U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL

FINAL REPORT: 

ADMINISTRATION OF PAYMENTS 

RECEIVED UNDER THE HELP 

AMERICA VOTE ACT BY THE 

NORTH CAROLINA STATE BOARD 

OF ELECTIONS 

MAY 13, 2003 THROUGH DECEMBER 31, 2007

Report No. 

E-HP-NC-04-08 

October 2008
U.S. ELECTION ASSISTANCE COMMISSION

OFFICE OF INSPECTOR GENERAL

1225 New York Ave. NW - Suite 1100 

Washington, DC 20005

October 31, 2008 

Memorandum 

To: Thomas Wilkey 

 Executive Director 

From: Curtis W. Crider 

 Inspector General 

Subject: Final Audit Report - Administration of Payments Received Under the Help America 

Vote Act by the North Carolina State Board of Elections 

 (Assignment Number E-HP-NC-04-08) 

 We contracted with the independent certified public accounting firm of Clifton 

Gunderson LLP (Clifton Gunderson) to audit the administration of payments received under the 

Help America Vote Act (HAVA) by the North Carolina State Board of Elections (SBE). The 

contract required that the audit be done in accordance with U.S. generally accepted government 

auditing standards. Clifton Gunderson is responsible for the attached auditor’s report and the 

conclusions expressed therein. 

 In its audit of the SBE, Clifton Gunderson concluded that, except for the accounting 

and reporting of interest and state matching of funds, and the filing of comprehensive financial 

reports, the audit concluded that the SBE generally accounted for and expended HAVA funds in 

accordance with the HAVA requirements and complied with the financial management 

requirements established by the U.S. Election Assistance Commission. The SBE also complied 

with section 251 requirements. 

In its July 16, 2008 and October 17, 2008 responses to the draft report (Appendix A), the 

SBE agreed with the report’s findings and recommendations, and provided corrective actions.

 Please provide us with your written response to the recommendation included in this 

report by December 1, 2008. Your response should contain information on actions taken or 

planned, including target dates and titles of EAC officials responsible for implementing the 

recommendation. 

 The legislation, as amended, creating the Office of Inspector General (5 U.S.C. § App.3) 

requires semiannual reporting to Congress on all audit reports issued, actions taken to implement 

audit recommendations, and recommendations that have not been implemented. Therefore, this 

report will be included in our next semiannual report to Congress. 

 If you have any questions regarding this report, please call me at (202) 566-3125. 
a1

PERFORMANCE AUDIT REPORT 

ADMINISTRATION OF PAYMENTS RECEIVED 

UNDER THE 

HELP AMERICA VOTE ACT 

BY THE 

STATE OF NORTH CAROLINA 

May 13, 2003 Through December 31, 2007 

UNITED STATES ELECTION 

ASSISTANCE COMMISSION 
TABLE OF CONTENTS

PAGE 

EXECUTIVE SUMMARY ................................................................................................ 1

BACKGROUND.............................................................................................................. 2 

AUDIT OBJECTIVES...................................................................................................... 2 

SCOPE AND METHODOLOGY...................................................................................... 3 

AUDIT RESULTS............................................................................................................ 4 

APPENDICES 

Appendix A: Executive Director, State Board of Elections Response To Audit 

Results ........................................................................................................................... 7 

Appendix B: Audit Methodology................................................................................ 10 

Appendix C: Monetary Impact as of December 31, 2007 ......................................... 12
1 

U.S. Election Assistance Commission 

Performance Audit of the Administration of Payments Received Under the 

Help America Vote Act by the State of North Carolina 

EXECUTIVE SUMMARY

Clifton Gunderson LLP was engaged by the U.S. Election Assistance Commission (EAC or the 

Commission) Office of Inspector General to conduct a performance audit of the North Carolina 

State Board of Elections (SBE) for the period May 13, 2003 through December 31, 2007 to 

determine whether the SBE used payments authorized by Sections 101, 102, and 251 of the 

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

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

and for program income, and met HAVA requirements for Section 251 funds for an election fund 

and for a matching contribution. We did not include a determination of whether the SBE and its 

subgrantees met the requirements for maintenance of a base level of state outlays because the 

Commission is reviewing its guidance on the applicability of the maintenance of a base level of 

state outlays to the SBE’s subgrantees. 

