Report No. 

E-HP-MD-08-16 

September 2017 

U.S. ELECTION ASSISTANCE
 

COMMISSION 

OFFICE OF INSPECTOR GENERAL 

FINAL REPORT: 

ADMINISTRATION OF PAYMENTS RECEIVED 

UNDER THE HELP AMERICA VOTE ACT BY 

THE MARYLAND STATE BOARD OF 

ELECTIONS
 

JANUARY 1, 2006 THROUGH SEPTEMBER 30, 2015 
 

 

 

 

 

 

 

 

 

OFFICE OF THE INSPECTOR GENERAL 

MEMORANDUM 

To:	 Brian Newby 

Executive Director 

From:	 Patricia L. Layfield 

Inspector General 

Date:	 September 6, 2017 

Subject:	 Final Performance Audit Report - Administration of Payments Received 

Under the Help America Vote Act by the Maryland State Board of Elections 

(Assignment Number E-HP-MD-08-16) 

We contracted with the independent certified public accounting firm of McBride, Lock & 

Associates, LLC to audit the administration of payments received under the Help America Vote 

Act (HAVA) by the Maryland State Board of Elections (MDSBE). 

In its audit, McBride, Lock & Associates, LLC concluded that the Office generally accounted for 

and expended the HAVA funds in accordance with applicable requirements for the period from 

January 1, 2006 through September 30, 2015. However the following exceptions were 

identified: 

1.	 The Office did not have established policies and procedures affecting financial 

management activities including equipment management, Federal financial reporting 

and Federal grant oversight and administration 

2.	 The Office submitted financial reports for Section 101, Section 102 and Section 251 

funds that could not be supported by underlying accounting records. 

3.	 The Office's equipment management is inadequate in regards to the maintenance of 

property records. 

4.	 The Office did not provide adequate documentation to support allowability for certain 

expenditures. 

5.	 The Office did not exceed the maintenance of expenditure during fiscal year 2006. 

1
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the report, McBride, Lock & Associates, LLC summarized the MDSBE response to the 

reported recommendations, as well as their comments on the responses after the 

recommendations. The MDSBE office generally agreed with the findings and recommendations 

and, in some cases, provided additional information for EAC to consider. The EAC indicated that 

it would work with the MDSBE to resolve the issues in the report. The complete MDSBE 

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

A-2. 

We would appreciate being kept informed of the actions taken on our recommendations as we 

will track the status of their implementation. Please respond in writing concerning the findings 

and recommendations included in this report by October 20, 2017. Your response should 

include information on actions taken or planned, targeted completion dates, and titles of 

officials responsible for implementation. 

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

General: 

•	 Reviewed McBride, Lock & Associates, LLC'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 the audit report, prepared by McBride, Lock & Associates, LLC to ensure 

compliance with Government Auditing Standards; and 

•	 Coordinated issuance of the audit report. 

McBride, Lock & Associates, LLC is responsible for the attached auditor’s report and the 

conclusions expressed in the report. We do not express any opinion on the conclusions 

presented in McBride, Lock & Associates, LLC's audit report. 

The legislation creating the Office of Inspector General requires that we report to Congress 

semiannually on all audit reports issued, actions taken to implement our recommendations, 

and recommendations that have not been implemented. 

If you have any questions regarding this report, please call me at (301) 734-3104. 

Attachment 

cc: Director of Grants and Payments 

2
 
Performance Audit Report 

Administration of Payments Received Under the Help America Vote Act by 

the Maryland State Board of Elections 

Prepared for 

The United States Election Assistance Commission (EAC)
 

Office of Inspector General
 

By 

McBride, Lock & Associates, LLC 

July 2017 

McBRIDE, LOCK & ASSOCIATES, LLC 

CERTIFIED PUBLIC ACCOUNTANTS 

KANSAS CITY 
 

 

Performance Audit Report
 

Administration of Payments Received Under the Help America Vote Act by 

the Maryland State Board of Elections 

TABLE OF CONTENTS 

Page 

EXECUTIVE SUMMARY 1 

BACKGROUND 2 

AUDIT OBJECTIVES 4 

SCOPE AND METHODOLOGY 5 

AUDIT RESULTS 5 

APPENDICES: 

Appendix A-1: Response of the Maryland 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 Methodology 

Appendix C: Monetary Impact as of September 30, 2015 
 

 

 

 

 

 

 

U.S. Election Assistance Commission
 

Performance Audit Report
 

Administration of Payments Received Under the Help America Vote Act by 

the Maryland 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 

Maryland State Board of Elections (Office) from January 1, 2006 through September 30, 2015 to 

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

America Vote Act of 2002 (the HAVA) in accordance with HAVA and applicable requirements; 

accurately and properly accounted for property purchased with HAVA payments and for program 

income; maintained state expenditures at a level not less than the level maintained in the fiscal 

year ending prior to November 2000; and met HAVA requirements for Section 251 funds for an 

election fund and for a matching contribution. 

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 Government, 41 CFR 105-71, (originally Office of 

Management and Budget Circular A-102, also known as the “Common Rule”). 

