation/inflation.php?amount=150000000&year=1947). However, getting the concurrence of a department head (especially when giving money to an agency, instead of clawing it away) is so trivial a hurdle as to be essentially irrelevant. Indeed, there has been no need to raise the $150 million dollar limit since it was first established in 1947, despite substantial inflation.

Outside of the reporting requirements, the National Security Act also created a Director of Central Intelligence (DCI) who collects, correlates, and disseminates intelligence, provides direction for intelligence gathering outside the United States, and performs other functions and duties related to national security intelligence as the President or the Director of National Intelligence (DNI) directs (see National Security Act of 1947, 50 U.S.C. 3001). This role would continue to grow in importance over the years.

As you can see, the National Security Act laid foundations for how the intelligence community would need to report on its activities and how it could shift funds for its covert programs. However, the National Security Act outright created the CIA. It was essentially trying to make sure it had covered the basics to allow the newly formed agency to function. It was not until two years later in 1949 that the CIA Act was passed and provided more precise rules on reporting and appropriations and put a final stamp of Congressional approval on the Black Budget.

B. Introducing the 1949 CIA Act

The National Security Act created the CIA, but that was not the true focus of the Act–it was a huge sweeping change in the structure of the government. This made the CIA an important change among many important changes, not the full focus of the Act. The 1949 CIA Act comprised additions to those sections of the 1947 National Security Act that dealt with the creation of CIA. It also gave a Congressional stamp of approval to the creation of a Black Budget through new appropriations provisions and sweeping reporting exemptions (see Pub.L. 110 or 50 U.S.C. §403f, available at http://www.legisworks.org/congress/81/publaw-110.pdf).

Under the Act, the CIA was authorized to “[t]ransfer to and receive from other Government agencies such sums as may be approved by the [OMB], for the performance of any [intelligence activities] and any other Government agency is authorized to transfer to or receive from the [CIA] such sums without regard to any provisions of law limiting or prohibiting transfers between appropriations” (50 U.S.C. §403f(a)). It was also empowered to reimburse other government agencies for personnel assigned to the CIA (which those agencies could assign without regard to any law to the contrary), rent and repair premises, and fix age limits to CIA positions without regard to any law to the contrary (see id.). This is mostly in line with the previous National Security Act reprogramming provisions, but it gave the CIA a few new toys: more flexibility for interagency reprogramming, and the ability to rent and purchase property with less reporting and oversight (see id.). However, chief among the changes was a doozy you probably spotted–complete freedom from any provisions or laws outside the CIA Act which would otherwise limit shifting funds to programs or agencies not originally anticipated by a Congressional appropriation pursuant to the Appropriations Clause of the Constitution (see id.).

To take the normal dangers of reprogramming even further, the CIA Act also authorized the CIA to spend notwithstanding other laws, and with minimal oversight, stating:

“[t]he 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; and for objects of a confidential, extraordinary, or emergency nature, such expenditures to be accounted for solely on the certificate of the Director and every such certificate shall be deemed a sufficient voucher for the amount therein certified.” (id. available at http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title50-section3510&num=0&edition=prelim#sourcecredit)

There are some added reporting requirements in the Act; the Director is required to report transfers for the acquisition of land by submitting a report “to the Select Committee on Intelligence of the Senate and the Permanent Select Committee on Intelligence of the House of Representatives” (id.). However, the bulk of the CIA Act limited reporting requirements for the intelligence community substantially.

Under the Act, the CIA was further exempted from most reporting laws, including any laws “which require the publication or disclosure of the organization, functions, names, official titles, salaries, or numbers of personnel employed by the Agency” (id.). As mentioned before, there’s obviously some logic behind keeping covert operatives and covert action secret. However, these exemptions are so broad as to create the Black Budget issues we see today.

The Act also added some clarification to the reporting requirements for non-financial activity. Classified semi-annual reports summarizing activities are required to be given to the DCI, and then given to the intelligence committees. “Such reports shall, at a minimum, include a list of the title or subject of each inspection, investigation, review, or audit . . . and a description of significant problems, abuses, and deficiencies relating to the administration of programs and operations . . . a description of the recommendations for corrective action . . . [and] a statement of whether corrective action has been completed” (id.). However, overall the CIA Act served to dramatically reduce restrictions on reporting and reprogramming for the intelligence community and, eventually, for the Black Budget.

