U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL

FINAL REPORT: 

Administration of Payments Received 

Under the Help America Vote Act by the 

Arkansas Secretary of State 

APRIL 16, 2003 THROUGH JUNE 30, 2009

Report No. 

E-HP-AR-03-09 

February 2010
U.S. ELECTION ASSISTANCE COMMISSION

OFFICE OF INSPECTOR GENERAL

1225 New York Ave. NW - Suite 1100 

Washington, DC 20005

February 26, 2010 

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 Arkansas Secretary of State (Assignment Number E-HP-AR-03-09) 

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 Arkansas Secretary of State (SOS). 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 SOS, Clifton Gunderson concluded that, except for the lack of personnel 

certifications and the maintenance of comprehensive equipment inventories, our audit concluded 

that the SOS 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 SOS also complied with section 251 requirements. 

In its December 21, 2009 and October 19, 2009 responses (Appendices A-1 and A-2), the 

SOS agreed with the report’s finding and recommendations, and provided corrective action.

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

by April 27, 2010. 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. 
PERFORMANCE AUDIT REPORT


ADMINISTRATION OF PAYMENTS RECEIVED


UNDER THE


HELP AMERICA VOTE ACT


BY THE


STATE OF ARKANSAS


April 16, 2003 Through June 30, 2009


UNITED STATES ELECTION 

ASSISTANCE COMMISSION 

a1
TABLE OF CONTENTS 

PAGE


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


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


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


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


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


APPENDICES


Appendix A: Secretary of State Response to Audit Results ..................................... 7


Appendix B: Audit Methodology.................................................................................. 8

U.S. Election Assistance Commission


Performance Audit of the Administration of Payments Received Under the


Help America Vote Act by the State of Arkansas


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 Arkansas 

Secretary of State (SOS) for the period April 16, 2003 through June 30, 2009 to determine 

whether the SOS 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 SOS 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 SOS’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 lack of personnel certifications and the maintenance of comprehensive 

equipment inventories, our audit concluded that the SOS generally accounted for and expended 

HAVA funds in accordance with the requirements mentioned above for the period from April 16, 

2003 through June 30, 2009. The exceptions needing SOS’s management attention are as 

follows: 

• The SOS did not complete semi-annual certifications for personnel working full-time 

on HAVA activities. 

1 
• Controls over equipment purchased with HAVA funds at the Counties visited did not 

ensure retention of physical possession of all equipment transferred to them, and 

property records were not maintained in accordance with federal regulations. 

We have included in this report the SOS managements’ formal response to the draft audit report 

dated December 21, 2009 as Appendix A-1, which confirmed their responses to the findings and 

recommendations dated October 19, 2009, Appendix A-2. In the State's October 19, 2009 

response, there was a response to a draft finding (NFR #2) which was subsequently resolved 

with satisfaction and therefore no longer reported in this final report. Although we have 

included management’s written responses to our findings and recommendations, such 

responses have not been subjected to the audit procedures and, accordingly, we do not provide 

any form of assurance on the appropriateness of the responses or the effectiveness of the 

corrective actions decribed therein. The SOS 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)]. 

2 
AUDIT OBJECTIVES 

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

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 SOS 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 SOS. 

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 SOS from April 16, 2003 through 

June 30, 2009. 

Funds received and disbursed from April 16, 2003 (program initiation date) to June 30, 2009 

(75-month period) are shown below: 

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. 

3 
FUNDS RECEIVED 

TYPE OF 

PAYMENT 

EAC 

PAYMENT 

PROGRAM 

INCOME 

STATE 

MATCH 

INTEREST 

EARNED 

TOTAL 

AVAILABLE 

FUNDS 

DISBURSED 

DATA


AS OF


Section 101 $ 3,593,164 $ - $ - $ 376,200 $ 3,969,364 $ 3,969,364 6/30/2009 

Section 102 2,569,738 - - 74,935 2,644,673 2,644,673 6/30/2009 

Section 251 23,586,449 - 1,500,000 2,133,929 27,220,378 21,591,875 6/30/2009 

$ 29,749,351 $ - $ 1,500,000 $ 2,585,064 $ 33,834,415 $ 28,205,912 6/30/2009 

Note:	 The Sec. 102 interest earned of $74,935 is included in Sec. 102 funds disbursed, and has 

been deducted from the Sec. 251 funds disbursed in the above schedule, because the funds 

were transferred from Sec. 102 to Sec. 251 as all of the Sec. 102 monies were expended. 