•	 Expend payments in accordance with cost principles set forth in Cost Principles for State 

and Local Governments, 2 CFR 225, (originally Office of Management and Budget 

Circular A-87) for establishing the allowability or unallowability of certain items of cost 

for federal participation. 

•	 Follow the requirements of the Federal Cash Management and Improvement Act. 

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

•	 Comply with the provisions of Audits of States, Local Governments and Non-Profit 

Organizations (Office of Management and Budget Circular A-133). 

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 Office generally accounted for and expended the Grant funds in accordance with the 

1
 
 

 

 

 

 

 

requirements mentioned above for the period from January 1, 2006 through September 30, 2015. 

The exceptions are as follows: 

1.	 The Office did not have established policies and procedures affecting financial 

management activities including equipment management, Federal financial reporting and 

Federal grant oversight and administration 

2.	 The Office submitted financial reports for Section 101, Section 102 and Section 251 funds 

that could not be supported by underlying accounting records. 

3.	 The Office's equipment management is inadequate in regards to the maintenance of 

property records. 

4.	 The Office did not provide adequate documentation to support allowability for certain 

expenditures. 

5.	 The Office did not exceed the maintenance of expenditure during fiscal year 2006. 

We have included in this report as Appendix A, the State Board of Election’s 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 payments to States authorized by HAVA under Titles 

I and II, as follows: 

•	 Title I, Section 101 payments are for activities such as complying with HAVA 

requirements for uniform and nondiscriminatory election technology and administration 

requirements (Title III), improving the administration of elections for federal office, 

educating voters, training election officials and pool workers, and developing a State plan 

for requirements payments. 

•	 Title I, Section 102 payments are available only for the replacement of punchcard and lever 

action voting systems. 

•	 Title II, Section 251 requirements payments are for complying with Title III requirements 

for voting system equipment; and addressing provisional voting, voting information, 

Statewide voter registration lists, and voters who register by mail. 

2
 
 

 

 

 

 

 

 

Title II also requires that states must: 

•	 Have appropriated funds equal to five percent of the total amount to be spent for activities 

for which requirements payments are made. 

•	 Maintain the expenditures of the State for activities funded by the requirements payment 

at a level that is not less than the expenditures maintained by the State for the fiscal year 

ending prior to November 2000. 

•	 Establish an election fund for amounts appropriated by the State for carrying out activities 

for which requirements payments are made, for the Federal requirements payments 

received, for other amounts as may be appropriated under law and for interest earned on 

deposits of the fund. 

The Awardee – The Maryland State Board of Election 

The HAVA funds were awarded to the Maryland State Board of Elections. The Maryland State 

Board of Elections (SBE), comprised of the Administrator as the chief State election official, the 

five-member State Board as the principal authority, and 30 employees, is responsible for 

administering and supervising elections conducted by the 24 Local Boards of Elections (LBEs) in 

the State. The LBEs and their respective local governments have the majority of fiscal 

responsibility for elections. In addition to fulfilling federal election responsibilities, the State’s 

elections community works cooperatively to serve State government, approximately 2.8 million 

registered voters, and over 1,700 political campaigns. 

Help America Vote Act State of Maryland State Plan 

The State of Maryland’s advisory committee consisted of 10 individuals representing a crosssection of election stakeholders. The committee was selected by the State Administrator for the 

Maryland State Board of Elections. 

The main objectives of the project funded by HAVA, as set forth in the state plan, were to purchase, 

implement, administrate and maintain compliant voting systems; and purchase, implement, 

administrate and maintain a computerized statewide voter checklist. 

The Maryland State Board of Elections established and is maintaining an election fund for the 

exclusive purpose of carrying out activities of HAVA. The fund is non-lapsing and accrues interest 

earned. Additionally, the BOE has managed all expenditures funded by HAVA and has not 

distributed any of the requirement payments to the local units of government. 

3
 
 

 

 

 

AUDIT OBJECTIVES 

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

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

Grant and applicable requirements; 

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

program income; 

3.	 Met HAVA requirements for Section 251 funds for creation of an election fund, providing 

required matching contributions, and meeting the requirements for maintenance of a base 

level of state outlays, commonly referred to as Maintenance of Expenditures (MOE). 

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: 

•	 Comply with the Uniform Administrative Requirements for Grants and Cooperative 

Agreements with State and Local Government, 41 CFR 105-71, (originally Office of 

Management and Budget Circular A-102, also known as the “Common Rule”). 

•	 Expend payments in accordance with cost principles set forth in Cost Principles for State 

and Local Governments, 2 CFR 225, (originally Office of Management and Budget 

Circular A-87) for establishing the allowability or unallowability of certain items of cost 

for federal participation. 

•	 Follow the requirements of the Federal Cash Management and Improvement Act. 

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

•	 Comply with the provisions of Audits of States, Local Governments and Non-Profit 

Organizations (Office of Management and Budget Circular A-133). 

4
 
 

 

 

 

SCOPE AND METHODOLOGY 

The Maryland State Board of Elections received the initial Grant funds in 2003. The period May 

1, 2003 through December 31, 2005 has been previously audited by the EAC-OIG and that activity 

was not considered in the scope of this audit. 

