U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL 

FINAL REPORT: 

Final Audit Report - Administration of 

Payments Received Under the Help 

America Vote Act by the Hawaii Office of 

Elections 

APRIL 23, 2003 THROUGH SEPTEMBER 30, 2009 

Report No. 

E-HP-HI-01-10 

February 2011 
 

 

 

 

 

 

 

 

 

 

 


 


 


 


 

	 

	 

	 

U.S. ELECTION ASSISTANCE COMMISSION
 

OFFICE OF INSPECTOR GENERAL
 

1201 New York Ave. NW - Suite 300
 

Washington, DC 20005
 

February 4, 2011 

Memorandum 

To:	 Thomas Wilkey 

Executive Director 

From:	 Curtis W. Crider 

Inspector General 

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

Vote Act by the Hawaii Office of Elections (Assignment Number E-HP-HI-01-10) 

We contracted with the independent certified public accounting firm of Clifton Gunderson 

LLP (Clifton Gunderson) to audit the administration of payments received under the Help America 

Vote Act (HAVA) by the Hawaii Office of Elections (HOE). The contract required that the audit be 

done in accordance with U.S. generally accepted government auditing standards. Clifton 

Gunderson is responsible for the attached auditor’s report and the conclusions expressed therein. 

In its audit of the HOE, Clifton Gunderson concluded that the HOE did not account for and 

expend HAVA funds in accordance with the HAVA requirements and the financial management 

requirements established by the U.S. Election Assistance Commission. The auditors noted that the 

HOE did not maintain equipment inventory records that conformed to the Common Rule; used 

HAVA funds to pay for expenses that are questionable as appropriate uses of the funds; did not 

transfer interest earnings on HAVA funds to the election fund; included $1,339,192, plus interest, as 

Section 102 funds in error; did not perform periodic reconciliations of HAVA funds to ensure that 

financial reports were accurate; and did not prepare semi-annual certifications to support personnel 

costs of $219,471. 

In its April 1, 2010 and October 4, 2010 responses to the findings and recommendations 

(Appendices A-1 and A-2, respectively), the HOE generally agreed with the finding and 

recommendations, and provided corrective action. However, they disagreed with the assessment 

that certain advertising costs and computer purchases should not be allowable uses of HAVA funds. 

On October 28, 2010, you provided us with your written response to the recommendations 

(Appendix A-3), which indicated general agreement. 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 April 4, 

2011. Your response should include information on actions taken or planned, targeted completion 

dates, and titles of officials responsible for implementation. 
 

The legislation, as amended, creating the Office of Inspector General (5 U.S.C. § App.3) 

requires semiannual reporting to Congress on all audit reports issued, actions taken to implement 

audit recommendations, and recommendations that have not been implemented. Therefore, this 

report will be included in our next semiannual report to Congress. 

If you have any questions regarding this report, please call me at (202) 566-3125. 
 

 

 

 

 

 

 

 


	


	


	


	


	


	


	


	

PERFORMANCE AUDIT REPORT
	

ADMINISTRATION OF PAYMENTS RECEIVED
	

UNDER THE
	

HELP AMERICA VOTE ACT
	

BY THE
	

STATE OF HAWAII
	

April 23, 2003 Through September 30, 2009 

UNITED STATES
	

ELECTION ASSISTANCE COMMISSION
	

a1
 

 

 

 

 

 

 

 

 

 

 


	

PAGE
	

TABLE OF CONTENTS 

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

BACKGROUND 

APPENDICES
	

.......................................................................................................................... 2
	

AUDIT OBJECTIVES ................................................................................................................. 3
	

SCOPE AND METHODOLOGY ................................................................................................. 4
	

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

Appendix A-1: Director, Office of Elections Response To
	

Audit Results .................................................................................................. 12
	

Appendix A-2: Director, Office of Elections Response to Draft Report ............................. 15
	

Appendix A-3: U. S. Election Assistance Commission Response to Draft Report ...........17
	

Appendix B: Audit Methodology ............................................................................................ 18
	

Appendix C: Monetary Impact as of September 30, 2009 ..................................................... 19
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


	


	


	


	

U.S. Election Assistance Commission
	

Performance Audit of the Administration of Payments Received Under the
	

Help America Vote Act by the State of Hawaii
	

EXECUTIVE SUMMARY 

Clifton Gunderson LLP was engaged by the U.S. Election Assistance Commission (EAC or the 

Commission) Office of Inspector General to conduct a performance audit of the Hawaii Office of 

Elections (HOE) for the period April 23, 2003 through September 30, 2009 to determine whether 

the State of Hawaii used payments authorized by Sections 101, 102, and 251 of the Help 

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

requirements; accurately and properly accounted for program income and property purchased 

with HAVA payments; and met HAVA requirements for Section 251 funds for an election fund 

and for a matching contribution. We did not include a determination of whether the HOE and its 

subgrantees met the requirements for maintenance of a base level of state outlays because the 

Commission is reviewing its guidance on the applicability of the maintenance of a base level of 

state outlays to the HOE’s subgrantees. 

