U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL 

FINAL REPORT: 

Administration of Payments Received 

Under the Help America Vote Act by the 

Nebraska Secretary of State 

APRIL 2003 THROUGH SEPTEMBER 30, 2012 

Report No. 

E-HP-NE-07-12 

September 2013 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. ELECTION ASSISTANCE COMMISSION
 

OFFICE OF INSPECTOR GENERAL
 

1201 New York Ave. NW - Suite 300
 

Washington, DC 20005
 

Acting Executive Director 

Memorandum 

September 12, 2013 

To:		 Alice Miller 

From:		 Curtis W. Crider 

Inspector General 

Subject: Final Performance Audit Report – Administration of Payments Received 

Under the Help America Vote Act by the Nebraska Secretary of State 

(Assignment Number E-HP-NE-07-12) 

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

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

Act (HAVA) by the Nebraska Secretary of State (SOS). 

In its audit, McBride, Lock & Associates concluded that the Nebraska Secretary of State 

(SOS) generally accounted for and expended the HAVA funds in accordance with applicable 

requirements for the period from April 22, 2003 through September 30, 2012. However the 

following exceptions were identified; 

•		 The SOS submitted financial reports that could not be supported by 

underlying accounting records. 

 The SOS did not accurately charge payroll costs to the grant based on 

percentage of effort for each of the State employees. 

 The SOS property records were not adequate per 41 CFR 105-71.132. 

 The SOS expended $10,000 of HAVA funds for purposes that are not 

allowable under the award’s terms and conditions or HAVA regulations. 

 The SOS did not have established procurement policies for soliciting 

services. 

In its August 29, 2013 r esponse to the draft report (Attachment A-1), the SOS provided 

comments to the findings and corrective actions, as applicable, to address the recommendations. 

The SOS did not agree with the questioned costs of $38,617 related to unsupported payroll costs 

or that it spent grant funds for unallowable purposes. 
 

 

 

 

 

 

 

 

In the report McBride, Lock & Associates summarized the SOS’s response to the 

recommendations, as well as their comments on the responses after the recommendations. Also 

included in the report is the EAC response to the draft report (Appendix A-2), dated August 12, 

2013, which indicated that the EAC would work with the SOS to ensure corrective action. 

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 to the finding and 

recommendation included in this report by November 13, 2013. 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’ 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 to ensure compliance with Government Auditing 

Standards; and 

 Coordinated issuance of the audit report. 

McBride, Lock & Associates 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 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 (202) 566-3125. 

Attachment 

cc: Director of Grants and Payments 
Performance Audit Report 

Administration of Payments Received Under the Help America Vote Act by 

the Nebraska Secretary of State 

Prepared for 

The United States Election Assistance Commission (EAC) 

Office of Inspector General 

By 

McBride, Lock & Associates 

July 2013 

McBRIDE, LOCK & ASSOCIATES 

CERTIFIED PUBLIC ACCOUNTANTS 

KANSAS CITY 
 

 


 

 

 

 

Performance Audit Report
 

Administration of Payments Received Under the Help America Vote Act by 

the Nebraska Secretary of State 

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 Nebraska Secretary of State 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, 2012 
 

 

 

 

 

 

 


 


 


 


 

	 

	 

	 

	 

	 


 


 


 


 


 

 

 

 

 

 

 

 

 

	 

 

	 

 

 

 

	 

	 

	 

 

 

 

 

 

 

 


 

U.S. Election Assistance Commission
 

Performance Audit Report
 

Administration of Payments Received Under the Help America Vote Act by
 

the Nebraska Secretary of State
 

EXECUTIVE SUMMARY 

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

(EAC) Office of the Inspector General to conduct a performance audit of the Nebraska Secretary 

of State’s Office (Office) from inception in April 22, 2003 through September 30, 2012 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 C FR 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 

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requirements mentioned above for the period from April 22, 2003 through September 30, 2012. 

The exceptions are as follows: 

1.		 The Office submitted financial reports that could not be supported by underlying 

accounting records. 

2.		 The Office did not accurately charge payroll costs to the grant based on percentage of 

effort for each of the State employees. 

3.		 The Office property records were not adequate per 41 CFR 105-71.132 

4.		 The Office expended $10,000 of HAVA funds for purposes that are not allowable under 

the award’s terms and conditions or HAVA regulations. 

5.		 The Office does not have established procurement policies for soliciting services. 

We have included in this report as Appendix A, the Secretary of State’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 p ayments 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. 