The Maryland State Board of Elections received Grant Funds in the following amounts: 

May 1, 2003 to 

September 30, 2015 

May 1, 2003 to 

December 31, 2005 

January 1, 2006 to 

September 30, 2015 

HAVA Section 101 

HAVA Section 102 

HAVA Section 251 

$ 5,636,731 

1,637,609 

42,455,017 

$ 5,636,731 

1,637,609 

37,270,291 

$ -

-

5,184,726 

State matching fund contributions and expenditures required for Section 251 funds received 

between January 1, 2006 and September 30, 2015 were determined to be $272,880. 

Based upon the accounting system records provided by the Maryland State Board of Elections, 

total expenditures of Grant Funds during the January 1, 2006 through September 30, 2015 period 

was $30,423,095. As noted in finding 2, the FFR submission were not be supported by the 

accounting records reviewed. Therefore, the accounting system records are not necessarily 

representative of the true expenditures during the audit period. 

The scope of this audit also included consideration of Program Income, however, because of the 

inadequacy of the accounting records, a determination of those revenues for the audit period could 

not be made. 

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, except for the matters discussed below, we concluded 

that the Office accounted for and expended the HAVA funds in accordance with the requirements 

mentioned above for the period from January 1, 2006 through September 30, 2015. The exceptions 

to applicable compliance requirements are described below. 

Finding No. 1 – Documentation of Policies and Procedures 

Key internal control policies affecting financial management activities including equipment 

management, Federal financial reporting and Federal grant oversight and administration, had not 

5
 
 

 

 

 

 

 

 

been addressed in policy and procedure documentation. The Maryland State Board of Election 

(Office) relied heavily on written documentation set forth in State manuals, and electronic controls 

implemented in the accounting system. 

Federal regulations, specifically 41 CFR § 105-71.120 –Standards for Financial Management 

Systems require that: 

a)	 A State must expend and account for grant funds in accordance with State laws and 

procedures for expending and accounting for its own funds, and 

b)	 Effective control and accountability must be maintained for all grant and subgrant cash, 

real and personal property, and other assets. 

The Comptroller of Maryland, Internal Control Manual states, "The agency head must establish 

controls that reasonably ensure that: (i) obligations and costs are in compliance with applicable 

law; (ii) funds, property, and other assets are safeguarded against waste, loss, unauthorized use or 

misappropriation; and (iii) revenues and expenditures applicable to agency operations are properly 

recorded and accounted for to permit the preparation of accounts and reliable financial and 

statistical reports and to maintain accountability over the assets." 

A key aspect of establishing and maintaining an effective system of internal controls is the 

documentation of related policies and procedures to ensure these criteria are current, approved, 

communicated, incorporated into training materials, and updated when appropriate. 

The lack of documented internal control policies and procedures may result in a lack of awareness, 

consistency in application, and compliance of regulations, which could allow for noncompliance 

with grant terms and conditions to occur and not be detected. 

Recommendation 

We recommend that the EAC resolve with the Office the adequacy of the internal policies. 

Specifically, internal policies and procedures should address financial management activities 

including equipment management, Federal financial reporting and Federal grant oversight and 

administration. Additionally, the EAC should require the Office to provide training to personnel 

involved in the administration of Federal awards to ensure the understanding of the new policies. 

Further, these procedures should be reviewed and updated on a regular basis. 

State Board of Elections’ Response: 

SBE consistently followed and continues to follow State of Maryland’s financial management, 

procurement, inventory, and record retention policies and procedures. In response to this audit, 

however, SBE supplemented these policies and procedures to include applicable federal 

requirements and will provide the revised policies and procedures to the EAC. SBE staff members 

will attend the State’s annual grant training conference to ensure that SBE’s policies and 

procedures reflect the latest federal requirements. 

6
 
 

 

 

 

 

 

 

Auditor’s Response: 

The response provides for appropriate corrective action. The Commission should ensure that the 

supplemental policies and procedures fully resolve the deficiencies identified. 

Finding No. 2 – Financial Reporting 

The Office submitted financial reports for Section 101, Section 102 and Section 251 funds that 

could not be supported by underlying accounting records. 

The terms and conditions of the HAVA awards require the submission of accurate and complete 

Federal Forms 269 (Financial Status Report) and 425 (Federal Financial Report) which reflect the 

uses of award funds and the interest and program income generated from those funds. HAVA Title 

IX, Section 902. AUDITS AND REPAYMENT OF FUNDS, Part (a) – Recordkeeping 

Requirement states, “Each recipient of a grant or other payment made under this Act shall keep 

such records with respect to the payment as are consistent with sound accounting principles, 

including records which fully disclose the amount and disposition by such recipient of funds, the 

total cost of the project or undertaking for which such funds are used, and the amount of that 

portion of the cost of the project or undertaking supplied by other sources, and such other records 

as will facilitate an effective audit.” 