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

requirements, specifically: 

•		 Comply with the Uniform Administrative Requirements for Grants and Cooperative 

Agreements with State and Local Governments (also known as the “Common Rule”) as 

published in the Code of Federal Regulations 41 CFR 105-71. 

•		 Expend payments in accordance with cost principles for establishing the allowance or 

disallowance of certain items of cost for federal participation issued by the Office of 

Management and Budget (OMB) in Circular A-87. 

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

We conducted this performance audit in accordance with Generally Accepted Government 

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

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

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

basis for our findings and conclusions based on the audit objectives. Because of inherent 

limitations, a study and evaluation made for the limited purposes of our review would not 

necessarily disclose all weaknesses in administering HAVA payments. 

Our audit concluded that the HOE did not account for and expend HAVA funds in accordance 

with the requirements mentioned above for the period from April 23, 2003 through September 

30, 2009. We noted exceptions needing HOE management attention as follows: 

•		 Inventory listings of election office equipment did not conform to the requirements of 41 

C.F.R. 105-71.132 (d) (1), (the Common Rule). The fixed asset listing did not contain all 

of the required information such as: description of equipment, location of equipment, 

condition of equipment, acquisition date, nor the funding of the purchase of equipment 

(specifically, whether the equipment item was purchased with HAVA funds). 

1
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


	

•		 The HOE used HAVA funds totaling $49,475.77 to pay for interest on delinquent 

invoices, advertising that was unrelated to voter education, and computers to be used in 

the daily operations of the elections office. These expenditures did not meet the HAVA 

guidelines or federal regulations as appropriate uses of the funds. 

•		 An undetermined amount of interest earnings on HAVA balances had not been 

transferred by the state to the election fund since February 2009. 

•		 As of September 30, 2009, the election fund included $1,339,192.30, plus interest, that 

was received as part of a special distribution by the EAC to selected states under the 

Consolidated Appropriation Resolutions Act, Public Law (PL) 108.7. This fund should not 

be co-mingled with the HAVA funds. 

•		 The HOE did not perform periodic reconciliations to agree the HAVA accounting records 

with the state’s official accounting records, resulting in errors in the annual financial 

status reports, Form SF269, filed with the EAC, and an unreconciled difference of 

$42,000 as of September 30, 2009. 

•		 The HOE lacked appropriate documentation or semi-annual certifications to support 

personnel costs charged to HAVA totaling $219,471.19. 

We have included in this report as Appendix A-1 the HOE management’s formal response on 

April 1, 2010 to the findings and recommendations, and as Appendix A-2 the HOE 

management’s followup response to the draft audit report, dated October 4, 2010, which clarified 

their position on the responses. Although we have included management’s written responses to 

our findings and recommendations, such responses have not been subjected to the audit 

procedures and, accordingly, we do not provide any form of assurance on the appropriateness of 

the responses or the effectiveness of the corrective actions described therein. 

The draft report, including the HOE responses, was provided to the Executive Director of the 

EAC for review and comment. The EAC responded on October 28, 2010, and generally agreed 

with the report’s findings and recommendations. The response indicated that the EAC would 

work with the HOE to ensure corrective action, to resolve disagreements on allowability of 

expenditures, and to determine appropriate resolution regarding the lack of personnel 

certifications. The EAC’s complete response is included as Appendix A-3. 

BACKGROUND 

HAVA created the Commission to assist states and insular areas with the improvement of the 

administration of federal elections and to provide funds to states to help implement these 

improvements. HAVA authorizes payments to states under Titles I and II, as follows: 

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

uniform and nondiscriminatory election technology and administration requirements, 

improving the administration of elections for federal office, educating voters, training 

election officials and poll workers, and developing a state plan for requirements 

payments. 

•		 Title I, Section 102 payments are available only for the replacement of punch card and 

lever action voting systems. 

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

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

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

2
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		

		

		

		

		


	

Title II also requires that states must: 

•		 Have appropriated funds “equal to 5 percent of the total amount to be spent for such 

activities [activities for which requirements payments are made].” [Section 253(b)(5)]. 

•		 “Maintain the expenditures of the state for activities funded by the [requirements] payment 

at a level that is not less than the level of such expenditures maintained by the state for 

the fiscal year ending prior to November 2000.” [Section 254 (a)(7)]. 

•		 Establish an election fund for amounts appropriated by the state “for carrying out the 

activities for which the requirements payment is made,” for the federal requirements 

payments received, for “such other amounts as may be appropriated under law,” and for 

“interest earned on deposits of the fund.” [Section 254 (b)(1)]. 

AUDIT OBJECTIVES 

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

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

HAVA and applicable requirements; 

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

program income; 

3.		 Met HAVA requirements for Section 251 funds for an election fund and for a matching 

contribution. We did not determine whether the HOE met the requirement for 

maintenance of a base level of state outlays, because the Commission is reviewing its 

guidance on the applicability of the maintenance of a base level of state outlays to 

subgrantees of the HOE. 