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 personnel certifications, the maintenance of comprehensive equipment 

inventories, and the determination of whether the SOS and its subgrantees met the requirement 

for maintenance of a base level of state outlays which were specifically omitted from our scope 

of work as explained above, our audit concluded that SOS generally accounted for and 

expended HAVA funds in accordance with the requirements mentioned above. The SOS has 

taken action on or is working to resolve the exceptions described below as set forth in Appendix 

A: 

I. Personnel Certifications 

The State of Arkansas’s Office of the Secretary of State (SOS) did not complete semi-annual 

certifications for employees that worked full-time or solely on HAVA activities for the period 

during which the SOS was paying personnel costs with HAVA program funds (July 16, 2003 – 

June 30, 2007). No HAVA program funds were used to pay personnel costs during the period 

from July 1, 2007 to the end of the audit period (June 30, 2009). All personnel costs during the 

period after July 1, 2007 were paid for through the State of Arkansas’ general fund. 

Recommendation: 

We recommend that the SOS resolve with the EAC the appropriate corrective action regarding 

the lack of periodic certifications for the period personnel costs were paid by HAVA program 

funds. 

4 
SOS Response: 

The SOS contacted the EAC both by phone and via email, and was advised that, unless the 

EAC specifically requests the information, the SOS is not required to send the certifications at 

this time. The EAC also suggested the SOS inform the Auditor that we have updated the 

personnel certifications and we are now aware of this requirement. If federal funds are spent on 

personnel salaries in the future and, if applicable, the SOS will prepare the required 

certifications and submit to the appropriate agency. 

II. Property Management 

During our testing of the existence of HAVA purchased equipment to the inventory 

documentation provided by the Secretary of State staff, we noted that there were discrepancies 

at five of eight counties we visited. The serial numbers on four of the equipment items at two of 

the counties did not match the serial numbers per the counties’ written inventory records. At 

three of the counties, they did not have written records or physical possession of a total of five 

equipment items that the SOS indicates were transferred to them. 

It was also noted that during our review of the County’s equipment/property maintenance 

records, the Counties are not complying with the requirements of 41 CFR 105-71.132 with 

regards to the identification and management of equipment purchased with federal funds. The 

Counties do not maintain property records that include the attributes outlined in 41 CFR 105­

71.132. 

The counties must conform to federal rules, and the Uniform Administrative Requirements for 

Grants and Cooperative Agreements with State and Local Governments, 41 CFR 105-71.132 

Equipment states that property records must be maintained that include a description of the 

property, serial number or other identification number, the source of property, who holds the 

title, the acquisition date, costs of the property, percentage of Federal participation in the cost of 

the property, the locations, use and condition of the property, and any ultimate disposition data 

including the date of disposal and sale price of the property. 

Recommendations: 

We recommend that the SOS: 

1)	 Ensures that the property listings of HAVA funded equipment owned by the state reflect 

accurate information as prescribed by the state fixed asset guidelines. 

2)	 Instruct the counties to ensure that the property listings of HAVA funded equipment in their 

possession reflect accurate information as prescribed by 41 CFR 105-71.132. 

3)	 Issue guidance to the jurisdictions that identifies 41 CFR 105-71.132(d) as the regulation 

that	 describes the property records to be prepared and maintained, and implement 

procedures to periodically monitor compliance with this regulation. 

SOS Response: 

The SOS will prepare and send correspondence to all Arkansas counties regarding the 

requirements of the Arkansas County Accounting Law 14-25-106, “Fixed Assets and Equipment 

5 
Records” and the Code of Federal Regulations 41 CFR 105-71.132. In addition, the SOS will 

send a template for the counties to use when establishing this inventory tracking 

procedure/policy. The template will include the following: Description of Property, Serial 

Number, Who Holds Title, Acquisition Date, Cost of the Property, Percentage of Federal 

Participation, Location of Property, Use and Condition. The SOS will conduct a physical 

inventory on all HAVA-funded equipment in the possession of the counties in order to correct 

and properly record any discrepancies. 

