CBSX provides worldwide asset visibility over the Army’s reportable equipment items, including the Army’s most critical war fighting equipment. The objective of CBSX is to provide accurate, timely, and auditable equipment balances for major items necessary for the direct support of troops, such as armored personnel carriers, battle tanks, helicopters, rifles, and gas masks. Operated and maintained by the Army’s Logistics Support Activity (LOGSA), CBSX furnishes the Army with an official inventory figure used to assess the overall preparedness of the force, determine the validity of unit equipment requisitions, distribute/redistribute equipment throughout the Army, and maintain worldwide asset visibility of deployed assets. As a result, if CBSX equipment balances are overstated, the Army may procure too few items, possibly resulting in reduced readiness. Conversely, if CBSX equipment balances are understated, the Army may procure too many items, potentially creating excess and wasting financial resources that could have been otherwise used to maintain and improve readiness. Moreover, Army planners and logisticians use equipment balances originating from CBSX to redistribute equipment to deploying units and estimate secondary item and other requirements to sustain this equipment. Therefore, if unit equipment balances are misstated, mobilization and deployment planning could be more difficult and inefficient. CBSX covers over 9,300 National Stock Numbers, which are primarily major items but also include other selected items, such as medical equipment, for which the Army requires worldwide visibility. CBSX seeks to mirror the official accountable records of equipment balances, such as property book records, held by various types of Army activities, including divisions subject to deployment, depots that repair or upgrade equipment, and storage sites. As of September 30, 1996, CBSX contained information on 13.5 million items whose reported value was over $116 billion. While some of this property is held at wholesale distribution centers, such as depots, the vast majority of these items, valued at about $94 billion, are maintained at the retail level. Of this retail equipment, about 80 percent, valued at a reported $75 billion, was accounted for by units that use the Standard Property Book System - Redesign (SPBS-R), an automated property book system, which is maintained by the U.S. Army Information Systems Software Development Center, Fort Lee, Virginia (see figure 1). Since CBSX is the Army’s centralized equipment asset visibility system, the Army plans to use it as a primary source for supplementary stewardship information, as prescribed by the Statement of Federal Financial Accounting Standard No. 8, Supplementary Stewardship Reporting. Beginning in fiscal year 1998, this standard requires agencies with federal mission property, plant, and equipment to disclose the value and condition of these assets as supplemental stewardship information. The standard specifically includes military weapons as federal mission property, plant, and equipment. In the past, military equipment has been misstated on the Army’s financial statements. For example, according to AAA, the Army’s fiscal year 1996 financial statements misstated its property, plant, and equipment by a material but unknown amount and major problems with the processes used to report and value military equipment precluded AAA from attesting to the reported value of military equipment. Army regulations require all activities to maintain accurate property books and ensure that they agree with CBSX. However, past audits by AAA and GAO found that CBSX balances for equipment items fluctuated for reasons that responsible officials could not explain, differed from records maintained by the units possessing equipment, and were substantially inaccurate for equipment in transit between units (see footnote 1). Moreover, a January 1992 Army Materiel Command Lessons Learned report on Operation Desert Storm demonstrated that inaccurate or unreliable CBSX data (1) hampered equipment distribution decisions, resulting in some deployed units receiving equipment in excess of their authorizations while others were short critical equipment, (2) delayed the distribution of major items to units that did not deploy to Southwest Asia, thus diminishing the readiness of those units, and (3) significantly affected efforts to identify major items that required accelerated procurement. SPBS-R is a stand-alone personal computer system operated independently at over 2,000 Army units. Figure 2 illustrates the three methods units can use to provide SPBS-R data to CBSX: (1) downloading data to diskettes that are hand-carried to another computer, which transmits the data to CBSX, (2) transmitting via modem from the property book computer directly to CBSX, and (3) downloading data to diskettes that are mailed to LOGSA where the data is loaded into CBSX. For submissions provided electronically to CBSX (methods 1 and 2 above), the system transmits a confirmation of receipt that contains the total number