DOCUMENT RESUME 02814 - A1993052] (pLtLt1 /4/ / 77 [Aulthority and Resources of the Deputy Assistant Secretary of Defense (Audit)]. GMSD-77-52; B-134192. Jujy 14, 1977. 7 pp. + enclosure (1 pp.) . Report to Rep. Jack Brooks, Chairman, House Committee on Government Operations: Legislation and National Security Subcommittee; by Elmer B. Staats, Comptroller General. Issue Area: Internal Auditing Syste., (200); Internal Auditing Systems: Sufficiency of Federal Auditors and Coverage (201!. Contact: Fiaancial and General Management Studies Div. Budget Function: iscellaneous: Financial Management and Infor !ion Systems 1002). Organizat .n Cor-serned: Department of Defense: Deputy Assistant secretary (Audit). Cong; -. sionai Relevauce: House Committ,e on Government Operations: Legislation and National Security Subcommittee. Authority: National Security Act of 1949 (10 U.S.C. 136). DOD Directive 7600.2. The Deputy Assistant Secret:iry of Defense (Audit) has the responsibility to develop internal audit policy and to review its implementation, but he does not have the authority to provide policy and procedural direction to the military service internal audi. agencies. He has sufficient resources to develop internal audit policy, but may not have sufficient resources to review its implementation. He may develop policy and evaluate the implementation of policies that have been approved by the Assistant Secretary of Defense (Comptroller). Recommendations: To improve the internal audit function in the Office of the Secretary of Defense, te Secretary of Dfense should: combine the audit policy, audit operations, and reporting functions into one functional organization; require the head of the combined organization to periodically review the implementation of policy and procedural directives by the military services and other internal audit organizations in the Department of Defense and to provide formal, written reports on policy violations directly to the Secretary or De'uty Secretary of Defense; and give careful consideration to required workload and the capabilities o te staff to perform that uorkload and bring the two into balance before making further staff reductions n the internal audit function. (SC) A ns'rRICYC7 - tloC b ~releailed euteM the General .Acutng O xct N th b .f specifi approval by the l50ft STATES ,\ / ~WASHINGTON. D.C. 04 i 485-134192 CKd The Honorable Jack Brooks, 'C' Chairman Ilegislation and National Security Subcommittee Committee on Government Operations House of Representatives Dear Mr. Chairman: In your February 24, 1977, letter you asked us to review the authority and resources of the Office of the Deputy Assistant Secretary of Defense (Audit) to provide policy and procedulal 6rrection to the military ervices' internal audit agencies. You also requested that we include recommendations outlining how improvements in this area may be accomplished. We have completed our review and found that -- the Deputy Assistant Secretary has the responsibility to develop internal audit policy and review its imple- mentation but does not have the authority to provide policy and procedural direction to the military service internal audit agencies and --the Deputy Assistant Secretary has sufficient resources to develop internal audit policy but may not have suffi- cient resources to review its implementation. Details of these and other findings resulting from our review are explained below. OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) The position of Assistant Secretary of Defense (Ccmp- troller) was established by the National Security Act of 1949 (10 U.S.C. 136). The Comptroller's position carries staff responsibilities for establishina and supervising the execu- tion of principles, policies, and prvcedures for internal audit in the Office of the Secretary of Defense, Defense agencies, and the military services. The law provides that in carrying out staff rsponsibilities, the Assistant Secre- tary (and all other Assistant Secretaries) take precedent in the Department of Defense organizational structure after the Secretary, the Deputy Secretary of Defense, the Secretar- ies of the military services, and the Director, Defense Re- search and Engineering. FGMSD-77-52 B-134192 The law further specifies that the Assistant Secretary cannot issue an order to military departments unless author- ized to do so by the Secretary of Defense. However, there is also a provision that service Secretaries and subordinate civilian and military ersaniiel will cooperate fully with personnel of the Office of the Secretary of Defense t effec- tively carry out the Seccetary's authority, direct.on, ano control. Specific internal audit responsibilities have been dele- gated to the Comptroller. These are implemented in DOD Direc- tive ?-00.2 and include responsibility for internal audit pol- icy, evaluating the operations of all Defense internal audit agencies, and taking such actions as may be necessary to as- sure implementation of the Defense ide interns' audit pol- icies set forth in the directive and related istructions. Also, DOD Directive 5118.3 specifically authorizes the Comp- trolle- to issue such orders--in the form qiinstructions and one-time directives as may be necessary to rovide internal audit policy and procedural direction to all Department of Defense and military service internal audit agencies. Office of the Deputy Assistant Secretary of Defense (Audit) The Deputy Assistant Secretary of Defense (Audit) holds both staff and line responsibilities under the direction of the Comptroller. He is both the Deputy Assistant Secretary, reporting directly to the Comptroller on audit policy aid reporting matters, and the Director of the recently created Defense Audit Service, reporting directly to the Secretary of Defense on the results of internal audit operations. How- ever, the Secretary does not provide day-to-day supervision of the Defense Audit Servize but relies on the Comptroller to provide such supervision. The Comptroller has delegated to the Deputy Assistant Secretary staff responsibilities for developing internal au- dit pDlicy and evaluating its implementation by all Defense internal audit agencies. In his role 3s Director, Defense Audit Service, the Dep- uty Assistant Secretary exercises line authority over (1) au- dits by Defense Audit Service staff of interservice audits, (2) audits requested by the Secretary and other Defense offi- cials, and (3) audits of Department of Defense headquarters, unified commands, specified commands, and Defense agencies. 