In addition, to accounting for HAVA payments, the Act requires states to maintain records that 

are consistent with sound accounting principles that fully disclose the amount and disposition of 

the payments, that identify the project costs financed with the payments and other sources, and 

that will facilitate an effective audit. The Commission requires states receiving HAVA funds to 

comply with certain financial management requirements, specifically: 

1.		 Comply with the Uniform Administrative Requirements for Grants and Cooperative 

Agreements with State and Local Governments (also known as the “Common Rule”) as 

published in the Code of Federal Regulations at 41 CFR 105-71. 

2.		 Expend payments in accordance with cost principles for establishing the allowance or 

disallowance of certain items of cost for federal participation issued by the OMB. 

1

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

1 EAC requires states to submit annual reports on the expenditure of HAVA Sections 101, 102, and 251 funds. 

Through December 31, 2008, for Sections 101 and 102, reports were due on February 28 for the activities of the 

previous calendar year, and, for Section 251, reports were due by March 30 for the activities of the previous fiscal 

year ending on September 30. Beginning in calendar year 2009, all reports will be effective as of September 30, 

20XX for the fiscal year ended that date and will be due by December 31, 20XX. 

3
	
 

 

 

 

 

 

 

 

 

12,496,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


	


	

		


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	


	

SCOPE AND METHODOLOGY 

We audited the HAVA funds received and disbursed by the HOE from April 23, 2003, through 

September 30, 2009, (77-month period) as shown in the following table: 

FUNDS RECEIVED 

TYPE OF 

PAYMENT 

EAC 

PAYMENT 

PROGRAM 

INCOME 

STATE 

MATCH 

INTEREST 

EARNED 

TOTAL 

AVAILABLE 

FUNDS 

DISBURSED 

DATA 

AS OF 

Section 101 

Section 102 

Section 251 

$ 5,000,000 

0 

11,596,803 

$ 0

0 

0 

$ 0 

0 

0 

$ 1,149,790

0 

899,348 

$ 6,149,790

0 

$ 1,533,295

0 

9,797,769 

9/30/2009 

9/30/2009 

9/30/2009 

Total HAVA Funds $16,596,803 $ 0 $0 $2,049,138 $18,645,941 $11,331,064 9/30/2009 

Notes: 1)		 The balances above do not include $1,339,192.30 that was received under P.L. 

108-7 prior to HAVA and deposited in the election fund as described in Finding IV 

below. The interest earnings shown as posted to Section 101 funds includes interest 

that was earned on the PL 108-7 funds; however, the amount of those earnings has 

not been determined and the election fund balance is overstated. Our 

recommendation under Finding IV is to compute the interest earnings applicable to 

these funds and to transfer them to the general fund. 

2)		 Hawaii did not deposit its state matching funds totaling $610,358 into the election 

fund. Instead, it considered in-kind expenditures prior to receipt of requirements 

payments as satisfying its state match. 

Our audit methodology is set forth in Appendix B. 

AUDIT RESULTS 

We conducted this performance audit in accordance with Generally Accepted Government 

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

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

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

basis for our findings and conclusions based on the audit objectives. Because of inherent 

limitations, a study and evaluation made for the limited purposes of our review would not 

necessarily disclose all weaknesses in administering HAVA payments. 

We concluded that the HOE did not account for and expend HAVA funds in accordance with the 

requirements mentioned above. Exceptions identified include the state’s failure to properly 

account for equipment purchased with federal funds, to utilize HAVA funds only for allowable 

purposes, to deposit interest earnings timely; reconcile the HOE’s election fund balance to the 

Hawaii State Treasurer’s Office (STO) account balances, and to maintain semi-annual 

personnel certifications. Also, the HOE co-mingled HAVA funds with other federal distributions 

intended for reimbursement of state expended funds. The HOE generally agreed with the 

findings and recommendations and has taken action on or is working to resolve the exceptions 

described below as set forth in Appendix A. However, the HOE disagreed with the finding 

regarding the improper use of HAVA funds for advertising costs and equipment purchases, and 

detailed their objection in Appendix A-1. In its formal response to the draft report, Appendix A-2, 

the HOE expanded on its position regarding the findings relating to the questioned costs listed 

in Appendix C: 

4
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		

		

		


	

I.		 Property Management 

Since the state of Hawaii leases its voting equipment when needed for elections, the inventory 

listing provided by the Hawaii Office of Elections included only equipment that was housed at 

the elections office. In addition, the listing was not maintained in accordance with the Common 

Rule as follows: 

•		 The fixed asset listing did not contain all of the required information such as: description 

of equipment, location of equipment, condition of equipment, acquisition date, nor the 

funding source of the purchase of equipment (specifically, whether the equipment item 

was purchased with HAVA funds). 

In addition, computer equipment purchased with HAVA funds, such as monitors and laptops to 

be used for Hawaii Computerized Voter Registration (HCVR) and other HAVA activities, were 

used primarily for operations. 

The risks of loss, theft or misappropriation is increased if properties are not properly accounted 

for in the accounting records or are not properly tagged as property of the HOE. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

and Local Governments 41 CFR § 105-71.132 Equipment states that property records must be 

maintained that include a description of the property, serial number or other identification 

number, the source of property, who holds the title, the acquisition date, and costs of the 

property, percentage of federal participation in the cost of the property, the locations, use and 

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

sale price of the property. 