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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 Nebraska Secretary of State 

HAVA funds were awarded to the Nebraska Secretary of State, who is the Chief Election Officer 

and is charged with working with election officials in the state’s 93 counties, the Elections 

Division oversees election law, the conduct of elections in the state, election tabulation 

equipment and the state voter registration system. The division accepts candidate filings and 

tabulates results for statewide, legislative, judicial retention and certain district elections. The 

division oversees filings for statewide initiative and referendum petitions. 

Help America Vote Act State of Nebraska State Plan 

The Secretary of State appointed a sixteen-member citizen advisory commission to help in the 

development of the State Plan. The Commission was called the Nebraska State Plan 

Commission. Members include the election officials from Nebraska’s two largest counties, a 

mid-size county election official, a former President of the Nebraska County Clerks Association, 

a representative from the Secretary of State’s office and representatives from various advocacy 

organizations including the disabled community. 

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

equipment to implement the central voter registration system, acquire voting equipment to 

accommodate people with disabilities and comply with the training mandates of the Act. 

The Secretary of State established and is maintaining an election fund for the exclusive purpose 

of carrying out activities of HAVA. Additionally, the Office has managed all expenditures 

funded by HAVA and has not distributed any of the requirements payments to the local units of 

government. 

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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 f unds 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 C FR 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). 

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SCOPE AND METHODOLOGY 

We audited the Grant funds received and disbursed by the Office from April 22, 2003 through 

September 30, 2012 as shown in the following table: 

FUNDS RECEIVED 

TYPE OF 

PAYMENT 

EAC 

PAYMENT 

PROGRAM 

INCOME 

STATE 

MATCH 

INTEREST 

EARNED 

TOTAL 

AVAILABLE 

FUNDS 

DISBURSED 

Section 101 

Section 251 

$ 5,000,000

15,435,006 

$ 23,083 

629 

-$ 

813,709 

$1,447,233 

898,386 

$ 6,470,316

17,147,730 

$ 5,628,030

16,947,604 

Total $20,435,006 $ 23,712 $ 813,709 $2,345,619 $23,618,046 $ 22,575,634 

Notes to Table of Funds Received and Disbursed: 

(1) The Interest Earned is allocated to the respective sections based on a nalysis of the 

reported interest earned on the September 30, 2012 Financial Status Reports. 

Our audit methodology is set forth in Appendix B. 

AUDIT RESULTS 

We conducted this performance audit in accordance with Generally Accepted Government 

Auditing Standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on the audit objectives. 

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 April 22, 2003 through September 30, 2012. 

The exceptions to applicable compliance requirements are described below. 

Finding No. 1 – Financial Reporting 

The Nebraska Secretary of State’s Office (Office) submitted financial reports 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 R EPAYMENT 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, 

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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.” 

The Office submitted financial reports for Section 101 and Section 251 through September 2012. 

A summary of the expenditure reconciliation of the Section 101 and Section 251 financial reports 

to the accounting records as of September 30, 2012 is as follows: 

Section 101 Section 251 

Report Report 

Federal Share of Expenditures $ 5,000,000 $ 15,435,005 

Program Income Expenditures 343,234 721,767 

Recipient Share of Expenditures - 812,369 

Total Expenditures Reported $ 5,343,234 $ 16,969,141 

Actual Expenditures Incurred 5,628,030 16,947,604 

Expenditures (Under)/Over $ (284,796) $ 21,537 

The Office was not able to provide a reconciliation to explain the above variances. It was stated 

that certain expenditures recorded as Section 251 expenditures in the accounting records were 

reported as Section 101 on the annual financial reports. 

Additionally, the program income reported by the Office could not be reconciled to the 

accounting records. The program income reported for Section 101 a nd Section 251 w as 

$1,184,783 and $721,767, respectively. The accounting records disclosed a total of $2,369,331 

for both. Therefore, the program income disclosed in the September 30, 2012 Federal financial 

reports was understated by $462,781. This evidences more available funding for the Office to 

expend on HAVA activities. 

Recommendation: 

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

Nebraska Secretary of State’s Office: 

(a) Perform a reconciliation of the grant activity for the Section 101 and Section 251 funds and 

ensure that all program income earned and expenditures incurred are fully disclosed. 

(b) Prepare and submit revised financial reports to the EAC for Section 101 and Section 251 

activities as of September 30, 2012. 

