U.S. ELECTION ASSISTANCE 

COMMISSION 

OFFICE OF INSPECTOR GENERAL

FINAL REPORT: 

ADMINISTRATION OF PAYMENTS 

RECEIVED UNDER THE HELP AMERICA 

VOTE ACT BY THE VERMONT SECRETARY 

OF STATE

APRIL 10, 2003THROUGH SEPTEMBER 30, 2015 

Report No. 

E-HP-VT-03-16 

August 2017
1

OFFICE OF THE INSPECTOR GENERAL

MEMORANDUM

To: Brian Newby

Executive Director

From: Patricia L. Layfield

Inspector General

Date: August 1, 2017

Subject: Final Performance Audit Report - Administration of Payments Received 

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

(Assignment Number E-HP-VT-03-16)

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

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

Act (HAVA) by the Vermont Secretary of State (VTSOS).

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

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

April 10, 2003 through September 30, 2015. However the following exceptions were identified:

1. The Office allocated indirect costs on a base other than the base indicated by the approved 

indirect cost agreement.

2. The Office was not able to provide support for the baseline maintenance of expenditure 

calculation.

3. The Office did not adequately support all salaries and wages charged to the grant award.

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

records and the performance of a physical observation of inventory.

5. The Office did not provide documentation of a competitive bidding process for the procurement 

of equipment.
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6. The Office expended $54, 112 of HA VA funds for purposes that are not allowable under the 

award's terms and conditions or HA VA regulations.

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

expenditures.

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

recommendations, as well as their comments on the responses after the recommendations. The VTSOS 

office generally agreed with the findings and recommendations. The EAC indicated that it would work 

with the VTSOS to resolve the issues in the report. The VTSOS complete response is included as 

Appendix A-1 and the EAC’s complete response is included as Appendix A-2. 

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

the status of their implementation. Please respond in writing to the findings and recommendation 

included in this report by October 20, 2017. Your response should include information on actions taken 

or planned, targeted completion dates, and titles of officials responsible for implementation.

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

 Reviewed McBride, Lock & Associates, LLC's approach and planning of the audit;

 Evaluated the qualifications and independence of the auditors;

 Monitored the progress of the audit at key points;

 Reviewed the audit report, prepared by McBride, Lock & Associates, LLC to ensure compliance 

with Government Auditing Standards; and

 Coordinated issuance of the audit report.

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

expressed in the report. We do not express any opinion on the conclusions presented in McBride, Lock 

& Associates, LLC's audit report.

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

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

that have not been implemented.

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

Attachment 

cc: Director of Grants and Payments
Performance Audit Report

Administration of Payments Received Under the Help America Vote Act by 

the Vermont Secretary of State

Prepared for

The United States Election Assistance Commission (EAC) 

Office of Inspector General

By

McBride, Lock & Associates, LLC

April 2017

McBRIDE, LOCK & ASSOCIATES, LLC

CERTIFIED PUBLIC ACCOUNTANTS

KANSAS CITY
Performance Audit Report

Administration of Payments Received Under the Help America Vote Act by 

the Vermont 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 Vermont 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, 2015
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U.S. Election Assistance Commission

Performance Audit Report

Administration of Payments Received Under the Help America Vote Act by 

the Vermont Secretary of State

EXECUTIVE SUMMARY

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

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

Vermont Secretary of State’s Office (Office) from inception on April 15, 2003 through 

September 30, 2015 to determine whether the Office used payments authorized by Sections 101, 

102, and 251 of the Help America Vote Act of 2002 (the HAVA) in accordance with HAVA and 

applicable requirements; accurately and properly accounted for property purchased with HAVA

payments and for program income; maintained state expenditures at a level not less than the level 

maintained in the fiscal year ending prior to November 2000; and met HAVA requirements for 

Section 251 funds for an election fund and for a matching contribution.

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

requirements, specifically: 

• Comply with the Uniform Administrative Requirements for Grants and Cooperative 

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

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

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

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

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

for federal participation.

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

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

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

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

We conducted this performance audit in accordance with Generally Accepted Government 

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

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

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

for our findings and conclusions based on the audit objectives. 

Based on the audit procedures performed, except for the matters discussed below, we concluded 

that the Office generally accounted for and expended the Grant funds in accordance with the 
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requirements mentioned above for the period from April 15, 2003 through September 30, 2015. 

The exceptions are as follows:

1. The Office allocated indirect costs on a base other than the base indicated by the 

approved indirect cost agreement.

2. The Office was not able to provide support for the baseline maintenance of expenditure 

calculation.

