U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL 

FINAL REPORT: 

ADMINISTRATION OF PAYMENTS 

RECEIVED UNDER THE HELP AMERICA 

VOTE ACT BY THE NORTH DAKOTA 

SECRETARY OF STATE 

APRIL 29, 2003 THROUGH SEPTEMBER 30, 2012 

Report No. 

E-HP-ND-08-12 

November 2013 
Memorandum

November 6, 2013

To: Alice Miller

Acting Executive Director

From: Curtis W. Crider 

Inspector General

Subject: Final Performance Audit Report – Administration of Payments Received 

Under the Help America Vote Act by the North Dakota Secretary of State

(Assignment Number E-HP-ND-08-12)

We contracted with the independent certified public accounting firm of McBride, Lock 

& Associates to audit the administration of payments received under the Help America Vote 

Act (HAVA) by the North Dakota Secretary of the State’s Office (Office).

 

In its audit, McBride, Lock & Associates concluded that the Office generally accounted 

for and expended the HAVA funds in accordance with applicable requirements for the period 

from April 2003 through September 30, 2012. However the following exceptions were 

identified:

• The Office submitted financial reports that could not be supported by underlying 

accounting records.

• The Office property records were not adequate per 41 CFR 105-71.132.

• The Office did not have documented policies and procedures.

• The Office did not timely deposit into the election fund the required state match for all 

Section 251 requirements payments. 

• The Office expended HAVA funds without adequate approval of certain invoices.

In its September 3, 2013 response to the draft report (Attachment A-1), the Office

provided comments to the findings and corrective actions, as applicable, to address the

recommendations.

In the report McBride, Lock & Associates summarized the Office’s response to the

recommendations, as well as their comments on the responses after the recommendations. Also

included in the report is the EAC response to the draft report (Appendix A-2), dated August 12, 

2013, which indicated that the EAC would work with the SOS to ensure corrective action. 

U.S. ELECTION ASSISTANCE COMMISSION

OFFICE OF INSPECTOR GENERAL

1335 East West Highway - Suite 4300

Silver Spring, MD 20910
We would appreciate being kept informed of the actions taken on our recommendations 

as we will track the status of their implementation. Please respond in writing to the findings and 

recommendation included in this report by January 6, 2014. Your response should include 

information on actions taken or planned, targeted completion dates, and titles of officials 

responsible for implementation.

To fulfill our responsibilities under Government Auditing Standards, the Office of 

Inspector General:

 Reviewed McBride, Lock & Associates’ approach and planning of the audit;

 Evaluated the qualifications and independence of the auditors;

 Monitored the progress of the audit at key points;

 Reviewed the audit report, prepared by McBride, Lock & Associates to ensure 

compliance with Government Auditing Standards; and

 Coordinated issuance of the audit report.

McBride, Lock & Associates is responsible for the attached auditor’s report and 

the conclusions expressed in the report. We do not express any opinion on the 

conclusions presented in McBride, Lock & Associates audit report.

The legislation creating the Office of Inspector General requires that we report to

Congress semiannually on all audit reports issued, actions taken to implement our

recommendations, and recommendations that have not been implemented. 

If you have any questions regarding this report, please call me at (301) 734-3104.

Attachment

cc: Director of Grants and Payments
Performance Audit Report 

Administration of Payments Received Under the Help America Vote Act by 

the North Dakota Secretary of State 

Prepared for 

The United States Election Assistance Commission (EAC)
 

Office of Inspector General
 

By 

McBride, Lock & Associates 

June 2013 

McBRIDE, LOCK & ASSOCIATES 

CERTIFIED PUBLIC ACCOUNTANTS 

KANSAS CITY 
 

 

 

 

Performance Audit Report
 

Administration of Payments Received Under the Help America Vote Act by 

the North Dakota Secretary of State 

TABLE OF CONTENTS 

Page 

EXECUTIVE SUMMARY 1 

BACKGROUND 2 

AUDIT OBJECTIVES 4 

SCOPE AND METHODOLOGY 5 

AUDIT RESULTS 5 

APPENDICES: 

Appendix A-1: Response of the North Dakota Secretary of State to the Draft Report 

Appendix A-2: Response of the U.S. Election Assistance Commission 

to the Draft Report 

Appendix B: Audit Methodology 

Appendix C: Monetary Impact as of September 30, 2012 
 

 

 

 

 

 

 

U.S. Election Assistance Commission
 

Performance Audit Report
 

Administration of Payments Received Under the Help America Vote Act by 

the North Dakota Secretary of State
 

EXECUTIVE SUMMARY 

McBride, Lock & Associates was engaged by the United States Election Assistance Commission 