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Secretary of State Response: 

We have performed additional analysis of the SFRs submitted for Section 101 and Section 

251 activities. Based upon this analysis and additional information received from the 

auditors, particularly information regarding their analysis of program income, we agree that 

amended SFRs will be necessary. The primary differences relate to how expenditures of state 

matching funds and interest on state matching funds were reported and the auditor has 

provided additional guidance as to the proper recording of those items. Additionally, for 

2009, the Title I report appears to contain an error. That year the Title I SFRs were revised to 

reflect a fiscal year period rather than a calendar year period. We will work with EAC Audit 

Resolution to determine which reports are necessary to amend. 

Auditor’s Response: 

The corrective action proposed is responsive to the recommendations. 

Finding No. 2 – Unsupported Payroll Costs Charged to the Grant 

The Office did not accurately charge payroll costs to the grant based on percentage of effort for 

each of the State employees. 

Office of Management and Budget (OMB) Circular A-87, Cost Principles for State, Local, and 

Indian Tribal Governments, Attachment B.8.h.(5)(e), states that, “Budget estimates or other 

distribution percentages determined before the services are performed do not qualify as support 

for charges to Federal awards but may be used for interim accounting purposes, provided that: (i) 

The governmental unit's system for establishing the estimates produces reasonable 

approximations of the activity actually performed; (ii) At least quarterly, comparisons of actual 

costs to budgeted distributions based on the monthly activity reports are made. Costs charged to 

Federal awards to reflect adjustments made as a result of the activity actually performed may be 

recorded annually if the quarterly comparisons show the differences between budgeted and 

actual costs are less than ten percent; and (iii) The budget estimates or other distribution 

percentages are revised at least quarterly, if necessary, to reflect changed circumstances.” 

Attachment B.8.h.(4), states that “Where employees work on multiple activities or cost 

objectives, a distribution of their salaries or wages will be supported by personnel activity reports 

or equivalent documentation which meets the standards in subsection (5)... Such documentary 

support will be required where employees work on... ( b) A Federal award and a non Federal 

award” 

Attachment B.8.h.(5), states that “Personnel activity reports or equivalent documentation must 

meet the following standards: (a) They must reflect an after the fact distribution of the actual 

activity of each employee, (b) They must account for the total activity for which each employee 

is compensated, (c) They must be prepared at least monthly and must coincide with one or more 

pay periods, and (d) They must be signed by the employee.” 

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The Office charges salaries to the grant based on annual budget estimates and makes adjustments 

as deemed necessary. The Office requires each employee to complete a timesheet on a monthly 

basis recording the hours worked and leave hours. This timesheet includes a column for work 

performed on HAVA activities. Although, the timesheet used by the Office is compliant with the 

above mentioned requirements, it is not mandated for employees to record their hours for HAVA 

activities. Additionally, there was no evidence that the Office made quarterly comparisons of 

actual costs to budgeted distributions. This resulted in the Office likely overallocating personnel 

cost to the grant. 

The audit sampled eight monthly pay periods and compared the effort recorded on e ach 

employee’s timesheet to the estimate used by the Office. The amount charged to the grant in 

excess of actual work effort reported on the timesheet totaled $38,617, or 40% of the $96,722 of 

salaries charged to the grant during those periods. Therefore, we question costs of $38,617 of the 

salaries allocated to HAVA. Of the $38,617 overallocated, $33,262 were for employees who did 

not record any hours on their timesheet in the column provided for HAVA activities. The Office 

charged approximately $1.37 million in salary costs to the grant during the period under review. 

The eight payroll periods tested provided 33 transactions. The audit requested documentation of 

approved pay rates for each transaction selected for testing. The Office was not able to provide 

11 of the 33 approved rates. It was noted that 9 of the 11 were for pay periods prior to June 2006. 

Additionally, there were four approved pay rates provided that did not agree with the annualized 

salary calculated from the supporting payroll documentation. The approved salary rates ranged 

from $269 to $4,244 less than what was supported on the payroll register. 

Recommendation: 

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

Nebraska Secretary of State’s Office: 

(a) Transfer into the election fund $38,617 for the questioned costs cited above. 

(b) Perform		and provide additional analysis for all payroll charges allocated to HAVA to 

determine the extent of any excess allocations. 

(c) Implement written policies and provide training to ensure that employees who expend efforts 

on Federal activities to accurately record their time on the Office provided timesheet. 

(d) Implement procedures to reconcile charges allocated to the grant to the percentage of time 

expended by employees on a periodic basis, no less than quarterly. 

