U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL

FINAL REPORT: 

ADMINISTRATION OF PAYMENTS 

RECEIVED UNDER THE HELP 

AMERICA VOTE ACT BY THE STATE 

OF INDIANA ELECTION DIVISION 

MAY 1,2003 THROUGH AUGUST 31,2006

Report No. 

E-HP-IN-13-06 

May 2007
U.S. ELECTION ASSISTANCE COMMISSION

OFFICE OF INSPECTOR GENERAL

1225 New York Ave. NW - Suite 1100 

Washington, DC 20005

May 11, 2007 

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 State of Indiana Election Division 

 (Assignment Number E-HP-IN-13-06) 

 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 State of Indiana Election Division (Election Division). 

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 Election Division, Clifton Gunderson concluded that, except for the 

accounting and reporting of the interest and matching funds, the Election Division 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. This includes compliance with section 251 requirements for an election 

fund and for maintenance of a base level of state outlays. Also, Clifton Gunderson identified a 

need for the Election Division to improve its accounting for interest and financial reporting, 

provide for the shortfall in state matching funds, and strengthen property controls. 

In an April 27, 2007 response to the draft report (Appendix A), the Election Division 

agreed with the findings and recommendations related to the reporting issues, the shortfall in state 

matching funds, and the loss of the compounding effect caused by delays in posting interest earned. 

The Election Division disagreed with the recommendations regarding the State’s responsibility over 

the controls of property at the county level, and the lost interest from delays in posting the state 

matching funds. The response indicated that the Election Division: 

o had amended and submitted corrected SF-269 reports, and procedures would be 

implemented to improve the reporting process. 

o would review the auditor’s interest computations to determine the correct interest 

differential, and would transfer the additional funds to the appropriate HAVA accounts. 

Also, the Treasurer’s office would begin computing interest monthly to forestall this 

problem in the future. 
o included a request in the FY 2008-09 biennial budget to fund the state matching 

shortfall, but would not include the interest on delayed depositing of matching funds, 

since they believed they complied with the regulations. 

o does not believe they have a responsibility to monitor the equipment owned by the 

counties; however, they would advise the counties of the state and federal regulations 

regarding property controls and procedures. 

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

report by July 11, 2007. Your response should contain information on actions taken or planned, 

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

recommendations. 

 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 
PERFORMANCE AUDIT REPORT 

ADMINISTRATION OF PAYMENTS 

RECEIVED UNDER THE HELP 

AMERICA VOTE ACT BY THE STATE OF 

INDIANA ELECTION DIVISION 

May 1, 2003 Through August 31, 2006 

UNITED STATES ELECTION 

ASSISTANCE COMMISSION 
TABLE OF CONTENTS

PAGE 

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

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

AUDIT OBJECTIVES..................................................................................................................................3 

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

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

APPENDICES 

Appendix A: ELECTION DIVISIONS’ RESPONSE TO AUDIT RESULTS...........................9 

Appendix B: AUDIT METHODOLOGY.............................................................................................17 

Appendix C: MONETARY IMPACT AS OF AUGUST 31, 2006 ...................................................18 
A1

Offices in 15 states and Washington, DC 1 h

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 State of Indiana 

Election Division (IED) for the period May 1, 2003 through August 31, 2006 to determine whether 

the IED 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, for a matching contribution, and 

for maintenance of a base level of state outlays. 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 the interest and state matching funds, our audit 

concluded that IED 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 and for maintenance of a base level of state outlays. We also identified four areas 

needing IED’s management attention: 

• There were reporting errors on the Financial Status Reports, Form 269, including interest 

earned on HAVA funds deposited with the State of Indiana that was not reported and 

expenditures that were incorrectly reported. 

• Interest earnings were lost as a result of delayed receipt of state matching funds, the shortfall 

in state matching funds transferred to the HAVA accounts, and the lack of the 

compounding because interest was not deposited to the HAVA accounts timely. 
2 

• As of August 31, 2006, there was a shortfall 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 physical security over voting equipment purchased with HAVA funds and controlled by 

the counties need improvement. 

We have included in this report the IED’s formal responses to our draft report and recommendations 

dated April 27, 2007. The IED agreed with the recommendations related to reporting issues, the 

shortfall in state matching funds, and the loss of the compounding effect caused by delays in posting 

interest earned. The IED disagreed with the recommendations regarding the lack of controls over 

property at the county level, and the lost interest from delays in posting the state matching funds. 

BACKGROUND

The Help America Vote Act of 2002 created the U.S. Election Assistance 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)(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 )(1)). 
3 

AUDIT OBJECTIVES

The objectives of our audit were to determine whether the State of Indiana: 

1. Used payments authorized by Sections 101, 102, and 251 of the Help America Vote Act 

(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, for a matching 

contribution, and for maintenance of a base level of state outlays. 

In addition, to account 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: 

4. 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. 

5. 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. 

6. 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 IED from May 1, 2003 through August 

31, 2006. 