3. The Office did not adequately support all salaries and wages charged to the grant award.

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

property records and the performance of a physical observation of inventory.

5. The Office did not provide documentation of a competitive bidding process for the 

procurement of equipment.

6. The Office expended $54,112 of HAVA funds for purposes that are not allowable under 

the award's terms and conditions or HAVA regulations. 

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

expenditures.

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 payments are available only for the replacement of punchcard and 

lever action voting systems. 
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• 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. 

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 Vermont Secretary of State

The HAVA funds were awarded to the Vermont Secretary of State. The Elections Division 

guides the administration of Vermont’s elections, works to protect the integrity of the democratic 

process, assists in the registration of voters, oversees campaign finance reporting, and 

implements Vermont’s lobbyist disclosure laws. Elections in Vermont are administered at the 

local level. The Elections Division works closely with Town, City and County clerks across 

Vermont to ensure the smooth administration of Vermont’s local, state, and federal elections. 

The Elections Division provides guidance on the election law, provides supplies that are 

fundamental to carrying out elections, and is a resource before and on election day to help 

election officials with any emergencies or routine questions that may arise.

Help America Vote Act State of Vermont State Plan

The State of Vermont’s advisory committee consisted of 14 individuals representing a cross

section of election stakeholders. The committee was selected by the Chief Elections Officer and

the Secretary of State.

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

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

administrate and maintain a computerized statewide voter checklist.

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

carrying out activities of HAVA. The fund is non-lapsing and accrues interest earned. Additionally, 

the 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 funds for creation of an election fund,

providing required matching contributions, and meeting the requirements for 

maintenance of a base level of state outlays, commonly referred to as Maintenance of 

Expenditures (MOE). 

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

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

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

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

comply with certain financial management requirements, specifically: 

• Comply with the Uniform Administrative Requirements for Grants and Cooperative 

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

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

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

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

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

for federal participation.

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

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

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

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

We audited the Grant funds received and disbursed by the Office from April 15, 2003 through 

September 30, 2015 as shown in the following table:

HAVA HAVA HAVA

Description Section 101 Section 102 Section 251 Total

Funds Received from EAC $ 5,000,000 $ - $ 12,453,257 $ 17,453,257

State Matching Funds - - 702,438 702,438

Program Income 580,051 - 2,488,486 3,068,537

Total Funds $ 5,580,051 $ - $ 15,644,181 $ 21,224,232

Less Disbursements (5,580,051) - (5,754,596) (11,334,647)

Fund Balance $ - $ - $ 9,889,585 $ 9,889,585

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 15, 2003 through September 30, 2015. 

The exceptions to applicable compliance requirements are described below.

Finding No. 1 – Indirect Cost Allocation

The Vermont Secretary of State (Office) allocated indirect costs on a base other than the base 

indicated by the approved indirect cost agreement.

The indirect cost agreements negotiated by the Office with the EAC and HHS indicates the base 

to apply indirect costs is “Total Direct Costs excluding capital expenditures (buildings, 

individual items of equipment; alterations and renovations).”

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

Indian Tribal Governments 2 CFR § 225, Appendix E.C.2.(b) states, “Both the direct costs and 

the indirect costs shall exclude capital expenditures and unallowable costs”.

The Office negotiated indirect cost rate agreements for the fiscal years 2006 through 2015. The 

agreements were approved by EAC and HHS. The Office charged $1,827,022 of indirect costs to 

the HAVA award as of September 30, 2015. The base and capital expenditures were provided to 

us by the Office. The maximum indirect costs allowable was calculated by audit under the 
6

approved agreements for each year for the years 2006 through 2015. Based upon this calculation, 

the Office charged indirect costs in excess of the allowable amount for the fiscal years 2007, 

2008, 2010, 2012, 2013, 2014 and 2015 by a total amount of $424,695. The Office charged less 

than the allowable amount for the fiscal years 2006, 2009 and 2011 by a total amount of 

$268,893.

The Office’s procedure for charging indirect costs to the HAVA award has been to use an 

estimated rate from the beginning of the State’s fiscal year up until the date the Indirect Cost 

Agreement is approved. Once the rate is approved, the Office uses the approved rate until the end 

of the fiscal year. The base used to apply the rates was administrative expenses rather than total 

direct costs excluding capital expenditures. 

Recommendation

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

(a) Review the calculation provided by the audit of the maximum indirect costs allowable.

(b) Transfer $155,802 to the election fund, which is the calculated amount of Indirect Costs 

charged in excess of the allowable amount. 