C. Private Contractor Reporting Requirements

The intelligence community also uses private contractors, and to some degree the Black Budget reporting protections are extended to them as well. In particular, and in addition to any protections of classified information, private contractors can be exempted from SEC reporting requirements by the Director of National Intelligence through a series of executive actions by Presidents Reagan and G.W. Bush (see Executive Order 12333, available at https://www.archives.gov/federal-register/codification/executive-order/12333.html, and Memorandum on Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives, available at https://www.gpo.gov/fdsys/pkg/FR-2006-05-12/html/06-4538.htm). They each used executive actions to change how private contractors were used by Black Budget agencies, allowing greater secrecy and creating larger holes in the reporting requirements of the intelligence community. President Reagan used an executive order, and President G.W. Bush used a presidential memo.

Executive orders have a few legal requirements in order to be used, while Presidential memos have none. Executive orders must be able to cite the legal authority the president has to make the order, report the estimated fiscal costs of the order, and be published to the Federal Register. A memo, on the other hand, may do any of those things, but none of that is required. Instead, it simply directs an agency to act in a certain manner (see Quester, Rachel, Executive or Memorandum? Let’s Call the Whole Thing an Action, available at https://www.npr.org/2017/01/30/512066715/executive-order-or-memorandum-lets-call-the-whole-thing-an-action).

President Reagan used Executive Order 12333 in 1981, in order to allow the outsourcing of classified projects to private contractors. The order states:

“Agencies within the Intelligence Community are authorized to enter into contracts or arrangements for the provision of goods or services with private companies or institutions in the United States and need not reveal the sponsorship of such contracts or arrangements for authorized intelligence purposes. Contracts or arrangements with academic institutions may be undertaken only with the consent of appropriate officials of the institution.” (see Executive Order 12333, Section 2.7)

In a later memorandum, President G.W. Bush waived the SEC reporting requirements for contractors. The SEC Act itself grants the authority to any president to exempt contractors from reporting via 15 U.S. Code § 78m(b)(3)(A), which states:

“With respect to matters concerning the national security of the United States, no duty or liability under paragraph (2) of this subsection shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph shall set forth the specific facts and circumstances with respect to which the provisions of this paragraph are to be invoked. Each such directive shall, unless renewed in writing, expire one year after the date of issuance.” (15 U.S. Code § 78m(b)(3)(A), available at https://www.law.cornell.edu/uscode/text/15/78m))

The use of this section was authorized by an obtusely named presidential memo to the Director of National Intelligence: “Memorandum on Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives,” stating:

“I hereby assign to you [the Director of National Intelligence] the function of the President under . . . [15 U.S.C. 78m(b)(3)(A)]. In performing such function, you should consult the heads of departments and agencies, as appropriate.” (Memorandum for the Director of National Intelligence, May 5, 2006).

This memo granted the required “Presidential authority” of section 78m(b)(3)(A) to the Director of National Intelligence, enabling the Director to exempt private contractors from SEC reporting requirements (id.). The combination of President Reagan’s executive order and President G.W. Bush’s presidential memo carved out a section of reporting requirements for private entities, in addition to the executive agencies themselves.

This creates an issue similar to and intertwined with the governmental reporting requirements discussed previously, but now drastically compounded in that it extends all those issues to private entities as well–allowing for much greater loss of transparency. While private entities don’t have a constitutional mandate for reporting, the agencies funding them do, and exemption from SEC reporting for private contractors is its own troubling can of worms considering that the SEC is the government body tasked with protecting fair competition in the marketplace (see About the SEC, available at https://www.sec.gov/about.shtml). The sheer lack of transparency is magnified when government spending is further obscured through private companies with no reporting requirements and the public and much of Congress is left with no knowledge of the specifics–what is purchased, the prices, the intellectual property details of the private agreements, and more are all left behind a wall inaccessible to all but a very few in Congress if at all.

D. Action Increasing Government Oversight of the Black Budget

The history of the Black Budget hasn’t all been action creating loophole after loophole to Constitutional reporting and appropriations requirements. As each new controversy arises (such as Vice President Cheney ordering information to be withheld from Congress,1 a “very serious” covert program in 2009,2 and the terrifying breadth of the 47 wiretapping leaks), there has also been action in more recent history to improve the transparency of the intelligence community.

