APPENDIX 3

COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
Bureau of Finance and Operations
308 North Office Building
HARRISBURG, PA 17120

Patricia A. Antelitano Telephone: (717) 783-1775
Director December 18, 2006 Fax: (717) 783-2724
Website: www.dos.state.pa.us

Curtis Crider

Inspector General

USS. Election Assistance Commission
Office of Inspector General

1225 New York Avenue NW — Suite 1100
Washington, DC 20005

Dear Mr. Crider:

The Pennsylvania Department of State (Department) has reviewed the draft report
entitled “Administration of Payments Received Under the Help America Vote Act by the
Secretary of the Commonwealth of Pennsylvania,” Assignment No. E-HP-PA-10-06. The
Department’s written comments to the report findings and recommendations are provided below.

PAYROLL

The Department agrees that semiannual certifications were not prepared for the two-year
period January 2004 through December 2005. The Department, however, did establish policies
and procedures to ensure that semiannual certifications are submitted effective January 1, 2006.
Certifications for the six HAVA funded positions for the period January 2006 through December
2006 were prepared and signed on December 30, 2006. The Department will continue to prepare
and submit semiannual certifications for all HAVA funded positions.

In order to resolve the questioned costs of $562,513, the following certifications have
been obtained:

e Judith L. Holjes, Federal Grant Administrator, signed a certification on November 27,
2006 (attached), certifying that for the period of September 11, 2004 through December
31, 2005, she worked solely on the Department of State’s Help America Vote Act of
2002 (HAVA) program.

e Harry VanSickle, Commissioner of the Bureau of Commissions, Elections and
Legislation, signed a certification on December 15, 2006 (attached), certifying that the
employees of the Bureau’s Division of the Help America Vote Act worked solely on

[Attachments withheld by the Office of Inspector General]

11



—EEE
FUNDING FOR

PENNSYLVANIA

— EE
FINANCIAL

MANAGEMENT
REQUIREMENTS

Eee
OBJECTIVE

HAVA funds received and expended by Pennsylvania are as follows:

TYPE OF AMOUNT OUTLAYS:
PAYMENT. RECEIVED AMOUNT AS OF'
101 $11,323,168 $ 7,292,798 12/31/05
102 22,916,952 0 12/31/05
251 100,578,829 10,166,601 09/30/05
Totals $134,818,949 $17,459,399

Within the Pennsylvania Department of State (Department), HAVA
programs are administered by the Bureau of Commissions, Elections
and Legislation. To account for the HAVA payments, the Act requires
states to maintain records that are consistent with sound accounting
principles, that fully disclose the amount and disposition of the
payments, that identify project costs financed with the payments and
with other sources, and that will facilitate an effective audit.

In addition, the Commission notified states of other management
requirements. Specifically, that states must:

¥ Comply with the Uniform Administrative Requirements for
Grants and Cooperative Agreements with State and Local
Governments (also known as the “Common Rule” and
published in 41 CFR 105-71).

v Expend payments in accordance with cost principles for
establishing the allowability or unallowability of certain items
of cost for federal participation issued by the Office of
Management and Budget (OMB) in Circular A-87.

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

The objectives of our audit were to determine whether Pennsylvania
(1) expended HAVA payments in accordance with the Act and related
administrative requirements and (2) complied with the HAVA
requirements for replacing punch card or lever voting machines, for
establishing an election fund, for appropriating a 5 percent match for
requirements payments, and for maintaining state expenditures for

"BAC requires states to submit annual reports on the expenditure of Sections 101, 102, and 251 funds, For
Sections 101 and 102, reports are due on February 28 for the activities of the previous calendar year. For
Section 251, reports are due by March 30 for the activities of the previous federal fiscal year.


a

OIG’s Mission

nie ree

Obtaining
Copies of
OIG Reports

a,

To Report Fraud,
Waste and Abuse
Involving the U.S.
Election Assistance
Commission or Help
America Vote Act
Funds

The OIG audit mission is to provide timely, high-quality
professional products and services that are useful to OIG’s clients.
OIG seeks to provide value through its work, which is designed to
enhance the economy, efficiency, and effectiveness in EAC
operations so they work better and cost less in the context of
today's declining resources. OIG also seeks to detect and prevent
fraud, waste, abuse, and mismanagement in these programs and
operations. Products and services include traditional financial and
performance audits, contract and grant audits, information systems
audits, and evaluations.