The recipient shall use the equipment in the project or program for which it was acquired as long 

as needed, whether or not the project or program continues to be supported by federal funds 

and shall not encumber the property without approval of the federal awarding agency. 

Current election office management and staff stated that they were not familiar with the 

regulations governing equipment acquired with federal funds. 

Recommendations: 

We recommend the HOE: 

1.		Update its equipment inventory records to include all information required by federal 

guidelines and identify the equipment purchased with HAVA funds. 

2.		Perform periodic inventories of equipment to facilitate proper accountability and 

safeguarding of assets for which federal funds were used to acquire. 

HOE’s Response: 

The HOE agreed with the corrective action recommended. 

5
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		


	

II. Procurements: 

During our test of other direct costs, we identified costs that are ineligible or unallowable under 

the HAVA Act and other federal guidelines as follows: 

� Interest totaling $2,971.61 was paid on seven invoices that were delinquent in payment 

(over 90 days). Interest incurred on late payment of invoices, wherein an interest 

penalty is paid, is not an allowable use of federal funds. 

� Advertising costs to “get out and vote” were incurred totaling $3,591.62. Although 

advertising costs are allowable, advertising to “get out the vote” are specifically not 

allowable under the HAVA program. 

� Computers were purchased totaling $42,912.54 using HAVA funds. However, the 

computers are used in the daily operations of the elections offices, and are not 

restricted solely for HAVA related activities. A determination could be not made as to 

what portion of these costs is an appropriate use of HAVA funds. 

OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, Attachment 

B, Item 16, Fines and Penalties, states that: 

� Fines, penalties, damages, and other settlements resulting from violations (or alleged 

violations) of, or failure of the governmental unit to comply with, federal, state, local, or 

Indian tribal laws and regulations are unallowable except when incurred as a result of 

compliance with specific provisions of the federal award or written instructions by the 

awarding agency authorizing in advance such payments. 

EAC Funding Advisory Opinion FAO-08-005 states that: 

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

out the vote efforts; including advertising for the event, setting up booths, and paying 

salaries of employees who register new voters. 

� HAVA authorizes the use of Section 101 funds to educate voters about registering to vote. 

However, as noted in above, neither Section 101 nor 251 funds can be used for “get out 

the vote” activities. In those cases where it is not clear whether a registration activity is 

educational or a get out the vote effort (i.e. encouraging citizens to vote on Election Day), 

the state should contact EAC for a determination on the basis of the specific 

circumstances. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

and Local Governments 41 CFR § 105-71.132(c) Use (1) t states that: 

the recipient shall use the equipment in the project or program for which it was acquired as 

long as needed, whether or not the project or program continues to be supported by federal 

funds and shall not encumber the property without approval of the federal awarding agency. 

The HOE management stated that the office had experienced significant turnover in key 

positions, which possibly contributed to the limited knowledge of current staff regarding federal 

regulations and the HAVA Act requirements. 

6
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		

		


	

There is a potential loss of HAVA funds totaling $49,375.77 as discussed in detail in the 

condition above. 

In addition, there is a potential for additional questioned costs for the amounts that were not 

included in our test sample but were part of the total costs paid for the same activities 

questioned in the condition above: 

� $10,784.17 of computer equipment costs. 

� $29,809.29 for radio advertising costs for “get out and vote”. 

Recommendations: 

We recommend that: 

3.		The HOE discontinue the use of HAVA funds to pay interest charged on delinquent invoices, 

and ensure that the state reimburses the election fund for any late payment interest paid to 

date. 

4.		The EAC work with the HOE to determine the allowability of the advertising costs and the 

equipment costs. 

HOE Response: 

The HOE agreed with the corrective action recommendation to discontinue the use of HAVA 

funds to pay interest charged on delinquent invoices. 

The HOE also agreed with the corrective action recommendation to work with the EAC to 

determine the allowability of the advertising costs and the equipment costs. However, they 

disagreed with the assessment that the advertising costs were not educational, and believe that 

the computer costs incurred in operating the HOE were expended for “improving the 

administration of elections for federal office.” Full details on the HOE position are shown in 

Appendices A-1 and A-2. 

III. Interest Earned 

The State of Hawaii, Department of Budget and Finance, Financial Administration Division – 

Treasury, determines the interest earned on HAVA funds using a pooling of funds approach and 

allocating the interest monthly based on average balances. The allocation is an electronic 

distribution as determined by the state’s accounting system. However, the allocation of the 

interest earned is not recorded timely and the HAVA election fund had not received all of the 

interest earnings to which it was entitled as of September 30, 2009. Interest earned for March 

2009 through September 30, 2009 had not been recorded or credited to the HAVA funds. The 

last interest income posted was for February 2009 earnings, which was recorded in September 

2009. The amount of unrecorded interest earned has not yet been determined. 

Sec. 254(b) (1) D of the HAVA requires that the interest earned on deposits of the fund be 

deposited into the HAVA election fund. 