Section 101, 102 and 251 

The Office was not able to provide financial records with adequate detail to separate expenditures 

between Section 101, 102 and 251. Therefore, the audit has combined the amounts in order to 

perform an analysis of Election Fund activity. 

Federal Funds Authorized - The Office's latest Federal Financial Report (FFR) submission of 

the Section 101, 102 and 251 funds were done for the periods ending September 30, 2009, 

September 30, 2012 and September 30, 2015, respectively. The amount of federal funds 

authorized, did not agree to disbursement records provided by the General Services Administration 

(GSA). The discrepancies noted are as follows: 

FFR GSA 

Reported Records Variance 

Section 101 

Section 102 

Section 251 

$ 5,636,731 $ 5,636,731

1,637,609 1,637,609 

47,639,743 47,663,156 

$ -

-

(23,413) 

Total Authorized $ 54,914,083 $ 54,937,496 $ (23,413) 

7
 
 

 

 

 

 

 

 

 

 

 

Federal Expenditures - The amount of federal expenditures, did not agree to the accounting 

records. Additionally, the accounting records were not kept with sufficient detail to determine 

whether the expenditures were related to Section 101, Section 102 or Section 251. The 

discrepancies noted are as follows: 

Maryland 

FFR 

Reported 

Accounting 

Records Variance 

Section 101 

Section 102 

Section 251 

Fund 105 

Fund 106 

$ 5,528,847 

1,637,609 

47,639,743 

-

-

$ - $ 5,528,847

- 1,637,609 

- 47,639,743 

49,632,515 (49,632,515) 

3,177,286 (3,177,286) 

Total Expenditures $ 54,806,199 $ 52,809,801 $ 1,996,398 

Recipient Share - The amount of total recipient share required did not agree to GSA records. The 

discrepancies noted are as follows: 

FFR GSA 

Reported Records Variance 

Total receipient share required $ 2,507,356 $2,508,588 $ (1,232) 

Additionally, the Office did not provide a transaction detail to support the recipient share of 

expenditures reported. The amounts reported are as follows: 

FFR 

Reported 

Section 101 $ 1,946,189 

Section 251 29,756,998 

Recipient share of expenditures $ 31,703,187 

Program Income - The Office did not provide a transaction detail to support the amount of 

program income earned reported on the FFR. The amounts reported are as follows: 

FFR 

Reported 

Section 101 $ 875,980 

Section 102 51,353 

Section 251 3,888,041 

Total Federal program income earned $ 4,815,374 

8
 
 

 

 

 

 

 

 

 

Additionally, the Office did not provide a transaction detail for program income expended. The 

amounts reported are as follows: 

FFR 

Reported 

Section 101 $ 549,875 

Section 102 51,353 

Section 251 3,888,041 

Total Program Income expended $ 4,489,269 

The Office has not attempted to provide a reconciliation between the submitted financial reports 

and the accounting records, further the Office has not provided a transaction detail for program 

income or recipient share. 

Recommendation: 

We recommend that the EAC require the Office to perform a reconciliation of their accounting 

records to the submitted financial reports to ensure that all expenditures, matching contributions 

and program income earned have been fully disclosed and have been adequately tracked in the 

State’s accounting system. 

State Board of Elections’ Response: 

SBE agrees that there are variances between financial records and the required Federal Financial 

Reports (FFR), but SBE has since reconciled some of the variances and has a corrective action plan 

for the remaining variances. 

1.	 Federal Funds Authorized: SBE failed to include in the FFR submission for 2012 the 

2012 disbursement of federal funds ($23,413). SBE will amend the 2012 and 

subsequent FFR submissions, and this amendment will resolve the variance in the 

amount of federal funds disbursed and received. 

2.	 Federal Expenditures: SBE provided the auditor with revised federal expenditures, but 

the revisions were not included in the audit report. Using the revised expenditures, the 

variance decreased from $1,996,398 to $547,974.58. This variance is the result of 

discrepancies and omissions in the FFR submissions and varying reporting periods 

(e.g., federal fiscal year versus calendar year). SBE will amend the FFR submissions, 

and these amendments will resolve the remaining variance. 

3.	 Recipient Share: SBE failed to include the 5% match for the 2012 disbursement of 

federal funds. (The amount of the match is $1,231.51, the same amount of the reported 

variance.) SBE will amend the 2012 FFY submission to include the 5% match amount. 

4.	 Program Income: SBE identified a discrepancy in previously submitted reports and it 

appears that the change in how interest was reported (cumulative interest on SF 269 to 

interest earned in the reporting period on FFR 425) impacted the reconciliation. SBE 

will amend FFR submissions to reflect the program income earned and spent. 

9
 
 

 

 

 

 

 

 

The audit reports states that SBE did not provide transaction details to support certain information. 

The State’s financial management system maintains detailed information for five years, but since 

the information requested during this audit ranged from 6 to 11 years ago, detailed information 

was and continues to be difficult to obtain. 

SBE will share with the EAC its reconciliations and amend the FFR submissions. The amended 

submissions will resolve all of the variances identified in the audit report. 