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

1225 New York Ave. NW - Suite 1100
Washington, DC 20005

To order by phone: Voice: (202) 566-3100
Fax: (202) 566-0957

By Mail: U.S. Election Assistance Commission
Office of Inspector General
1225 New York Ave. NW - Suite 1100
Washington, DC 20005

E-mail: — eacoig(@eac.gov

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

FAX: 202-566-0957



requirement established by Section 254 (a)(7) of HAVA.

Organizational Base Year

Unit FY 1999 FY 2003 FY 2004
Bureau of
Commissions,
Elections &
Legislation $344,565 $301,841 $230,522
Election
Division $393,535 $394,183 $413,595
Voter
Registration
Division $737,000 $487,548 $493,297
Totals $1,475,100 $1,183,572 $1,137,414

Recommendations:
We recommend that EAC:

6. Require the Department to identify its base year expenditures
for activities related to HAVA Section 251 requirements
payments and annual expenditures for these activities for the
fiscal years 2003 and 2004.

7. Identify any appropriate actions to be taken based on the
information submitted by the Department.

Department Response:

Although the Department agreed to identify its applicable base year
(state fiscal year ending prior to November 2000) expenditures; it did
not agree that it may not have met the maintenance of effort
requirement imposed by HAVA. In that regard, it believes that the
costs of the Department’s election related programs shown in the audit
as pertaining to the base year and fiscal years 2003 and 2004 includes
the costs of activities that are not related to requirements payments. Its
response also stated that there is no requirement to identify the base
year costs.

OIG Comments:

We agree that there is no provision in HAVA that specifically requires
the identification of base year costs. However, without quantification
of a state base year costs pertaining to activities currently funded by
requirements payments, it is not possible to determine whether a state
met the maintenance of effort requirement. Thus, a state must
quantify its base year costs. Also, we recognize that the costs analysis


PAYROLL

fiscal year 1999 operations and expenditures for activities currently
funded by Section 251 requirements payments and did not monitor
State spending for such activities in subsequent years.

The Department did not adequately support salary charges for six staff
positions funded 100 percent by Help America Vote Act (HAVA)
payments for the two-year period January 2004 through December
2005. Requirements for time distribution records are included in
Office of Management and Budget Circular A-87, Appendix B.8.h (3).
Specifically, Circular A-87 states that where employees are expected to
work solely on a single Federal award, charges for their salaries and
wages will be supported by semiannual certifications that the
employees worked exclusively on that program for the period covered
by the certification. The Department had not developed sufficient
policy and procedures to ensure that semiannual certifications were
prepared and submitted. The Department calculated that the total cost
for salaries and benefits for these six positions for the period from
January 2004 to December 2005 was $562,513, and we classified this
amount as a questioned cost.

Recommendations:
We recommend that the EAC require the Department to:

1. Establish policy and procedures to ensure that semiannual
certifications are submitted.
2. Resolve the questioned costs of $562,513.

Department Response:

The Department agreed that it did not prepare semiannual certifications
during the period January 2004 through December 2005. To address
the finding, the Department submitted a certification from the
Commissioner of the Bureau of Commissions, Elections and
Legislation. The Commissioner certified that the six employees whose
salaries were questioned had worked full-time on HAVA programs.
Also, the Department responded that it had established policies and
procedures to ensure that the semiannual certifications are prepared.

OIG Comments:

We believe the actions taken by the Department are sufficient to
support the questioned costs and to resolve Recommendation 1.


elections at a level not less than expended in fiscal year 1999.”

Specifically, we audited reported outlays shown on page 2 and
reviewed controls to assess their adequacy over the expenditure of
HAVA funds. We also evaluated compliance with certain
administrative requirements for the following activities:

¥ Accumulating financial information reported to EAC on the
Financial Status Reports (Standard Forms number 269).
Accounting for property.

Purchasing goods and services.

Accounting for salaries.