Funds received and disbursed from May 1, 2003 (program initiation date) to August 31, 2006 (41-

month period): 

 

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 31 for the activities of the 

previous fiscal year ending on September 30. 
4 

 

TYPE OF PAYMENT

AMOUNT 

RECEIVED 

AMOUNT 

DISBURSED 

 DATA 

AS OF 

101 $6,309,538 $1,617,285 8/31/2006 

102 9,601,275 9,601,052 8/31/2006 

251 51,144,283 50,211,822 8/31/2006 

$67,055,283 $61,430,159

Note: The above table does not include auditors’ adjustments for the state matching 

shortfall ($129,919) and additional interest earned through August 31, 2006 

($2,093,036) that was not posted to financial records as of August 31, 2006, but 

should be made available for the HAVA program. 

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. 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 the interest and state matching funds, our audit 

concluded that IED 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 and for maintenance of a base level of state outlays. We also identified areas needing 

IED’s management attention, as described below: 

I. Financial Reporting 

The Financial Status Report, Standard Forms 269, did not include all of the required information or 

included incorrect information. 

• Interest earned on HAVA funds deposited with the State of Indiana in the Sections 101, 102 

and 251 accounts was not reported on Form SF 269. Interest income aggregating $2,283,208 

through June 30, 2006, was earned on HAVA funds deposited with the state, and should have 

been included in the total receipts on Line 10.o. on the financial forms at each reporting 

period. The interest earned for the reporting year and the cumulative interest earnings to the 

date of the report should be reported in the explanation block on Line 12. 

 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 
5 

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, and explained in Line 12, Remarks. 

• The expenditures reported on the Section 102 and Title II Financial Status Report, SF 269, 

for 12/31/05 and 9/30/05, did not agree with the amounts recorded to date in the HAVA 

financial records, as follows: 

 The 12/31/05 expenditures for Section 102 were underreported by $261,086 as that 

would have placed the balance of funds available in a negative position on the SF 

269. The negative balance in this fund was subsequently recorded by interest earning 

and transfers from Title II funds prior to 7/31/05. 

 The 9/30/05 expenditures for Title II funds reported on the SF 269 exceeded the 

total to date in the financial system by $1,061,458. 

The instructions for the Financial Status Report, SF 269, states that for Line 10a – “Enter 

total gross program outlays...........For reports prepared on a cash basis, outlays are the sum 

of actual cash disbursements for direct costs for goods and services, the amount of direct 

costs for goods and services, the amount of indirect expense charged, the value of in-kind 

contributions applied, and the amount of cash advances and payments made to 

subrecipients. For reports prepared on an accrual basis, outlays are the sum of actual cash 

disbursements for direct charges for goods and services, the amount of indirect expense 

incurred, the value of in-kind contributions applied, and the net increase or decrease in the 

amounts owed by the recipient for goods and other property received, for services 

performed by employees, contractors, subgrantees and other payees, and other amounts 

becoming owed under programs for which no current services or performances are required, 

such as annuities, insurance claims, and other benefit payments.” 

Recommendations: 

1. 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. 

2. Contact USEAC to determine if amended reports will have to be filed for prior periods to 

provide the correct information. 

IED’s Response: 

The IED agrees with this finding and stated that all financial reports had been reviewed and 

amendments were submitted to EAC’s OIG on April 5, 2007. Also, procedures had been revised 

internally, and with the State Treasurer’s and State Auditor’s offices, to improve the reporting 

process for future reports submitted for the Indiana HAVA program. 

 
6 

II. Interest Earned

The State treasurer’s office computed interest earned by the HAVA program through June 30, 2006, 

totaling $2,200,179; however, during our review, we noted the following:

• no interest was recorded in the HAVA accounts until April 2006. Since the account 

balances used to determine the amount did not include the interest earned to date, earnings 

were lost from the compounding effect. 

• State matching funds were deposited to the HAVA Sec. 251 funds in installments over a 

twenty-two month period, and should have been included in full at the date of receipt of the 

requirements payments. There was lost interest because of the delayed receipt of funds, as 

noted in recommendation 4. 

• there was a shortage in the amount of State matching funds transferred to the HAVA 

account, resulting in lost interest on the shortage amount, as noted in recommendation 4. 

• interest earnings for the period from inception of the program through September 30, 2004 

totaling $332,341, was recorded in the HAVA accounts in April 2006. 

The estimated financial impact of these observations is determined as follows: 

Interest earnings computed by the State treasurer $2,200,179 

 Interest earnings for July and August 2006 142,169 

 Lost interest from the shortage in State matching funds 8,142 

 Lost interest from delayed deposit of State matching funds 

 and the lack of compounding effect 74,887

 Total interest through 8/31/06 as recalculated $2,425,377 

 Less interest recorded in April 2006 332,341

 Estimated understatement of HAVA accounts – 8/31/06 $2,093,036

Recommendation: 

3. Verify the amount of interest earned on HAVA funds, based on the timely depositing of all 

monies owed the election fund, and update the election fund account(s) with the additional 

funds. 

IED’s Response: 

The IED agreed that the earned interest was not deposited in a timely manner, and stated that the 

Treasurer of the State of Indiana’s office was reviewing the calculations worksheet prepared by the 

Clifton Gunderson auditor to verify the difference between the amounts of interest earned and 

deposited. After verifying the correct interest differential, a transfer of funds would be made to the 

appropriate HAVA accounts. 
7 

They also stated that the Treasurer’s office, in the future, would make the interest calculations 

monthly instead of quarterly to prevent future discrepancies. 

