Energy Secretary James D. Watkins often has said it would take him two years to turn around his troubled department. Approaching the second anniversary of his swearing in March 1, he still has a long way to go, by his own account.

In a report to President Bush, he listed "material weaknesses" plaguing the department and its far-flung facilities in nuclear safety, contract management, budget analysis, quality control and staff recruitment and training.

"Taken as a whole," he told the president, a new management system instituted in the department last year "provides reasonable assurance that the management control objectives were achieved, except for the material weaknesses identified in this report."

Those exceptions, however, cover some of the most intractable problems that Watkins has been wrestling with since he took office.

Most of the problems Watkins cited have been identified separately in previous internal reports or publicized through congressional hearings and come as no surprise.

But in the aggregate, they indicate Watkins is far from his goal of getting the department to run with the same efficiency and responsiveness to direction that he experienced as an officer in the nuclear Navy.

Watkins "was even more candid this year than last year," a department official said, referring to the annual management assessment required by the Federal Managers' Financial Integrity Act.

Last March, one year into his tenure, Watkins announced abolition of the office of assistant secretary for management and administration and reassigned its responsibilities to three new staffs in an effort to get control of the department's finances, management and personnel.

In a late December interview with the trade newsletter Inside Energy, Watkins said "these things are coming on line. . . . And 1991, I hope, will be the real year and the proof of whether or not what I've done is going to be here and lasting. My feeling is that it will. I'm hopeful."

The Energy Department is different from other Cabinet departments because it includes the huge network of factories that produce the nation's nuclear weapons. More than 100,000 employees of civilian contractor firms work in the weapons complex.

Many of these facilities "have safety deficiencies that impair our ability to ensure the health and safety of both our workers and the public," Watkins told Bush. "These include flawed nuclear facility safety analyses that are out of date, flawed in their analytical methods or conclusions, and inadequate to demonstrate the required degree of protection from nuclear safety hazards."

Watkins is scheduled to unveil in late January his proposals for reorganizing the nuclear weapons complex, proposals that are likely to include closing some of the most troubled facilities.

The United States currently is not manufacturing new nuclear weapons because Energy Department facilities that produce plutonium triggers, tritium gas and other key components are shut down for safety and environmental reasons.

"Without valid justification for continuing operations, including upgraded operation practices," Watkins said in his report, "it is very possible that many more nuclear operations within DOE will be curtailed temporarily or permanently."