7
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		

		


	

The Funds Custody Manager in the treasury office informed us that there was a staffing 

shortage in her office resulting from budget cuts that caused the delays in transferring the 

interest earned. 

The HAVA election fund is understated by an undetermined amount of interest earned as of 

September 30, 2009 and going forward as long as the recording delays continue. 

Recommendations: 

We recommend that the HOE: 

5.		Determine the amount of delinquent interest due the election fund and transfer it to the fund. 

6.		Implement procedures to follow up with the treasurer’s office periodically to ensure timely 

recording of interest earned. 

HOE Response: 

The HOE agreed with the corrective action recommended. 

IV. Reimbursement of Funds (Pre-HAVA Distribution) 

Prior to the enactment of the Help America Vote Act (HAVA) of 2002, the State of Hawaii used 

its own funds to obtain electronic voting equipment for the regularly scheduled general election 

for federal office held in November 2000. Subsequent to the passing of the HAVA, the 

Consolidated Appropriation Resolutions Act, Public Law (PL) 108-7, signed on February 20, 

2003, authorizes a one-time payment to those states that had upgraded or replaced their voting 

systems prior to the November 2000 election. The State of Hawaii received $1,339,192.30 as a 

reimbursement for qualifying equipment purchased for the 2000 election in accordance with PL 

108-7. 

On April 23, 2003, the previous Chief Elections Officer (CEO) filed the required state 

certification statement for reimbursement stipulating that the state had spent $2,500,000 for 

qualifying equipment and accessories, and that the state would not be eligible to receive Sec. 

102 funds, which were appropriated as part of the HAVA provisions. However, in a letter to the 

Governor excerpted below, dated May 16, 2003, describing HAVA funding received to date, the 

previous CEO incorrectly described this special payment as Sec. 102 funds. 

“On May 3, 2003, the State of Hawaii received an additional $1,339,192.30 pursuant to 

Section 102 of the Act. This money will be used as a reimbursement for monies spent for 

the replacement of punch card voting machines.” 

The $1.3 million was deposited in the HAVA election fund, and is still included with the HAVA 

fund balances as of September 30, 2009. In addition, interest has accrued on the funds since 

May 2003 through February 2009, and is included in the election fund. This has resulted in the 

HAVA fund balance being overstated by the $1,339,192.30, plus compounded interest. 

Excerpt from H.J. Res. 2 (P.L. 108-7) Consolidated Appropriations Resolution, 2003 (Enrolled 

as Agreed to or Passed by Both House and Senate) states that: 

8
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		


	

ELECTION REFORM REIMBURSEMENTS 

For necessary expenses to carry out a program under which a one-time payment shall be made 

to the chief election authority of each state which, on a statewide basis, obtained optical scan or 

electronic voting equipment for the administration of elections for federal office in the state prior to 

the regularly scheduled general election for federal office in November 2000, $15,000,000: 

Provided, That the amount of the payment made with respect to a state under such program shall 

be equal to the costs incurred by the state in obtaining optical scan or electronic voting equipment 

used to administer the most recent regularly scheduled general election for federal office in the 

state, except that in no case may the amount of the payment exceed $4,000 per voting precinct in 

the state at the time of the election: Provided further, That total payments made under such 

program shall not exceed $15,000,000. 

Excerpts from House Report 107-575 - Treasury, Postal Service, And General Government 

Appropriations Bill, 2003 state that: 

H.R. 3295, the Help America Vote Act of 2001, authorizes appropriations for states to upgrade 

and replace voting systems with optical scan or electronic voting equipment on a statewide 

basis. H.R. 3295 does not, however, take into account those states that had upgraded or 

replaced their voting systems prior to the November 2000 election. The Committee has included 

new language to rectify this disparity by providing authorization and appropriations for one-time 

payments to those states that obtained optical scan or electronic voting equipment prior to the 

regularly scheduled general election for federal office held in November 2000. It is the 

Committee's understanding that this provision affects five states with a total estimated cost of 

approximately $23,000,000. 

The current Office of Elections’ management and staff did not know why the funds were not 

deposited in the state’s general fund, since they were not on staff at the time. 

Recommendation: 

7.		We recommend the HOE officials determine whether these funds should remain in the 

HAVA election funds or transferred to the state’s general fund. 

HOE Response: 

The HOE stated that they agreed with the corrective action recommended, and have transferred 

the original reimbursement money to the general funds. Interest which had accrued on the 

original funds is still in the process of being determined. After it is calculated, they will consult 

with the Department of Budget and Finance (DBF) if the funds should likewise be transferred to 

the general fund. To the extent the DBF permits the interest money to remain in the HAVA 

account, the HOE would like guidance on whether funds in addition to the requirements 

payments may be deposited in the HAVA account, to the extent that the State of Hawaii agrees 

to use those funds for HAVA purposes (i.e. matching funds or other commitments of funds by 

the state for HAVA purposes). 