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Secretary of State Response: 

This Office does not disagree with the Finding but does disagree with the Recommendations 

and offers a response to the specific recommendations as indicated below. 

(a) The findings reflect that the Office charged $1.37 m illion in salary costs to the grant 

during the 8 year period under review, and only $38,617 is contested. The disputed 

amount of $38,617 arises from the lack of allocation of time on the time sheets to HAVA 

activities for the Deputy for Elections and his Administrative Assistant for 8 payroll 

periods tested after 2009. 

Specifically, the Office contests the findings that the “amount charged to the grant in 

excess of actual work reported to the time sheets totaled $38,617, or 40% of the $96,722 

of salaries charged to the grant during those periods”; and the further finding that $33,262 

of the claimed over-allocation were for employees who did not record any hours on their 

timesheets in the column provided for HAVA activities. 

Despite the considerable time spent by both on HAVA related activities prior to 2009, 

they did not allocate time to HAVA as a precaution to preserve HAVA funds for the 

Central Voter Registration System and Vote Tabulation equipment’s ongoing costs for 

future years since state funding to take over those costs was not assured. When these two 

employees began allocating, they did not make the monthly allocations of their time to 

HAVA and non-HAVA on their time sheets as provided, although percentage allocations 

were designated for salary purposes. 

The two employees, the Division Deputy and Administrative Assistant, were the two 

employees who were most engaged in and directing and supporting Division staff and 

HAVA activities being performed by the staff of that Division. To say that they were not 

detailing their time sheets to reflect allocation of time is a proper conclusion, a ministerial 

error on their part. However, to say their percentage allocation was excessive by $33,262 

is unwarranted. If anything, they were underestimating their percentage of allocation to 

HAVA, in an effort to continue preserving as much HAVA funds as possible for future 

costs. 

Per the exit conference, the Secretary of State will work with EAC Audit Resolution to 

determine any necessary corrective action. 

(b) The Secretary of State’s Office will work with EAC Audit Resolution to perform or 

provide any required additional analysis of the questioned costs of $38,317 using 

meaningful and objective standards based upon work performed and duties required of 

the employees during the period under review. 

(c) The Office agrees with this recommendation and has already implemented the 

recommendation. 

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(d) The Office agrees with this recommendation and will implement the recommendation at 

the completion of each quarter. 

Auditor’s Response: 

The Office disagrees with the $33,262 questioned for employees who did not code any time 

to HAVA. However, without compliant time keeping it cannot be assured that the Office is 

not over-allocating salary to HAVA. The corrective action plans for remaining issues are 

responsive to the concerns 

Finding No. 3 – Inadequate Equipment Management 

The Office property records are not adequate. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

and Local Governments 41 CFR § 105-71.132 (d) (the “Common Rule”) states that,, “Procedures 

for managing equipment (including replacement equipment), whether acquired in whole or in 

part with grant funds, until disposition takes place will, as a minimum, meet the following 

requirements: (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 data of disposal and sale price of the property.” 

The official inventory listing provided for review did not detail the cost or location for all 

inventory items. The inventory listing identified 44 items paid for with HAVA funds that did not 

have the cost populated. Additionally, AutoMARKs purchased for each of the counties did not 

identify the location of the assets. The Office does maintain a separate listing identifying the 

location. 

Recommendation: 

We recommend that the EAC require the Office to populate all fields included in their inventory 

system. 

Secretary of State Response: 

During 2004, several servers and other HAVA equipment items were added to the Secretary 

of State’s equipment inventory under one tag number and dollar amount. In August of 2012, 

our IT Manager traveled to the equipment site, separately tagged each equipment item and 

then correctly separated this equipment in our statewide inventory system. As this employee 

did not have access to the state’s financial system, he was only able to add the new tag 

numbers, location, description, etc. for these pieces of equipment. 

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As communicated to the auditors during their period of audit fieldwork, state policy requires 

each state agency to reconcile their equipment inventory by June 30 of each year. We 

explained to the auditors that costs associated with those 44 pieces of equipment would be 

added to the fixed asset system during June, 2013. On June 25, 2013 our office processed the 

appropriate accounting entries to add cost to the HAVA equipment referenced above. 

We have since sent the auditors an updated fixed asset listing for the items in question. As a 

result, we believe this audit finding is no longer relevant and should be removed from the 

final audit report. 

Auditor’s Response: 

The inventory system has been updated to include the cost for the equipment purchased with 

HAVA fund. The corrective action has resolved the finding. 