(EAC) Office of the Inspector General to conduct a performance audit of the North Dakota 

Secretary of the State’s Office (Office) from inception on April 29, 2003 through September 30, 

2012 to determine whether the Office used payments authorized by Sections 101, 102, and 251 

of the Help America Vote Act of 2002 (HAVA) in accordance with HAVA and applicable 

requirements; accurately and properly accounted for property purchased with HAVA payments 

and for program income; maintained state expenditures at a level not less than the level 

maintained in the fiscal year ending prior to November 2000; and met HAVA requirements for 

Section 251 funds for an election fund and for a matching contribution. 

In addition, the Commission requires states to comply with certain financial management 

requirements, specifically: 

•	 Comply with the Uniform Administrative Requirements for Grants and Cooperative 

Agreements with State and Local Governments, 41 CFR 105-71, (originally Office of 

Management and Budget Circular A-102, also known as the “Common Rule”). 

•	 Expend payments in accordance with cost principles set forth in Cost Principles for State 

and Local Governments, 2 CFR 225, (originally Office of Management and Budget 

Circular A-87) for establishing the allowability or unallowability of certain items of cost 

for federal participation. 

•	 Follow the requirements of the Federal Cash Management and Improvement Act. 

•	 Submit detailed annual financial reports on the use of Title I and Title II payments. 

•	 Comply with the provisions of Audits of States, Local Governments and Non-Profit 

Organizations (Office of Management and Budget Circular A-133) 

We conducted this performance audit in accordance with Generally Accepted Government 

Auditing Standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on the audit objectives. 

1
 
 

 

 

 

 

 

 

 

 

Based on the audit procedures performed, except for the matters discussed below, we concluded 

that the Office generally accounted for and expended the Grant funds in accordance with the 

requirements mentioned above for the period from April 29, 2003 through September 30, 2012. 

The exceptions are as follows: 

1.	 The Office submitted financial reports that could not be supported by underlying 

accounting records. 

2.	 The Office property records were not adequate per 41 CFR 105-71.132. 

3.	 The Office does not have documented policies and procedures. 

4.	 The Office did not timely deposit into the election fund the required state match for all 

Section 251 requirements payments. 

5.	 The Office expended HAVA funds without adequate approval of certain invoices. 

We have included in this report as Appendix A, the Secretary of State’s written response to the 

draft report. Such response has not been subjected to the audit procedures and, accordingly, we 

do not provide any form of assurance on the appropriateness of the response or the effectiveness 

of the corrective actions described therein. 

BACKGROUND 

The Help America Vote Act of 2002 (HAVA) created the U.S. Election Assistance Commission 

(Commission) to assist States and insular areas (hereinafter referred to as States) with improving 

the administration of federal elections and to provide funds to States to help implement these 

improvements. The Commission administers payments to States authorized by HAVA under 

Titles I and II, as follows: 

•	 Title I, Section 101 payments are for activities such as complying with HAVA 

requirements for uniform and nondiscriminatory election technology and administration 

requirements (Title III), improving the administration of elections for federal office, 

educating voters, training election officials and pool workers, and developing a State plan 

for requirements payments. 

•	 Title I, Section 102 payments are available only for the replacement of punchcard and 

lever action voting systems. 

•	 Title II, Section 251 requirements payments are for complying with Title III requirements 

for voting system equipment; and addressing provisional voting, voting information, 

Statewide voter registration lists, and voters who register by mail. 

2
 
 

 

 

 

 

Title II also requires that states must: 

•	 Have appropriated funds equal to five percent of the total amount to be spent for 

activities for which requirements payments are made. 

•	 Maintain the expenditures of the State for activities funded by the requirements payment 

at a level that is not less than the expenditures maintained by the State for the fiscal year 

ending prior to November 2000. 

•	 Establish an election fund for amounts appropriated by the State for carrying out 

activities for which requirements payments are made, for the Federal requirements 

payments received, for other amounts as may be appropriated under law and for interest 

earned on deposits of the fund. 

The Awardee – The North Dakota Secretary of State 

The HAVA funds were awarded to the North Dakota Secretary of State, who is an elected 

official and is charged with the oversight of all elections, including administration of state 

election law, election official training, candidate filings, candidate certification, campaign 

finance and disclosure oversight, and compilation of election results. Elections in the State are 

administered at the county level by the county election officials. North Dakota is the only state in 

the nation without some form of voter registration due to the rural character of the numerous 

small precincts and the local election boards whose members know most of the voters who enter 

the polling location. 