There has been some effort on this front even before the troubling revelations of whistleblowers such as William Binney and Edward Snowden as to the sheer extent of some domestic surveillance projects funded by the Black Budget. Mr. Binney has even alleged that, further than mere government bloat, the situation in the NSA is a “set-up for corruption,” explaining:

“[t]he NSA and the intelligence agencies are exempt from auditing by the US Government….You’re head of the NSA and you’re handed somewhere between $10-15 billion a year to spend any way you see fit and nobody will check on how you spend it. It means that you can take $1 million home a month without nobody missing it and even if they did they would not follow up to see what you did with it. It’s a set-up for corruption and that’s exactly what is going on.” (William Binney, The Future of Freedom, available at https://www.youtube.com/watch?v=3owk7vEEOvs)

For instance, the Hughes-Ryan Amendment was one such attempt to bring greater government oversight to the Black Budget. Passed in 1974 as an amendment to the Foreign Assistance Act, the Amendment required the President to report CIA activities to Congressional committees (Foreign Assistance Act of 1974, Public L. No. 93-559 (December 30, 1974), 88 Stat. 1795, available at https://www.gpo.gov/fdsys/pkg/STATUTE-88/pdf/STATUTE-88-Pg1795.pdf). The Amendment stated:

“No funds appropriated under the authority of this or any other Act may be expended by or on behalf of the Central Intelligence Agency for operations in foreign countries, other than activities intended solely for obtaining necessary intelligence, unless and until the President finds that each such operation is important to the national security of the United States and reports, in a timely fashion, a description and scope of such operation to the appropriate committees of the Congress, including the Committee on Foreign Relations of the United States Senate and the Committee on Foreign Affairs of the United States House of Representatives.” (id. at 88 Stat. 1804)

In 1980, the Hughes-Ryan Amendment was supplemented by a statutory requirement directing intelligence reporting to two intelligence committees (Intelligence Authorization Act for Fiscal Year 1981, Public L. No. 96-450, (October 14, 1908), 94 STAT. 1975) available at https://www.gpo.gov/fdsys/pkg/STATUTE-94/pdf/STATUTE-94-Pg1975.pdf). The new statute requires all agencies involved in intelligence activities to “keep the Select Committee on Intelligence of the Senate and the Permanent Select Committee on Intelligence of the House of Representatives . . . fully and currently informed of all intelligence activities . . .” (id. at 94 STAT. 1978). However, “if the President determines it is essential to limit prior notice to meet extraordinary circumstances affecting vital interests of the United States, such notice shall be limited3” to a smaller group of Congressmen (id.). This obviously has some fairly substantial leeway to circumvent reporting. However, it was still a substantial step forward at the time.

In 1991, Congress took further steps to increase accountability on the intelligence community. In the Intelligence Authorization Act for Fiscal Year 1991 (Public L. No. 102-88 (August 14, 1991), H.R.1455, available at https://www.congress.gov/bill/102nd-congress/house-bill/1455/text), Congress officially repealed Hughes-Ryan, while supporting its objectives by replacing it with new reporting requirements and more precise definitions. The new Act requires the President to “ensure that the intelligence committees4 are kept fully and currently informed . . . of all intelligence activities, other than a covert action5 . . . including any significant anticipated intelligence activity and any significant intelligence failure. . .” (id.). The intelligence committees must also be given “any information or material concerning intelligence activities, other than covert actions . . . which is requested by either of the intelligence committees . . .” (id.). While this helps, there have nonetheless been multiple subsequent scandals regarding unreported intelligence programs,6 and what Congress doesn’t know, they can’t request information on.

The provisions additionally require that when covert action “is necessary to support identifiable foreign policy objectives of the United States and is important to the national security of the United States” (id.), the President must set forth the reasons action is required in a written finding, either before or 48 hours after action is taken. The finding must specify each federal agency funding or participating in the action, and whether any third parties will fund or participate in the action (id.).

However, the Act also has a pair of clauses ensuring a certain degree of non-interference. On the one hand, the Act states “[n]othing in this title shall be construed as requiring the approval of the intelligence committees as a condition precedent to the initiation of any significant anticipated intelligence activity” (id.). On the other, “[n]othing in this Act shall be construed as authority to withhold information from the intelligence committees on the grounds . . . [it] would constitute the unauthorized disclosure of classified information . . .” (id.). In other words, the intelligence committees are entitled to know pretty much everything the intelligence community is doing, but likewise cannot interfere in operations aside from, ostensibly, cutting funding.