9
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		

		


	

V. Financial Accounting and Reporting 

The Office of Elections does not reconcile the HAVA funds in its books against the State 

Treasurer’s records. We noted differences between the Office of Election’s records as reported 

on the Financial Status Reports and Hawaii’s accounting system, Financial Accounting & 

Management Information System (FAMIS). As of September 30, 2009 the Office of Election’s 

computed HAVA fund balance was $8,661,280.33 and Hawaii’s Financial Accounting and 

Management Information System (FAMIS) account balances totaled $8,619,280.33, resulting in 

an unreconciled difference of $42,000. Consequently, amounts reported on financial reports 

may not be accurate and errors could occur and not be detected in a timely manner. 

HAVA receipts and expenditures were co-mingled in the Office of Elections accounting system 

until April 2007, and were not individually coded as Section 101 or Section 251 funds. In 

preparing the Financial Status Report, SF 269, it was necessary for the staff to evaluate the 

entries in the accounting records for allocation to the appropriate fund, utilizing Excel 

worksheets to accumulate HAVA data for tracking purposes. 

HAVA Section 902. Audits and Repayment of Funds, Part (a) – Recordkeeping Requirement. 

states that 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. 

We were informed that the HOE has experienced significant turnover, specifically in its 

accounting staff, therefore, reconciliations have not been performed as necessary. 

Recommendations: 

We recommend the HOE: 

8.		Perform monthly reconciliations of HAVA funds and accounts to ensure that all receipts and 

disbursements are properly recorded and accounted for in the state’s accounting records. 

9.		Resolve the unreconciled difference of $42,000. 

10. Coordinate with EAC if corrected SF 269s need to be filed retroactively or prospectively. 

HOE Response: 

The HOE agreed with the corrective action recommended. 

VI. Personnel Documentation and Certifications 

The HOE did not complete semi-annual certifications for employees that worked full-time or 

solely on HAVA activities. 

We identified only one employee position that was chargeable to the HAVA program. The 

position description of the employee indicates that the duties are for HAVA-related activities. 

10
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


	

However, there were no timesheets or other documentation to support the number of hours 

worked, overtime hours, leave taken, and holidays for total HAVA personnel charges of 

$219,471,19. Accordingly, there was no assurance that salaries and fringe benefit costs paid to 

HOE staff was incurred for work done solely on HAVA activities during the audit period. 

OMB Circular A-87, in Attachment B Section 8(h) (3) requires that: 

(3) Where employees are expected to work solely on a single federal award or cost 

objective, charges for their salaries and wages will be supported by periodic certifications 

that the employees worked solely on that program for the period covered by the certification. 

These certifications will be prepared at least semi-annually and will be signed by the 

employee or supervisory official having first hand knowledge of the work performed by the 

employee. 

The staff of the HOE stated that they were not aware of this requirement. 

Recommendation: 

11. We recommend that the EAC consult with the HOE to determine the appropriate corrective 

action regarding the lack of periodic certifications. 

HOE Response: 

The HOE agreed with the corrective action recommended, and noted that the NFR stated that 

the position description for the employee indicates that the duties are HAVA-related activities. 

Specifically, the employee position was created to implement a Section 261 grant to assure 

access for individuals with disabilities. As such, the employee has always worked solely on 

HAVA activities. Going forward, the State of Hawaii will submit the required semi-annual 

certifications. 

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

We provided a draft of our report to the appropriate individuals of the HOE and the Commission. 

We considered any comments received prior to finalizing this report. 

The draft report, including the HOE responses, was provided to the Executive Director of the 

EAC for review and comment. The EAC responded on October 28, 2010, and generally agreed 

with the report’s findings and recommendations. The response indicated that the EAC would 

work with the HOE to ensure corrective action, to resolve disagreements on allowability of 

expenditures, and to determine appropriate resolution regarding the lack of personnel 

certifications. The EAC’s complete response is included as Appendix A-3. 

a1

CG performed its work between October 5, 2009 and October 23, 2009. 

Calverton, Maryland 

May 31, 2010 

11
	

 

STATE OF HAWAII 

OFFICE OF ELECTIONS 

802 LEHUA AVENUE 

PEARL CITY, HAWAII 96782 

SCOTT T. NAGO 

CHIEF ELECTION OFFICER 

www.hawaii.gov/elections 

Curtis Crider, Inspector General 

U.S. Election Assistance Commission 

Office of Inspector General 

1225 New York Ave., NW, Suite 1100 

Washington, D.C. 20005 

April 1, 2010 

Re: NOTICE OF FINDINGS AND RECOMMENDATIONS 

Dear Mr. Crider: 

I am writing in response to the six Notices of Findings and Recommendation 

(NFR) that you sent to us by email on March 22, 2010. 

1. NFR # 1 Fixed Asset Listing 

We agree with the corrective action recommended. 

2. NFR # 2 Procurement-Disbursements 

We agree with the corrective action recommendation to discontinue the use of 

Help America Vote Act (HAVA) funds to pay interest charged on delinquent invoices. 

We likewise agree with the corrective action recommendation to work with the 

Election Assistance Commission (EAC) to determine the allowability of the advertising 

costs and the equipment costs. 

In regards to the advertising material, it is our position that it was educational as 

opposed to a "get out the vote" effort. 42 USC§ 15301(b)(1)(C). Additionally, it is not 

clear whether the specific advertising at issue was actually paid for with HAVA funds, as 

opposed to being treated as free public service announcements by the vendors (i.e. 

some ads were paid for and others were provided for free by the vendors as public 

service announcements). 