Help America Vote Act North Dakota State Plan 

The objectives of the project funded by HAVA, as set forth in the state plan, were to equip each 

polling location with voting systems capable of providing second-chance voting and allowing 

voters with disabilities to vote unassisted; posting easy to understand voting information, 

improve election official training and poll worker training; improve voter education; and develop 

and implement a centralized database of voters for the purpose of preventing and detecting fraud. 

The Secretary of State established and is maintaining an Election Fund for the exclusive purpose 

of carrying out activities of HAVA. Additionally, the Office has managed all expenditures 

funded by HAVA and has not distributed any of the requirements payments to the local units of 

government. 

3
 
 

 

 

 

AUDIT OBJECTIVES 

The objectives of our audit were to determine whether the Office: 

1.	 Used payments authorized by Sections 101, 102, and 251 of the Grant in accordance with 

Grant and applicable requirements; 

2.	 Accurately and properly accounted for property purchased with Grant payments and for 

program income; 

3.	 Met HAVA requirements for Section 251 funds for creation of an election fund, 

providing required matching contributions, and meeting the requirements for 

maintenance of a base level of state outlays, commonly referred to as Maintenance of 

Expenditures (MOE). 

In addition to accounting for Grant payments, the Grant requires states to maintain records that 

are consistent with sound accounting principles that fully disclose the amount and disposition of 

the payments, that identify the project costs financed with the payments and other sources, and 

that will facilitate an effective audit. The Commission requires states receiving Grant funds to 

comply with certain financial management requirements, specifically: 

•	 Comply with the Uniform Administrative Requirements for Grants and Cooperative 

Agreements with State and Local Governments, 41 CFR 105-71, (originally Office of 

Management and Budget Circular A-102, also known as the “Common Rule”). 

•	 Expend payments in accordance with cost principles set forth in Cost Principles for State 

and Local Governments, 2 CFR 225, (originally Office of Management and Budget 

Circular A-87) for establishing the allowability or unallowability of certain items of cost 

for federal participation. 

•	 Follow the requirements of the Federal Cash Management and Improvement Act. 

•	 Submit detailed annual financial reports on the use of Title I and Title II payments. 

•	 Comply with the provisions of Audits of States, Local Governments and Non-Profit 

Organizations (Office of Management and Budget Circular A-133) 

4
 
 

 

 

 

 

 

 

SCOPE AND METHODOLOGY 

We audited the Grant funds received and disbursed by the Office from April 29, 2003 through 

September 30, 2012 as shown in the following table: 

FUNDS RECEIVED 

TYPE OF EAC STATE INTEREST TOTAL FUNDS
 

PAYMENT PAYMENT MATCH EARNED AVAILABLE DISBURSED
 

Section 101 $ 5,000,000 -$ $ 48,195 $ 5,048,195 $ 5,025,685

Section 251 13,028,257 1,846,347 1,338,626 16,213,230 10,421,101 

Total $ 18,028,257 $ 1,846,347 $ 1,386,821 $ 21,261,425 $ 15,446,786 

Notes to Table of Funds Received and Disbursed: 

(1) Section 101 interest earned and amounts disbursed are based on the official accounting 

records of the Office. As indicated in Finding No. 1 activity from the initial years is no 

longer maintained by the Office due to the state retention policy. 

(2) The State Match Funds Received and Funds Disbursed include $457,491 as received and 

disbursed to account for in-kind transactions and invoices paid for by general funds or 

expenditures transferred to the general fund to meet the matching requirement. 

Our audit methodology is set forth in Appendix B. 

AUDIT RESULTS 

We conducted this performance audit in accordance with Generally Accepted Government 

Auditing Standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on the audit objectives. 

Based on the audit procedures performed, except for the matters discussed below, we concluded 

that the Office accounted for and expended the HAVA funds in accordance with the 

requirements mentioned above for the period from April 29, 2003 through September 30, 2012. 

The exceptions to applicable compliance requirements are described below. 

Finding No. 1 – Financial Reporting 

The North Dakota Secretary State’s Office (Office) submitted financial reports for Section 101 

and Section 251 funds that could not be supported by underlying accounting records. 

