Summary: By law, the head of each government agency must set up and maintain systems of accounting and internal control, of which internal audit is an integral part. In the Navy, internal auditing is done by the Naval Audit Service under the direction of the Assistant Secretary of the Navy for Financial Management, who also serves as Comptroller.
The Navy should make its internal audit stronger to keep top management better informed on how operations are conducted and recommendations for improvement are carried out. The internal audit function is not placed high enough in the Navy's organization to grant auditors maximum independence in conducting and reporting on audit work. The current organizational structure is inconsistent with the Comptroller General's audit standards which advocate that the audit function be placed at the highest practical level. The Department of Defense policy requires all nonmilitary positions to be filled by civilians. Contrary to this policy, the Audit Service is headed by a military officer and it employs 34 other military officers. The Naval Audit Service has been unable to meet its audit goals and has a large audit backlog, due in part to the massive work load and the use of audit resources on work not in keeping with its primary mission. The Navy's audit follow-up system does not provide assurance that all deficiencies identified by audits are promptly corrected. Opportunities for savings are lost and inefficient and ineffective operations continue.
