The Australian National Audit Office released a scathing report on Thursday saying Defence should improve how it monitors its progress in a five-year program aiming to make its workforce more diverse and hold staff accountable for unacceptable behaviour.

It follows years of reported incidents of unacceptable behaviour - including unlawful discrimination and harassment - reaching between 800 and 900 annually in Defence.

The department is three years into a second round of reforms aiming to improve its culture, a project described by its secretary Greg Moriarty as linked to "the future success of defence and the nation's security" by helping attract and retain "a motivated, engaged, and innovative workforce".

But the audit office blasted Defence for flaws in tracking the progress of the changes, and for not paying enough attention to lessons from its first round of reforms between 2012 and 2017.

The department copped the criticisms as it prepares an agenda of cultural changes that respond to the Brereton report detailing alleged unlawful killings committed in Afghanistan by Australian special forces.

Among the failures in pursuing its cultural reform agenda, released in 2017, was the evidence Defence used to decide its strategy, the audit office report said on Thursday.

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"While Defence identified lessons learned from its implementation of the first strategy and conducted staff consultations, it did not undertake a systematic evaluation of the first strategy to inform development of the second," the audit report said.

Another shortcoming was how it tracked changes to its culture through the reform program.

The project lacked structure in collecting information on how Defence's groups and services were progressing with the changes. Defence could not show it was achieving the goals of the reform effort, the audit office said.

The report urged the department to improve how it monitored the changes and to better measure their impact - recommendations accepted by Defence.

In a letter to Auditor-General Grant Hehir, Mr Moriarty and Australian Defence Force chief Angus Campbell said internal surveys showed it had made significant progress in changing its culture.

"The extent of Defence's efforts to date to deliver cultural reform initiatives, and continuously improve culture, is considerable," they said.

Mr Moriarty and General Campbell said Defence was working to align cultural reform efforts and the work of the taskforce responding to the Afghanistan inquiry.

"In this context, Defence is cognisant of the audit's findings that further effective monitoring and reporting arrangements on cultural reform is needed at the enterprise level to demonstrate that intended outcomes are being achieved," they said.

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