UNITED STATES

ELECTION ASSISTANCE COMMISSION

OFFICE OF INSPECTOR GENERAL

Administration of Payments Received 

Under the Help America Vote Act by 

the Kentucky State Board of Elections

Report No. E-HP-KY-10-20
Find us here: EAC OIG Website

Toll free: 1- 866-552-0004 | e-mail: eacoig@eac.gov

Memorandum 

To: Mona Harrington

Executive Director

From: Patricia L. Layfield

Patricia L. Layfield

Inspector General

Date: March 8, 2021

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

Help America Vote Act by the Kentucky State Board of Elections (Assignment Number

E-HP-KY-10-20)

The Office of Inspector General (OIG) engaged McBride, Lock & Associates, LLC (MLA), an 

independent certified public accounting firm, to audit the administration of payments received 

under the Help America Vote Act (HAVA) by the Kentucky State Board of Election (KYBOE). The 

audit scope covered the grant funds received and disbursed by the KYBOE, from July 13, 2018,

through September 30, 2019. The $5.7 million in funds paid to the KYBOE represented

Kentucky’s share of the appropriation of $380 million under the Consolidated Appropriations 

Act of 2018 (P.L. 115-151). KYBOE expended approximately $3.6 million of the HAVA funds 

(including program income) during the period covered by the audit.

Results of Audit 

Based on the audit procedures performed, MLA concluded that, except for the matters 

discussed below, KYBOE generally accounted for and expended the Grant funds in accordance 

with Federal requirements for the period from July 13, 2018 through September 30, 2019.

However, MLA noted the following exceptions:

1. The interest income reported on the Federal Financial Reports (FFRs) for the years ended 

September 30, 2019 and 2018 was not allocated between Election Security grant funds 

and previously awarded HAVA Section 101 funds using an allocation method.

Additionally, there was one expense in the amount of $67,180 for election auditing 

OFFICE OF THE INSPECTOR GENERAL

US ELECTION ASSISTANCE COMMISSION

633 3RD STREET, NW, SUITE 200

WASHINGTON, DC 20001
2

services that was allocated between Election Security grant funds and the previously 

awarded Section 101 funds for reporting on the FFRs. Of the total amount expended, 

$28,174 was allocated to the Election Security grant. The Board did not provide an 

explanation for how the allocation was determined, therefore the $28,174 is considered 

unsupported.

2. The Board purchased 5,226 e-pollbooks at $570 per item, which exceeded the state 

threshold of $500 for tagging and recording in an inventory listing. However, the epollbooks were not tagged and recorded in the Board’s fixed asset inventory listing on 

the eMARS accounting system. The Board provided a listing of e-pollbooks deployed at 

each county; however, this record did not include cost, acquisition date, source of 

funding, or use and condition of the property. Also, to the extent that the items were 

not included in the Board’s official inventory listing, they would not be included in the 

annual physical inventory that is performed.

3. The 2019 Schedule of Expenditures of Federal Awards (SEFA) disclosed $5,014,207 of 

expenditures for the year ended June 30, 2019 under Catalog of Federal Domestic 

Assistance (CFDA) 39.011, Election Reform Payments. The correct CFDA for the 

$3,232,874 of Election Security grant expenditures for the year ended June 30, 2019 is 

90.404.

The KYBOE generally agreed with the report’s findings and recommendations. The EAC 

responded on March 2, 2021, and stated that they are reviewing KYBOE’s planned actions.

Evaluation of MLA’s Audit Performance 

To fulfill our responsibilities under Government Auditing Standards, the Office of Inspector 

General:

• Reviewed MLA's approach and planning of the audit;

• Evaluated the qualifications and independence of the auditors;

• Monitored the progress of the audit at key points;

• Reviewed MLA’s audit report and selected work products, to ensure compliance with 

Government Auditing Standards; and

• Coordinated issuance of the audit report.

MLA is responsible for the attached auditor’s report and the findings and conclusions 

expressed in the report. The work the EAC OIG performed in evaluating MLA’s conduct of the

audit was not sufficient to support an opinion on the effectiveness of internal control or 

compliance with laws and regulations, thus EAC OIG does not express any opinion on the 

internal controls or compliance of the KYBOE.
3

The Inspector General Act of 1978, as amended, requires semiannual reporting to Congress on 

all reports issued, actions taken to implement recommendations, and recommendations that 

have not been implemented. Therefore, we will report the issuance of this audit report in our 

next semiannual report to Congress. The distribution of this report is not restricted and copies 

are available for public inspection. Pursuant to the IG Empowerment Act of 2016, the EAC OIG 

will post this audit report on the OIG website within 3 days of its issuance to EAC management. 

The OIG will also post the report to Oversight.gov.