5
 
 

 

 

 

 

 

 

The terms and conditions of the HAVA awards require the submission of accurate and complete 

Federal Forms 269 (Financial Status Report) and 425 (Federal Financial Report) which reflect 

the uses of award funds and the interest and program income generated from those funds. HAVA 

Title IX, Section 902. AUDITS AND REPAYMENT OF FUNDS, Part (a) – Recordkeeping 

Requirement states, “Each recipient of a grant or other payment made under this Act shall keep 

such records with respect to the payment as are consistent with sound accounting principles, 

including records which fully disclose the amount and disposition by such recipient of funds, the 

total cost of the project or undertaking for which funds are used, and the amount of that portion 

of the cost of the project or undertaking supplied by other sources, and such other records will 

facilitate an effective audit.” 

The Office submitted the final report for Section 101 funds for the period ending February 28, 

2006. The report disclosed that the Office had received and expended all of the available funds 

totaling $5,063,997. The receipts are comprised of $5 million in Federal funds and $63,997 of 

interest income derived from the Federal funds. A summary of the reconciliation of the financial 

reports to the accounting records is as follows: 

Final Accounting 

Report Records Variance 

Federal Share of Outlays $ 5,063,997 $ 5,025,685 $ 38,312 

Federal Funds Authorized $ 5,063,997 $ 5,048,195 $ 15,802 

The variances are comprised of the following: 

A revision to the Calendar Year 2005 financial report was submitted on March 29, 2006. The 

revision recognized $10,830 in interest income previously reported as Section 101 that should 

have been attributed to Section 251. However, this adjustment and the resulting cumulative 

balances were not considered in the Final Report submission. Accordingly, the final report 

beginning amounts for Federal share of outlays and Federal funds authorized were overstated by 

$11,677 and $10,830, respectively. 

The remaining variances for Federal share of outlays and Federal funds authorized of $26,635 

and $4,972 is a result of the current accounting system not including all of the transactions that 

were reported for the Section 101 funds. The State of North Dakota changed accounting software 

during the fiscal year ending June 30, 2004. The general ledger as provided included detailed 

expenditures from June 2004 through September 30, 2012. For Calendar Year 2003 the Office 

was able to provide a listing of expenditures, totaling $110,700. However, of the $110,700 

reported, $27,184 could not be determined whether it was included in the accounting system 

because the conversion entries were journalized at a batch level only and detail was not 

maintained. 

It was also noted that the initial federal receipt of funds of $5 million of section 101 payments 

was not included in the new accounting system. It could not be assured therefore, that all interest 

has been credited to the election fund. 

6
 
 

 

 

 

 

 

 

Further the Office reported $1,872,663 as the recipient share of expenditures for Section 251 

funds as of September 30, 2012. The accounting records disclosed $516,910 in matching 

expenditures. Additionally, $457,491 of recipient match was provided through in-kind 

contributions, invoices paid for by general funds or expenditures transferred to the general fund. 

This results in an over-reporting of $898,262 of the recipient share of expenditures. The Office 

was able to provide a listing of the transactions that accounted for the amount reported. 

However, the detail provided to support the amount included budget appropriations, 

reimbursements from counties and program income earned. The amount reflects funds going into 

the fund and not the outlays incurred by the Office. 

Recommendation: 

We recommend that the EAC address and resolve the following recommendation that the North 

Dakota Secretary of State’s Office: 

(a) Perform a reconciliation of the grant activity for the Section 101 funds and ensure that all 

interest earned and expenditures incurred are fully disclosed. 

(b) Prepare and submit revised financial reports to the EAC for Section 101 and Section 251 

activities as of September 30, 2012. 

Secretary of State’s Response: 

The Office believes that the interest earned and expenditures incurred for Section 101 funds 

have been previously verified through processes independent of this Office. The Office stated 

that prior to the previous accounting software being closed, all records in the system were 

reconciled by the Office and audited by the State Auditor. After the retention period expired, 

the records were purged according to state law. The Office also indicated that the state 

auditors conducted an audit of the administration of the HAVA funds every two years and no 

findings were reported in any of those audits. Due to the fact that the early accounting 

records have been purged the auditors were provided spreadsheets used by the HAVA 

coordinator for the sole purpose of the general tracking of expenditures and income. These 

spreadsheets were not intended for accounting purposes. 

The Office has submitted a revised financial report for Section 251 as of September 30, 2012 

as a result of the finding. 

Auditor’s Response: 

The auditors acknowledge that the old accounting records were purged after the retention 

period expired and recommend that EAC provide further guidance on the resolution of 

Section 101 reporting. 

The submission of the revised Section 251 FSR as of September 30, 2012 addressed the 

concern. 