A few years later, in the Intelligence Authorization Act for fiscal year 1994, Congress added a requirement for an unclassified annual report on the activities of the intelligence community (Public L. No. 103-178 (December 3, 1993), H.R.2330, available at https://www.congress.gov/103/bills/hr2330/BILLS-103hr2330enr.pdf). The annual report needed to describe “the activities of the intelligence community during the preceding fiscal year . . that can be described in an unclassified manner; and the areas of the world and the issues that . . will require increased or unusual attention . . . during the next fiscal year” (id. at 11). They must also discuss significant successes and failures of the intelligence community “that can be described in an unclassified manner” (id.). This once again leaves quite a bit of wiggle room. However, versions of the annual (and now semi-annual) reports can be received via a FOIA request7 or occasionally found online.8

More recently, in the Implementing Recommendations of the 9/11 Commission Act of 2007 (Public L. No. 110-53 (August 3, 2007), available at https://www.congress.gov/bill/110th-congress/house-bill/1/text), the Director of National Intelligence is required to “disclose to the public the aggregate amount of funds appropriated by Congress for the National Intelligence Program for such fiscal year.” However, there is still an option to decline disclosing even aggregate fund data:

“[T]he President may waive or postpone the disclosure required . . . [by] submitting to the [intelligence committees] (1) a statement, in unclassified form, that the disclosure would damage national security; and (2) a statement detailing the reasons for the waiver or postponement, which may be submitted in classified form.” (id. at p. 121 Stat. 335)

Even still, this has led to some further reporting from the intelligence community–albeit generally on very surface level matters–which can once again be received via a FOIA request9 or occasionally found online.10 The total amount requested for intelligence activities through NIP and MIP is posted online with some regularity after the 2007 Act.11 However, in terms of readily available information, there’s simply not a lot out there for the public.

Over the years, Congress has instituted a variety of reporting requirements, with mixed success. Each new controversy arising out of the intelligence community usually prompts some manner of new reporting requirement, but the information to the public is often sorely lacking nonetheless. The reports that do exist publicly are often high level overviews lacking any detail or specificity, or redacted to uselessness. The classified documents submitted to the intelligence committees ostensibly have more detail, but the repeated complaints from Congress regarding the intelligence community’s omissions in reporting certainly leaves room for doubt.

IV. The Black Budget and the Constitution–Is It Legal?

The unfortunate answer to this question is an almost certain yes. The very idea of the Black Budget certainly does not seem in line with the Constitutional goal of a public holding its government–and especially the Executive branch–accountable through the power of the purse. However, as we’ve discussed in previous articles, the courts have given extreme deference to Congress to enforce its own powers of the purse through its own actions. They’ve consistently refused to hear cases on the topic of either Constitutional appropriations or reporting on the grounds of either standing to sue (even when the case is brought by Congressmen) or political question (a legal concept that the courts should settle issues firmly within the realms of the executive or legislative branches). (See supra The Appropriations Clause: A History of the Constitution’s (As of Yet) Underused Clause, available at https://constitution.solari.com/the-appropriations-clause-a-history-of-the-constitutions-as-of-yet-underused-clause/, and see The U.S. Statutes Creating Modern Constitutional Financial Management and Reporting Requirements and the Government’s Failure to Follow Them, available at https://constitution.solari.com/the-u-s-statutes-creating-modern-constitutional-financial-management-and-reporting-requirements-and-the-governments-failure-to-follow-them/).

So, is the Black Budget constitutional? That’s a challenging question. It certainly doesn’t seem to follow the intent of the Constitution. However, from a legal standpoint, it’s hard to imagine a lawsuit that would succeed at challenging the constitutionality of the Black Budget without a particularly extraordinary set of facts. To illustrate this, let’s take a look at the most famous case challenging the Black Budget and the CIA Act–United States v. Richardson, 418 U.S. 166 (1974), available at https://www.oyez.org/cases/1973/72-885.

Richardson was one of the first cases to really challenge the Appropriations Clause constitutionality of Black Budget practices and specifically the CIA Act appropriations provisions. The lawsuit was one of two suits challenging the CIA Act to be brought in the late ’60s and early ’70s by an insurance adjuster by the name of William Richardson. The first failed to go anywhere but the second, arguing that the CIA Act violated the Appropriations Clause of the Constitution, made it all the way to the Supreme Court.