If you have any questions regarding this report, please call me at (202) 853-2760.

cc: Commissioner Donald L. Palmer, Chair

Commissioner Thomas Hicks, Vice-Chair

Commissioner Christy McCormick

Commissioner Benjamin W. Hovland, 

Jared Dearing, Executive Director, Kentucky State Board of Elections 

Attachment 
McBRIDE, LOCK & ASSOCIATES, LLC

Certified Public Accountants

Established 1980

Performance Audit Report 

Administration of Election Security Payments Received Under the Help 

America Vote Act by the Kentucky State Board of Elections 

Prepared for 

The United States Election Assistance Commission (EAC) 

Office of Inspector General 

By 

McBride, Lock & Associates, LLC 

January 2021

4151 N. Mulberry Drive, Suite 275

Kansas City, Missouri 64116

p. 816‐221‐4559

f. 816‐221‐4563

admin@mcbridelock.com

www.mcbridelock.com
Performance Audit Report 

Administration of Election Security Payments Received Under the Help 

America Vote Act by the Kentucky State Board of Elections 

TABLE OF CONTENTS 

Page 

EXECUTIVE SUMMARY 1 

BACKGROUND 2 

AUDIT OBJECTIVES 3 

SCOPE AND METHODOLOGY 4 

AUDIT RESULTS 5 

APPENDICES: 

Appendix A-1: Response of the Kentucky State Board of Elections to the Draft Report 

Appendix A-2: Response of the U.S. Election Assistance Commission 

 to the Draft Report 

Appendix B: Audit Scope and Methodology 

Appendix C: Expenditures by Budget Category and Program Category 

Appendix D: Monetary Impact as of September 30, 2019 
1 

U.S. Election Assistance Commission 

Performance Audit Report 

Administration of Election Security Payments Received Under the Help 

America Vote Act by the Kentucky State Board of Elections 

EXECUTIVE SUMMARY

McBride, Lock & Associates, LLC was engaged by the United States Election Assistance 

Commission (EAC) Office of the Inspector General to conduct a performance audit of the election 

security funds the Kentucky State Board of Elections (Board) received between July 13, 2018 and 

September 30, 2019. The objective of the audit was to determine whether the Board used payments 

authorized by Sections 101 of the Help America Vote Act of 2002 (the HAVA) in accordance with 

HAVA and applicable requirements; properly accounted for and controlled the funds and property 

purchased with HAVA payments; and, used the funds in a manner consistent with the budget plan 

provided to EAC. 

In addition, the Commission requires states to comply with certain financial management 

requirements, specifically: 

 Expend payments in accordance with Federal cost principles established by the Office of 

Management and Budget (OMB) – (2 CFR 200). 

 Submit detailed annual financial reports on the use of Title I payments. 

 Maintain documents and records subject to audit to determine whether payments were used 

in compliance with HAVA. 

 

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. 

Based on the audit procedures performed, except for the matters discussed below, we concluded 

that the Board generally accounted for and expended the Grant funds in accordance with the 

requirements mentioned above for the period from July 13, 2018 through September 30, 2019. 

The exceptions are as follows: 

1. The interest income reported on the Federal Financial Reports (FFR’s) for the years ended 

September 30, 2019 and 2018 was not allocated between Election Security grant funds and 

previously awarded HAVA Section 101 funds using an allocation method. Additionally, 

there was one expense in the amount of $67,180 for Election auditing services that was 

allocated between Election Security grant funds and the previously awarded Section 101 

funds for reporting on the FFR’s. Of the total amount expended, $28,174 was allocated to 
2 

the Election Security grant. The Board did not provide an explanation for how the 

allocation was determined, therefore the $28,174 is considered unsupported. 

2. The Board purchased 5,226 e-pollbooks at $570 per item, which exceeded the state 

threshold of $500 for tagging and recording in an inventory listing. However, the epollbooks were not tagged and recorded in the Board’s fixed asset inventory listing on the 

eMARS accounting system. The Board provided a listing of e-pollbooks deployed at each 

county. 150 e-pollbooks were selected to be viewed and were determined to exist. To the 

extent that the items were not included in the Board’s official inventory listing, they would 

not be included in the annual physical inventory that is performed. 

3. The 2019 Schedule of Expenditures of Federal Awards (SEFA) disclosed $5,014,207 of 

expenditures for the year ended June 30, 2019 under Catalog of Federal Domestic 

Assistance (CFDA) 39.011, Election Reform Payments. The correct CFDA for the 

$3,232,874 of Election Security grant expenditures for the year ended June 30, 2019 is 

90.404. 

We have included in this report as Appendix A, the Board of Elections written response to the 

draft report. Such response has not been subjected to the audit procedures and, accordingly, we do 

not provide any form of assurance on the appropriateness of the response or the effectiveness of 

the corrective actions described therein.

BACKGROUND

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

(Commission) to assist States and insular areas (hereinafter referred to as States) with improving 

the administration of federal elections and to provide funds to States to help implement these 

improvements. The Commission administers grants to States authorized by HAVA under Title I, 

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; developing a state plan for requirements payments; 

improving, acquiring, leasing, modifying, or replacing voting systems, and methods for 

casting and counting votes; improving the accessibility and quantity of polling places; and 

establishing toll-free telephone hotlines that voters may use. 

The 2018 HAVA Election Security Grant also requires that states must: 

 Provide matching funds equal to 5 percent of the total federal funds within two years of the 

award to be spent for activities for which Election Security Grants are made. 