7
 
 

 

 

 

 

Finding No. 2 – Inadequate Equipment Management 

The Office’s equipment management is inadequate in regards to property records. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

and Local Governments 41 CFR § 105-71.132 (d) (the “Common Rule”) section states that, (1) 

“Property records must be maintained that include a description of the property, a serial number 

or other identification number, the source of property, who holds the title, the acquisition date, 

and cost of the property, percentage of Federal participation in the cost of the property, the 

location, use and condition of the property, and any ultimate disposition data including the data 

of disposal and sale price of the property and (2) A physical inventory of the property must be 

taken and the results reconciled with the property records at least once every two years.” 

The Office purchased, with HAVA funds, approximately $6.3 million of voting equipment for all 

53 counties. The counties were required to verify the delivery of the equipment along with a 

remittal of a 2.5% matching contribution. Upon the verification and receipt of payment the title 

of the assets were transferred to the counties. The inventory records of the Office provided the 

required detail for only one of the 53 counties. The detail for the other counties had not been 

entered into the system as of the beginning of fieldwork. The Office did update the inventory 

system for the remaining 52 counties during the audit. The audit was able to substantiate the 

accuracy of the inventory listing through physical observation of three county inventories 

representing 28% of the voting equipment. 

Without the updated inventory system it cannot be assured that the Office adequately monitored 

and safeguarded assets purchased with grant funds since the initial purchase in 2004. The Office 

receives maintenance reports from the equipment provider on an annual basis that identify how 

many voting systems were serviced to ensure that the counties still maintain the equipment that 

was purchased. 

Recommendation: 

We recommend that the EAC require the Office to ensure that the equipment listing is updated as 

necessary and a physical inventory be conducted every two years through the use of county or 

state personnel. An analysis should also be performed to ensure that all purchases have been 

ultimately recorded through the inventory. 

Secretary of State’s Response: 

The Office could not initially provide the inventory records for all counties since the data had 

not been uploaded to the inventory system. The Office uploaded the data for all the counties 

and verified the data with each county and provided a complete inventory list to the auditors. 

The inventory listing was substantiated by the auditors through their on-site visits. 

The Office does conduct a physical inventory annually in conjunction with the yearly billing 

process for each county’s share of equipment maintenance costs. The statements sent to the 

8
 
 

 

 

 

 

counties and payments received are compared and any differences are resolved and 

reconciled to maintain accurate lists. 

Auditor’s Response: 

The Office has adequately updated the inventory records for the equipment purchased with 

HAVA funds. The Office also adequately addressed the performance of a physical inventory. 

Finding No. 3 – Documentation of Policies and Procedures 

Key internal control policies affecting financial management activities including purchasing, 

payment, payroll, Federal financial reporting, monthly budgetary and reconciliation reviews, and 

Federal grant oversight and administration, have not been addressed in a departmental policy and 

procedure document. Due to the few personnel involved in award administration, accounting and 

financial reporting, policies and procedures have been developed informally over the years. 

Federal regulations, specifically 41 CFR 105-71.120 – Post-Award Requirements/Financial 

Administration, Standards for Financial Management Systems, Internal Control, require that: 

(a) A State must expand and account for grant funds in accordance with State laws and 

procedures for expending and accounting for its own funds, and 

(b) Effective control and accountability must be maintained for all grant and subgrant cash, 

real and personal property, and other assets. 

North Dakota Management and Budget Fiscal and Administrative Policy 216 – Internal Control 

& Fraudulent/Significant Dishonest Acts states, “Each state agency has a particular role to play 

and is ultimately responsible for implementing proper internal controls within their 

organization.” 

A key aspect of maintaining an effective system of internal controls is the documentation of 

related policies and procedures to ensure these criteria are current, approved, communicated, 

incorporated into training materials, and updated when appropriate. 

The lack of documented departmental internal control policies and procedures may result in lack 

of awareness, consistency in application, and compliance of regulations, which could allow for 

noncompliance with grant terms and conditions to occur and not be detected. 

Recommendation: 

We recommend that the EAC require the Office to complete and document internal control 

procedures and other appropriate policies in written manuals and also provide training to 

personnel involved in the administration of Federal awards. Specifically, these policies and 

procedures should address financial management activities including purchasing, payment, 

payroll, Federal financial reporting, monthly budgetary and reconciliation reviews, and Federal 

9
 
 

 

 

grant oversight and administration. Additionally, these procedures should be reviewed and 

updated on a regular basis. 

Secretary of State’s Response: 

The Office established an Internal Control Policy plan as of September 6, 2013 to address the 

concern. 

Auditor’s Response: 

The Office has adopted an Internal Control Policy that should be considered by EAC in 

resolving the finding. 