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 (also known as the “Common Rule”) as 

published in the Code of Federal Regulations 41 CFR 105-71. 

• Expend payments in accordance with cost principles for establishing the allowance or 

disallowance of certain items of cost for federal participation issued by the Office of 

Management and Budget (OMB) in Circular A-87. 

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

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. 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. 

Except for the accounting and reporting of interest and state matching of funds, and the filing of 

comprehensive financial reports, our audit concluded that SBE generally accounted for and 

expended HAVA funds in accordance with the requirements mentioned above for the period 

from May 13, 2003 through December 31, 2007. The exceptions needing SBE’s management 

attention are as follows: 

• Interest is owed the election fund by the counties that failed to disburse HAVA Section 

102 funds timely. 
2 

• As of December 31, 2007, there was a shortfall of $2,067 in the amount of funds 

provided by the state as matching funds, as well as lost interest earnings because of a 

delay in providing the matching funds. 

• The state’s financial status report to the EAC on HAVA Section 251 funds did not include 

all of the required information. 

We have included in this report the SBE managements’ formal response to the findings and 

recommendations dated July 16, 2008 and to the draft report dated October 17, 2008. The SBE 

officials agreed with the recommendations and provided corrective action. 

BACKGROUND

HAVA created the 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: 

• 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. 

• Title I, Section 102 payments are available only for the replacement of punch card 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)]. 

• “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)]. 

AUDIT OBJECTIVES

The objectives of our audit were to determine whether the North Carolina State Board of 

Elections: 
3 

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

HAVA and applicable requirements; 

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

program income; 

3. Met HAVA requirements for Section 251 funds for an election fund and for a matching 

contribution. We did not determine whether the SBE met the requirement for 

maintenance of a base level of state outlays, because the Commission is reviewing its 

guidance on the applicability of the maintenance of a base level of state outlays to 

subgrantees of the SBE. 

In addition, to accounting for 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 the project costs financed with the payments and other sources, and 

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

comply with certain financial management requirements, specifically: 

1. Comply with the Uniform Administrative Requirements For Grants And Cooperative 

Agreements With State and Local Governments (also known as the “Common Rule”) as 

published in the Code of Federal Regulations at 41 CFR 105-71. 

2. Expend payments in accordance with cost principles for establishing the allowance or 

disallowance of certain items of cost for federal participation issued by the OMB. 

3. Submit detailed annual financial reports on the use of Title I and Title II payments.1

SCOPE AND METHODOLOGY

We audited the HAVA funds received and disbursed by the SBE from May 13, 2003 through 

December 31, 2007. 

Funds received and disbursed from May 13, 2003 (program initiation date) to December 31, 

2007 (55-month period) are shown below: 

FUNDS RECEIVED 

TYPE OF 

PAYMENT

EAC 

PAYMENT

STATE 

MATCH 

INTEREST

EARNED

TOTAL 

AVAILABLE

FUNDS 

DISBURSED

DATA 

AS OF

 

101 $7,887,740 $ 0 $555,586 $8,443,326 $6,825,359 12/31/2007

102 893,822 0 0 893,822 893,822 12/31/2007

251 65,477,808 3,444,133 5,769,043 74,690,984 51,322,849 12/31/2007

$74,259,370 $3,444,133 $6,324,629 $84,028,132 $59,042,030 12/31/2007

Our audit methodology is set forth in Appendix B. 

 

1 EAC requires states to submit annual reports on the expenditure of HAVA 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 fiscal year ending on September 30. 
4 

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. 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. 

Except for the accounting and reporting of interest and state matching of funds, and the filing of 

comprehensive financial reports, our audit concluded that SBE generally accounted for and 

expended HAVA funds in accordance with the requirements mentioned above. This includes 

compliance with section 251 requirements for an election fund. The SBE has taken action on or 

is working to resolve the exceptions described below as set forth in Appendix A: 

I. Interest due from Subgrantees 

The State election fund is owed interest of an undetermined amount as a result in the delays by 

the counties in disbursing the HAVA Section 102 funds. 

