October 20,2011 

BACKGROUND 

EAC MANAGEMENT DECISION: 

Resolution of the OIG Audit Report on the Administration of 

Payments Received Under the Help America Vote Act by the 

Texas Secretary of State for the Period January 1, 2006 

Through November 30, 2010 Report No. E-HP-TX-01-11 

The EAC is an independent, bipartisan agency created by the Help America Vote Act of 

2002 (HA V A). EAC assists and guides state and local election officials in improving the 

administration of elections for Federal office. EAC distributes HAVA funds to States for 

the acquisition of voting systems, and supports the establishment of statewide voter 

registration lists, and other activities to improve the administration of elections for 

Federal office. EAC monitors State use ofHAVA funds to ensure funds distributed are 

being used for authorized purposes. To help fulfill this responsibility, the EAC 

determines the necessary corrective actions to resolve issues identified during Single 

Audit Act and Department of Inspector General (OIG) audits of state administration of 

HA V A funds. The EAC OIG has established a regular audit program to review the use 

ofHAVA funds by States. The OIG's audit plan and audit reports can be found at 

www.eac.gov. 

The EAC Audit Follow-up Policy authorizes the EAC Executive Director to issue the 

management decision for OIG audits of Federal funds to state and local governments, to 

non-profit and for-profit organizations, and for single audits conducted by state auditors 

and independent public accountants (external audits). The Executive Director has 

delegated the evaluation of final audit reports provided by the OIG and single audit 

reports to the Director of the HA V A Grants Division of EAC. The Division provides a 

recommended course of action to the Executive Director for resolving questioned costs, 

administrative deficiencies, and other issues identified during an audit. The EAC 

Executive Director issues the EAC Management Decision that addresses the findings of 

the audit and details corrective measures to be taken by the State. 

States may appeal the EAC management decisions. The EAC Commissioners serve as 

the appeal authority. A State has 30 days to appeal the EAC management decision. All 

appeals must be made in writing to the Chair of the Commission. The Commission will 

render a decision on the appeal no later than 60 days following receipt of the appeal or, in 

the case where additional information is needed and requested, 60 days from the date that 

the information is received from the State. The appeal decision is final and binding. 

Please note, with two vacancies the Commission presently lacks a quorum to conduct 

appeals. The 30 day period to file an appeal remains in place. However, the 60 day 

period for a decision will toll until a Commission quorum is reestablished. 

1 
AUDIT HISTORY 

The 010 issued an audit report on the administration of payments received under the 

Help America Vote Act (HA V A) by the Texas Secretary of State (SOS) on August 22, 

2011. Except for unsupported payroll charges, failing to deposit interest on program 

income, improper property management, and failing to deposit interest on insurance 

proceeds, the audit concluded that the SOS generally accounted for and expended HA V A 

funds in accordance with requirements mentioned for the period from January 1,2006 

through November 30, 2010. 

Finding 1 - Unsupported Payroll Charges 

The state of Texas charged a total of $1,747,062 in payroll expenditures to the HAVA 

election fund from January 1,2006 through November 30, 2010. Ofthis amount, the 

auditors questioned $102,677 of salary for the five pay periods tested. The $102,677 

included $56,672 for employees whose full salaries were paid with HA V A funds and 

$46,005 for employees whose salaries were partially paid with HA V A funds. The fulltime salaries were questioned because employees did not have semi-annual certifications 

that they worked only on HA V A related activities or their time cards did not indicate that 

the work was on HAVA related activities. The part-time salaries were questioned 

because the time cards did not indicate the hours worked on HA V A related activities. 

Based on the internal control weakness, additional unsupported payroll charges could be 

as much as $1.6 million for the pay periods not tested during which the same procedures 

were in effect. 

Recommendation: 

1. The auditors recommended that EAC work with the SOS to determine the 

appropriate corrective action regarding the lack of periodic payroll certifications 

and inadequate documentation of time charged to HA V A. 

SOS's Response: 

The state agreed that payroll charges were not supported. Prior to September 1, 2009 

Election Division staff were 100 percent HAVA funded. The state said that appropriate 

supervisors will certify to the time periods in which employees who were HA V A funded 

did work full time on HA V A-related activities. Currently IT and Election Division staff 

members assigned to HA V A work part-time on HA V A activities and part-time on other 

election activities. For questioned costs related to part-time HAV A employees the state 

will either transfer state funds to the HA V A election account or identify state-funded 

HA V A-eligible expenditures equal to the amount in question. In the future, any 

personnel who are charged partially to HAVA will be documented accordingly on the 

employee's timesheet. 