Finding No. 4 – Unallowable Cost 

The Office expended HAVA funds for purposes that are not allowable under the award’s terms 

and conditions or HAVA regulations. 

HAVA Section 101 (b)(1) states, “A State shall use the funds provided under a payment made 

under this section to carry out one or more of the following activities: (C) Educating voters 

concerning voting procedures, voting rights, and voting technology. 

The EAC, in its Funding Advisory Opinion FAO-08-005, concluded that: 

•	 Neither Section 101 nor 251 funds may be used to conduct voter registration drives or get 

out the vote efforts 

The Office expended $10,000 of Section 101 funds on advertising in October 2004. The script 

approved for use in this advertisement shows that the main message communicated in the 

commercial was to “get out the vote.” Therefore, we question the $10,000 spent in order to 

create this advertisement. 

Additionally, the Office hired a consultant to provide public relation services. He was 

compensated for activities such as, Vote in Honor of a V eteran Video, drafting news releases, 

drafting letters to county officials, etc. The audit requested additional documentation on t hese 

activities but it was not provided. Without this additional documentation it cannot be determined 

whether these activities comply with program requirements. Total disbursements made to the 

consultant were $29,828. Therefore, we question the $29,828 paid to the consultant. 

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Recommendation: 

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

Nebraska Secretary of State’s Office: 

(a) Transfer to the election fund $39,828 for the questioned costs cited above. 

(b) Determine if public relation services paid for with Section 101 funds are allowable due to the 

lack of documentation provided by the Office. 

Secretary of State Response: 

The Nebraska Secretary of State’s Office disagrees with Finding No. 4, which consists of two 

parts. The first portion addresses the production of a Public Service Announcement targeting 

young voters in October of 2004. The Office disagrees with the finding’s characterization of 

the PSA as solely a “Get Out the Vote” advertisement. The PSA was intended to pique young 

voters’ interest in the process and used scenes of a staged rally by 18-25 year olds. The signs 

used in the PSA were of a generic nature and did not address any issue that was on the ballot 

in 2004 or in subsequent years. 

The finding references and partially quotes the EAC’s FAO-08-005, which was issued almost 

four years after production of the PSA. It should also be noted that FAO-08-005 (p. 2, #4) 

recognizes that this area is not always clear and suggests that the EAC should be contacted 

“for a determination on the basis of the specific circumstances.” Obviously it is impossible to 

“pre-clear” an activity that occurred almost four years prior. The Secretary of State will 

work with EAC Audit Resolution as to further action relative to this finding 

(Recommendation (a)). 

The Secretary of State Office also disagrees with the second portion of this finding. The 

auditors, in addressing the communications contractor’s one invoice, apparently have jumped 

to the conclusion that none of the contractor’s work was allowable and the resulting 

recommendation merely compiles all costs of the invoices attributed to HAVA over a 9 year 

period. 

The independent communications contractor providing the questioned services was a trained 

attorney and a career journalist prior to contracting to provide services to the Secretary of 

State Office, and his services were contracted for over nine years from 2003 through 2012. 

He was required by contract to provide a detailed reporting of his hours of work on a 

monthly basis to justify his contract payments, which he did. However, the contracts did not 

provide for how the contractor would designate his time for funding allocation purposes. 

The Secretary of State reviewed and approved those monthly invoices for purposes of 

confirming the work done and the invoice cost. The invoices were for work as 

communications director for the Office and covered all five divisions of the Office; the 

contractor worked directly for the Secretary of State for that reason, and the Secretary 

reviewed the time allocations monthly. The Secretary of State only reviewed the invoices for 

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purposes of confirming the projects worked on and the total time expended on such projects; 

the Secretary was not reviewing the invoices for payment allocation purposes, which was 

done by the Controller of the Office. 

It is unlikely that the contractor was intentionally indicating which funds should be used in 

his designation of how his time was spent. Based on the one invoice questioned, where the 

designation “HAVA” was used may have included covered HAVA and non-HAVA election 

matters, certainly a good portion of such designations did arise from HAVA projects directly 

or indirectly. While some transfer may be needed to the election fund, only a full review of 

the contractors nine years of invoices can determine what was properly HAVA and what was 

not. The Office is willing to perform a full item by item review to confirm what might be a 

proper allocation of the contractor’s time to HAVA and what was not. Per the exit 

conference, we will work with EAC Audit Resolution as to any necessary corrective action. 

Auditor’s Response: 

We recommend that EAC provide further guidance on the allowability of the Public Service 

Announcement and the charges for the Communication Director. 