III. State Matching Funds 

As of August 31, 2006, there is a $129,919 shortfall in the amount of state matching funds required 

to augment Section 251 HAVA funds received, because the requirement to provide an additional 

amount equal to 5% of the state matching funds was not considered. 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 Indiana, the $48,544,987 Section 251 proceeds, divided by 95%, 

equals $51,099,986. The difference between the two numbers is the state matching requirement of 

$2,554,999, compared to the amount provided by the state totaling $2,425,080. 

In addition, 100% of the state matching funds transferred to the HAVA accounts were not 

deposited in advance of receiving the Sec. 251 requirements payments. They were paid in 

installments during the period June 19, 2004 through April 1, 2006, resulting in lost interest income 

estimated to be $8,142. 

Recommendations: 

4. Ensure that the state matching funds shortfall of $129,919 is transferred to the HAVA election 

fund. 

5. Determine the actual amount of lost interest income, based on the required state matching funds 

total from the date of receipt of the Section 251 requirements payment from the federal 

government, and transfer the earnings to the HAVA election fund. 

IED’s Response: 

The IED agreed that there was an underpayment of the amount of state matching funds, due to 

unfamiliarity with the matching guidelines, and have included a request in the 2008-09 biennial 

budget to fund the difference. As regards the lost interest, the IED believes that the state matching

funds had been properly appropriated, in accordance with Indiana budget processes. Allotments of 

those funds were made prior to expenditure on the HAVA program, and at no time did HAVA 

expenditures allocated to the state matching funds exceed the balance of those funds. 

Auditors’ Response: 

We believe that the HAVA regulations are very explicit, as set forth in Section 253, where it states 

that: 

“(a) In General.-A State is eligible to receive a requirements payment for a fiscal year if the chief 

executive officer of the State, or designee, in consultation and coordination with the chief State 

election official, has filed with the Commission a statement certifying that the State is in compliance 

with the requirements referred to in subsection (b)......” 
8 

“(b)(5) The State has appropriated funds for carrying out the activities for which the requirements 

payment is made in an amount equal to 5 percent of the total amount to be spent for such activities 

(taking into account the requirements payment and the amount spent by the State) and, in the case 

of a State that uses a requirements payment as a reimbursement under section 251(c)(2), an 

additional amount equal to the amount of such reimbursement.” 

It appears that the intent of Section 253(a) is that the requirements set forth in Section (b) should be 

met as a condition of receiving any requirements payments from the federal government. 

IV. Personal Property Records and Inventory Control 

The personal property records and inventory control are maintained by the counties. During our 

physical inventory audit of voting machines at one of the counties selected for testing, we observed 

that access to the machines was not adequately controlled since more than 20 employees worked in 

the warehouse had access to the machines. The warehouse where the machines were stored was 

shared with the court house. There was no separation between the two spaces and entry was 

obtained through the same door. 

The Code of Federal Regulations at 41CFR105-71.132(3) states that a control system must be 

developed to ensure adequate safeguards to prevent loss, damage or theft of the property. Any loss, 

damage or theft shall be investigated. 

Recommendation: 

6. The State should make the counties are aware of the federal guidelines and the USEAC guidance 

in the pamphlet entitled Quick Start Management Guide issued in September 2006 relating to the 

security of voting machines and other equipment. 

 

IED’s Response: 

The IED disagreed with the recommendations and stated that: 

It is the State’s position that the voting equipment acquired by the county, either with HAVA 

reimbursed funds or otherwise, is the responsibility of the county. Additionally, each county is 

responsible for determining the type of inventory records and physical controls. 

However, the Indiana Secretary of State and IED will contact all the counties, and provide them the 

Indiana State Board of Accounts’ guidelines for complying with federal and state procedural matters. 

The counties will also receive a copy of 41 CFR 105-71.132 covering federal guidelines for property 

controls. 

Auditor’s Response: 

We concur with the proposed steps to be taken by the IED, and encourage the State to consider 

requesting counties to certify, on an annual basis, that they are in compliance with the minimum 

requirements of maintaining personal property and the property records. This certification would 

help the State ensure that property purchased with federal funds is properly controlled. 








17 

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 IED employees about the organization and operations of the HAVA 

program. 

• Reviewed prior single audit report and other reviews related to the State of Indiana’s financial 

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

• Reviewed policies, procedures and regulations for the IED’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 of Indiana 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. 

• Reviewed/examined information regarding source/supporting documents kept for maintenance 

of effort and matching contributions. 
18 

• 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. 

• Verified whether the State of Indiana has sustained the state’s level of expenditures for 

Elections. 
19 

Appendix C 

MONETARY IMPACT AS OF AUGUST 31, 2006 

 

Description 

Additional Funds 

 for Program 

Interest $2,084,036

 

State Match Delayed Deposit Interest Shortfall 8,142

 

State Match Shortfall 129,919

 

Totals $2,222,955
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