2 
EAC Response: 

EAC will work the SOS to determine the appropriate corrective action regarding the lack 

of periodic payroll certifications and inadequate documentations of time charged to 

HAVA. 

Finding 2 - Interest on Program Income 

Each of the seven counties visited earned program income from the rental ofHAVA 

funded voting equipment to local jurisdictions within their counties. Pursuant to 

instructions from the SOS, all seven counties deposited this income into an election 

account held by their county treasuries. These funds are used only for HA V A related 

activities such as maintenance of HA V A funded voting equipment. 

Five of these counties' election accounts earn interest which is deposited into an election 

account for HAVA purposes. One county's election account earns interest, but the 

interest is deposited into the county treasury and used for non-HAVA purposes. The 

other county's election account did not earn interest. 

Recommendation: 

2. The auditors recommended that EAC work with the SOS to resolve the issue of 

lost interest on program income. 

SOS's Response: 

The state agreed that the interest should be earned on program income and that interest 

should be used for HA V A eligible expenditures. The state will advise all Texas counties 

of this policy. The state said that the county that earned interest on its program income 

and deposited those funds into a county fund will be instructed to transfer that amount 

into the county's election fund. 

The state disagrees that the one county which did not earn interest on program income 

should have to go back and calculate the potential lost interest, and put that amount in an 

election fund. The state said that when they set up HA V A sub-grants, counties were 

required to expend county funds, and then seek reimbursement from the HA V A election 

fund. The state told counties they could not hold HA V A funds which could earn interest. 

The state believes it is reasonable that the county interpreted the restriction against 

earning interest on grant payments to also apply to program income. They also said that 

in a previous EAC audit ofHAVA funds in Texas the issue of program income was dealt 

with extensively. EAC did not raise the issue of the deposit of program income in an 

interest bearing account during the audit resolution process. The state also believes that 

the language in HA V A regarding interest appears to be permissive. That is, a state may 

earn interest on HA V A funds but there is no language in HA V A requiring interest to be 

earned. 

3 
EAC Response: 

EAC will work with the SOS to resolve the issue of lost interest on program income. 

Finding 3 - Property Management 

In one ofthe counties visited, 38 HAVA funded laptop computers were stolen from the 

county election office warehouse in January 2009. These laptops had been purchased in 

August 2006 and August 2008 for an average cost of about $1,500 each. The county 

notified local police of the theft, but the crime was never solved. SOS officials told the 

auditors that the county did not insure the HA V A funded equipment against loss or 

damage. The county has not replaced the stolen equipment. 

Recommendation: 

3. The auditors recommended that EAC work with the SOS to resolve the issue of 

the reimbursement to the HA V A account for the cost of the stolen laptop 

computers. 

SOS's Response: 

The state agreed with this finding and said that the county will be instructed to determine 

the depreciated value of the stolen equipment and given the option to either demonstrate 

it has spent county funds on HAVA-eligible expenditures equal to the depreciated value 

of the stolen equipment or use county funds equal to the depreciated value of the stolen 

equipment towards replacement equipment. The county will use program income to fund 

the balance of the replacement equipment. 

EAC Response: 

EAC will work with the SOS to ensure appropriate corrective action regarding the stolen 

laptop computers. 

Finding 4 - Interest on Insurance Proceeds 

In August 2010 a fire destroyed the warehouse where Harris County stored its HA V A 

funded voting equipment. In addition to the HA V A voting equipment, county vehicles 

and other county equipment and supplies used in elections were destroyed. According to 

the SOS officials, the county used its own funds to purchase an insurance policy on the 

building and its contents. The insurance policy provided funds for the replacement cost 

of the building and all of the contents. A Harris County official told the auditors that the 

insurance proceeds had been received in September 2010 and placed in a special fund 

with the county treasurer. Interest has been earned on the proceeds and deposited into 

this special fund. 

4 
Interest earned on the proceeds used to purchase HA V A replacement voting equipment 

between the dates the insurance funds were received and when they were paid out should 

be credited to the HA V A election account instead of the special fund. 

Recommendation: 

4. The auditors recommended that EAC work with the SOS to determine the amount 

of interest earned on the insurance proceeds which were used to purchase new 

voting equipment, and assure that the county transfers that amount into the 

HA V A election account. 

SOS's Response: 

The state said the county used its own funds to purchase the insurance policy and the 

proceeds and associated interest related to HAVA and non-HAVA election equipment are 

comingled. They said it is virtually impossible to determine interest earned on proceeds 

that replaced HAVA-funded equipment. They also pointed out that both the proceeds 

and the interest will be spent on election related expenses, both HAVA and non-HAY A. 

EAC Response: 

EAC will work with the SOS to gather additional information and ensure appropriate 

corrective action. 

5