Finding No. 5 – Procurement of Contract Services 

The Office does not have written policies and procedures relating to procurement of services. 

Without written policies and procedures that require documentation for selection of services it 

cannot be assured that the best value is received with HAVA funds. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

and Local Governments 41 CFR § 105 -71.136 (a) (the “Common Rule”) states that, “When 

procuring property and services under a grant, a S tate will allow the same policies and 

procedures it uses for procurements from its non-Federal funds.” 

The State of Nebraska has written procurement policies for contract services that are outlined by 

the Department of Administration (DAS) Materiel Division. However, Nebraska Statute provides 

an exemption to the Secretary of State’s Office from those procurement policies. Although the 

Office is exempt from using the State’s procurement policies there should be fully developed 

written policies that achieve the same objectives when soliciting contractual services. Written 

policies allow for contractual services to be sought in a fair and consistent manner. 

The audit reviewed ten service contracts entered into by the Office. Of these ten contracts, nine 

contracts were entered into without the use of competitive bidding. There were 173 p ayments 

made to these vendors totaling $1,067,634. 

The State Auditor of Public Accounts issued a finding in 2004 relating to one of the contracts 

that was selected for review and noted no documentation was maintained to support the basis for 

the selection of the consultant. 

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Recommendation: 

We recommend that the Office implement and document written policies and procedures that 

ensure that services purchased with Federal funds are solicited through fair and open bidding. 

Documentation should be maintained to support that interested bidders were evaluated and that 

the best value is achieved with Federal funds. 

Secretary of State Response: 

The Nebraska Secretary of State follows all statutes and procedures that apply to the agency 

and adheres to and employs sound business practices. However, we do understand the merit 

of written policies to ensure and document a fair and transparent process for the procurement 

of contractual services. Therefore, the Secretary of State will develop written policies for the 

procurement of contractual services by December 31, 2013. 

Auditor’s Response: 

The corrective action is responsive to the concerns. 

We provided a draft of our report to the appropriate individuals of the Office of the Nebraska 

Secretary of State. We considered any comments received prior to finalizing this report. 

The Office responded on August 29, 2013 a nd generally agreed with the report’s findings and 

recommendations. The EAC responded on August 12, 2013 and stated they would work with the 

Office to resolve the issues and 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 performed the related audit procedures between March 12, 2013 

and July 3, 2013. 

(Original Signed by McBride, Lock & Associates) 

McBride, Lock & Associates 

July 3, 2013 

14
	
STATE OF NEBRASKA 


JOnNA.GALE P.o. Box 94608 

SECRETARY OF STATE State Capitol, Suite 2300 

Lincoln, NE 68509.. 4608 

Phone 402 .. 471-2554 

August 29, 2013 Fax 402-471 ..3237 

www.sos.state.ne.us 

McBride, Lock & Associates 

Attn: Ray Miller 

1111 Main St. 

Kansas City, MO 64105 

Dear Mr. Miller: 

My office has completed a final revie.w ofthe Draft Audit Report for the HA V A audit conducted 

by your firm. Below are our responses to the Findings and Recommendations. 

Finding No.1-Financial Reporting 

We have performed additional analysis of the ~FRs submitted for Section 101 and Section 251 

activities. Based upon this analysis and additional information received from the auditors, 

particularly information regarding their analysis of program income, we agree that amended 

SFRs will be necessary. The primary differences relate to how expenditures of state matching 

funds and interest on state matching funds were reported and the auditor has provided additional 

guidance as to the proper recording of those items. Additionally, for 2009, the Title I report 

appears to contain an error. That year the Title I SFRs were revised to reflect a fiscal year period 

rather than a calendar year period. We will work with EAC Audit Resolution to determine 

which reports are necessary to amend. 

Finding No.2- Unsupported Payroll Costs Charged to the Grant 

This Office does not disagree with the Finding but does disagree with the Recommendations and 

offers a response to the specific reconunendations as indicated below. 

(a) The findings reflect that the Office charged $1.37 million in salary costs to the grant during 

the 8 year period under review, and only $38,617 is contested. The disputed amount of $38,617 

arises from the lack of allocation of time on the time sheets to HAV A activities for the Deputy 

for Elections and his Administrative Assistant for 8 payroll periods tested after 2009. 