2 B-134192 AUTHORITY TO PROVIDE POLICY AND PROCEDURAL DIRECTION In our opinion, the Deputy Assistant Secretary should be delegated the responsibility and authority to provide policy and procedural direction on internal audit matters to the military services and other Defense internal audit agencies. Further, we believe the Deputy Assistant Secretary's responsi- bilities for policy development and review of agency imple- mentation should be merged with his responsibilities for in- ternal audit operations of the Defense Audit Service. Public law sets the stage for accomplishment of duties and responsibilities of the Comptroller and Deputy Assistant Secretay. But:, because both ur these positions are essen- tially staff positions, attempts to prescribe and insure that internal audit policy is carried out is, of necessity, accom- plished on an advisory basis. Both the Assistant Secretary and Deputy Assistant Secretary have adopted a policy of mutual cooperation with service Secretaries and their line manacers. The Deputy Assistant Secretary told us that in matters involv- ing internal audit policy and its implementation, they have, through friendly persuasion, attempted to reach mutual uder- standings to carry out their responsibilities. We believe this approach is both practical and consistent with basic line-staff management relationships. The approach has not always been successful, however, and significant internal audit problems and recommended solutions have not always been brought to the attention of the Secretary or Deputy Secretary of Defense. For example, in our draft report on the Army's internal audit function, a copy of which was provided to you on March 15, 1977, we suggested that, to provide for more effec- tive Defense internal auditing consistent with our standards, the Congress amend the National Security Act to require placing internal audit functions of the three military depart- ments under the Secretary or Under Secretary of the respective military departments dnd have the internal auditors report directly to those officials. We suggested this because we found that the scope f internal audit work of the Army Audit Agency had been unnecessarily restricted. As a result, too Army managers could not realize the full benefit of the management control function provided by internal audit. The Comptroller and Deputy Assistant Secretary were aware of the problems in the Army and had ursuccessfully attempted through negotiation and friendly persuasion to prevent the restrictions and other problems from occurring. 3 B-134192 We believe that this situation arose, partly ecause of the staff relationship of the Comptroller to the Secretary of Defense and service Secretaries and partly, we believe, because the matter was never reported to the Secretary of Defense. Also, we were told that in considering whether to bring matters involving internal audit to the attention of the Secretary and/or Deputy Secretary of Defense, the Comptroller must ive consider tion to higher priority areas. Consequently, few matters involving internal audit, as a practical matter, would be brought to the attention of the Secretary and Deputy Secretary of Defense. While this is a normal part of the decisionmaKing proc- ess, the Deputy Assistant'Secretary is charged with the re- sponsibility for evaluating and reporting on policy implemen- tation in each of the military services. Crnsistent with Department of Defense and our reporting standards, we believe that evaluations and reports must be made as a matter of record. In ur opinion, a decision that internal audit ;itters are of relatively low priority and should not be brought to the attention of higher management levels is inconsistent with our standards. Further, such decisions cannot always best be reacled without a complete evaluation and formal report being made. Our report on the Army's internal audit functions, discussed on page 3, is a case in point. AUD'T RESOURCES Including the Deputy Assistant Secretary, a total staff of 21, consisting of 15 professional and 6 administrative persor iel, is assigned to assist te Deputy Assistant Secre- tary in carrying out functional responsibilities for develop- ing and reviewing internal audit policy in all Defense internal audit agencies. In the Defense Audit Service, the Deput Assistant Secre- tary has an authorized personnel strength of 367. Currently, the Defense Audit Service has a total of 356 staff on board to carry cut the Deputy Assistant Secretary's internal audit oper- ations responsibilities. While the Deputy Assistant Secretary has a combined audit policy and operations strength of 377 personnel this my not be enough to carry out all of his as- signed responsibilities. In our report, "Ations Needed to Strengtben the New Defense Internal Audit Service" (FGMSD-77-11), January 27, 1977, we noted that the reorganization which established the 4 B-134192 Defense Audit Service, combined the work of the old office of audit operations with a broader responsibility for Defense-wide reviews. We also noted that a staff reduction of 15 percent was made without first determining whether the remaining staff was adequate to erform that work. We rcommended that Secretary of Defense assess both the minimum required the workload and the capability of the planned staff to do the work that appropriate consideration be given to bringing and and staff capability into balance. worklcad The Secretary agreed with or recc;imendation and on March 25, 1977. said the assessment would be made as soon practicable. nd the orkload