U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL

FINAL REPORT: 

ADMINISTRATION OF HELP AMERICA 

VOTE ACT FUNDS BY THE MARYLAND 

STATE BOARD OF ELECTIONS

MAY 1, 2003 THROUGH DECEMBER 31, 2005 

Report No. 

E-HP-MD-08-06 

June 2007
 U.S. ELECTION ASSISTANCE COMMISSION

 OFFICE OF INSPECTOR GENERAL

 1225 New York Ave. NW - Suite 1100 

 Washington, DC 20005

June 5, 2007 

Memorandum 

To: Thomas Wilkey 

 Executive Director 

From: Curtis Crider 

 Inspector General 

Subject: Final Audit Report on the Administration of Help America Vote Act Funds by 

the Maryland State Board of Elections (Assignment No. E-HP-MD-08-06) 

 This report presents the results of the subject audit. The objectives of the audit 

were to determine whether Maryland (1) expended Help America Vote Act (HAVA) 

payments in accordance with HAVA 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 Maryland generally complied with requirements and 

identified the following areas needing management attention: 

9 Reporting of Costs - Maryland included the same expenditures totaling 

$250,554 in its annual financial reports for both HAVA Section 101 and 

Section 251 programs. 

9 Accounting for Costs - Maryland did not separately account for costs incurred 

under HAVA Sections 101, 102, and 251 as required by the Uniform 

Administrative Requirements for Grants and Cooperative Agreements with 

State and Local Governments. 

9 Accounting for Equipment - Maryland did not maintain a comprehensive 

equipment managements system or have written policies and procedures to 

ensure that property acquired with HAVA funds was inventoried and properly 

controlled. 

9 Use of Funds - Maryland used a portion of Section 251 requirements 

payments for activities related to improving the administration of elections for 

Federal office, such as storing and transporting voting equipment. Such use of 
funds is permissible but only if the state submits one of two certifications to 

the Election Assistance Commission. 

 Maryland’s response to the audit (Appendix 3) indicates that corrective action has 

been completed or is in process for all areas. 

 Please provide us with your written response to the recommendations included in 

this report by August 6, 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.3) 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. 

 

 

 

 

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BACKGROUND

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 

I and II, as follows: 

HELP AMERICA 

VOTE ACT

9 Title I, Section 101 payments are for activities such as 

complying with Title III 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. 

9 Title I, Section 102 payments are available only for the 

replacement of punchcard and lever action voting systems. 

9 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: 

9 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)). 

9 “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)). 

9 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)). 
4 

 

1

 Our audit cites the Uniform Administrative Requirements for Grants and Cooperative Agreements with 

States and Local Governments promulgated by the U.S. General Services Administration (GSA) in Section 

41 of the Code of Federal Regulations (CFR), Part 105 – 71. We use this citation because GSA disbursed 

the HAVA funds on behalf of EAC and because the EAC was not authorized to issue regulations. 

FUNDING FOR 

MARYLAND

FINANCIAL 

MANAGEMENT 

REQUIREMENTS

HAVA funds received and expended by Maryland are as follows: 

TYPE OF AMOUNT OUTLAYS 

PAYMENT RECEIVED AMOUNT AS OF 

101 $5,636,731 $1,114,563 12/31/05 

102 1,637,609 1,637,609 12/31/05 

251 42,478,430 24,931,033 12/31/05 

Totals $49,752,770 $27,683,205 

Within the State of Maryland, HAVA programs are principally 

administered by the State Board of Elections (SBE). To account for 

the HAVA payments, the Act requires recipients 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: 

9 Comply with the Uniform Administrative Requirements for 

Grants and Cooperative Agreements with State and Local 

Governments (also known as the “Common Rule”).1

 

9 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. 

9 Submit annual financial reports on the use of Title I and Title II 

payments. 
5 

The objectives of our audit were to determine whether Maryland (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 

elections at a level not less than expended in fiscal year 2000. 

OBJECTIVE 

Specifically, we audited expenditures from May 1, 2003 through 

December 31, 2005, and reviewed controls to assess their adequacy 

over the expenditure of HAVA funds. We also evaluated compliance 

with certain HAVA requirements for the following activities: 

9 Accumulating financial information reported to EAC on the 

Financial Status Reports (Standard Forms number 269). 

9 Accounting for property. 

9 Purchasing goods and services. 

9 Accounting for salaries. 

9 Charging indirect costs. 

9 Spending by counties. 

We also determined whether Maryland had complied with the 

requirements in HAVA applicable to Section 251 requirements 

payments for: 

9 Establishing and maintaining the election fund. 

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

9 Appropriating funds equal to five percent of the amount 

necessary for carrying out activities financed with Section 251 

requirements payments. 