In August 2003 the State distributed $893,822 of Section 102 funds to 13 counties to replace 

lever and/or punch card voting equipment. At the time the disbursements were made to the 

counties, the State had not yet certified voting equipment, and all but one of the counties 

retained the funds for varying lengths of time up to 36 months. In August 2006, the SBE 

discovered that nine of the counties either still had undisbursed funds or had disbursed the 

funds for items other than replacement equipment, including voting booths, storage carts, 

lockable ballot bags, and PCMCIA cards. The State paid for voting equipment to ensure that 

the SBE could certify that the State was in compliance with HAVA prior to the May 2, 2006 

primary election. The SBE Director sent the counties a letter requiring them to remit payment to 

the voting equipment vendor for the entire amount of Section 102 funds received. Since the 

State had already paid for the equipment, the voting equipment vendor issued credits to the 

State for the overpayments, which were applied to subsequent billings. This action resulted in 

the proper use of Section 102 funds, although it was delayed compliance. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

and Local Governments, 41 CFR 105-71, also known as the Common Rule states in 41 CFR 

105-71.120(b)(7) that “procedures for minimizing the time elapsing between the transfer of 

funds from the U. S. Treasury and disbursement by grantees and subgrantees must be followed 

whenever advance payment procedures are used. Grantees must establish reasonable 

procedures to ensure the receipt of reports on subgrantees’ cash balances and cash 

disbursements in sufficient time to enable them to prepare complete and accurate cash 

transactions reports to the awarding agency.” 

Further, 41 CFR 105-71.121(b) states that “methods and procedures for payment shall minimize 

the time elapsing between the transfer of funds and disbursement by the grantee or subgrantee, 

in accordance with Treasury regulations at 31 CFR part 205.” 
5 

Recommendation: 

Direct the counties to compute the interest that should have been earned on the Section 102 

funds from the date of receipt to the date they were expended on qualifying purchases, namely 

the replacement of punch card and lever voting machines, and make restitution to the election 

fund. 

SBE’s Response: 

The SBE concurred with the recommendation, based on their understanding of the EAC’s 

acceptance of the following: 

1. Counties will be able to offset any interest liability it might owe on these funds by 

offsetting any county expenditures made by county funds to improve election 

administration allowed under Title I and Title II of HAVA. 

2. There will be no interest charged to counties that properly spent these Section 102 

funds within 30 days after receipt. 

3. That any interest on the Section 102 funds paid by counties will be deposited into the 

State HAVA Fund. 

II. Financial Reporting 

The Section 251 Financial Status Reports, SF 269, did not include all of the required 

information. Interest earned was only reported for the current year, and maintenance of effort 

and state matching funds financial data were not reported on Forms SF 269 for any reporting 

period through September 2006. 

HAVA, Section 254(b)(1), Requirements for Election Fund states that, “For purposes of 

subsection (a)(5), a fund described in this subsection with respect to a State is a fund which is 

established in the treasury of the State government, which is used in accordance with 

paragraph (2), and which consists of the following amounts: (D) Interest earned on deposits of 

the fund.” Since interest is included in the fund balance, it should also be reported with the 

federal funds authorized on the SF 269, line 10h, and explained in Line 12, Remarks. 

Beginning with the September 2006 SF 269, information on the state’s maintenance of effort 

and state matching compliance was required to be included as set forth in guidance provided in 

the fall of 2006 on the EAC’s website at http://www.eac.gov/docs/Model 269 Title II final.pdf. 

Recommendation: 

Ensure that the Financial Status Report, SF 269 contains complete and accurate information 

prior to filing, as identified on EAC’s website at http://www.eac.gov/docs/Model 269 Title II 

final.pdf. 

SBE’s Response: 

The SBE concurred with the recommendation and revised the reports to reflect the required 

information. 
6 

III. State Matching Funds 

As of December 31, 2007, there is a $2,067 shortfall in the amount of state matching funds 

required to augment Section 251 HAVA funds received. The method of computing the amount 

of the state matching funds, as set forth in HAVA Section 253(b)(5), is to divide the 

requirements payments to be received from the federal government by 95%, and then multiply 

the grossed up number by 5%. For North Carolina, the $65,477,808 Section 251 proceeds, 

divided by 95%, equals $68,924,008. The difference between the two numbers is the state 

matching requirement of $3,446,200, compared to the amount provided by the state totaling 

$3,444,133. In addition, there is lost interest on the shortfall, which has not been quantified, that

will accrue from the date the state matching funds were deposited until the date the shortfall is 

added to the election fund. 

