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EAC MANAGEMENT DECISION:

Resolution of the OIG Audit Report on the Administration of 

Payments Received Under the Help America Vote Act by the 

North Dakota Secretary of State for the Period April 29, 2003

Through September 30, 2012 Report No. E-HP-ND-08-12

January 16, 2014 

BACKGROUND

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

(HAVA). EAC assists and guides state and local election officials in improving the 

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

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

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

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

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

determines the necessary corrective actions to resolve issues identified during Single 

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

funds. The EAC OIG has established a regular audit program to review the use of 

HAVA funds by States. The OIG’s audit plan and audit reports can be found at 

www.eac.gov. 

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

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

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

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

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

reports to the Director of the HAVA Grants Division of EAC. The Division provides a 

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

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

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

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

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

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

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

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

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

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

Please note with four Commissioner vacancies, the Commission presently lacks a quorum 

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

60 day period for a decision will toll until a Commission quorum is reestablished.
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AUDIT HISTORY 

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

Help America Vote Act (HAVA) by the North Dakota Secretary of State on November 6, 

2013. Based on the audit procedures performed, except for the matters discussed below, 

the auditors concluded that the North Dakota Secretary of State’s Office (Office) 

generally accounted for and expended the Grant funds in accordance with grant and audit 

requirements for the period from April 29, 2003 through September 30, 2012. 

Finding 1 – Financial Reporting

The auditors found that the North Dakota Secretary of State’s Office (Office) submitted 

financial reports for Section 101 and Section 251 funds that could not be supported by 

underlying accounting records. 

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

complete Federal Forms 269 (Financial Status Report) and 425 (Federal Financial 

Report) which reflect the uses of award funds and the interest and program income 

generated from those funds. HAVA Title IX, Section 902. AUDITS AND REPAYMENT 

OF FUNDS, Part (a) – Recordkeeping Requirement states, “Each recipient of a grant or 

other payment made under this Act shall keep such records with respect to the payment 

as are consistent with sound accounting principles, including records which fully disclose 

the amount and disposition by such recipient of funds, the total cost of the project or 

undertaking for which 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 will facilitate an 

effective audit.”

Recommendation: 

The auditors recommend that the EAC address and resolve the following 

recommendation that the North Dakota Secretary of State’s Office:

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

all interest 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. 

Secretary of the State’s Response: 

The Office believes that the interest earned and expenditures incurred for Section 101 

funds have been previously verified through processes independent of this Office. The 

Office stated that prior to the previous accounting software being closed, all records in 

the system were reconciled by the Office and audited by the State Auditor. After the 
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retention period expired, the records were purged according to state law. The Office also 

indicated that the state auditors conducted an audit of the administration of the HAVA 

funds every two years and no findings were reported in any of those audits. Due to the 

fact that the early accounting records have been purged the auditors were provided 

spreadsheets used by the HAVA coordinator for the sole purpose of the general tracking 

of expenditures and income. These spreadsheets were not intended for accounting 

purposes. 

The Office has submitted a revised financial report for Section 251 as of September 30, 

2012 as a result of the finding. 

EAC Response:

EAC will work with the Secretary of State to determine the status of interest earned and 

expenditures incurred for Section 101 funds. EAC will ensure corrective action. 

Finding 2 – Inadequate Equipment Management

The auditors found that the Office’s equipment management is inadequate in regards to 

property records. 

The Uniform Administrative Requirements for Grants and Cooperative Agreements with 

State and Local Governments 41 CFR § 105-71.132 (d) (the “Common Rule”) section 

states that, (1) “Property records must be maintained that include a description of the 

property, a serial number or other identification number, the source of property, who 

holds the title, the acquisition date, and cost of the property, percentage of Federal 

participation in the cost of the property, the location, use and condition of the property, 

and any ultimate disposition data including the data of disposal and sale price of the 

property and (2) A physical inventory of the property must be taken and the results 

reconciled with the property records at least once every two years.”

Recommendation:

The auditors recommend that the EAC require the Office to ensure that the equipment 

listing is updated as necessary and a physical inventory be conducted every two years 

through the use of county or state personnel. An analysis should also be performed to 

ensure that all purchases have been ultimately recorded through the inventory. 

Secretary of State’s Response:

The Office could not initially provide the inventory records for all counties since the data 

had not been uploaded to the inventory system. The Office uploaded the data for all the 

counties and verified the data with each county and provided a complete inventory list to 

the auditors.The inventory listing was substantiated by the auditors through their on-site 

visits.
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The Office does conduct a physical inventory annually in conjunction with the yearly 

billing process for each county’s share of equipment maintenance costs. The statements 

sent to the counties and payments received are compared and any differences are resolved 

and reconciled to maintain accurate lists.

EAC Response:

As noted by the auditors the Secretary of State has updated the inventory records for the 

equipment purchased with HAVA funds. The Office has also conducted a physical 

inventory. EAC considers this matter closed.