 Maintain all federal funds and state cash matching funds in the state election fund, as 

described in Section 104 (d) of HAVA, along with interest earned on the award’s funds. 

States may also track eligible funds/activities from their state and local general operating 
3 

budgets to meet the match obligations. State and local funds used for match must be 

different from funds used to meet Maintenance of Effort or state match associated with 

HAVA Requirement Payments. 

The Awardee – The Kentucky State Board of Elections 

The HAVA funds were awarded to the Kentucky State Board of Elections, which is chaired by the 

Secretary of State. The Secretary of State is Kentucky's Chief Election Official and the filing 

official for all candidates seeking an office to be voted for by the electors of more than one county, 

members of Congress, members of the General Assembly and of the Court of Justice. The 

Secretary of State also certifies candidates for those offices to be printed on the ballots, and vote 

totals for those offices are certified to the Secretary of State by the respective county clerks. 

The Secretary of State also serves as Chair of the State Board of Elections, an independent agency 

that administers the Commonwealth's election laws, promulgates administrative regulations 

necessary to properly carry out its duties, supervises the registration and purgation of voters, 

appoints political party representatives to the 120 county boards of elections and certifies the 

official election results. 

Help America Vote Act Commonwealth of Kentucky State Plan 

The Commonwealth of Kentucky’s HAVA budget narrative was prepared by the Secretary of 

State. The main objectives of the project funded by HAVA, as set forth in the budget letter, were 

for the purposes of increasing security for election systems, election technology and physical 

security for election administrators. The Board will purchase new voting machines which create a 

Voter Verified Paper Audit Trail. The Commonwealth of Kentucky has the need to replace 13,000 

voting machines. The Board recommended that the majority of the HAVA funds be utilized in this 

area. A portion of the funding is proposed to be used to hire a full-time SBE Chief Information 

Security Officer who will work exclusively on matters related to elections cyber security. A portion 

of the funding is proposed to be used to develop and produce an updated version of the 

Commonwealth’s voter registration system, which will be achieved by hiring a full-time systems 

architect. A portion of the funding will be used to identify and rectify any physical security needs 

and concerns specific to the Board’s physical location. 

AUDIT OBJECTIVES

The objectives of our audit were to determine whether the Board: 

1. Used funds for authorized purposes in accordance with Section 101 of HAVA and other 

applicable requirements; 

2. Properly accounted for and controlled property purchased with HAVA payments; and 

3. Used the funds in a manner consistent with the budget plan provided to EAC. 
4 

In addition to accounting for Grant payments, the Grant 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 Grant funds to comply 

with certain financial management requirements, specifically: 

 Expend payments in accordance with Federal cost principles established by the Office of 

Management and Budget (OMB) – (2 CFR 200). 

 Submit detailed annual financial reports on the use of Title I payments. 

 Maintain documents and records subject to audit to determine whether payments were used 

in compliance with HAVA.

SCOPE AND METHODOLOGY

We audited the Grant funds received and disbursed by the Board, from July 13, 2018 through 

September 30, 2019. These funds are related to the appropriation of $380 million under the 

Consolidated Appropriations Act (CAA), 2018 (P.L. 115-151). The scope of activity audited is 

shown in the following table: 

Election

Description Security Funds

Funds Received from EAC 5,773,423 $ 

State Matching Funds - 

Program Income 35,487 

Total Funds 5,808,910 $ 

Less Disbursements (3,612,874) 

Fund Balance 2,196,036 $ 

The Board’s expenditures detailed by budget and program category are included as Appendix C. 

In planning and performing our audit, we identified the following internal control components and 

underlying internal control principles as significant to the audit objective: 
5 

Objective Component Principle

1 Control Activities Selects and develops control activities

Selects and develops general controls over technology

Deploys through policies and procedures

Information and Communication Uses Relevant Information

Communicates Internally

2 Control Activities Selects and develops control activities

Selects and develops general controls over technology

Deploys through policies and procedures

Information and Communication Communicates Externally

3 Control Activities Selects and develops control activities

Selects and develops general controls over technology

Deploys through policies and procedures

We assessed the design, implementation, and operating effectiveness of these internal controls and 

identified deficiencies that we believe could affect the Board’s ability to use funds for authorized 

purposes, and properly account for and control property. The internal control deficiencies we found 

are discussed in the Audit Results section of this report. 

Additionally, for the components and principles which we determined to be significant, we 

assessed the internal controls and compliance with laws and regulations necessary to satisfy the 

audit objective. 

However, because our review was limited to these internal control components and underlying 

principles, it may not have disclosed all internal control deficiencies that may have existed at the 

time of this audit. 

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. 

Based on the audit procedures performed, we concluded that the Board accounted for HAVA funds 

in accordance with the requirements mentioned above, and used the funds in a manner consistent 

with the budget plan for the period from July 13, 2018 through September 30, 2019. However, the 

Board did not properly account for property purchased with HAVA payments. The exceptions to 

applicable compliance requirements are described below. 
6 

Finding No. 1 – Allocation of Program Income and Federal Expenditures 

The interest income reported on the Federal Financial Reports (FFR’s) for the years ended 

September 30, 2019 and 2018 was not allocated between Election Security grant funds and 

previously awarded HAVA Section 101 funds using an allocation method. 