Appendix A-1
 

12

 

Mr. Curtis Crider 

April 1, 2010 

Page 2 

As for the computers, it is our position that the computers are an allowable HAVA 

expense used for "improving the administration of elections for Federal office." 42 USC 

§ 15301(b)(1)(B). The very nature of the Office of Elections is the administration of 

federal elections. Specifically, all primary and general elections are regularly scheduled 

county/state/federal combined elections. To the extent there is ever a special election 

for a county office; the election is separately conducted by the county. Any vacancy in a 

state office is handled either through appointment by the Governor or a special election 

held in conjunction with a regularly scheduled election (i.e. county/state/federal 

combined election). 

'

The Office of Elections has no other responsibilities which are separate and 

distinct from our duty to administer elections, which as noted above involve Federal 

offices. The unique statutory structure of elections in Hawaii mandates the central 

administration of federal elections by the Office of Elections, as opposed to on the 

county level, which occurs in other states. As it relates to "improving the administration 

of elections," the new computers provide (at that time) current hardware and software 

compatibility and features to run the offices newly developed election management 

program, Phoenix. The election management programs - the computer is used on -

manages and tracks a wide array of logistical and personnel resources necessary to 

conduct this state's elections. 

To the extent our interpretation of what constitutes "improving the administration 

of elections for Federal office" is incorrect, further guidance from the EAC should be 

provided on this matter. 

Finally, to the extent the recommendations noted above involve possible 

reimbursement, we would like to discuss whether this can be waived or if the State 

would be allowed to off-set this through the expenditure of state funds for HAVA 

purposes above and beyond our maintenance of effort (MOE) requirements. A review 

of our finances indicates that for several years the State of Hawaii has been utilizing 

state funds for HAVA expenses in excess of its MOE requirements. In other words, if 

we were to reimburse the HAVA account, it would simply result in the State of Hawaii 

spending an equivalent amount less of its general funds on HAVA expenses. 

Additionally, there is the issue of whether the State of Hawaii should receive some type 

of credit or off-set for these past expenditures in excess of MOE. 

3. NFR #3 

As per your email, there is no NFR #3 as it was incorporated into NFR #6. 

4. NFR # 4 Interest Earned 

We agree with the corrective action recommended. 

13
 

 

Mr. Curtis Crider 

April 1, 2010 

Page 3 

5. NFR # 5 Pre-HAVA funds not reimbursed to State General Fund 

We agree with the corrective action recommended. We have transferred the 

original reimbursement money to the state general fund. Interest which has accrued on 

the original funds is still in the process of being determined. After it is calculated we will 

consult with the Department of Budget and Finance if the funds should likewise be 

transferred to the general fund. To the extent the Department of Budget and Finance 

permits the interest money to remain in the HAVA account, we would like guidance on 

whether funds in addition to the federal requirements payments may be deposited into 

the HAVA account, to the extent the State agrees to use those funds for HAVA 

purposes (i.e. matching funds or other commitments of funds by the State for HAVA 

purposes). 

6. NFR # 6 Financial Accounting and Reporting 

We agree with the corrective action recommended. 

7. NFR # 7 Personnel Costs 

We agree with the corrective action recommended. As noted by the NFR the 

position description of the employee indicates that the duties are for HAVA-related 

activities. Specifically, the employee position was created to implement a HAVA 

Section 261 grant to assure access for individuals with disabilities. As such, the 

employee has always worked solely on HAVA activities. Going forward, the State of 

Hawaii will submit the required semi-annual certifications. 

If you have any questions or require any additional information, please feel free 

to contact us at (808) 453-8683 or by email at elections@hawaii.gov. 

STN:AHS:cr 

OE-093-10 

Sincerely, 

~ SCOTT T. NAGO 

Chief Election Officer 

14
 
STATE OF HAWAII 

OFFICE OF ELECTIONS 

802 LEHUA AVENUE SCOTT T. NAGO 

CHIEF ELECTION OFFICER PEARL CITY, HAWAII 96782

www.hawaii.gov/elections 

October 4, 2010 

VIA E-MAIL (CCRIDER@EAC.GOV) 

Curtis Crider, Inspector General 

U.S. Election Assistance Commission 

Office of Inspector General 

1225 New York Ave., NW, Suite 1100 

Washington, D.C. 20005 

Re: Draft Performance Audit Report 

Dear Mr. Crider: 

Thank you for the opportunity to comment on your draft performance audit 

report. 

We continue to stand by our comments made in our April 1, 2010 

response to the six Notices of Findings and Recommendation (NFR) that you 

sent us on March 22, 2010, which you have included as Appendix A to your draft 

report: 

Having said that, to the extent you plan to recommend possible 

reimbursement of HAVA funds, we would ask you to consider the totality of the 

circumstances in making_ such a decision. 

First, we would note that this is the first audit of the Office of Elections 

regarding its use of HAVA funds and in fact the Office of Elections has never 

previously received federal funds or participated in a corresponding audit. As 

such, we would ask for the EAC's understanding as any errors were not 

intentional. 