The highest Court in the land shut down the claims against the CIA Act, and very nearly any other future similar claim, completely. They ruled that, as a taxpayer who had not suffered any particularized injury, Richardson did not have the right to sue over the CIA Act’s appropriations rules in the first place. This is a fairly common approach to taxpayer standing, or lack thereof, under the law. In order to have standing to sue, it is generally required that you have suffered more than a generalized grievance–an injury specific to you that is not suffered by the public at large. The Chief Justice at the time, Warren Burger, said in the case:

As our society has become more complex, our numbers more vast, our lives more varied, and our resources more strained, citizens increasingly request the intervention of the courts on a greater variety of issues than at any period of our national development. The acceptance of new categories of judicially cognizable injury has not eliminated the basic principle that, to invoke judicial power, the claimant must have a “personal stake in the outcome,” in short, something more than “generalized grievances. . ..” (United States v. Richardson, supra, 418 U.S. 166, at 179)

The Supreme Court was not unanimous in its ruling on the issue; the case came out as a 5-4 split. The dissent suggested that standing should not be denied when an injury is widespread but truly exists as it denies redress on the grounds that too many people are injured. The argument of the dissent went along the lines that as long as the plaintiff can establish an injury to their personal rights as opposed to a more general right of the public, they should be granted standing. Justice Brennan’s dissent argued this had been done by Richardson as the appropriations and reporting rules of the CIA Act impacted his “right as a voter to receive information to aid his decision how and for whom to vote” (United States v. Richardson, supra, 418 U.S. 166, at 236). However, this is an argument that has never been adopted in any actual Supreme Court ruling on standing. This means that, after Richardson, the door was shut on any would-be lawsuit unless a particularized injury could be established–an incredibly difficult task when it comes to financial reporting and appropriations provisions if what is discussed above is taken off the table.

This falls in line with a history of the courts eschewing these sorts of Constitutional reporting and appropriations issues in favor of placing the responsibility on Congress to provide solutions to any existing problems (see supra The Appropriations Clause: A History of the Constitution’s (As of Yet) Underused Clause, and see supra The U.S. Statutes Creating Modern Constitutional Financial Management and Reporting Requirements and the Government’s Failure to Follow Them). It also falls in line with, as mentioned, the usual approach to standing in the courts. This means that, if the situation is to be changed, it will be on Congress and the people and state and local governments who put pressure on their representatives or take matters into their own hands to take action.

V. About Us

This article was written and edited by Michele Ferri and Jonathan Lurie of The Law Offices of Lurie and Ferri for use by The Solari Report. Michele Ferri and Jonathan Lurie are both practicing attorneys out of California. The Law Offices of Lurie and Ferri focus on working with start-up businesses as well as on intellectual property and business law issues. They can be found at http://www.lflawoffices.com/ or contacted at partners@lflawoffices.com.

1. https://www.reuters.com/article/idUSN1275615
2. http://www.nbcnews.com/id/31849628/ns/politics-capitol_hil
3. Specifically, to the “Gang of Eight”
4. The Select Committee on Intelligence of the Senate and the Permanent Select Committee on Intelligence of the House of Representatives.
5. The Act defines covert action as an activity or activities of the United States Government to influence political, economic, or military conditions abroad, where it is intended that the role of the United States Government will not be apparent or acknowledged publicly, but does not include:
(1) activities the primary purpose of which is to acquire intelligence, traditional counterintelligence activities, traditional activities to improve or maintain the operational security of United States Government programs, or administrative activities; (2) traditional diplomatic or military activities or routine support to such activities; (3) traditional law enforcement activities conducted by United States Government law enforcement agencies or routine support to such activities; or (4) activities to provide routine support to the overt activities (other than activities described in paragraph (1), (2), or (3)) of other United States Government agencies abroad. (f) No covert action may be conducted which is intended to influence United States political processes, public opinion, policies, or media.’
6. BBC article, CIA ‘often lied to congressmen’ http://news.bbc.co.uk/2/hi/americas/8143081.stm
7. https://fas.org/irp/dni/icig/sar-0313.pdf
8. https://www.dni.gov/files/documents/ICIG/April-Sept-2016-SAR.pdf
9. https://www.dni.gov/index.php/foia
https://www.dni.gov/index.php/download-odni-foia-reports
10. https://www.dhs.gov/sites/default/files/publications/crcl-annual-2016.pdf
11. https://www.dni.gov/index.php/what-we-do/ic-budget