Election Security grant funds were received in July 2018, and were recorded in the same fund as 

the remaining unspent HAVA Section 101 funds. The $35,487 of interest allocated to the fund for 

the months of August, September, and October 2018 was reported entirely as program income of 

the Election Security grant on the FFR’s, while the $94,138 of interest for all other months was 

reported as program income of the prior Section 101 grant. Our analysis determined that the 

Election Security grant comprised 63% to 76% of the fund balance between July 2018 and 

September 2019, however, only 27% of the total interest earned in the fund over that time was 

reported as program income of the Election Security grant on the FFR’s. The Board did not provide 

an explanation for how the allocation was determined. 

There was one expense in the amount of $67,180 for Election auditing services that was allocated 

between Election Security grant funds and the previously awarded Section 101 funds for reporting 

on the FFR’s. Of the total amount expended, $28,174 was allocated to the Election Security grant. 

The Board did not provide an explanation for how the allocation was determined, therefore the 

$28,174 is considered unsupported. 

Uniform Guidance, 2 CFR 200.405(d) states that, “If a cost benefits two or more projects or 

activities in proportions that can be determined without undue effort or cost, the cost must be 

allocated to the projects based on the proportional benefit. If a cost benefits two or more projects 

or activities in proportions that cannot be determined because of the interrelationship of the work 

involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or 

transferred to benefitted projects on any reasonable documented basis.” 

The Board did not establish and apply a consistent, logical method or document the reasonable 

basis for allocating interest earned and expenses incurred in the election fund between the two 

HAVA grants. 

HAVA activity may not be accurately reported or accounted for which may increase the potential 

of misuse of federal funds. 

Recommendation 

We recommend that the EAC require the Board: 

1. Transfer to the Election Security grant $28,174 for the unsupported cost cited above. 

2. Provide either an allocation of the program income based on the proportional benefit, or 

based on a documented basis for the allocation. 
7 

3. Implement procedures to ensure that for items which benefit multiple projects or activities, 

the allocation of program income earned or expenditures incurred is based on the 

proportional benefit, or on a reasonable documented basis. 

Board of Elections’ Response: 

The Kentucky State Board of Elections does not contest this finding and agrees to work with the 

Election Assistance Commission to resolve this issue and establish procedures to prevent these 

actions in the future. 

Auditor’s Response: 

The resolution of the findings and the appropriateness of procedures to resolve future findings will 

be determined during the resolution process between the Board and EAC. 

Finding No. 2 – Property Records and Annual Physical Inventory 

The Board purchased 5,226 e-pollbooks at $570 per item, which exceeded the state threshold of 

$500 for tagging and recording in an inventory listing. However, the e-pollbooks were not tagged 

and recorded in the Board’s fixed asset inventory listing on the eMARS accounting system. The 

Board provided a listing of e-pollbooks deployed at each county. 150 e-pollbooks were selected to 

be viewed and were determined to exist. To the extent that the items were not included in the 

Board’s official inventory listing, they would not be included in any annual physical inventory that 

is performed. 

The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal 

Awards (Uniform Guidance) at 2 CFR 200.313(b) states that, “A state must use, manage and 

dispose of equipment acquired under a Federal award by the state in accordance with state laws 

and procedures.” FAP120-20-01 of the Commonwealth of Kentucky Finance and Administration 

Cabinet Manual of Policies and Procedures states that, “All non-expendable property valued at 

$500 or more shall be recorded as a line item. This record shall include agency number, state 

property identification tag number, make, description, model number, serial number, quantity, 

location by building and cost.” Further FAP120-20-01 states that, “The administrative head of an 

agency shall be responsible and accountable for the custody and safekeeping of all personal 

property assigned to, purchased, or otherwise acquired by the agency. Each agency head shall 

either serve as, or appoint an employee of the agency to serve as, agency property officer with 

responsibility for both maintaining the agency’s fixed asset records and taking the annual physical 

inventory.” 

The items were shipped directly to the Counties, and the Board relied on the vendor to provide a 

listing of equipment sent to each location. Therefore, the e-pollbooks were not recorded in the 

Board’s fixed asset inventory listing nor were they part of an annual physical inventory. 

Proper tracking of property purchased with federal funds ensures that equipment is being used and 

disposed of in accordance with federal regulations and state laws and procedures.
8 

Recommendation 

We recommend that the EAC require the Board to: 

4. Include all items purchased with federal funds on an inventory listing that is compliant 

with state laws and procedures.

5. Implement policies and procedures to ensure items shipped directly to the Counties are 

included in the eMARS accounting system and included in an annual physical inventory 

as required by state laws and procedures. 

Board of Elections’ Response: 

The Kentucky State Board of Elections does not contest this finding and agrees to work with the 

Election Assistance Commission to resolve this issue and establish procedures to prevent these 

actions in the future. 

Auditor’s Response: 

The resolution of the findings and the appropriateness of procedures to resolve future findings will 

be determined during the resolution process between the Board and EAC. 