Charging indirect costs.

Spending by counties.

VARNA

We also determined whether Pennsylvania had complied with the
requirements in HAVA for:

v Establishing and maintaining the election fund.

Y Appropriating funds equal to five percent of the amount
necessary for carrying out activities financed with Section 251
requirements payments.

¥ Sustaining the State’s level of expenditures for elections.

RESULTS OF AUDIT
‘SUMMARY We concluded that the Department generally accounted for and

expended HAVA funds in accordance with requirements. However,
we identified a need for the Department to improve its management
procedures and/or processes to ensure that expenditures for payroll are
adequately supported and equipment is properly managed and
safeguarded. Because of insufficient supporting documentation, we
classified expenditures for payroll of $562,513 as questioned costs.

Regarding significant HAVA compliance requirements, we found that
the Department met the requirements for establishing a state election
fund and appropriating matching funds. We were not, however, able
to determine whether the Department satisfied the requirement for
maintaining state expenditures for activities funded by Section 251
payments at a level not less than expended in the state fiscal year
ending June 30, 2000. This occurred because the state did not identify

? Pennsylvania uses the calendar year in which the fiscal year begins to designate the fiscal year; for
example, fiscal year 1999 began on July 1, 1999, and ended on June 30, 2000.


MAINTENANCE
OF EFFORT

Department Response:

The Department agreed that it was unable to provide a policy for
inventory control or a formal inventory of HAVA-funded equipment.
To address this finding, the Department responded that it is updating
its inventory to comply with the Common Rule, incorporating in future
agreements with counties a provision requiring compliance with the
Common Rule, drafting polices and procedures that will require
counties to record equipment purchased with HAVA funds, requiring
counties to submit updated lists of property on an annual basis, and
performing random site visits to assess county equipment lists.

OIG Comments:

We believe the Departments response is sufficient to resolve the
recommendations.

The Department did not identify fiscal year 1999 (base year)
expenditures for activities funded by Section 251 requirements
payments and did not monitor State spending for such activities in
subsequent years. Further, in its amended State Plan, the Department
recognized the State’s obligation to maintain programs at base year
levels but did not state whether or not this commitment had been met.
Section 254 (a)(7) of HAVA requires the State to maintain
expenditures for activities funded by requirements payments at a level
that is not less than the level of such expenditures maintained by the
State for the fiscal year ending prior to November 2000.

The Department told us that it had taken a holistic approach to
monitoring the maintenance of effort required by HAVA; monitoring
the total budget appropriation provided to the Department of State
rather than identifying and tracking election-specific expenditures.
The Department also believed that the generalized statements included
in the amended State Report were sufficient to meet the reporting
requirement of Section 254 (a) (7).

As the Pennsylvania Department of State had not quantified spending
for its base year and subsequent years levels of effort, we could not
determine whether it satisfied the maintenance of effort requirement.
However, we obtained and analyzed expenditure data for fiscal years
1999, 2003 and 2004. Our analysis included costs of the Bureau of
Commissions, Elections, and Legislation general operations and the
costs of its Election and Voter Registration Divisions.

Based on total costs of these organizational units, as shown below, it
appears that the State may not have met the maintenance of effort


U.S. ELECTION ASSISTANCE

COMMISSION
OFFICE OF INSPECTOR GENERAL

ADMINISTRATION OF PAYMENTS
RECEIVED UNDER THE HELP AMERICA
VOTE ACT BY THE SECRETARY OF THE
COMMONWEALTH OF PENNSYLVANIA

Report No.
E-HP-PA-10-06
January 2007


APPENDIX I

SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed:

v The prior single audit report and other reviews related to the
Department’s financial management systems and the HAVA
program for the last 2 years.

Y Policies, procedures and regulations for Pennsylvania’s
management and accounting systems as they relate to the
administration of HAVA programs.

¥ Inventory lists of equipment purchased with HAVA funds to the
extent these documents were produced.

¥ Major purchases.

v Supporting documents maintained in the accounting system for
payments made with HAVA funds.

¥ Support for reimbursements to counties.

