The Department of the Interior's new Inspector General faces many problems in carrying out independent and effective audits as required by law because top management has not given adequate attention to Interior's auditors and investigators nor effectively responded to, or acted on, audit findings, conclusions, and recommendations. Moreover, appropriate staff and funds have not been allocated to audit and investigate activities to provide adequate coverage of Interior's programs and activities. At least 60 percent of the Inspector General's audit staff are used to audit grants and contracts, auditing which could be done by certified public accounting firms. The General Accounting Office (GAO) recommends that the Secretary of the Interior should direct all Interior managers at all levels to be more cooperative with the Inspector General and more responsive to audit findings and recommendations. Staffing resources should be shifted to internal auditing, and more attention needs to be given to fraud detection. Despite the department's large budget and large number of employees, no concerted effort has been made to detect fraud and abuse; the department relies only on a reactive approach by responding to complaints and allegations. Department of Interior officials agreed that additional staff should be devoted to audits to provide better internal audit coverage, but did not agree that a separate appropriation was necessary or that other ways should be found to conduct contract and grant audits. Tables and a list of abbreviations are provided. (Author abstract modified)