Finding No. 3 – Financial Management 

The 2019 Schedule of Expenditures of Federal Awards (SEFA) reported $5,014,207 of 

expenditures, for the year ended June 30, 2019 under Catalog of Federal Domestic Assistance 

(CFDA) 39.011, Election Reform Payments. The correct CFDA for the $3,232,874 of Election 

Security Grant expenditures for the year ended June 30, 2019 is 90.404. 

The Uniform Guidance at 2 CFR 200.302(a) states that, “Each state must expend and account for 

the Federal award in accordance with state laws and procedures for expending and accounting for 

the state's own funds. In addition, the state's and the other non-Federal entity's financial 

management systems, including records documenting compliance with Federal statutes, 

regulations, and the terms and conditions of the Federal award, must be sufficient to permit the 

preparation of reports required by general and program-specific terms and conditions; and the 

tracing of funds to a level of expenditures adequate to establish that such funds have been used 

according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 

FAP120-07-00.4.c of the Commonwealth of Kentucky Finance and Administration Cabinet 

Manual of Policies and Procedures states that it is the agency’s fiscal officer’s responsibility to 

provide “assurances that agency financial reports accurately reflect underlying activity.” 

The Section 101 and Election Security grant funds were kept in the same state fund, and no 

distinction was made for the differing CFDA numbers leading to the financial reports not 

accurately reflecting the underlying activity. 
9 

The improper identification of a federal program increases the likelihood that the entity would 

have instances of noncompliance with the requirements of that program. 

Recommendation 

6. We recommend that the EAC require the Board to implement a policy or procedure to 

ensure amounts reported by the Fiscal Officer for inclusion on the Statewide SEFA are 

accurate and are properly identified by CFDA title and number. 

Board of Elections’ Response: 

The Kentucky State Board of Elections does not contest this finding and agrees to work with the 

Election Assistance Commission to resolve this issue and establish procedures to prevent these 

actions in the future. 

Auditor’s Response: 

The resolution of the findings and the appropriateness of procedures to resolve future findings will 

be determined during the resolution process between the Board and EAC. 

We provided a draft of our report to the appropriate individuals of the Kentucky State Board of 

Elections. We considered any comments received prior to finalizing this report. 

The Board responded on February 16, 2021 and generally agreed with the report’s findings and 

recommendations. The EAC responded on March 2, 2021 and stated they are working with 

Kentucky state staff to review the recommendations and implement appropriate corrective action. 

The Board’s complete response is included as Appendix A-1 and the EAC’s complete response as 

Appendix A-2. 

McBride, Lock & Associates, LLC performed the related audit procedures between December 13, 

2019 and February 16, 2021. 

McBride, Lock & Associates, LLC 

Kansas City, Missouri 

February 16, 2021 
APPENDIX A-1 

Response of the 

Kentucky State Board of Elections 

to the Draft Report 
 Jared Dearing Karen Sellers

Executive Director Assistant Director

 Jared.Dearing@ky.gov Karen.Selllers@ky.gov

 Taylor Brown

 General Counsel

 TaylorA.Brown@ky.gov

 

COMMONWEALTH OF KENTUCKY

STATE BOARD OF ELECTIONS

 140 WALNUT STREET AN EQUAL OPPORTUNITY EMPLOYER M/F/D PHONE (502) 573-7100

 FRANKFORT, KY 40601-3240 www.elect.ky.gov FAX (502) 573-4369

 OR (502) 696-1952

February 16, 2021

McBride, Lock & Associates, LLC

4151 N. Mulberry Drive, Suite 275

Kansas City, Missouri 64116

Performance Audit Report for the Kentucky State Board of Elections

To Whom It May Concern,

Included in this letter please find the responses from the Kentucky State Board of Elections to 

the findings provided by McBride, Lock & Associates, LLC.

Finding No. 1 – Allocation of Program Income and Federal Expenditures

The interest income reported on the Federal Financial Reports (FFR’s) for the years ended

September 30, 2019 and 2018 was not allocated between Election Security grant funds and

previously awarded HAVA Section 101 funds using an allocation method.

Election Security grant funds were received in July 2018, and were recorded in the same fund as

the remaining unspent HAVA Section 101 funds. The $35,487 of interest allocated to the fund 

for the months of August, September, and October 2018 was reported entirely as program 

income of the Election Security grant on the FFR’s, while the $94,138 of interest for all other 

months was reported as program income of the prior Section 101 grant. Our analysis determined 

that the Election Security grant comprised 63% to 76% of the fund balance between July 2018 

and September 2019, however, only 27% of the total interest earned in the fund over that time 

was reported as program income of the Election Security grant on the FFR’s. The Board did not 

provide an explanation for how the allocation was determined.