Finding No. 4 – Matching Contributions 

The Office deposited a portion of the state matching funds into the election fund subsequent to 

receipt of certain requirements payments. 

HAVA Section 254(b)(1) requires that the following monies be deposited into the state’s election 

fund: 

(a) Amounts appropriated or otherwise made available by the State for carrying out the 

activities for which the requirement payment is made to the State under this part. 

(b) The requirements payment made to the State under this part. 

(c) Such other amounts as may be appropriated under law. 

(d) Interest earned on deposits of the fund. 

The Office received $4,150,000 for 2003 and $7,446,803 for 2004 in requirements payments on 

July 13, 2004 and May, 11, 2005, respectively. The Office’s matching requirement was $218,421 

and $391,937, respectively. The Office provided $105,000 and $334,070 through budget 

appropriations and an in-kind contribution of the Election Management System used for HAVA 

activities for the 2003 and 2004 requirement, respectively. The remaining $113,421 and $57,867 

was to be provided as reimbursements from the counties. Based on the accounting records, the 

county portion of the match was not met until February 2006. This resulted in an undetermined 

amount of lost interest earning for the period from July, 13, 2004 to the date the matching funds 

were deposited in the election fund. 

Additionally, the Office received $500,000 on July 9, 2009 for the 2009 requirements payments 

which required a state match of $26,316. The State of North Dakota authorized a $30,000 

transfer from general funds to be deposited into the election fund. However, it could not be 

verified that the funds were actually deposited into the fund. 

10
 
 

 

 

 

 

 

Further, the Office received $350,000 on April 8, 2010 for the 2010 requirements payment which 

required a state match of $18,421. The Office met this matching requirement through a partial 

payment of an invoice for HAVA activity in December 2010. This results in an undetermined 

amount of lost interest earning for the period April 8, 2010 through the date the invoice was paid 

with general funds. 

Finally, the Office recorded approximately $1.87 million in matching contributions. Of this 

amount, $1.26 million was received from the 53 counties for reimbursements of voting 

equipment, maintenance of equipment and electronic poll books. The Office determined, based 

on the number of existing precincts as of 2002, the number of votes cast in the last Gubernatorial 

Election, number of eligible voters and square miles, the number of precincts within the counties 

that would receive 95% grant funded voting equipment. The county could also purchase 

additional machines at their own cost. Once the equipment was purchased and deployed, the 

Office invoiced 2.5% of the allotted equipment and the full amount for additional requested 

equipment. The Office also has been invoicing the counties for a percentage of maintenance and 

warranty costs that are incurred annually for the voting equipment. The percentage of 

reimbursement has increased through the years to transition the cost entirely to the counties. 

The Office did not maintain archived receivable records to support that all counties have remitted 

their share of the required matching amounts. There is evidence that the Office does establish a 

tracking sheet when invoices are prepared and monitors and enters in the receipts as they are 

received. However, documentation could not be provided that assures that the Office has 

received all invoices billed and that the deposit of those funds have been made to the election 

fund. 

Recommendation: 

We recommend that the EAC address and resolve the following recommendation that the North 

Dakota Secretary of State’s Office: 

(a) Calculate the amount of interest to transfer to the election fund for the untimely deposit 

of matching funds. This calculation should consider the period from the date the 

requirements payments were received through the date the matching requirement was met 

and include any compound interest through the date of the transfer. 

(b) Perform an analysis of the amount invoiced to the counties to ensure that the election 

fund has received all county required matching contributions. 

Secretary of State’s Response: 

The Office agreed with the $26,316 matching contribution not being deposited into the 

election fund. There was a coding error made that inadvertently credited the match approved 

by the Legislative Assembly to the Office’s general fund. The Office will submit a funding 

request to the Governor, which will be ultimately considered by the 2015 Legislative 

Assembly to appropriate $26,316 plus the compound interest on that amount through the date 

of transfer. 

11
 
 

 

 

 

The Office disagrees that interest was not properly accounted for on the other state matching 

dollars figures of $113,421, $57,867 and $18,421. To obtain the matching funds, the 

Governor and Secretary of State must first certify that the state match has been provided. The 

EAC would not have released the requirements payments to North Dakota until it was certain 

that the Office and state had met the necessary requirements. Therefore, the Office believes 

that the matching funds and applicable interest for these funds were correctly accounted for 

and that no further discovery is warranted. 

Auditor’s Response: 

The Office’s corrective action plan for the 2009 matching requirement of $26,316 is 

adequate. We believe the Office did not deposit the matching contributions as required prior 

to receipt of the applicable requirements payments as noted in the finding and should resolve 

with the EAC appropriate corrective action. 