Specifically, the Office contests the findings that the "amount charged to the grant in excess of 

actual work reported to the time sheets totaled $38,617, or 40% of the $96,722 of salaries 

charged to the grant during those periods"; and the further finding that $33,262 ofthe claimed 

over-allocation were for employees who did not record any hours on their timesheets in the 

column provided for HAV A activities. 
Despite the considerable time spent by both on HAVA related activities prior to 2009, they did 

not allocate time to HAV A as a precaution to preserve HAV A funds for the Central Voter 

Registration System and Vote Tabulation equipment's ongoing costs for future years since state 

funding to take over those costs was not assured. When these two employees began allocating, 

they did not make the monthly allocations of their time to HAV A and non-HAV A on their time 

sheets as provided, although percentage al1ocations were designated for salary purposes. 

The two employees, the Division Deputy and Administrative Assistant, were the two ~mployees 

who were most engaged in and directing and supporting Division staff and HAV A activities 

being performed by the staff of that Division. To say that they were not detailing their time 

sheets to reflect allocation oftime is a proper conclusion, a ministerial error on their part. 

However, to say their percentage allocation was excessive by $33,262 is unwarranted. If 

anything, they were underestimating their percentage of allocation to HAVA, in an effort to 

continue preserving as much HAV A funds as possible for future costs. 

(a) Per the exit conference, the Secretary of State will work with EAC Audit Resolution to 


determine any necessary corrective action. 


(b) The Secretary of State's Office will work with EAC Audit Resolution to perfonn or provide 

any required additional analysis of the questioned costs of $38,317 using meaningful and 

objective standards based upon work performed and duties required of the employees during the 

period under review. 

(c) The Office agrees with this recommendation and has already implemented the 

recommendation. 

(d) The Office agrees with this recommendation and will implement the recommendation at the 

completion of each quarter. 

Finding No.3-Inadequate Equipment Management 

During 2004, several servers and other HAVA equipment items were added to the Secretary of 

State's equipment inventory under one tag number and dollar amount. In August of2012, our IT 

Manager traveled to the equipment site, separately tagged each equipment item and then 

correctly separated this equipment in our statewide inventory system. As this employee did-not 

have access to the state's financial system, he was only able to add the new tag numbers, , 

location, description, etc. for these pieces of equipment. 

As communicated to the auditors during their period of audit fieldwork, state policy requires 

each state agency to reconcile their equipment inventory by June 30 of each year. We explained 

to the auditors that costs associated with those 44 pieces of equipment would be added to the 

fixed asset system during June, 2013. On June 25,2013 our office processed the appropriate 

accounting entries to add cost to the HAV A equipment referenced above. 
We have since sent the auditors an updated fixed asset listing for the items in question. As a 

result, we believe this audit finding is no longer relevant and should be removed from the final 

audit report. 

Finding No. 4- Unallowable Cost 

The Nebraska Secretary of State's Office disagrees with Finding No.4, whlch consists of two 

parts. The first portion addresses the production of a Public Service Announcement targeting 

young voters in October of2004. The Office disagrees with the finding's characterization ofthe 

PSA as solely a "Get Out the Vote" advertisement. The PSA was intended to pique young 

voters' interest in the process and used scenes ofa staged rally by 18-2S year olds. The signs 

used in the PSA were of a generic nature and did not address any issue that was on the ballot in 

2004 or in subsequent years. 

The finding references and partially quotes the EAC's FAO-08-00S, which was issued almost 

four years after production ofthe PSA. It should also be noted that FAO-08-00S (p. 2, #4) 

recognizes that this area is not always clear and suggests that the EAC should be contacted "for a 

determination on the basis of the specific circumstances. H Obviously it is impossible to "preclear" an activity that occuned almost four years prior. The Secretary of State" will work with 

EAC Audit Resolution as to further action relative to this finding. (Recommendation (a)) 

The Secretary of State Office also disagrees with the second portion ofthis finding. The auditors, 

in addressing the communications contractor's one invoice, apparently have jumped to the 

conclusion that none of the contractor's work was allowable and the resulting recommendation 

merely compiles all costs ofthe invoices attributed to HA V A over a 9 year period. 

The independent communications contractor providing the questioned services was a trained 

attorney and a career journalist prior to contracting to provide services to the Secretary of State 

Office, and his services were contracted for over nine years from 2003 through 2012. He was 

required by contract to provide a detailed reporting of his hours of work on a monthly basis to 

justify his contract payments, which he did. However, the contracts did not provide for how the 

contractor would designate his time for funding allocation purposes. 