of transactions received by CBSX. In addition, listings of transactions that affect unit balances are printed by CBSX and mailed to the units by LOGSA monthly. Figure 3 shows the three types of SPBS-R data units sent to CBSX during the time the adjustments in our review were made: catalog data, transaction data, and validation data. Catalog Data: The Army provides units with an updated automated catalog semiannually that designates which supply items in SPBS-R are reportable to CBSX. When a unit runs the catalog update process in SPBS-R, the system generates a listing of the unit’s equipment balances for items that have become reportable due to catalog changes. Units are supposed to transmit these balances to CBSX, which, in turn, records the new balances. Transaction Data: Units are required to transmit their SPBS-R equipment transactions (such as additions and transfers) to LOGSA at least monthly to update CBSX. If these transactions pass various edits to detect common types of errors, CBSX updates unit asset balances. Validation Data: Units transmit SPBS-R balances to CBSX (called validation data) twice a year. As part of the validation process, CBSX compares these SPBS-R balances to CBSX balances, identifies discrepancies, and adjusts the CBSX balances to agree with SPBS-R. CBSX is adjusted to agree with SPBS-R because SPBS-R is the Army’s official accountable record. As also shown in figure 3, in September 1996, after the time frame of the adjustments that we reviewed, SPBS-R was changed to allow units to begin providing SPBS-R unit identifier data to CBSX. Both CBSX and SPBS-R contain unit identifier data, which are used to ensure that unit transactions are posted to the proper accounts. If SPBS-R and CBSX unit identifier data are inconsistent, property book transactions will be either rejected by CBSX or posted to the wrong accounts. In the past, CBSX and SPBS-R unit identifier data have been inconsistent, which has led to differences between the two systems. Consequently, in the new process, CBSX compares the data from the SPBS-R unit file to the unit identifier data in CBSX and provides LOGSA analysts with a report of differences for review. After the validation process, LOGSA calculates a compatibility rate, which measures the extent to which CBSX and the unit records agree. According to the CBSX user manual, Army headquarters adopted the compatibility rate as the yardstick to measure the degree of property book officer compliance with CBSX asset reporting requirements. To determine the primary causes for adjustments to correct discrepancies between CBSX and SPBS-R, we analyzed a statistically projectable sample of 150 adjustments from our sample universe of 32,649 adjustments. The sample was selected to identify common, recurring problems that caused adjustments to CBSX between January 1996 and August 1996 as a result of the validation process. We chose this time period in order to cover a complete validation period, from the time units submitted validation balances until the semiannual CBSX validation process was completed. We excluded adjustments that were made during the conversion of manual property books to SPBS-R because we considered these adjustments as nonrecurring. We also excluded adjustments to non-equipment National Stock Numbers, such as clothing. Our analysis consisted of reviewing applicable SPBS-R reports, such as the CBSX Transaction Listing, and CBSX reports, such as the Proof of Shipment report. We also provided documentation to, and discussed the results of our analysis with, applicable property book officers, LOGSA officials, and/or Software Development Center, Fort Lee, officials and reached consensus with these officials about the causes of adjustments. Appendix I identifies the various Army activities that were part of our sample. We also interviewed officials from the Office of the Deputy Chief of Staff for Logistics, LOGSA, and the Army Quartermaster Center and School. To determine if the Army’s improvement efforts adequately address the causes of CBSX errors, we reviewed and analyzed the Army’s plans and related documentation. We also interviewed LOGSA, Software Development Center at Fort Lee, and contractor officials. To determine whether the CBSX compatibility rate is an adequate measure of performance, we reviewed LOGSA compatibility reports, which quantify the extent to which CBSX agrees with unit records, analyzed LOGSA’s methodology for calculating the rate, and interviewed LOGSA officials. We conducted our review between July 1996 and October 1997 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Secretary of Defense or his designee. On December 18, 1997, the Army’s Deputy Chief of Staff for Logistics provided us with written comments, which are discussed in the “Agency Comments and Our Evaluation” section and are reprinted in appendix II. From January 1996 through August 1996, LOGSA made more than 32,000 adjustments to CBSX to bring it into agreement with SPBS-R balances. We reviewed a representative sample of 150 adjustments and identified the causes of 124 of them.