There was one expense in the amount of $67,180 for Election auditing services that was 

allocated between Election Security grant funds and the previously awarded Section 101 funds 

for reporting on the FFR’s. Of the total amount expended, $28,174 was allocated to the Election 

Security grant. The Board did not provide an explanation for how the allocation was 

determined, therefore the $28,174 is considered unsupported.
 Jared Dearing Karen Sellers

Executive Director Assistant Director

 Jared.Dearing@ky.gov Karen.Selllers@ky.gov

 Taylor Brown

 General Counsel

 TaylorA.Brown@ky.gov

 

COMMONWEALTH OF KENTUCKY

STATE BOARD OF ELECTIONS

 140 WALNUT STREET AN EQUAL OPPORTUNITY EMPLOYER M/F/D PHONE (502) 573-7100

 FRANKFORT, KY 40601-3240 www.elect.ky.gov FAX (502) 573-4369

 OR (502) 696-1952

Uniform Guidance, 2 CFR 200.405(d) states that, “If a cost benefits two or more projects or

activities in proportions that can be determined without undue effort or cost, the cost must be

allocated to the projects based on the proportional benefit. If a cost benefits two or more 

projects or activities in proportions that cannot be determined because of the interrelationship of 

the work involved, then, notwithstanding paragraph (c) of this section, the costs may be 

allocated or transferred to benefitted projects on any reasonable documented basis.”

The Board did not establish and apply a consistent, logical method or document the reasonable

basis for allocating interest earned and expenses incurred in the election fund between the two

HAVA grants. HAVA activity may not be accurately reported or accounted for which may 

increase the potential of misuse of federal funds.

The recommendation from McBride, Lock & Associates is as follows:

1. Transfer to the Election Security grant $28,174 for the unsupported cited above. 

2. Provide either an allocation of the program income based on the proportional benefit, or 

based on a documented basis for the allocation.

3. Implement procedures to ensure that for items which benefit multiple projects or activities, 

the allocation of program income earned or expenditures incurred is based on the 

proportional benefit, or on a reasonable documented basis.

The Kentucky State Board of Elections does not contest this finding and agrees to work with the 

Election Assistance Commission to resolve this issue and establish procedures to prevent these 

actions in the future.

Finding No. 2 – Property Records and Annual Physical Inventory

The Board purchased 5,226 e-pollbooks at $570 per item, which exceeded the state threshold of

$500 for tagging and recording in an inventory listing. However, the e-pollbooks were not 

tagged and recorded in the Board’s fixed asset inventory listing on the eMARS accounting 

system. The Board provided a listing of e-pollbooks deployed at each county. 150 e-pollbooks 

were selected to be viewed and were determined to exist. To the extent that the items were not 

included in the Board’s official inventory listing, they would not be included in any annual 

physical inventory that is performed.

The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for 

FederalAwards (Uniform Guidance) at 2 CFR 200.313(b) states that, “A state must use, manage 
 Jared Dearing Karen Sellers

Executive Director Assistant Director

 Jared.Dearing@ky.gov Karen.Selllers@ky.gov

 Taylor Brown

 General Counsel

 TaylorA.Brown@ky.gov

 

COMMONWEALTH OF KENTUCKY

STATE BOARD OF ELECTIONS

 140 WALNUT STREET AN EQUAL OPPORTUNITY EMPLOYER M/F/D PHONE (502) 573-7100

 FRANKFORT, KY 40601-3240 www.elect.ky.gov FAX (502) 573-4369

 OR (502) 696-1952

and dispose of equipment acquired under a Federal award by the state in accordance with state 

laws and procedures.” FAP120-20-01 of the Commonwealth of Kentucky Finance and 

Administration Cabinet Manual of Policies and Procedures states that, “All non-expendable 

property valued at $500 or more shall be recorded as a line item. This record shall include 

agency number, state property identification tag number, make, description, model number, 

serial number, quantity, location by building and cost.” Further FAP120-20-01 states that, “The 

administrative head of an agency shall be responsible and accountable for the custody and 

safekeeping of all personal property assigned to, purchased, or otherwise acquired by the

agency. Each agency head shall either serve as, or appoint an employee of the agency to serve 

as, agency property officer with responsibility for both maintaining the agency’s fixed asset 

records and taking the annual physical inventory.”

The items were shipped directly to the Counties, and the Board relied on the vendor to provide a

listing of equipment sent to each location. Therefore, the e-pollbooks were not recorded in the

Board’s fixed asset inventory listing nor were they part of an annual physical inventory.

Proper tracking of property purchased with federal funds ensures that equipment is being used 

and disposed of in accordance with federal regulations and state laws and procedures.

The recommendation from McBride, Lock & Associates is as follows:

4. Include all items purchased with federal funds on an inventory listing that is complaint with 

state laws and procedures. 

5. Implement policies and procedures to ensure items shipped directly to the Counties are 

included in the eMARS accounting system and included in an annual physical inventory as 

required by state laws and procedures. 

The Kentucky State Board of Elections does not contest this finding and agrees to work with the 

Election Assistance Commission to resolve this issue and establish procedures to prevent these 

actions in the future.