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

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

State, and the United States Election Assistance Commission. We considered any comments 

received prior to finalizing this report. 

CG performed its work between August 18, 2009 and August 27, 2009. 

a1

Calverton, Maryland 

November 4, 2009 

6 
December 21, 2009 

Mr. Curtis Crider 

Inspector General 

U.S. Election Assistance Commission 

1225 New York Ave. NW Suite 1100 

Washington, D.C. 20005 

Re: Letter dated December 1, 2009 with attached Draft Performance Audit Report-Administration 

of Payments Received Under the Help America Vote Act by the State of Arkansas dated 

November 10, 2009 

Dear Inspector General Crider, 

Thank you for the opportunity to review and comment on the draft Audit Report dated 

November 10, 2009 that you sent on December 1, 2009. 

Our comments regarding both findings remain the same. 

Again, thank you for the opportunity to review and comment prior to the publication of this 

report. If I can be of any further assistance regarding this audit, please do not hesitate to contact 

me. 

Sincerely, 

Charlie Daniels 

Arkansas Secretary of State 
Appendix A-2

state of Arkansas 

Secretary of State 

Charlie Daniels 

Secretary of State 

Business & Commercial Services 682·3409 

Elections 6B2-5070 

Building & Orounds 6B2·3407 

Communications & Education 683·0057 

Stale Capllal Pollee 682-5173

Business Ornce 682·8032 

Information Technology 662·3411

October 19, 2009 

U. S. Election Assistance Commission 


Curtis Crider, Inspector General 


1225 New York Ave. NW - Suite 1100 


Washington, DC 2005 . 


Dear Mr. Crider: 

The Arkansas Secretary ofState (SOS) respectfully submits the following responses to U. 

S. Election Assistance Commission (EAC) Audit findings and recommendations concerning 


Arkansas's administration of He)p America Vote Act (HAVA) funds for period ending June 30, 


2009. 


NFR # 1: The Arkansas SOS office contacted the EAC both by phone and via email. 


Our contact, _ advised the SOS that unless the EAC specifically requests the 


information, the SOS is not required to send the certifications at this time. also 


suggested the SOS inform the Auditor that we have updated the personnel certifications and we 


are now aware of the requirement. Iffederal funds are spent on personnel salaries in the future 


and if applicable, the Arkansas Secretary of State wi11 prepare the required certifications and 


submit to the appropriate agency. 


NFR # 2: The two payments were approved according to policy, however notation was 


not indicated or internal routing as required. Proper procedures previously implemented will be 


enforced. 


NFR # 3: The (SOS) will prepare and send correspondence to all Arkansas counties 


regarding the requirements of the Arkansas Couoly Accounting Law section 14-25-106, "Fixed 


Assets and Equipment Records" and the Code of Federal Regulations 41 CFR 105-71.132. In 


addition, the SOS will send a template for the counties to use when establishing this inventory 


tracking procedure/policy. The template will include the following: Description of Properly, 


Serial Number, Who Holds the Title, Acquisition Date, Cost of the Properly, Percentage of 


Federal Participation, Location ofProperly, Use and Condition. The SOS will conduct a physical 


inventory of all HA VA-funded equipment in the possession ofthe counties in order to correct and 


properly record any discrepancies. 


cc: 	Janet Harris, Deputy Secretary ofState 

Carder Hawkins, HAVA Project Manager 

Room 256 State Capitol' Little Rocl,. Arlmnsas 72201·1094 

501-682-1010 • Fax 501-682-5510 ------------' 

e-mail: arsos@sos.arliansas.gov • www.sos.arlmnsas.gov 

Text redacted pursuant to 

Freedom of Information Act Exemption 6.

7
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 SOS 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 SOS’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. 

• 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. 

8

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

� Observe equipment purchased with HAVA funds for proper accounting and 

safeguarding 

� Ensure compliance with HAVA Act. 

9

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 

Commission or Help 

America Vote Act 

Funds

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