and staff capability would beas brought inLo balance. The assessment has not yt been completed. However. in October 1976, the Deputy Assistant SecLetary estimated that the Defense Audit Service needed a total of 698 spaces to accomplish the projected annual audit workload. With an au- thorized strenygth of only 367 in the Defense Audit Service and a combined staff of only 377 on board to carry out toth audit po:icy and audit operations responsibilities, it unlikely that all required appears ork can be accomplished by the existing staff. Further, a recent Department of Defense release indicated that an additional 25 percent staff press reduc- tion may be required by the Secretary. On the policy side, the Deputy Assistant Secretary us that he has sufficient staff to develop internal audittold policy. He also said that he had identified several areas where improvements were needed to carry out audit policy re- quirements including -- strengthening the audit policy role, -- reviewiing and evaluating DOD audit operations, -- improving audit workload planning, -- establishing career development and training standards, and -- establishing audit followup capabilities. According to .:he Depu:y Assistant Secretary, several projects to bring about these improvements are now underway. We noted that one of the projects, a study of the interface of audit, inspection, internal review, =nd other DOD study 5 B-134192 groups is underway and jointly staffed by the Deputy Secretary's policy staff and the military service Assistant audit agen- cies. Two Defense Audit Service staff members are partici- pating. CONCLUSIONS The Assistant Secretary of Defense (Com.Dtroller) has adequate authority to p:ovide policy and procedural to the ilitary services internal audit agencies; thedirection Assistant Scretary of Defense (Audit) does nt. Instead, Deputy the Deputy Assistant Secretar , who also has ceraticnal responsibilities as Director of the Defense Aucit udit Service. oniv has the authority to develop policy and evaluate the tation of policies approved by the Comptroller. ilemen- The Deputy Assistant Secretary's audit, and reporting responsibilities policy, operational should not be separate. Instead, the internal audit functior., including nternal audit policy, should be merged under one internal audit ganization. Audit policy formulation is best developed or- it is made as a result of knowledge ained through when first- hand experience and should not b made independently of the audi- function. The Deputy Assistant Secretary should periodically the implementation of policy and procedural directives review military services and other internal audit organizationsby the the Department of Defense and should provide formal, in written reports on olicy violations directly to the Secretary Deputv Secretary of Defense. and hile the Deputy Assistant Secretary ma:y have adequate resour es to carry out police, development responsibilities, it is unlikely that the staff is sufficient to review agency imlementation of those policies given the limited staff avaiiaLle in the Defense Audit Service and priority lines work, of ombiing the policy and operational audit functions under one office would facilitate assessment of policy audit operations piorities and the identification and of respec- t:ve resource needs. REC,MIENDTIONS TO THE SECRETARY OF DEFENSE To improve the internal audit function in thoe Secre ary of Defense, we recommend that the the Office of Secretary of Defense: 6 B-134192 -- Combine the audit policy, audit operations, and reporting functions into one functional organi- zation. -- Require the head of the combined oraunization periodically review the implementation to of policy and procedural directives by the military services and other internal audit organizations in the Department of Defense, and provide formal, reports on policy violations directly to the ritten Secretary or Deputy Secretary of Defense. -- Give careful consideratior t recuired workload and the ca-abilitieS of te taff to perform that workload and to bring the two into balance before naking further staff redux-ions i: the internal audit function. As you know, section 236 of the Legislative tion Act of 1970 requires the head of a Federal Reorcaniza- submit a written statement on actions taken agency to dations ,to the House.Committee on Government on our recommen- the Senate Cor'uittee on Governmental Affairs Operations and not later than 60 days after the date of the report and to Senate Committees on Appropriations with the the house and request for appropriations made more than agency's first 60 days after the date of the report. As arranged with your offi , we are sending this report to the Secretary of Defense, the copies of tary of Defense (Cmptroller), and the Deputy Assistant Secre-' tary of Defense (Audit). As you requested, Assistant Secre- we written comments from the Department of Defense. did not obtain requested that we make no further distribution Your office prior to committee hearings at which the report of the report will be used. The hearings are now scheduled to be held on July 27, 1977. Sin ely yours, / Ccmptroller General of the United States Enclosure 7 ENCLOSURE 1 ENCLOSURE 1 PRINCIPAL DEPARTMENT OF DEFENSE OFFICIALS RESPONSIBLE FOR ADMINISTERING ACTIVITIES DISCUSSED IN THIS REPORT Tenure of office From To SECRETARY OF DEFENSE: Harold Brown Jan. Donald 1977 Present . Rumsfeld Nov. 1975 Jan. 1977 Wziliam P. Clement3, Jr. (acting) Nov. 1975 James R. Schlesinger Nov. 1975 July 1973 Nov. 1975 ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER): Fred ?P. Wacker Sept. 1976 Present Terence E. McClary June 1973 Donald razier (acting) Aug. 1976 Jan. 3973 Jun- 1973 Robert Moot Aug. 1968 Jan. 19,3 DEPUTY ASSISTANT SECRETARY OF DEFENSE (AUDIT): Frank S. Sato Aug. 1974 Joseph P. Welsch Present Sept. 1971 Aug. 1974 or
Authority and Resources of the Deputy Assistant Secretary of Defense (Audit)
Published by the Government Accountability Office on 1977-07-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)