Finding 3 – Documentation of Policies and Procedures

The auditors found that key internal control policies affecting financial management 

activities including purchasing, payment, payroll, Federal financial reporting, monthly 

budgetary and reconciliation reviews, and Federal grant oversight and administration, 

have not been addressed in a departmental policy and procedure document. Due to the 

few personnel involved in award administration, accounting and financial reporting, 

policies and procedures have been developed informally over the years. 

Federal regulations, specifically 41 CFR 105-71.120 – Post-Award 

Requirements/Financial Administration, Standards for Financial Management Systems, 

Internal Control, require that:

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

procedures for expending and accounting for its own funds, and 

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

cash, real and personal property, and other assets. 

Recommendation: 

The auditors recommend that the EAC require the Office to complete and document 

internal control procedures and other appropriate policies in written manuals and also 

provide training to personnel involved in the administration of Federal awards. 

Specifically, these policies and procedures should address financial management 

activities including purchasing, payment, payroll, Federal financial reporting, monthly 

budgetary and reconciliation reviews, and Federal grant oversight and administration. 

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

Secretary of State’s Response: 

The Office established an Internal Control Policy plan as of September 6, 2013 to address 

the concern. 
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EAC Response:

EAC has reviewed the Secretary of State’s Internal Control Policy. Once EAC receives 

confirmation of its implementation, this matter will be closed. 

Finding 4: Matching Contributions

The auditors found that the Office deposited a portion of the state matching funds into the 

election fund subsequent to receipt of certain requirements payments.

HAVA Section 254(b)(1) requires that the following monies be deposited into the state’s 

election fund: 

(a) Amounts appropriated or otherwise made available by the State for carrying out 

the activities for which the requirement payment is made to the State under this 

part.

(b) The requirements payment made to the State under this part. 

(c) Such other amounts as may be appropriated under law. 

(d) Interest earned on deposits of the fund. 

Recommendation:

The auditors recommend that the EAC address and resolve the following 

recommendation that the North Dakota Secretary of State’s Office:

(a) Calculate the amount of interest to transfer to the election fund for the untimely 

deposit of matching funds. This calculation should consider the period from the 

date the requirements payments were received through the date the matching 

requirement was met and include any compound interest through the date of the 

transfer.

(b) Perform an analysis of the amount invoiced to the counties to ensure that the 

election fund has received all county required matching contributions. 

Secretary of the State’s Response: 

The Office agreed with the $26,316 matching contribution not being deposited into the 

election fund. There was a coding error made that inadvertently credited the match 

approved by the Legislative Assembly to the Office’s general fund. The Office will 

submit a funding request to the Governor, which will be ultimately considered by the 

2015 Legislative Assembly to appropriate $26,316 plus the compound interest on that 

amount through the date of transfer. 

The Office disagrees that interest was not properly accounted for on the other state 

matching dollars figures of $113,421, $57,867 and $18,421. To obtain the matching 
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funds, the Governor and Secretary of State must first certify that the state match has been 

provided. The EAC would not have released the requirements payments to North Dakota 

until it was certain that the Office and state had met the necessary requirements. 

Therefore, the Office believes that the matching funds and applicable interest for these 

funds were correctly accounted for and that no further discovery is warranted. 

EAC Response:

EAC will work with the Office to ensure appropriate corrective action.

Finding 5 – Inadequate Invoice Approval 

The auditors found that the Office paid invoices which did not have adequate review and 

approval to ensure that costs are accurate and appropriate for HAVA funds. 

North Dakota Management and Budget Fiscal and Administrative Policy 216 – Internal 

Control & Fraudulent/Significant Dishonest Acts states, “Internal controls play an 

important role in the prevention and detection of fraud. Examples of internal controls are, 

but not limited to: Authorization of transactions – review of particular transactions by an 

appropriate person.” It further states, “Each state agency has a particular role to play and 

is ultimately responsible for implementing proper internal controls within their 

organization.” 

Proper internal controls include assurance that documented support exists for costs 

charged to Federal awards are commensurate with the value received. The Office’s 

internal controls, as described, identify the Deputy Secretary of State as the person with 

the primary role of reviewing and approving invoices for allowability and allocability to 

the grant.

Recommendation:

The auditors recommend that the EAC require the Office to implement procedures to 

ensure that all payments made with Federal funds are reviewed to ensure that costs are 

reasonable, allowable and allocable.

Secretary of State’s Response: 

Although the audit identified a few isolated invoices that did not have any evidence of 

being reviewed or approved directly noted on the invoices themselves, the Office did and 

does have procedures in place for review and approval of expenditures. The initial 

procedure involved the Accounting/Budget Specialist reviewing the invoices and then 

providing them to the Deputy Secretary of State for approval and signature. The Office 

subsequently implemented additional controls for the review and approval process for 

expenditures. The Deputy Secretary of State and the Accounting Director approve the 

claim for payment and the Accounting/Budget Specialist reviews and processes payment 

based on the claim for payment and documentation provided. Although a few earlier 
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invoices missed having a notation of being reviewed, all payments were correctly and 

accurately processed and accounted for or they would not have been paid. In addition, the 

audit did not have any findings of unreasonable, unallowable or non-allocable 

expenditures. 

EAC Response:

EAC will work with the Secretary of State to ensure appropriate corrective action.