Finding No. 3 – Financial Management

The 2019 Schedule of Expenditures of Federal Awards (SEFA) reported $5,014,207 of

expenditures, for the year ended June 30, 2019 under Catalog of Federal Domestic Assistance

(CFDA) 39.011, Election Reform Payments. The correct CFDA for the $3,232,874 of Election

Security Grant expenditures for the year ended June 30, 2019 is 90.404.
 Jared Dearing Karen Sellers

Executive Director Assistant Director

 Jared.Dearing@ky.gov Karen.Selllers@ky.gov

 Taylor Brown

 General Counsel

 TaylorA.Brown@ky.gov

 

COMMONWEALTH OF KENTUCKY

STATE BOARD OF ELECTIONS

 

140 WALNUT STREET AN EQUAL OPPORTUNITY EMPLOYER M/F/D PHONE (502) 573-7100

 FRANKFORT, KY 40601-3240 www.elect.ky.gov FAX (502) 573-4369

 OR (502) 696-1952

The Uniform Guidance at 2 CFR 200.302(a) states that, “Each state must expend and account 

for the Federal award in accordance with state laws and procedures for expending and 

accounting for the state's own funds. In addition, the state's and the other non-Federal entity's 

financial management systems, including records documenting compliance with Federal 

statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to 

permit the preparation of reports required by general and program-specific terms and 

conditions; and the tracing of funds to a level of expenditures adequate to establish that such 

funds have been used according to the Federal statutes, regulations, and the terms and 

conditions of the Federal award.” FAP120-07-00.4.c of the Commonwealth of Kentucky 

Finance and Administration Cabinet Manual of Policies and Procedures states that it is the 

agency’s fiscal officer’s responsibility to provide “assurances that agency financial reports 

accurately reflect underlying activity.”

The Section 101 and Election Security grant funds were kept in the same state fund, and no 

distinction was made for the differing CFDA numbers leading to the financial reports not 

accurately reflecting the underlying activity.

The improper identification of a federal program increases the likelihood that the entity would 

have instances of noncompliance with the requirements of that program. 

The recommendation from McBride, Lock & Associates is as follows: 

6. We recommend that the EAC require the Board to implement a policy or procedure to 

ensure amounts reported by the Fiscal Officer for inclusion on the Statewide SEFA are 

accurate and are properly identified by CFDA title and number.

The Kentucky State Board of Elections does not contest this finding and agrees to work with the 

Election Assistance Commission to resolve this issue and establish procedures to prevent these 

actions in the future. 

Please accept our responses and contact Rachel Poynter at (502) 782-9501 or 

rachel.poynter@ky.gov for any additional information. 

 __________________________________ __02/16/2021__ 

 Rachel Poynter, Executive Staff Advisor Date
APPENDIX A-2 

Response of the 

U.S. Election Assistance Commission 

to the Draft Report
U.S. ELECTION ASSISTANCE COMMISSION

633 3rd Street, NW Suite 200

Washington, DC 20001

TO: Patricia Layfield

Inspector General

FROM: Mona Harrington 

Executive Director

DATE: March 2, 2021

RE: Response to the Draft Performance Audit Report, Administration of 

Payments Received under the Help America Vote Act by the Kentucky 

State Board of Elections

Thank you for the opportunity to respond to the draft performance audit report of EAC’s 

grant funds to Kentucky. 

We appreciate the auditor’s findings and recommendations and note the state agreed with 

the findings in their response. We are working with Kentucky state staff to review the 

recommendations and implement appropriate corrective action. We expect to provide our 

final management decision to the OIG soon after the audit report is issued as final.
15 

Appendix B 

AUDIT SCOPE AND 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 and of 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. 

As part of our audit, we gained an overall understanding of the internal control environment at the 

Board. Based on this understanding, we identified certain internal controls that we considered to 

be significant (or key controls) to achieving each objective. All components of internal control are 

relevant, but not all may be significant. Significance is defined as the relative importance of a 

matter within the context in which it is being considered, and is a matter of professional judgment. 

We made the following determination as to the significance of the underlying internal control 

principles: 
16

1 2 3

Control Environment

1. Demonstrates Commitment to integrity and ethical values No No No

2. Exercises oversight responsibility No No No

3. Establishes structure, authority, and responsibility No No No

4. Demonstrates commitment to competence No No No

5. Enforces accountability. No No No

Risk Assessment 

6. Specifies suitable objectives No No No

7. Identifies and analyzes risk No No No

8. Assesses fraud risk No No No

9. Identifies and analyzes significant change No No No

Control Activities 

10. Selects and develops control activities Yes Yes Yes

11. Selects and develops general controls over technology Yes Yes Yes

12. Deploys through policies and procedures Yes Yes Yes

Information and Communication 

13. Uses relevant information Yes No No

14. Communicates internally Yes No No

15. Communicates externally No Yes No

Monitoring 

16. Conducts ongoing and/or separate evaluations No No No

17. Evaluates and communicates deficiencies No No No

Objective

The significance was determined as follows:

Objective 1: Control Activities and its underlying principles were deemed to be significant to our 

determination of the awardee’s compliance with the objective. The Control Activities component 

includes the design and implementation of specific tasks performed by individuals within the entity 

to fulfill their duties and responsibilities and to respond to identified risks. These principles address 

the design and implementation of activities related to management review, segregation of duties 

(including restriction of access with the information system), and documentation of internal 

controls and transactions. We determined these principles to be the most significant to the state’s 

proper use of funds and compliance with award requirements.