SBE’s Response: 

The SBE concurred with the recommendation and stated that the shortfall will be appropriated in 

the 2009 Legislative Session. 

**************************************** 

We provided a draft of our report to the appropriate individuals of the North Carolina State 

Board of Elections, and the United States Election Assistance Commission. We considered any 

comments received prior to finalizing this report. 

CG performed its work between February 5, 2008 and 

a1

February 28, 2008. 

Calverton, Maryland 

August 24, 2008 


9 

STATE BOARD OF ELECTIONS 

6400 Mail Service Center  Raleigh, North Carolina 27699-6400 

GARY O. BARTLETT 

Executive Director

Mailing Address:

P.O. BOX 27255

RALEIGH, NC 27611-7255

(919) 733-7173

FAX (919) 715-0135

July 16, 2008 

Re: Response to EAC NFR 0800.02 

From: Gary O. Bartlett, Executive Director 

The State Board of Elections does not dispute the Notice of Findings and 

Recommendations 0800.02. The issue listed was the State Board of Elections had not 

included all the required information on its Section 251 Financial Status Report, SF 269 

for 2006 and prior years. As noted in the NFR, the reports have already been corrected to 

reflect accurate information. This was completed during the course of the audit. 

July 16, 2008 

Re: Response to EAC NFR 0800.04 

From: Gary O. Bartlett, Executive Director 

The State Board of Elections does not dispute the Notice of Findings and 

Recommendations 0800.04. The issue listed was the State Board of Elections had not 

received the proper amount of state matching funds in its budget. 

We have been informed by North Carolina Legislative Fiscal Staff that the shortfall of 

$2,067 will be appropriated in the 2009 Legislative Session. 

We note that the state auditors conducting a prior single audit of HAVA funds found the 

shortfall, but informed me that the amount of the shortfall was too small to report under 

the reporting guidelines they followed. 
10 

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. 

• Understanding 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 SBE employees about the organization and operations of the HAVA 

program. 

• Reviewed prior single audit report and other reviews related to the state’s financial 

management systems and the HAVA program for the last 2 years. 

• Reviewed policies, procedures and regulations for the SBE’s management and accounting 

systems as they relate to the administration of HAVA programs. 

• Analyzed the inventory lists of equipment purchased with HAVA funds. 

• Tested major purchases and supporting documentation. 

• Tested randomly sampled payments made with the HAVA funds. 

• Verified support for reimbursements to local governments (counties, cities, and 

municipalities). 

• Reviewed certain state laws that impacted the election fund. 

• Examined 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. 

• Evaluated compliance with the requirements for accumulating financial information reported 

to the Commission on the Financial Status Reports, Form SF-269, accounting for property, 

purchasing HAVA related goods and services, and accounting for salaries. 

• Verified the establishment and maintenance of an election fund. 
11 

• Conducted site visits of selected counties to perform the following: 

Observe equipment purchased with HAVA funds for proper accounting and 

safeguarding 

Test disbursement of HAVA funds for allowability and compliance 

Test cash receipts from SBE to ensure proper cash management 

Test procurement of voting equipment for competitive bid process 

Ensure compliance with HAVA Act. 
12 

Appendix C 

MONETARY IMPACT AS OF DECEMBER 31, 2007 

Description 

Questioned 

Costs 

Additional Funds for 

Program 

 

State matching funds $0 $2,067

Totals $0 $2,067

Note: In addition to the amounts shown in the schedule above, additional funds for the HAVA 

program should be made available as a result of the resolution of issues related to 

interest earnings as discussed in the report. 
OIG’s Mission 

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. 

Obtaining 

Copies of 

OIG Reports 

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 

To Report Fraud, 

Waste and Abuse 

Involving the U.S. 

Election Assistance 

By Mail: U.S. Election Assistance Commission 

 Office of Inspector General 

 1225 New York Ave. NW - Suite 1100 

 Washington, DC 20005

Commission or Help 

America Vote Act 

Funds

E-mail: eacoig@eac.gov

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

FAX: 202-566-0957