The Secretary-of State reviewed and approved those monthly invoices for purposes of 

confitming the work done and the invoice cost. The invoices were for work as communications 

director for the Office and covered all five divisions of the Office; the contractor worked directly 

for the Secretary of State for that reason, and the Secretary reviewed the time allocations 

monthly. The Secretary of State only reviewed the invoices for purposes of confinning the 

projects worked on and the total time expended on such projects; the Secretary was not 

reviewing the invoices for payment allocation purposes, which was done by the Controller of the 

Office. 

It is unlikely that the contractor was intentional1y indicating which funds should be used in his 

designation of how his time was spent. Based on the one invoice questioned, where the 

designation "HAVA" was used may have included covered HAVA and non-HA VA election 

matters, certainly a good portion of such designations did arise from HAVA projects directly or 
" 

indirectly. While some transfer may be needed to the election fund, only a full review of the 

contractors nine years of invoices can determine what was properly HAV A and what was not. 

The Office is willing to perform a full item by item review to confirm what might be a proper 

allocation of the contractor's time to HAVA and what was not. Per the exit conference, we will 

work with EAC Audit Resolution as to any necessary corrective action. 

Finding No.5.. Procurement of Contract Services 

The Nebraska Secretary of State follows all statutes and procedures that apply to the agency and 

adheres to and employs sOWld business practices. However, we do understand the merit of 

written policies to ensure and document a fair and transparent process for the procurement of 

contractual services. Therefore, the Secretary of State will develop written policies for the 

procurement ofcontractual services by December 31, 2013. 

Thank you for the opportunity to respond to the draft findings and should you have questions 

about this infolmation, please don't hesitate to contact Suzie Hinzman in this office. 
EAC RESPONSE TO THE DRAFT AUDIT: 

OIG Performance Audit Report on the Administration of 

Payments Received Under the Help America Vote Act by the 

State of Nebraska, for the Period April 2003 through 

September 30, 2012. 

August 12, 2013 


MEMORANDUM 


To: Curtis Crider 

Inspector General 

From: Alice P. Miller, Chi¢0~)~~i5ffiGel& Acting Executive ~61 

Subject: Draft Performance Audit Report - "Administration of Payments 

Received Under the Help America Vote Act by the State of 

Nebraska" 

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

the Nebraska Secretary of State (SOS). 

The Election Assistance Commission (EAC) will work with the SOS to ensure 

appropriate corrective action. 
 

 

 

 

 

 

 

 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 


 

	 

	 

	 

	 

 

	 

	 

 

	 

 

	 

	 

	 

	 

 

	 

 

 

	 

	 

	 


 

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. 

•	 Tested payments and documentation provided by subawardees to verify activities were 

allowable, allocable, and reasonable in accordance with federal requirements and HAVA 

award terms and conditions. 

•	 Evaluated compliance with the requirements for accumulating financial information 

reported to the Commission on t he 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. 

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Appendix C 

MONETARY IMPACT AS OF SEPTEMBER 30, 2012 

Additional 

Questioned Funds for 

Description Costs Program 

Unsupported Payroll Costs $ 38,617 $ -

Unallowable Advertising Costs 39,828 -

Total $ 78,445 $ -

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OIG’s Mission 

The OIG audit mission is to provide timely, high-quality 

professional products and services that are useful to OIG’s clients. 

OIG seeks to provide value through its work, which is designed to 

enhance the economy, efficiency, and effectiveness in EAC 

operations so they work better and cost less in the context of 

today's declining resources. OIG also seeks to detect and prevent 

fraud, waste, abuse, and mismanagement in these programs and 

operations. Products and services include traditional financial and 

performance audits, contract and grant audits, information systems 

audits, and evaluations. 

Obtaining 

Copies of 

OIG Reports 

Copies of OIG reports can be requested by e-mail. 

(eacoig@eac.gov). 

Mail orders should be sent to: 

U.S. Election Assistance Commission 

Office of Inspector General 

1201 New York Ave. NW - Suite 300 

Washington, DC 20005 

To order by phone: Voice: (202) 566-3100 

Fax: (202) 566-0957 

To Report Fraud, 

Waste and Abuse 

Involving the U.S. 

Election Assistance 

Commission or Help 

America Vote Act 

Funds 

By Mail: U.S. Election Assistance Commission 

Office of Inspector General 

 1201 New York Ave. NW - Suite 300 

 Washington, DC 20005 

E-mail: eacoig@eac.gov 

OIG Hotline: 866-552-0004 (toll free) 

FAX: 202-566-0957