S

Certain Pennsylvania laws that impact the election fund.

v Appropriations and expenditure reports for State funds used to
maintain the level of expenses for elections at least equal to the
amount expended in fiscal year 1999 and to meet the five percent
matching requirement for section 251 requirements payments.

v Information regarding source/supporting documents kept for
maintenance of effort and matching contributions.

We also interviewed appropriate Department employees about the
organization and operation of the HAVA program.

We conducted our review in accordance with Government Auditing
Standards issued by the Comptroller General of the United States. As
such, we included tests and procedures as considered necessary under
the circumstances to evaluate the Department’s controls over the
administration of HAVA payments. Because of inherent limitations, a
study and evaluation made for the limited purposes of our review
would not necessarily disclose all weaknesses in administering HAVA
payments.


in our report pertaining to maintenance of effort may include costs not
related to activities funded by requirements payments. We presented
the costs based on available information and to demonstrate the
importance for states to specifically identify their costs related to
implementing Section 251 of HAVA.

The Department needs to document the results of the analysis its base
year and subsequent years costs pertaining to Section 251 and provide
the results to the EAC.



———————EEEee
PROPERTY

The Department and six Counties we visited did not maintain adequate
records of equipment purchased with Help America Vote Act (HAVA)
funds in compliance with the Common Rule. Part 41 CFR 105-71.132
stipulates that 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; 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.

The Department had not developed sufficient policy and procedures to
account for equipment purchased with HAVA payments. In addition,
the Department’s agreements with the counties did not include a
requirement to comply with Federal regulations regarding the
management of equipment. As a result, the Department was unable to
provide its policy for inventory control or a formal inventory that
included HAVA-funded equipment. Further, at the six counties we
visited, we found that property records were not maintained or did not
contain all the required information.

¢ Chester, Luzerne, Cambria and Westmoreland counties had not
maintained a formalized inventory record for HAVA-funded
equipment that included the required data such as funding
source, cost, and acquisition date.

e Allegheny County did not maintain any property records for
voting machines delivered prior to the May 2006 primary
election because the vendor had borrowed some of the
machines for use in another state.

e Philadelphia had established property management policy that
generally met Common Rule requirements but had not
inventoried all components of its voting system and had not
captured the extent of Federal participation in the value of
upgraded voting equipment.

Recommendations:
We recommend that the EAC require the Department to:

3. Establish policy and procedures to account for equipment
purchased with HAVA payments.

4. Ensure that the counties comply with the Federal equipment
management requirements.

5. Include in future agreements the specific Federal equipment
management requirements.


BACKGROUND

HELP AMERICA
VOTE ACT

The Help America Vote Act of 2002 (HAVA or the Act) created the
U.S. Election Assistance Commission (EAC or Commission) to assist
states and insular areas with the improvement of the administration of
Federal elections and to provide funds to states to help implement
these improvements. HAVA authorizes payments to states under Titles
Tand II, as follows:

v Title I, Section 101 payments are for activities such as
complying with Title IIl of HAVA for uniform and
nondiscriminatory election technology and administration
requirements, improving the administration of elections for
Federal office, educating voters, training election officials and
poll 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
for addressing provisional voting, voting information, statewide
voter registration lists, and voters who register by mail.

Title II also requires that states must:

¥ Have appropriated funds “equal to 5 percent of the total amount
to be spent for such activities [activities for which requirements
payments are made].” (Section 253(b)(5)).

v “Maintain the expenditures of the State for activities funded by
the [requirements] payment at a level that is not less than the
level of such expenditures maintained by the State for the fiscal
year ending prior to November 2000.” (Section 254 (a)(7)).

¥ Establish an election fund for amounts appropriated by the state
“for carrying out the activities for which the requirements
payment is made,” for the Federal requirements payments
received, for “such other amounts as may be appropriated under
law,” and for “interest earned on deposits of the fund.” (Section
254 (b)(1)).


Curtis Crider, Inspector General

U.S. Election Assistance Commission
December 18, 2006

Page 2

programs related to HAVA for the period January 2004 through December 2005. This
certification is based on personal knowledge and reports made to Commissioner
VanSickle by Gail Borger, who served as Chief of the Division of HAVA from October
10, 2003 to August 3, 2005.