(c) Implement procedures to ensure indirect costs are charged in accordance with the 

negotiated indirect cost agreement and federal regulations.

Secretary of State Response:

We have reviewed the calculation provided by the audit of the maximum indirect costs allowable

for the period 6-30-2006 thru 6-30-2015. The IDC worksheets we provided to the Auditors for 

FFY14 and FFY15 were overstated as they included direct capital costs. The approved IDC rate 

for both years did not include direct capital costs, and the modified rate from the Agency of 

Health & Human Services reflected this, and was applied correctly in the auditor’s worksheets.

On July 1, 2015, recognizing that the IDC charged to the election fund from SFY06 thru 

SFY2015 were in excess of the allowable amount, we reduced the IDC rate from 17.0 to 9.32. 

The IDC of 9.32% has been applied for SFY16 and SFY17 (see “speedcharts” Fund 7/1/2015 & 

7/1/2015). We will continue to review and revise the IDC rate as needed to ensure the elections 

fund is appropriately charged.

Procedures have been implemented to ensure indirect costs are charged in accordance with the 

negotiated indirect cost agreement and federal regulations.

Auditor’s Response:

The Secretary of State’s response provides additional information pertaining to the indirect costs 

claimed. However, the information does not modify the original position of the audit.
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Finding No. 2 – Maintenance of Expenditure

The Office was not able to provide support for the baseline maintenance of expenditure 

calculation. 

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

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

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

the fiscal year ending prior to November 2000.”

The State Plan indicated that the State of Vermont will continue to fund the election system at or 

above the level required by HAVA. The Office established the maintenance of expenditure as 

$150,000. Per the state plan, this amount represented the amount expended by the state for the 

Election Division during fiscal year 2000. 

The Office was not able to provide support for this amount, therefore it could not be determined 

that the maintenance of expenditure was properly established.

The Office used the amount of budget and expenditures for the Elections Division budget to 

determine the base for Maintenance of Effort. The current officials at the Office have not been 

able to locate the budget and expenditure information for that time period.

Recommendation:

We recommend the EAC require the Office to evaluate the baseline established for the 

maintenance of expenditure to ensure that those expenditures included in the baseline are 

consistent with the maintenance of expenditure policy established by the EAC in June 2010.

Secretary of State Response:

We have not been able to locate the election division expenditures for SFY 2000 either in copy 

or electronic format. We contacted the Vermont Department of Finance & Management (DFM) 

to determine if the SFY2000 expenditures were available. Unfortunately, the oldest fiscal year 

the DFM has is SFY2001.

Auditor’s Response:

The Secretary of State’s response does not provide any additional information. Therefore, there 

is no modification to the original position of the audit.
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Finding No. 3 – Inadequate Payroll Documentation

The Office had seven instances of not having adequate support of salaries and wages.

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

Indian Tribal Governments 2 CFR § 225, Appendix B.8.h.(3) states that “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 terms and conditions of the HAVA awards require the submission of accurate and complete 

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

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

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

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

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

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

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

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

as will facilitate an effective audit.” 

The sample selection of eight payroll transactions found that in three instances the employee did 

not have an adequate work effort certification. In all of the instances, the employee worked on a 

single Federal award. The Office uses timesheets to document effort but the time sheet does not 

separately identify work effort by federal award. The effort is tracked as regular hours or 

administrative hours. In four instances, the Office did not maintain any support documentation 

for the transactions described.

Of the $112,193 of salary costs reviewed $70,346 (63%) was determined to be unsupported.

Effort allocations are determined by work title. There is no semi-annual certification for those 

employees whose time was allocated 100% to HAVA. Until May 2013, the Office used an 

exception based timekeeping system which did not allow for project reporting. The current 

electronic timesheet also does not allow for project reporting.

Recommendation

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

(a) Transfer into the election fund $70,346 for the questioned salary charges, the related 

fringe benefits and the applicable indirect costs.
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(b) Implement written policies and provide training to ensure that employees who expend 

efforts on Federal activities accurately record their time in accordance with Federal 

Regulations.

Secretary of State Response:

Although we did not have the proper certification either written or via timesheets for the period 

tested, the Elections Administrator has worked solely on HAVA EAC allowable activities for her 

entire employment period. We do not believe it is appropriate to charge us for not reporting 

properly when we were following the intent and use of HAVA EAC requirements. The Auditors 

provided us with language for a semi-annual certification. Please note the attached semi-annual 

certifications from November 11, 2011 (date of employment), thru December 31, 2016. The 

originals of the semi-annual certifications are being retained in the employee’s personnel file.

