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U.S. Navy Wants to Throw 70% of Its Internal Auditors Overboard

Blogs Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA Mar 01, 2021

The courageous men and women who risk their lives for our national defense also face dangers from volatile risks, such as cyberattacks and the COVID-19 pandemic.

In addition, citizens and taxpayers rightly expect efficiency and effectiveness in defense operations. So why would the U.S. Navy make plans to slash its internal audit budget by 70% over the next two years?

The proposed cuts to the Naval Audit Service budget would effectively dismantle the agency, leaving it with 85 employees compared with its current staff of 290. By comparison, the U.S. Army and Air Force audit agencies execute their missions with more than 600 staff members each. Not only would such a move by the Navy devastate critical assurance services, it would severely weaken oversight of a massive organization, whose budget was nearly $206 billion in taxpayer dollars in 2020.

What’s more, such a drastic cut would be foolhardy at a time when proposed budgets for the Navy anticipate a huge influx of tax dollars to accelerate shipbuilding. The proposed 2022 Department of Defense (DoD) budget includes about $167 billion for designing and building more than 100 ships over the next several years, according to published reports.

History tells us that such ambitious construction agendas are ripe for fraud, waste, and abuse. The Naval Audit Service has a proven record of effectively identifying such waste. Just in the last six months of 2020, the service published 19 reports, made 85 recommendations, and identified approximately $192 million in potential monetary benefits. That final figure is particularly relevant when one considers the Naval Audit Service’s entire 2020 budget was $46.1 million.

It is troubling, if not surprising, that the Navy would be willing to throw more than 200 dedicated and effective internal auditors overboard in such a short-sighted move. As an auditor within the U.S. Department of Defense (DOD) for more than 21 years, I often witnessed DOD audit functions suffer disproportionate cuts. While internal audit in government should not be immune to cuts, a 70% reduction in Navy audit oversight capabilities would be nothing short of reckless and dangerous. Whether by design or happenstance, another effect of such cuts would be to muzzle or starve the Naval Audit Service of its “watchdog” role.

The proposed DOD budget is a holdover from the previous presidential administration. I fervently urge the current administration to reconsider this penny-wise-and-pound-foolish approach to internal audit funding. Indeed, the new administration can affirm its commitment to accountability, oversight, and assurance over taxpayer dollars by ensuring all government audit services are properly funded.

To that end, I have sent a letter to the White House and Secretary of Defense requesting reconsideration of the proposed reductions to the Naval Audit Service budget.

During my years at the Pentagon, the word I heard most often was stewardship. Military leaders at the time constantly emphasized the importance of being good stewards of taxpayers’ resources. Good stewardship is more important today than ever. Our government institutions need reliable, independent assurance, which is essential to battling waste, fraud, and misappropriation; protecting taxpayer dollars; and serving the public good. Reducing effective oversight and assurance services at a time when the Navy is preparing to award billions of taxpayer dollars in construction contracts is not good stewardship. In my opinion, carrying through with draconian cuts to the Naval Audit Service budget is a recipe for disaster.

Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA

Former president and CEO of The IIA, the global professional association and standard-setting body for internal auditors.