Second, fundamental interpretations of provisions of HAVA were not firmly 

in place at the time of the audit. For example, the interpretation of the 

maintenance of effort provision as noted in the report was not resolved at the 

time of the audit. 

Appendix A-2

15
Mr. Curtis Crider 

October 4, 2010 

Page2 

Third, the allegations regarding ineligible expenses for voting materials 

and computers require an interpretation of the law and facts surrounding those 

expenses. In recognition of this, the EAC issues advisory opinions on various 

fact patters. We believe our materials were in line with those advisory opinions. 

To the extent the EAC were to entertain deeming these expenses ineligible, we 

would contend that due process would require the EAC to review the actual 

voting materials, and to direct any questions regarding those materials to the 

Office of Elections to respond to. 

In terms of the computers, we have stated our position, see Appendix A to 

the Draft Report, that said computers were used to improve the administration of 

elections for federal office, as allowed for under HAVA. The auditors point to no 

specific evidence to contradict the position of the Office of Elections. Yet again, 

we are more than happy to respond to direct questions from the EAC on this 

matter. 

Fourth, we would note that if the EAC is concerned that these alleged 

ineligible expenses, result in less than the appropriate amount of money being 

spent toward compliance with HAVA, the opposite is true in that we have 

historically spent significantly in excess of that amount, even taking into account 

these alleged ineligible expenses. 

In the end, we appreciate the purpose of the audit and our mutual goal to 

ensure that federal grant monies are spent appropriately and consistent with the 

law. 

If you have any questions or require any additional information, please feel 

free to contact us at (808) 453-VOTE(8683) or by email at elections@hawaii.gov. 

Sincerely, 

SCOTT T. NAGO 

Chief Election Officer 

STN:AS:cl 

OE-245·10 

16

	


	

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 Hawaii, for the Period April 23, 2003 Through 

September 30, 2009. 

October 28, 2010 

MEMORANDUM 

To: Curtis Crider 

Inspector General 

From: Thomas Wilkey 

Executive Director 

Subject: Draft Performance Audit Report – “Administration of Payments 

Received Under the Help America Vote Act by the State of Hawaii”. 

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

Hawaii. 

The Election Assistance Commission (EAC) generally concurs with the results of 

the review and recommendations. The EAC will work with the Hawaii Office of 

Elections (HOE) to ensure appropriate corrective action. Where the state 

disagrees with the recommendations, the EAC will work with the HOE to 

determine the allowability of incurred advertising and equipment costs. 

Additionally, the EAC will consult with the HOE to determine the appropriate 

corrective action regarding the lack of periodic personnel certifications. 

Appendix A-3

17
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


	

Appendix B 

AUDIT METHODOLOGY 

Our audit methodology included: 

•		 Assessing audit risk and significance within the context of the audit objectives. 

•		 Obtaining an understanding of internal control that is significant to the administration of the 

HAVA funds. 

•		 Understanding relevant information systems controls as applicable. 

•		 Identifying sources of evidence and the amount and type of evidence required. 

•		 Determining whether other auditors have conducted, or are conducting, audits of the 

program that could be relevant to the audit objectives. 

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

•		 Interviewed appropriate HOE employees about the organization and operations of the HAVA 

program. 

•		 Reviewed prior single audit report and other reviews related to the state’s financial 

management systems and the HAVA program for the last 2 years. 

•		 Reviewed policies, procedures and regulations for the HOE’s management and accounting 

systems as they relate to the administration of HAVA programs. 

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

•		 Tested major purchases and supporting documentation. 

•		 Tested randomly sampled payments made with the HAVA funds. 

•		 Verified support for reimbursements to local governments (counties, cities, and 

municipalities). 

•		 Reviewed certain state laws that impacted the election fund. 

•		 Examined appropriations and expenditure reports for state funds used to meet the five 

percent matching requirement for section 251 requirements payments. 

•		 Evaluated compliance with the requirements for accumulating financial information reported 

to the Commission on the Financial Status Reports, Form SF-269, accounting for property, 

purchasing HAVA related goods and services, and accounting for salaries. 

•		 Verified the establishment and maintenance of an election fund. 

18
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


	


	

Appendix C
	

MONETARY IMPACT AS OF SEPTEMBER 30, 2009
 


Description 

Interest payments on delinquent 

invoices 

Questioned 

Costs 

$2,972 

Additional Funds for 

Program 

$0 

Advertising costs not considered to be 

educational $3,592 $0 

Computer equipment used for nonHAVA purposes $42,912 $0 

Election fund balance in excess of state 

accounting balance $42,000 $0 

Lack of semi-annual HAVA employment 

certifications $219,471 $0 

Totals $310,947 $0 

Note: 1)		 There is an undetermined amount of interest due the election fund for the months 

from March to September 2009. 

2)		 As of September 30, 2009, the HAVA election fund included $1,339,192.30 that was 

distributed to the state under P.L. 108-7, plus accumulated interest, that was due to 

the state’s general fund. 

19
	
 

 

 

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