We have implemented a policy and procedure to ensure employees who expend efforts on 

Federal activities accurately record their time in accordance with Federal Regulations.

Auditor’s Response:

The Secretary of State’s response does provide certifications that would be relevant to the salary 

costs in question. We recommend EAC evaluate the submitted documentation to determine 

whether it meets allowable criteria.

Finding No. 4 – Inadequate Equipment Management

The Office’s equipment management is inadequate in regards to the maintenance of property 

records and the performance of a physical observation of inventory.

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. (2) A physical inventory of the 

property must be taken and the results reconciled with the property records at least once every 

two years.”

The majority of equipment over the capitalization threshold that was charged to the HAVA 

award is voting tabulators. The vendor maintains an inventory of this equipment as part of the 

maintenance agreement on the equipment with the Office. The inventory listing provided did not 

list the following required items: source of property, cost of property, percentage of Federal 

participation, and the use and condition of property. The Office provided an inventory listing 

that included computer servers which were purchased over the capitalization threshold. The 
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inventory listing provided did not list the following required items: source of property, 

percentage of Federal participation, use and condition of property, and any ultimate disposition 

data including the date of disposal and sale price of property. Additionally, the Office could not 

provide documentation that an inventory was performed at least every two years.

The Office recently documented internal controls over equipment and software purchased with 

federal funds to ensure the adequate safeguarding of assets, including the performance of an 

annual physical observation of inventory. However, these controls were not in place during the 

audit period.

Recommendation

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

(a) Implement the recently documented policies and procedures regarding inventory 

management and the conduct of an annual physical observation of inventory.

(b) Fully populate the required data in the inventory system for assets purchased with Federal 

funds.

(c) Document the conduct of the annual physical observation of inventory.

Secretary of State Response:

We have implemented the policies and procedures regarding inventory management and do have

an annual physical observation of inventory. The State of Vermont uses a PeopleSoft financial 

application referred to as “VISION”. Within VISION is a fixed asset module where the 

information noted above is entered annually.

An inventory has been performed every year in VISION (I am not certain when this was initiated 

as a statewide effort). Since FY2014 we have been fully populating the fixed asset module. We 

will verify and update any missing information relating to Federal funds. We will also work with 

LHS Associates regarding the tabulator inventory and missing information to ensure we are in 

compliance with federal guidelines.

The annual physical observation inventory is documented in VISION.

Auditor’s Response:

We commend the Secretary of State for establishing the current system.
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Finding No. 5 – Procurement Procedures

The Office did not provide competitive bidding documentation for three of seven equipment 

purchases tested.

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 State will allow the same policies and 

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

The Office follows State of Vermont Agency of Administration Bulletin No. 3.5, Contracting 

Procedures. The Bulletin requires competitive bidding using a standard or simplified bid process 

for contracts over $15,000 and the standard bid process for contracts over $100,000. A sole 

source contract may be made under certain circumstances and must be properly approved.

Three of seven equipment purchases tested were not supported with documentation of 

competitive bidding or documentation of an approved sole source contract. These transactions 

represent $295,478 of expenditures.

Procuring all contractual services and goods through full and open competition helps prevent 

misuse of federal funds and responsible bidders are selected for goods and services needed for 

HAVA purposes.

Documentation of competitive bidding was not maintained in a manner that it could be provided 

to the auditors.

Recommendation

We recommend that EAC require the Office to substantiate that the equipment purchased was 

done through a competitive bidding process or properly obtained through a sole source contract.

Secretary of State Response:

We were unable to locate the files for the purchases of 11/2/2005 (Gateway Companies Inc.), 

10/24/2008 & 1/20/2009 (LHS Associates). We believe the appropriate procurement process was 

followed, however, we cannot locate documentation to that effect.

Auditor’s Response:

The Secretary of State’s response does not provide any additional information. Therefore there is 

no modification to the original position of the audit.
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Finding No. 6 – 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.

Two of twenty-four Other Costs tested were for advertising expense that were not allowable 

according to HAVA. The supporting documentation for one of the expenses for $12,000 was 

described in an email from the Secretary of State as a “:30 Get Out the Vote NCSA spot”. The 

supporting documentation for the other expense of $42,112 was a post card reminding voters of 

the change in the Primary Election date.

The Director of Corporations and Business Services stated she believed the $12,000 amount was 

coded to the wrong fund. The Office did not state why the $42,112 was charged to HAVA.

Documentation of expenses was not maintained in a manner that it could be provided to the 

auditors.