RESULTS OF AUDIT

We concluded that Maryland properly established the State election 

fund, sustained the appropriate level of State expenditures for 

elections, and satisfied the 5 percent matching requirement for Section 

251 funds. In addition, we found that Maryland needed to adjust its 

annual financial reports for expenditures of $250,554 that it reported 

under both Sections 251 and 101, improve accounting for HAVAfunded expenditures and equipment, and submit a certification to EAC 

regarding its use of a portion of its Section 251 funds for improving the 

administration of elections for Federal office. 

SUMMARY
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Duplicate Costs. Maryland reported costs of $250,554 twice - once as 

an expenditure of 101 funds and again as an expenditure of 251 funds. 

The costs represent payments to BSC Systems, Inc. for acceptance 

testing. Although Maryland paid BSC Systems only once, it reported 

the payments as expenditures under both Sections 101 and 251. As a 

result, we classified costs of $250,554 as questioned. 

QUESTIONED 

COSTS 

Recommendation: 

1. We recommend that the EAC resolve the questioned costs. 

SBE Response: 

SBE advised that it had “submitted corrected annual financial report 

for its Section 101 and 251 funds and has cleared up any reporting 

errors.” 

OIG Comments: 

We reviewed the revised reports and supporting information and 

determined that the State made proper adjustments to eliminate the 

duplicate costs. No further action is required. 

The SBE did not separately account for costs incurred under Sections 

101, 102, and 251 of the HAVA. Instead, SBE established two 

Program Cost Account (PCAs) codes in the State’s accounting system 

to track HAVA funds, one for voter registration information 

technology costs and one for everything else. Because the PCAs did 

not correspond to the three HAVA sections, SBE had to extract 

transaction detail from the accounting system to report outlays on the 

Financial Status Reports (SF-269) submitted to the EAC for each of 

the three HAVA sections. 

ACCOUNTING 

FOR 

EXPENDITURES

Part 41 CFR 105–71.120, Standards for financial management 

systems, (a) requires that: “Fiscal control and accounting procedures 

of the State, as well as its subgrantees and cost-type contractors, must 

be sufficient to— 

 (1) Permit preparation of reports required by this part and the 

statutes authorizing the grant, and 

 (2) Permit the tracing of funds to a level of expenditures 

adequate to establish that such funds have not been used in violation of 

the restrictions and prohibitions of applicable statutes.” 

Further, Maryland’s Accounting Procedures Manual requires State 

agencies to establish an effective system of internal controls to ensure 
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EQUIPMENT 

MANAGEMENT 

CONTROLS

During Maryland’s State fiscal years 2004 and 2005, the SBE did not 

maintain a comprehensive equipment management system or have 

written policies and procedures to ensure that property acquired with 

HAVA funds was properly controlled and inventoried. The inventory 

database maintained by SBE did not contain control accounts 

identifying beginning or ending balances and consisted of multiple 

spreadsheets that were not reconciled with the State’s property 

management system. In addition, although we were told that a 

physical inventory of SBE’s property was conducted during 2004 and 

2005, we were not provided adequate documentation to support the 

taking of the inventory or the results of the verification process. As 

such, there is little assurance that the spreadsheet listing of property is 

accurate because it has not been updated based on the results of 

physical inventories. 

According to 41 CFR 105-71.132, Equipment, (b) States should “use, 

manage, and dispose of equipment acquired under a grant by the State 

in accordance with State laws and procedures.” Maryland’s 

Department of General Services Inventory Control Manual Section II 

describes the controls and record keeping requirements for capital 

equipment considered sensitive or non-sensitive. Section II.03 requires 

that a complete physical inventory shall be taken at least once each 

year for sensitive items and every 3 years for non-sensitive items. In 

addition, the Manual requires that records of the taking of the physical 

inventory as well as control accounts (beginning and ending balances) 

be maintained and a final control account reconciliation be certified to 

by the State agency. 

there is “adequate support for all billings and financial status reports 

sent to the Federal government.” SBE personnel, however, did not 

establish the accounting procedures to facilitate the preparation of SF269 reports and allow the tracing of reported amounts to supporting 

documentation. 

Recommendations: 

We recommend that EAC require SBE: 

2. To establish accounting records for HAVA Sections 101, 102, 

and 251 funds in accordance with requirements. 

SBE Response: 

SBE said that it is “working to establish separate Program Cost 

Analysis (PCA) codes for each section of HAVA funding.” 

OIG Comments: 

None. 
The property management responsibilities for SBE are performed as a 

collateral duty substantially by one employee who could not ensure 

that all property acquired with HAVA funds was recorded in the 

spreadsheets. As such, we believe that improvements in property 

management are needed to ensure that property acquired with HAVA 

funds is adequately controlled. 

Recommendations: 

We recommend that the EAC require SBE: 

3. To develop and maintain an equipment management system in 

accordance with State requirements that will record, identify 

and track equipment purchased with HAVA funds. 