Finding No. 5 – Inadequate Invoice Approval 

The Office paid invoices which did not have adequate review and approval to ensure that costs 

are accurate and appropriate for HAVA funds. 

North Dakota Management and Budget Fiscal and Administrative Policy 216 – Internal Control 

& Fraudulent/Significant Dishonest Acts states, “Internal controls play an important role in the 

prevention and detection of fraud. Examples of internal controls are, but not limited to: 

Authorization of transactions – review of particular transactions by an appropriate person.” It 

further states, “Each state agency has a particular role to play and is ultimately responsible for 

implementing proper internal controls within their organization.” 

Proper internal controls include assurance that documented support exists for costs charged to 

Federal awards are commensurate with the value received. The Office’s internal controls, as 

described, identify the Deputy Secretary of State as the person with the primary role of reviewing 

and approving invoices for allowability and allocability to the grant. 

Six invoices were selected for review from the State of North Dakota Information Technology 

Department (ITD) and there was no indication of review or approval from the Deputy Secretary 

of State. There was only one that evidenced review by the Account/Budget Specialist III. The 

ITD provides data processing and storage services for the Office. The invoices that are provided 

on a monthly invoice document processing fees that are incurred by the Office and only a portion 

is allocated to HAVA based on usage. The total costs charged was $200,968 from the six 

invoices reviewed. The accounting records disclosed that a total of $800,904 was paid to ITD as 

of September 30, 2012. 

Additionally, one invoice paid to an outside vendor for software and licensing fees, totaling 

$633,946 that did not evidence review of the Deputy Secretary of State for allowability to the 

grant. 

12
 
 

 

 

 

 

 

 

 

 

Recommendation: 

We recommend that the EAC require the Office to implement procedures to ensure that all 

payments made with Federal funds are reviewed to ensure that costs are reasonable, allowable 

and allocable. 

Secretary of State’s Response: 

Although the audit identified a few isolated invoices that did not have any evidence of being 

reviewed or approved directly noted on the invoices themselves, the Office did and does have 

procedures in place for review and approval of expenditures. The initial procedure involved 

the Accounting/Budget Specialist reviewing the invoices and then providing them to the 

Deputy Secretary of State for approval and signature. The Office subsequently implemented 

additional controls for the review and approval process for expenditures. The Deputy 

Secretary of State and the Accounting Director approve the claim for payment and the 

Accounting/Budget Specialist reviews and processes payment based on the claim for 

payment and documentation provided. Although a few earlier invoices missed having a 

notation of being reviewed, all payments were correctly and accurately processed and 

accounted for or they would not have been paid. In addition, the audit did not have any 

findings of unreasonable, unallowable or non-allocable expenditures. 

Auditor’s Response: 

We agree that most expenditures reviewed through the audit disclosed appropriate reviews 

for reasonableness, allowability and allocability. However, we still recommend that all 

expenditures have sufficient documentation that cost have been approved and reviewed to 

ensure compliance with grant requirements. 

We provided a draft of our report to the appropriate individuals of the North Dakota Secretary of 

State’s Office. We considered any comments received prior to finalizing this report. 

The Office responded on September 9, 2013 and generally agreed with the report’s findings and 

recommendations, except as noted in the responses. The EAC responded on September 9, 2013 

and stated that they would work with the Office to resolve the issues and ensure appropriate 

corrective action. The Office’s complete response is included as Appendix A-1 and the EAC’s 

complete response as Appendix A-2. 

McBride, Lock & Associates performed the related audit procedures between February 25, 2013 

and June 20, 2013. 

(Original Signed by McBride, Lock & Associates) 

McBride, Lock & Associates 

June 20, 2013 

13
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix A 

RESPONSE OF THE NORTH DAKOTA SECRETARY OF STATE TO 

THE DRAFT REPORT
 

September 3, 2013 

Finding No. 1 – Financial Reporting (pages 5 – 8) 

Secretary of State’s Second Response: The Office will wait for further guidance from the EAC 

regarding the Section 101 reporting interpretation. 

With this response, the Office is submitting revised financial reports for Section 251 activities as 

of September 30, 2012 (Attachment 1). 

Finding No. 2 – Inadequate Equipment Management (pages 8 – 9) 

Secretary of State’s Second Response: The Auditors acknowledged that the Office has 

adequately complied and no response is required. 

Finding No. 3 – Documentation of Policies and Procedures (pages 9 – 10) 

Secretary of State’s Second Response: With this response, the Office is submitting its internal 

control policy (Attachment 2). 