Auditor’s Response: 

The response provides for appropriate corrective action except for the detail involving information 

from 6 to 11 years ago. The Commission should consider the revised submissions to ensure that 

they accurately portray the source and use of Section 101, 102 and 251 funds. 

Finding No. 3 – Inadequate Equipment Management 

The Office’s equipment management is inadequate for the maintenance of property records. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State and 

Local Governments 41 CFR § 105-71.132 (d) (The “Common Rule”) section states that, (1) 

“Property records must be maintained that include a description of the property, a serial number 

or other identification number, the source of property, who holds the title, the acquisition date, and 

cost of the property, percentage of Federal participation in the cost of the property, the location, 

use and condition of the property, and any ultimate disposition data including the date of disposal 

and sale price of the property.” 

The Office does not have documented policies regarding the maintenance of the equipment listing. 

The inventory listing provides a column for all required details with the exception of who holds 

the title, use and condition of the property and disposition data. The inventory listing does not 

adequately track the percentage of Federal participation in the cost of the property, therefore, the 

audit was not able to reconcile property purchased with federal funds per the financial records to 

property recorded on the inventory listing. 

The Office was not compliant with federal and state regulations requiring property records to 

include who holds the title, disposition data, use and condition, and Federal participation in the 

cost of the property. The deficiencies in equipment management result from the Office not 

implementing adequate internal policies regarding the maintenance of a fixed asset inventory 

listing. 

Recommendation 

We recommend that EAC resolve with the Office the adequacy of the Office's formalized policies 

and procedures regarding inventory management. Additionally, the EAC should review the 

Office's inventory system to ensure all fields are populated with the required data for assets 

purchased with Federal funds. 

10
 
 

 

 

 

 

 

 

State Board of Elections’ Response: 

During the audit, the auditor reviewed SBE’s prior inventory reports and verified that SBE 

accounted for its equipment. Since the auditor’s recommendations were limited to improving 

inventory documentation and recordkeeping, this finding confirms that SBE performed the 

required inventories and accounted for equipment purchased with federal funds. 

Over the last several years, SBE has diligently worked to identify the inventory issues identified 

with its previous inventory system and procedures. This led to the procurement and 

implementation of the new inventory system. While the prior inventory system was sufficient to 

store most of the inventory data required, the new system improves the efficiency of the inventory 

process and will include all of the fields required by State and federal inventory rules. 

SBE is in the final phase of implementing the new inventory management system. The system 

customization is almost complete, the equipment records have been converted, and the data fields 

for each equipment record are being updated. SBE is also establishing and documenting policies 

and procedures for adding, transferring, retiring, reporting, and other aspects of asset management 

for all users of the new inventory system. SBE will provide the EAC with the data dictionary for 

the new inventory system, any requested reports, and, when completed, its written inventory 

policies and procedures. 

Auditor’s Response: 

The response provides for a description of an appropriate inventory system to be responsive to the 

recommendation. The Commission should evaluate that system to ensure that it is fully responsive 

to the inventory requirements. 

Finding No. 4 – Unallowable Costs 

Certain expenditures were not supported by invoices and contracts to support the allowability of 

the expenditures. 

Office of Management and Budget Circulars and Guidance, Cost Principles for State, Local, and 

Indian Tribal Governments 2 CFR § 225, Appendix A.C.1.j states, “To be allowable under Federal 

awards, costs must meet the following general criteria: (j) Be adequately documented.” 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State and 

Local Governments 41 CFR § 105-71.120 (b)(6) (The “Common Rule”) section states that, 

“Accounting records must be supported by such source documentation as cancelled checks, paid 

bills, payrolls, time and attendance records, contracts and subgrant award documents, etc.” 

11
 
 

 

 

 

 

The audit sampled 38 non-payroll transactions and 15 payroll transactions. The audit identified the 

following issues and discrepancies: 

•	 2 of the 38 non-payroll transactions were missing a contract or were not identified as not 

having a contract to ensure that the costs were charged in accordance with the contract 

agreement. 

•	 11 of the 38 non-payroll transactions were missing an invoice to provide the detail of the 

costs incurred. 

•	 15 of the 38 non-payroll transactions were missing either a payment voucher and/or an 

approved purchase order to indicate that the costs were properly approved when procured 

or when paid. 

•	 20 of the 38 non-payroll transactions were missing sufficient evidence regarding final work 

product or deliverables that provide the allowability of the transaction. 

•	 11 of 15 payroll transactions were not supported by an approved pay rate document. 

Based on the discrepancies above the audit has determined that there were 20 non-payroll 

transactions and 11 payroll transactions reviewed that did not have sufficient evidence to support 

that the cost were allowable to HAVA grants. This resulted in $14,352,212 in unsupported nonpayroll costs and $27,119 in unsupported payroll costs. 

Recommendation: 

We recommend that the EAC address and resolve the following recommendations that the Office: 

(a) Transfer to the election fund $14,379,331 for the unsupported costs cited above. 

(b) Develop and implement policies and procedures regarding maintenance of supporting 

source documentation for all Federal expenditures incurred. 