The Information and Communication principles of Use Relevant Information and Communicate 

Internally were deemed to be significant to our determination of the awardee’s compliance with 

the federal financial reporting portion of this objective. These principles address the relevance of 

the information and the internal communication processes used to compile the data necessary to 

meet the state’s reporting objectives.
17 

Objective 2: Control Activities and its underlying principles were deemed to be significant to our 

determination of the awardee’s compliance with the objective. The Control Activities component 

includes the design and implementation of specific tasks performed by individuals within the entity 

to fulfill their duties and responsibilities and to respond to identified risks. These principles address 

the design and implementation of activities related to management review, segregation of duties 

(including restriction of access with the information system), and documentation of internal 

controls and transactions. We determined these principles to be the most significant to the state’s 

proper accounting and control over equipment purchased with HAVA funds. 

The Information and Communication principle of Communicate Externally was deemed to be 

significant to our determination of the awardee’s compliance with the objective because the state 

communicated with and relied on information from the equipment vendor and the counties where 

the equipment is located as part of the control system for accounting and controlling equipment 

purchased with HAVA funds. 

Objective 3: Control Activities and its underlying principles were deemed to be significant to our 

determination of the awardee’s compliance with the objective. The Control Activities component 

includes the design and implementation of specific tasks performed by individuals within the entity 

to fulfill their duties and responsibilities and to respond to identified risks. These principles address 

the design and implementation of activities related to management review, segregation of duties 

(including restriction of access with the information system), and documentation of internal 

controls and transactions. We determined these principles to be the most significant to the state’s 

use of funds in a manner consistent with the plans provided to EAC. 

To implement our audit methodology, below are some of the audit procedures we performed. 

 Interviewed appropriate Board employees about the organization and operations of the 

HAVA program. 

 Reviewed prior single audit reports and other reviews related to the State’s financial 

management systems and the HAVA program for the period under review. 

 Reviewed policies, procedures and regulations for the Board management and accounting 

systems as they relate to the administration of the HAVA program. 

 Tested major purchases and the supporting documentation. 

 Tested randomly sampled payments made with HAVA funds. 

 Evaluated compliance with the requirements for accumulating financial information 

reported to the Commission on the financial status reports and progress reports, accounting 

for property, purchasing HAVA related goods and services, and using funds in a manner 

consistent with the budget plan provided to EAC. 

 Verified the establishment and maintenance of an election fund. 

 Observed the physical security/safeguards of selected equipment purchased with HAVA 

funds and ensure compliance with federal regulation. 

 Verified whether the matching requirement was met and, if so, that matching expenditures 

met the prescribed criteria and allowability requirements of HAVA. 

 Verified program income was properly accounted for and not remitted to the State’s 

general fund. 

 
18 

EXPENDITURES BY BUDGET CATEGORY AND PROGRAM CATEGO

JULY 13, 2018 TO SEPTEMBER 30, 2019 

Budget Categories

Voting 

Equipment

Election 

Auditing

Voter 

Registration 

Systems

Cyber 

Security Communications O

Personnel (Including Fringe) - $ - $ - $ - $ - $ 

$ 

Equipment 3,584,700 - - - - 

 

Subgrants - - - - - 

 

Training - - - - - 

 

All Other Costs - - - 28,174 - 

 

Total Direct Costs 3,584,700 $ - $ - $ 28,174 $ - $ 

$ 

Indirect Costs (if applied) - - - - - 

 

Total Federal Expenditures 3,584,700 $ - $ - $ 28,174 $ - $ 

$ 

Non-Federal Match - - - - - 

 

Total Program Expenditures 3,584,700 $ - $ - $ 28,174 $ - $ 

$ 

Program Categories
19 

Appendix D 

MONETARY IMPACT AS OF SEPTEMBER 30, 2019

Description

Questioned 

Costs

Unsupported 

Costs

Additional 

Funds for 

Program

Election Auditing Services 28,174 $ 28,174 $ - $ 

Total 28,174 $ 28,174 $ - $ 
OIG’s Mission

Prevent fraud, waste, and abuse; promote economy and efficiency in EAC programs; and support the mission of the EAC by reporting on current performance and accountability and by fostering sound program 

management to help ensure effective government operations.

Obtain Copies 

of OIG Reports

Retrieve OIG reports on the OIG website, https://www.eac.gov/inspectorgeneral/

Request copies by e-mail to: eacoig@eac.gov

Send mail orders to:

U.S. Election Assistance Commission

Office of Inspector General

633 3rd Street, NW, Second Floor

Washington, DC 20001

To order by phone: Voice: 1-866-552-0004 

Report Fraud, 

Waste or Abuse 

Involving the EAC 

or Help America 

Act Funds

By mail : U.S. Election Assistance Commission

Office of Inspector General

633 3rd Street, NW, Second Floor

Washington, DC 20001

By e-mail: eacoig@eac.gov

OIG Hotline 866-552-0004 (toll free)

On-line 

Complaint Form https://www.eac.gov/inspector-general/file-acomplaint/
Inspector General 

U.S. Election Assistance Commission

This report, as well as other OIG reports and testimony, are available on the internet at: 

EAC OIG Reports Page