4. To develop written policies and procedures that describe, with 

regard to HAVA equipment, how SBE will comply with the 

State’s Inventory Control Manual. 

5. To conduct, during this current year (2007), a physical 

inventory of HAVA-funded equipment, reconcile the physical 

inventory to the acquisition records of equipment purchased 

with HAVA funds, and adjust and update the property 

management records on the basis of the reconciliation. 

SBE Response: 

SBE agreed with the general finding and said it was working to rectify 

the problem. SBE also said that it believes “the inventory purchased 

with federal funds is accounted for through the extensive testing of the 

equipment before and after each election as well as the in-depth chain 

of custody procedures followed by the State and every local 

jurisdiction.” 

 

OIG Comments: 

None. 

The SBE used Section 251 funds of about $5.2 million to pay Diebold 

Election Systems, Inc. for various activities such as warehousing and 

transporting voting machines, training election officials and precinct 

workers, acceptance testing, and providing on-site technicians during 

the conduct of elections. All of these activities represent allowable 

uses of Section 251 funds. However, some of them, such as 

warehousing voting machines may be financed with Section 251 funds 

only if: 

CERTIFICATION 

FOR THE USE OF 

SECTION 251

FUNDS 

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the State certifies to the Commission that—(A) the 

State has implemented the requirements of title III; or 

(B) the amount expended with respect to such other 

activities does not exceed an amount equal to the 

minimum payment amount applicable to the State under 

section 252(c). 

Recommendation: 

We recommend that the EAC require SBE to: 

6. Submit the required certification for its use of Section 251 

funding. 

SBE Response: 

SBE said that it “recently [May 15, 2007] certified to EAC that 

Maryland has implemented the requirements of Title III.” 

OIG Comments:

No further action is required. 

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APPENDIX 1 

SCOPE AND METHODOLOGY 

To accomplish our objective, we reviewed: 

9 The prior single audit report and other reviews related to the State’s 

financial management systems and the HAVA program for the last 

2 years. 

9 Policies, procedures and regulations for the Maryland State Board 

of Election’s management and accounting systems as they relate to 

the administration of HAVA programs. 

9 Inventory lists of equipment purchased with HAVA funds. 

9 Major purchases. 

9 Supporting documents maintained in the accounting system for 

payments made with HAVA funds. 

9 Certain Maryland laws that impacted the election fund. 

9 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 2000 and to meet the five percent 

matching requirement for section 251 requirements payments. 

9 Information regarding source/supporting documents kept for 

maintenance of effort and matching contributions. 

We also interviewed appropriate Division 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 SBE’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.

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APPENDIX 2 

MONETARY IMPACT 

Questioned 

Description Costs 

Duplicate Costs 250,554

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APPENDIX 3 

SBE Response To Federal Audit of HAVA Funds 

Questioned Costs 

 Since the time of the audit, SBE submitted corrected SF-269 financial reports for 

its Section 101 and 251 funds and has cleared up any reporting errors. It is important to 

note that, although the $250,554 may have originally been reported twice, the vendor was 

not paid twice. 

Accounting for Expenditures 

 SBE is currently working to establish separate Program Cost Analysis (PCA) 

codes for each section of HAVA funding. However, SBE strongly disagrees that the 

outlays reported on the SF-269 were not reconciled with expenditures recorded in the 

accounting system. Expenses for HAVA and for all agency functions are reconciled 

monthly with the State accounting system. This reconciliation is the basis for reporting 

SF-269 expenditures. In fact, SBE uses accounting system records for all federal and 

State reporting, budget preparation and each fiscal year closeout. 

Equipment Management Controls 

SBE agrees with the general finding that the inventory database does not contain 

control accounts and consists of multiple spreadsheets not reconciled with the State’s 

property management system. However, SBE disagrees with the effect that property 

acquired with HAVA funds have not been adequately controlled to identify if the 

equipment is lost, damaged, stolen or no longer needed to support the administration of 

Federal elections. 

In fact, the inventory purchased with federal funds is accounted for through the 

extensive testing of the equipment before and after each election as well as the in-depth 

chain of custody procedures followed by the State and every local jurisdiction. 

Reconciling the inventory control account with the State’s property management system 

is an administrative function that SBE is currently rectifying. However, the implication 

that Maryland cannot account for its equipment because this reconciliation has not taken 

place is wrong, as it does not consider the strict property control procedures that ensure 

the integrity and security of all voting equipment. 

 

Certification For The Use of Section 251 Funds 

SBE recently certified to the EAC that Maryland has implemented the 

requirements of Title III. This certification allows the State to use Section 251 funds for 

the general improvement of election administration. With this certification, the audit’s 

recommendation has been satisfied. 

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