State Board of Elections’ Response: 

During the audit, there were delays in finding some of the requested documents, in part due to a 

State law that requires that voting system expenses be shared equally between the State and the 

local jurisdictions. When the auditor requested documents related to a federal fund expenditure of 

a certain amount (for example, $25,000), SBE records reflect the full amount of the invoice 

($50,000), not just SBE’s share. Because the requested amount differed from the actual amount, 

finding the supporting documents for the requested expenditures were challenging. SBE has since 

located relevant documents that resolve $3.5 million and will provide them to the EAC for their 

review. 

The majority of the expenditures without invoices or purchase orders – over $10.2 million – are 

payments SBE made to the State Treasurer’s Office (STO). When the State purchased a HAVA12
 
 

 

 

 

 

 

compliant voting system in 2003, the State Treasurer financed the purchase. Under the binding 

agreement with STO, SBE agreed to repay the STO’s loan in semi-annual payments over five 

years. On each payment date, the STO electronically transferred funds from SBE into the State 

Treasury. There were no invoices from STO for SBE to pay; it was an automatic, electronic 

transfer. SBE has a copy master equipment lease-purchase agreement and payment schedule and 

will provide it to the EAC1. 

SBE was unable to obtain the personnel records necessary to support the approved pay rate for 11 

transactions. Although the State’s personnel system no longer has records from 2006- 2008, SBE 

has copies of official personnel documents showing the pay rate for the employees whose salaries 

were paid using federal funds. SBE will provide these documents to the EAC. 

While SBE concurs that SBE did not retain the appropriate financial or payroll records, SBE 

disagrees with the recommendation that the funds be returned to the election fund. Each of these 

expenditures was allowable, and individuals with knowledge of these transactions can attest to the 

contracts and services provided under these contracts. 

Auditor’s Response: 

The response provides for general response for the various concerns noted in the finding. Without 

detail of the specific items, the audit provides no additional comment. The Commission should 

evaluate the detail of the various compliance matters discussed in the finding. SBE does concur 

that the support for the payroll record is not available for support of those transactions. 

Finding No. 5 – Maintenance of Expenditure 

The Office did not exceed the maintenance of expenditure during fiscal year 2006. 

HAVA Section 254(a)(7) requires the State Plan to describe “How the State, in using the 

requirements payment, will maintain the expenditures of the State for activities funded by the 

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.” 

The State Plan indicated that the State of Maryland will maintain expenditures of the State for 

activities funded by the payment at a level equal to or greater than the level of such expenditures 

in State FY 2000 – a total of $1,994,914. This amount represents the amount of money paid in 

fiscal year 2000 for the statewide voter registration system and an allocation of all other State 

Board of Election expenditures made in fiscal year 2000. 

The baseline maintenance of expenditure was exceeded every year from fiscal year 2006 through 

2015 with the exception of fiscal year 2006. The state expended $1,226,366 during fiscal year 

2006, this resulted in $768,548 less than the required level of expenditure of state funds. 

1 Since the binding agreement with the STO was in effect in 2006, SBE assumes that the EAC’s previous auditors 

reviewed this agreement any payment schedule in its 2006 audit of HAVA funds. 

13
 
 

 

 

 

 

 

 

 

Recommendation: 

We recommend the EAC require the Office to: 

(a) Evaluate the baseline established for maintenance of expenditure to ensure that those 

expenditures included in the baseline are consistent with the maintenance of expenditure 

policy established by the EAC in June 2010. 

(b) Implement procedures to ensure that the maintenance of expenditure is exceeded each 

year. 

State Board of Elections’ Response: 

While SBE concurs that the State did not meet its maintenance of effort in fiscal year 2006, budget 

instructions from the State’s Department of Budget and Management specified the maximum 

amount of general funds that could be included in SBE’s fiscal year 2006 budget. This reduced 

the budget target was the result of a shortfall of general funds and prevented SBE from including 

general funds to meet the maintenance of effort requirement in fiscal year 2006. 

In each year prior to and after fiscal year 2006, the State exceeded the maintenance of effort 

amount. From federal fiscal year 2006 through federal fiscal year 2012, the State’s maintenance 

of effort payments exceeded $28.2 million, which exceeds the State’s minimum maintenance of 

effort by 49%. 

SBE will provide the EAC with documents showing how SBE’s maintenance of effort was 

calculated. This documentation was reviewed during the prior EAC audit and found to be 

sufficient. During the annual budget preparation, SBE will review proposed expenditures to verify 

that the maintenance of effort can be met. As part of SBE’s monthly expenditure review, SBE 

will review expenditures and verify that the maintenance of effort is being met throughout each 

fiscal year. 

Auditor’s Response: 

The response concurs with the issue involving the 2006 Maintenance of Effort concerns. The 

Commission should review the information that the SBE indicates is available regarding the 

support for the Maintenance of Effort calculation. 

14
 
 

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

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

The Office responded on August 31, 2017 and generally agreed with the report’s findings and 

recommendations. The EAC responded on July 26, 2017 and stated they will work with the State 

Board of Elections to ensure appropriate corrective action. The Office’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 July 22, 2016 

and July 14, 2017. 