PROPERTY

The Department agrees that it was unable to provide a policy for inventory control or a
formal inventory that included HAVA funded equipment in the Commonwealth. The
Department does have an agency-wide inventory on file in the Division of Procurement
(ivision), Bureau of Finance and Operations; however, the inventory is not current. The
Division is in the process of updating the inventory in compliance with the Common Rule, Part
41 CFR 105-71.132.

The Department also agrees that the Department’s agreements with the counties did not
include a requirement that they comply with Federal regulations regarding the management of
equipment. Effective September 21, 2006, all future Commonwealth-issued grant agreements
and/or amendments will contain the following paragraph:

“The county agrees to establish policies and procedures to account for equipment
purchased with HAVA funds and to comply with all state and federal equipment
management requirements including, but not limited to, the Uniform Administrative
requirements for Grants (41 CFR 105-71).”

In addition, the Department is currently drafting polices and procedures that will require
counties to record equipment purchased with HAVA grant dollars. The Department will provide
guidance through written communication aiding counties in the creation of adequate records of
this property. The information will instruct counties to submit to the Department a description
of the property; a serial number or other identification number; the source of the property; who
holds the title; the acquisition date; cost of the property; the location; use and condition of the
property; and any disposition data, including the date of disposal and sale price of the property.
The Department will set a deadline for the submittal of these records. Upon submittal, the
Department will thoroughly review them for accuracy and compliance with Part 41 CFR 105-
71.132 of the Common Rule. The Department is prepared to offer substantial direction to
counties regarding this request.

The Department will also require counties to record all of the above information on any
newly acquired property. The Department will require counties to submit an updated list of
property with all of the required information to the Department on an annual basis. These
records will be reviewed for compliance with Federal law.

12


Curtis Crider, Inspector General

U. S. Election Assistance Commission
December 18, 2006

Page 4

The total costs provided by the Department in its Response to the Notification of Finding
and Recommendation PA- 2006-01 dated September 13, 2006 were a response to the findings of
the preliminary audit report and not a statement of agreement with the auditors’ method of
calculating expenditures for election administration.

As recommended, the Department is currently reviewing all State FY 1999-2000
expenditures to identify any base year expenditures for activities related to the requirements now
imposed by Title II] of HAVA and for which requirements payments were made to the
Commonwealth under section 251 of HAVA. Based on this recommended review of
Commonwealth expenditures during the base year, it is clear that the Commonwealth of
Pennsylvania (Commonwealth) in the base year expended very few State funds, if any funds, for
the activities that are now required by Title III of HAVA and for which the Commonwealth
received requirements payments beginning in 2004. That is so because most of the requirements
of Title III of HAVA were not among the activities for which the Commonwealth was expending
State funds during fiscal year 1999 (base year). Further, because the EAC has never defined
what activities are included under HAVA, our task is made more complicated. In view of the
fact that during the 1999-2000 fiscal year Pennsylvania had no provisional ballots, no voter
identification requirements, no statewide voter registration list, etc., thus far we have not
identified any Commonwealth maintenance of efforts cost because none of our responsibilities
were Title III.

Should you have any questions, please do not hesitate to contact me at 717.783.1775 or
pantelitan@state.pa.us.

Sincerely,
Xb: Tieca) 4 Lh le l la a)

Patricia A. Antelitano
Director

Cc: Paul S. DeGregorio, Chairman, U.S. Election Assistance Commission
Thomas R. Wilkey, Executive Director, U.S. Election Assistance Commission

14



individuals in question were working on HAVA programs and established procedures for
the completion of semiannual certifications for all HAVA funded positions.
Pennsylvania also indicated that it was drafting policies and procedures to address the
property related issues. Finally, based on a review of expenditures for its base year,
Pennsylvania believes that it met the maintenance of effort requirement.

Please provide us with your written response to the recommendations included in
this report by March 9, 2007. Your response should contain information on actions taken
or planned, including target dates and titles of EAC officials responsible for
implementing the recommendations.

Section 5(a) of the Inspector General Act (5 U.S.C. § App.1) requires the Office
of Inspector General to list this report in its semiannual report to Congress.

