The number of newly created national security secrets dropped to a record low level last year, but the financial costs of protecting classified information increased sharply, according to the latest data from the Information Security Oversight Office.

Original classification activity — meaning the designation of new classified information — declined by 20 percent in 2014 to a historic low of 46,800 original classification decisions, ISOO said in its new annual report for Fiscal Year 2014.

It was the fourth consecutive year of reductions in original classifications. ISOO has never reported a smaller number of original classification decisions. Ten years earlier (FY 2004), for example, original classification activity was reported at 351,150 original classification decisions.

What accounts for the continuing drop-off in the creation of new secrets? The answer is not entirely clear. It is in part a reflection of changes in the national security environment, as well as the vagaries of how agencies report their classification practices. ISOO director John P. Fitzpatrick said it was also likely to be a consequence of the Fundamental Classification Guidance Review that was performed under the Obama executive order in 2010-2012 in an effort to improve the quality of agency classification guides.

In the course of that Review, all existing guides were “scrubbed” to ensure that they provided current classification guidance and in some cases they were also refined to improve their clarity. One result, Mr. Fitzpatrick said yesterday, was that some agency classification decisions that might have otherwise been counted as new secrets were instead deemed to be “derivative” classification decisions that were based on the improved classification guidance.

Significantly, however, the volume of derivative classification decisions also declined for the past two years. Therefore, even if some reported classification actions were displaced from the original classification category to the derivative classification category, the overall result is still a net reduction in new national security classification activity, a significant policy achievement in itself.

While the number of new secrets dropped to a record low last year, however, the cost of protecting those secrets reached a record high.

“The total security classification cost estimate within Government for FY 2014 is $14.98 billion,” the ISOO report said, up from $11.63 billion in FY 2013.

The increase was primarily due to Department of Defense expenditures on information systems security, which increased by a reported $3.2 billion in FY 2014.

While some of the reported increase can be explained by improved accounting methods, much of it “was attributable to the many new initiatives underway in the aftermath of the serious security breaches that have occurred in recent years,” the ISOO report said. The breaches were not specified in the report, but major changes in security policy were prompted by the WikiLeaks disclosures of 2010.

These new DOD initiatives include measures to “improve network security by reducing anonymity, enhancing access controls and user monitoring, establishing enterprise auditing, restricting the removal of media, and developing insider threat programs.”

“None of these improvements come without considerable cost,” the ISOO report said.

The new ISOO report included several other notable observations, such as these:

* In FY 2014 there were 813 formal classification challenges filed by authorized holders of classified information — government employees or contractors — who believed the information was wrongly classified. In response to the challenges, agencies overturned the classification status of the information in whole or in part in 453 of the cases (56 percent). In FY 2013, by comparison, there were only 68 such challenges and only 12 of them led to changes in classification.

* The Interagency Security Classification Appeals Panel maintained its record of granting public appeals of Mandatory Declassification Review requests that had been denied by executive branch agencies in the majority of cases presented to it, in whole or in part. Out of 451 documents considered by the Panel on appeal, 181 were declassified in their entirety, and 157 were declassified in part. The continued classification of 113 documents was affirmed by the Panel.

The Fundamental Classification Guidance Review that apparently led to the recent reduction in national security classification must be performed every five years. The next such Review will soon begin and is due to be completed in 2017.