(Original Signed by McBride, Lock & Associates, LLC) 

McBride, Lock & Associates, LLC 

July 14, 2017 

15
 
 

APPENDIX A-1
 

Response of the Maryland
 

Secretary of State to the Draft Report
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARYLAND 

STATE BOARD OF ELECTIONS 

P.O. BOX 6486, ANNAPOLIS, MD 21401-0486 PHONE (410) 269-2840 

David J. McManus, Jr., Chairman Linda H. Lamone 

Patrick J. Hogan, Vice Chairman Administrator 

Michael R. Cogan 

Kelley A. Howells Nikki Charlson 

Gloria Lawlah Deputy Administrator 

August 31, 2017 

Via Electronic Mail Only 

Patricia L. Layfield 

Inspector General 

U.S. Election Assistance Commission 

1335 East-West Highway, Suite 4300 

Silver Spring MD 20910 

Dear Ms. Layfield: 

Thank you for the opportunity to respond to the draft report entitled Performance Audit 

Report – Administration of Payments Received Under the Help America Vote Act by the Maryland 

State Board of Elections and dated May 2017. 

Finding No. 1 – Documentation of Policies and Procedures 

SBE consistently followed and continues to follow State of Maryland’s financial management, 

procurement, inventory, and record retention policies and procedures. In response to this 

audit, however, SBE supplemented these policies and procedures to include applicable federal 

requirements and will provide the revised policies and procedures to the EAC. SBE staff 

members will attend the State’s annual grant training conference to ensure that SBE’s policies 

and procedures reflect the latest federal requirements. 

Finding No. 2 – Financial Reporting 

SBE agrees that there are variances between financial records and the required Federal 

Financial Reports (FFR), but SBE has since reconciled some of the variances and has a 

corrective action plan for the remaining variances. 

1.	 Federal Funds Authorized: SBE failed to include in the FFR submission for 2012 the 

2012 disbursement of federal funds ($23,413). SBE will amend the 2012 and 

subsequent FFR submissions, and this amendment will resolve the variance in the 

amount of federal funds disbursed and received. 

2.	 Federal Expenditures: SBE provided the auditor with revised federal expenditures, 

but the revisions were not included in the audit report. Using the revised 

expenditures, the variance decreased from $1,996,398 to $547,974.58. This variance 

is the result of discrepancies and omissions in the FFR submissions and varying 

reporting periods (e.g., federal fiscal year versus calendar year). SBE will amend the 

FFR submissions, and these amendments will resolve the remaining variance. 

FAX (410) 974- 2019 Toll Free Phone Number (800) 222-8683 151 West Street Suite 200
 

MD Relay Service (800) 735-2258 http://www.elections.maryland.gov Annapolis, Maryland 21401
 
 

 

 

 

 

 

 

 

 

 

 

 

 

Letter to Ms. Layfield 

August 31, 2017 

Page 2 

3.	 Recipient Share: SBE failed to include the 5% match for the 2012 disbursement of 

federal funds. (The amount of the match is $1,231.51, the same amount of the 

reported variance.) SBE will amend the 2012 FFY submission to include the 5% 

match amount. 

4.	 Program Income: SBE identified a discrepancy in previously submitted reports and it 

appears that the change in how interest was reported (cumulative interest on SF 269 

to interest earned in the reporting period on FFR 425) impacted the reconciliation. 

SBE will amend FFR submissions to reflect the program income earned and spent. 

The audit reports states that SBE did not provide transaction details to support certain 

information. The State’s financial management system maintains detailed information for five 

years, but since the information requested during this audit ranged from 6 to 11 years ago, 

detailed information was and continues to be difficult to obtain. 

SBE will share with the EAC its reconciliations and amend the FFR submissions. The amended 

FFR submissions will resolve all of the variances identified in the audit report. 

Finding No. 3 – Inadequate Equipment Management 

During the audit, the auditor reviewed SBE’s prior inventory reports and verified that SBE 

accounted for its equipment. Since the auditor’s recommendations were limited to improving 

inventory documentation and recordkeeping, this finding confirms that SBE performed the 

required inventories and accounted for equipment purchased with federal funds. 

Over the last several years, SBE has diligently worked to identify the inventory issues 

identified with its previous inventory system and procedures. This led to the procurement and 

implementation of the new inventory system. While the prior inventory system was sufficient 

to store most of the inventory data required, the new system improves the efficiency of the 

inventory process and will include all of the fields required by State and federal inventory 

rules. 

SBE is in the final phase of implementing the new inventory management system. The system 

customization is almost complete, the equipment records have been converted, and the data 

fields for each equipment record are being updated. SBE is also establishing and documenting 

policies and procedures for adding, transferring, retiring, reporting, and other aspects of asset 

management for all users of the new inventory system. SBE will provide the EAC with the data 

dictionary for the new inventory system, any requested reports, and, when completed, its 

written inventory policies and procedures. 