If you have any questions regarding this report, please call me at (202) 566-3125.



U.S. ELECTION ASSISTANCE COMMISSION
OFFICE OF INSPE IR GENERAL
1225 New York Ave. NW - Suite 1100
Washington, DC 20005

January 10, 2007

Memorandum

To: Thomas Wilkey
Executive Director

I pe -
From: Curtis W. Crider Gta bd + Etmr

Inspector General

Subject: Final Audit Report - Administration of Payments Received Under the Help
America Vote Act by the Secretary of the Commonwealth of Pennsylvania
(Assignment Number E-HP-PA-10-06)

This report presents the results of the subject audit. The objectives of the audit
were to determine whether Pennsylvania (1) expended Help America Vote Act (HAVA)
payments in accordance with the Act and related administrative requirements and (2)
complied with the HAVA requirements for replacing punch card or lever voting
machines, for appropriating a 5 percent match for requirements payments, for
establishing an election fund, and for maintaining state expenditures for elections at a
level not less than expended in fiscal year 2000.

The report concluded that Pennsylvania generally complied with requirements
and identified the following areas needing management attention:

v Pennsylvania did not have adequate documentation to support salary charges
for six positions financed with HAVA funds resulting in questioned costs of
$562,513.

¥ Counties did not keep records that sufficiently accounted for equipment
purchased with HAVA funds.

v Pennsylvania was unable to provide supporting documentation to show that it
had met its maintenance of effort requirement for activities funded by Section
251 payments at a level not less than expended in the state fiscal year ending
June 30, 2000.

In its December 18, 2006 response to the draft report (Appendix 3), Pennsylvania
indicated that actions were underway to address the issues identified in the report.
Regarding the $526,513 in questioned costs for salaries, Pennsylvania certified that the


MONETARY IMPACT
Questioned
Description Costs
Payroll $562,513

APPENDIX 2


Curtis Crider, Inspector General

U. S. Election Assistance Commission
December 18, 2006

Page 3

The Department will also perform random site-assessments of inventory lists submitted
by counties. In these site-assessments, Department employees will visit the randomly selected
county and evaluate whether the records of property are compliant with the requirements set
forth in Federal law. The Department will submit its findings to the county with any guidance
and remedies should they be necessary.

The Department will keep detailed files of all records submitted by the counties and will
have the ability to submit the records to Federal or State government agencies should they be
requested.

MAINTENANCE OF EFFORT

The Department agrees that it did not specifically identify in the State Plan (Element 7)
fiscal year 1999 (base year) expenditures for activities funded by the requirements payments
authorized by section 251 of HAVA to fund the election administration requirements that are
now mandated by Title III of HAVA. That is because section 254(a)(7) of HAVA does not
require that a State identify a specific dollar amount.

Though the Commonwealth’s HAVA State Plan has never specified a specific amount of
expenditures for the base year, the EAC never advised Pennsylvania that its State Plan was
deficient in failing to specify the amounts that it expended in the base year for the activitics that
were funded by the requirements payments made under Title II of HAVA. Moreover, neither the
EAC nor any other person or entity ever made any adverse comment upon Element 7 of
Pennsylvania’s State Plan following the Commonwealth’s submission of amendments to its State
Plan in 2004 and 2005. For these reasons, the Commonwealth reasonably concluded, and
continues to believe, that Element 7 of its HAVA State Plan complies with section 254(a)(7) of
HAVA.

The Department also disagrees with the assertion made in the draft report that, based on
total costs of the Depariment’s organizational units, Pennsylvania might not have met the
maintenance of effort requirement established by section 254(a)(7) of HAVA. The total costs
illustrated in the draft report list the total dollars spent by the Department for all election
administration activities, including the administration of the Pennsylvania campaign finance law,
the filing of candidate nomination petitions and papers, and the certification of candidates for
office. Those costs were not incurred in support of the activities that were subsidized by the
requirements payments made under Title Il of HAVA. That is because these activities for which
the Commonwealth expended State funds in the base year are not activities that are now required
by Title Ill of HAVA. Neither does the dollar statements expressed in the draft report take into
consideration non-recurring fiscal year costs or reductions in salary for newly-hired employees.

13