Finding No. 4 – Matching Contributions (pages 10 – 12) 

Secretary of State’s Second Response: The Auditors acknowledged that the Office has 

adequately complied with the 2009 matching requirement so no response is required. 

As stated in its initial response, the Office believes it met all of the requirements in timely 

depositing the matching contributions and that no corrective action is warranted. 

Finding No. 5 – Inadequate Invoice Approval (pages 13 – 14) 

Secretary of State’s Second Response: The Office did have and still has procedures in place 

that have been enhanced to ensure that all expenditures have been reviewed and approved, as is 

also required by the State Auditor. 

Comment: In the second to last paragraph on page 14, it states that the Office “generally agreed with 

the report’s findings and recommendations.” While the Office “generally” agreed with the report and 

recommendations, the Office believes it is also important to note that it did not agree with all of the 

findings as it has identified in its respective responses. 
EAC RESPONSE TO THE DRAFT AUDIT: 

OIG Performance Audit Reporl on the Administration of 

Payments Received Under the Help America Vote Act by the 

State of Norlh Dakota, for the Period April 29, 2003 through 

September 30, 2012. 

September 9, 2013 

MEMORANDUM 

To: 

From: 

Subject: 

Curtis Crider 

Inspector General 

Alice P. Mille~,. 9?t.t51p)erCJqngJ)fficer & 

Acting Exec~~ct6~~ 

Draft Performance Audit Report - "Administration of Payments 

Received Under the Help America Vote Act by the State of North 

Dakota" 

Thank you for this opportunity to review and respond to the draft audit report for 

the North Dakota Secretary of State (SOS). 

The Election Assistance Commission (EAC) will work with the SOS to ensure 

appropriate corrective action. 
 

 

 

 

 

 

 

 

 

Appendix B 

AUDIT METHODOLOGY 

Our audit methodology included: 

•	 Assessing audit risk and significance within the context of the audit objectives. 

•	 Obtaining an understanding of internal control that is significant to the administration of 

the HAVA funds and of relevant information systems controls as applicable. 

•	 Identifying sources of evidence and the amount and type of evidence required. 

•	 Determining whether other auditors have conducted, or are conducting, audits of the 

program that could be relevant to the audit objectives. 

To implement our audit methodology, below are some of the audit procedures we performed. 

•	 Interviewed appropriate Office employees about the organization and operations of the 

HAVA program. 

•	 Reviewed prior compliance audit reports related to the State’s financial management 

systems and the HAVA program for the period under review. 

•	 Reviewed policies, procedures and regulations for the Office management and 

accounting systems as they relate to the administration of the HAVA program. 

•	 Analyzed the inventory lists of equipment purchased with HAVA funds 

•	 Tested major purchases and the supporting documentation. 

•	 Tested randomly sampled payments made with HAVA funds. 

•	 Evaluated compliance with the requirements for accumulating financial information 

reported to the Commission on the financial status reports and progress reports, 

accounting for property, purchasing HAVA related goods and services and accounting 

for salaries. 

•	 Verified the establishment and maintenance of an election fund. 

•	 Verified the State expenditures met the Maintenance of Expenditures requirement. 

•	 Conducted site visits of selected counties to observe physical security/safeguard of 

equipment purchased with HAVA funds and ensure compliance with federal regulation. 

16
 
Appendix C 

MONETARY IMPACT AS OF SEPTEMBER 30, 2012 

The findings did not result in any questioned costs. 

17
 
 

 

 

 

 

 

Help to ensure efficient, effective, and transparent EAC operations and OIG’s Mission 

programs 

Obtaining Copies 

of OIG Reports 

Copies of OIG reports are available on the OIG website, 

www.eac.gov/inspector_general/ 

Copies of OIG reports can be requested by e-mail: (eacoig@eac.gov). 

Mail orders should be sent to: 

U.S. Election Assistance Commission
 

Office of Inspector General
 

1335 East West Highway - Suite 4300
 

Silver Spring, MD 20910 

To order by phone: Voice: (301) 734-3104 

Fax: (301) 734-3115 

To Report Fraud, Waste 

and Abuse Involving the 

U.S. Election Assistance 

Commission or Help 

America Vote Act Funds 

By Mail: U.S. Election Assistance Commission 

Office of Inspector General 

1335 East West Highway - Suite 4300 

Silver Spring, MD 20910 

E-mail: eacoig@eac.gov 

OIG Hotline: 866-552-0004 (toll free)
 

On-Line Complaint Form: www.eac.gov/inspector_general/
 

FAX: (301)-734-3115