SUPERVISION.

In

DODIG and GAO emphasized a need for the Naval Audit Service to improve the degree of supervision applied during audits. Based on several GAO quality assurance reviews of internal audit agencies it appears that the basic finding leading to this conclusion is a lack of documentation of supervision. The Auditor General of the Navy is committed to improving the amount of documentation and more importantly the degree and quality of supervision being applied during the conduct of audits. To accomplish this objective short term, near term and long term goals are in order. the short term the internal policies of the Audit Service must mandate documentation of supervision. Additionally, personnel in supervisory positions must be schooled on proper supervisory techniques. Actions to achieve these short term objectives have been taken. In the near term the NAVAUDSVC must size the number of individual auditors to supervisory personnel in a manner which provides the proper span of control to allow a working environment conducive to effective supervision. Within the past year the Naval Audit Service has recognized the need, and has developed a position management strategy in line with the desired audit team structure. In the long term, the Audit Service is committed to align its manpower against the revised structure.

Proper application of the flexibilities inherent within the DON Management to Payroll concept will allow the Audit Service to eventually achieve the proper supervisor to employee ratio. Attainment requires the manager to have sufficient patience to introduce change as normal attrition occurs. This is the most efficient way to realize the desired result. The Audit Service believes that in an ideal situation an Assistant Director will oversee the work efforts of no more than three auditors-in-charge who have under them an average of eight qualified auditors. In theory an Assistant Director would be managing three major audit efforts, each directly supervised by an auditor-in-charge. Normally one audit would be in survey phase, one in verification, while a third would be in the utilization phase. In layman's terms, one would be starting with a moderate amount of manpower being applied, a second would be in process with an extensive amount of effort being applied, while a third would be tapering off with a minimal amount of manpower being applied. A consistent attempt to achieve the proper worker to supervisor balance, coupled with mandated documentation of supervision, a sufficient level of effort of supervisory training and an effective performance evaluation system will eventually overcome the deficiencies cited by GAO and DODIG in this area.

MONETARY SAVINGS.

DODIG, GAO and the Congressional Committee emphasized the need for the Naval Audit Service to identify a greater level of potential monetary benefits. At the hearing the Auditor General of the Navy testified that this deficiency was valid in the 1985 and prior year timeframe which served as the basis for the DODIG and GAO finding. He provided data which revealed positive action on the part of the Naval Audit Service to reverse the trend. The attached chart presents historical data since 1985.

Amounts reported to the Department of the Navy and to the Congress are provided. There is a slight deviation in the data since the DODIG has promulgated specific guidelines for reporting potential savings to the Congress. To improve the credibility of NAVAUDSVC savings reported to the Congress, the DODIG has conducted in-depth reviews of savings reported during each of the three most recent submissions. During each review a significant amount of NAVAUDSVC reported savings have withstood the DODIG review. It is of interest to note that the area of greatest discrepancy related to findings is associated with overstated obligations. DODIG guidance does not allow Defense audit agencies to report these savings to Congress. Public Law Nr. 100-504 of October 18, 1988, now requires that these be reported. An area of current dispute between NAVAUDSVC and DODIG relates to potential savings as a result of findings wherein excess materials, parts or end items are identified which can be used to offset valid inventory or allowance requirements. DODIG guidance does not specifically allow such potential savings to be reported to the Congress. The Naval Audit Service is committed to provide the Secretary of the Navy with information deemed appropriate to allow the Department to be managed more efficiently while, at the same time, is committed to report only those potential savings to the Congress consistent with DODIG guidance. Fortunately, the GAO audit standards allow for information within audit reports to be qualified. Accordingly, NAVAUDSVC includes total potential efficiencies within the audit reports to the Navy and Marine Corps providing specific language in the audit report to identify those amounts which will not be officially reported to the Congress. This allows the Naval Audit Service to satisfy the needs of both the Department of the Navy and the DODIG.

The current intent of the NAVAUDSVC to primarily conduct economy, efficiency and program result audits should ensure a continuation of the current level of potential monetary benefits. Recent trends, however, portend that a larger segment of the audit workforce may be compelled to perform oversight audits, investigative assists, follow-up audits and other compliance type audits which have a low probability of large returns on investment ratios.

The NAVAUDSVC is currently monitoring internal productivity. The best measure of the audit agency's progress in changing its audit approach is in the rate at which findings and recommendations containing quantifiable efficiencies are appearing in audit reports. The Auditor General of the Navy continually emphasizes the need to maintain and enhance this ratio.

In summary, it is believed that the NAVAUDSVC has overcome this GAO/DODIG-cited deficiency.

COMPLEXITY OF AUDITS.

Since 1985 the NAVAUDSVC has attempted to move toward accomplishing more complex program performance audits to more nearly conform to the GAO standards. Both DODIG and GAO have voiced agreement with this approach. The attached charts provide information on the trends being experienced.

It is intended that these trends be extended into the future. From a management perspective the audit workforce will attempt to apply appropriate parts of the Deming management philosophy to achieve greater productivity by constantly striving to improve the overall audit process. Such a strategy should lead to a continuation of the trends being experienced.