Finding No. 4 – Unallowable Costs 

During the audit, there were delays in finding some of the requested documents, in part due 

to a State law that requires that voting system expenses be shared equally between the State 

and the local jurisdictions. When the auditor requested documents related to a federal fund 

expenditure of a certain amount (for example, $25,000), SBE records reflect the full amount of 

the invoice ($50,000), not just SBE’s share. Because the requested amount differed from the 

actual amount, finding the supporting documents for the requested expenditures were 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Letter to Ms. Layfield 

August 31, 2017 

Page 3 

challenging. SBE has since located relevant documents that resolve $3.5 million and will 

provide them to the EAC for their review. 

The majority of the expenditures without invoices or purchase orders – over $10.2 million – 

are payments SBE made to the State Treasurer’s Office (STO). When the State purchased a 

HAVA-compliant voting system in 2003, the State Treasurer financed the purchase. Under the 

binding agreement with STO, SBE agreed to repay the STO’s loan in semi-annual payments 

over five years. On each payment date, the STO electronically transferred funds from SBE into 

the State Treasury. There were no invoices from STO for SBE to pay; it was an automatic, 

electronic transfer. SBE has a copy master equipment lease-purchase agreement and 

payment schedule and will provide it to the EAC1. 

SBE was unable to obtain the personnel records necessary to support the approved pay rate 

for 11 transactions. Although the State’s personnel system no longer has records from 2006-

2008, SBE has copies of official personnel documents showing the pay rate for the employees 

whose salaries were paid using federal funds. SBE will provide these documents to the EAC. 

While SBE concurs that SBE did not retain the appropriate financial or payroll records, SBE 

disagrees with the recommendation that the funds be returned to the election fund. Each of 

these expenditures was allowable, and individuals with knowledge of these transactions can 

attest to the contracts and services provided under these contracts. 

Finding No. 5 – Maintenance of Expenditures 

While SBE concurs that the State did not meet its maintenance of effort in fiscal year 2006, 

budget instructions from the State’s Department of Budget and Management specified the 

maximum amount of general funds that could be included in SBE’s fiscal year 2006 budget. 

This reduced the budget target was the result of a shortfall of general funds and prevented 

SBE from including general funds to meet the maintenance of effort requirement in fiscal year 

2006. 

In each year prior to and after fiscal year 2006, the State exceeded the maintenance of effort 

amount. From federal fiscal year 2006 through federal fiscal year 2012, the State’s 

maintenance of effort payments exceeded $28.2 million, which exceeds the State’s minimum 

maintenance of effort by 49%. 

SBE will provide the EAC with documents showing how SBE’s maintenance of effort was 

calculated. This documentation was reviewed during the prior EAC audit and found to be 

sufficient. During the annual budget preparation, SBE will review proposed expenditures to 

verify that the maintenance of effort can be met. As part of SBE’s monthly expenditure 

review, SBE will review expenditures and verify that the maintenance of effort is being met 

throughout each fiscal year. 

1 Since the binding agreement with the STO was in effect in 2006, SBE assumes that the EAC’s previous auditors 

reviewed this agreement and payment schedule in its 2006 audit of HAVA funds. 
Letter to Ms. Layfield 

August 31, 2017 

Page 4 

If you have any questions, please feel free to contact me. 

Sincerely, 

L~ //&47/J" "-' 

Linda H. Lamone 

State Administrator 
APPENDIX A-2 

Response of the 

U.S. Election Assistance Commission
 

to the Draft Report
 
 

 

 

 

 

 

 

EAC RESPONSE TO THE DRAFT AUDIT: 

OIG Performance Audit Report on the Administration of Payments 

Received Under the Help America Vote Act by the Maryland State 

Board of Elections for the Period January 1, 2006 through 

September 30, 2015. 

July 26, 2017 

MEMORANDUM 

To: Patricia Layfield, Inspector General 

From: Brian Newby, Execu

 BN

tive Director 

Subject: Draft Performance Audit Report – “!dministration of Payments Received 

under the Help America Vote Act by the Maryland State Board of 

Elections. 

Thank you for this opportunity to review and respond to the draft audit report for the 

Maryland State Board of Elections. 

The Election Assistance Commission (EAC) appreciates the auditor’s detailed findings 

and recommendations outlined in the draft audit report and will work with the 

Secretary’s Office to ensure appropriate corrective actions are taken in a timely and 

complete manner. 
APPENDIX B
 

Audit Methodology 
 

 

 

 

 

 

 

 

 

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 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. 

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

•	 Interviewed appropriate Office 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 Office management and accounting 

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

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

•	 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 accounting for salaries. 

•	 Verified the establishment and maintenance of an election fund. 

•	 Verified the State expenditures met the Maintenance of Expenditures requirement 

•	 Conducted site visits of selected counties to observe physical security/safeguard of 

equipment purchased with HAVA funds and ensure compliance with federal regulation. 

•	 Verified that the matching requirement was timely met and 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. 

21
 
APPENDIX C 

Monetary Impact 
Appendix C 

MONETARY IMPACT AS OF SEPTEMBER 30, 2015 

Additional 

Funds for 

Description Questioned Costs Program 

Unsupported Costs $ 14,379,331 $ ­

22