Recommendation

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

(a) Transfer to the election fund $54,112 for the questioned costs cited above along with the 

applicable indirect costs.

(b) Develop and implement policies and procedures and provide training to ensure that 

charges to HAVA are allowable, allocable and reasonable to HAVA.

Secretary of State Response:

The $12,000 invoice (2009) appeared to be incorrectly coded and we agree to transfer this 

amount to the election fund. The $42,112 (2010) invoice was for a voter education post card 

stating the change in Primary Election date. We consider the $42,112 cost to be voter education, 

not a “get out the vote promotion”, therefore, this was an appropriate charge to the election fund.

We have implemented policies, procedures, and training ensuring allowable, allocable and 

reasonable charges to HAVA.
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Auditor’s Response:

The Secretary of State’s response requests that the $42,112 expenditure be further evaluated 

since it is their belief that this represents a voter education expenditure. We recommend that 

EAC evaluate this activity to determine whether it meets allowable criteria.

Finding No. 7 – Unsupported Costs

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

the expenditures.

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

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

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

The Uniform Administrative Requirements for Grants and Cooperative Agreements with State 

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

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

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

The audit sampled 64 transactions and identified the following issues and discrepancies:

• 4 of the 64 transactions were missing an invoice to provide the detail of the costs incurred.

• 5 of the 64 transactions were missing sufficient evidence regarding final work product or 

deliverables that provide the allowability of the transaction.

• All transactions related to matching costs were missing supporting documentation such as an 

invoice to support the allowability of the transaction as a matching expenditure.

In summary, there were nine transactions reviewed that did not have sufficient evidence to 

support that the costs were allowable to HAVA grants. This resulted in $32,299 in unsupported 

costs. Additionally, the $702,438 of matching expenditures reported did not have sufficient 

evidence to support their allowability.

Documentation of invoices and contracts was not maintained in a manner that it could be 

provided to the auditors.

Recommendation:

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

Office:

(a) Transfer to the election fund $32,299 for the unsupported costs cited above along with 

the applicable indirect costs.

(b) Provide an analysis of the $702,438 reported as matching expenditures to substantiate 

their allowability.
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(c) Develop and implement policies and procedures regarding maintenance of supporting 

source documentation for all Federal expenditures incurred.

Secretary of State Response:

4 of the 64 (2006-2009) transactions were missing an invoice to provide the detail of the costs 

incurred. Five of the 64 transactions (2006 – 2011) were missing sufficient evidence regarding 

final work product or deliverables that provide the allowability of the transaction. Although we 

believe these transactions were allowable, we are unable to locate the supporting documentation.

We provided the auditors with expenditure detail reports from VISION for the $702,438 reported 

matching expenditures from 10/1/2003 thru 9/30/2004 and 10/01/2005 thru 9/30/2006. The 

invoices for these two time periods could not be found as they had been purged according to our 

retention schedule.

The system detail provides the following funds and program codes:

• Fund 21160 = state elections (fund# is primary level, then program#). Expenses charged 

to the elections fund by program code in numerical order:

29005 = indirect cost allocation to elections for administration

29020 = elections administration

29025 = elections – campaign finance

29030 = Presidential Primary

29940 = primary and general elections

29960 = lobbyist

Auditor’s Response:

The Secretary of State’s response does not provide any additional information. Therefore, there 

is no modification to the original position of the audit.

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

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

The Office responded on May 30, 2017 and generally agreed with the report’s findings and 

recommendations. The EAC responded on June 15, 2017 and stated they will work with the 

Secretary’s Office to ensure appropriate corrective actions are taken. The Office’s complete 

response is included as Appendix A-1 and the EAC’s complete response as Appendix A-2.

McBride, Lock & Associates, LLC performed the related audit procedures between May 6, 2016

and April 12, 2017. 

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

McBride, Lock & Associates, LLC

April 12, 2017
APPENDIX A-1

Response of the 

Vermont Secretary of State 

to the Draft Report
~ .. 

State of Vermont 

Office of the Secretary of State 

Secretary 

[phone] 

[fax] 

802-828-2363 

802-828-2496 

128 State Street www .sec.state. vt. us 

Montpelier, Vf 05633-1101 

May 30, 2017 

Ms. Patricia Layfield 

Inspector General 

Office of the Inspector General 

1335 East-West Highway, Suite 4300 

Silver Spring, MD 20910 

Dear Ms. Layfield, 

James C. Condos, Secretary of State 

Christopher D. Winters, Deputy 

Thank you for the opportunity to respond to the draft Performance Audit Report for the Vermont 

Secretary of State. Per your request I am including our response to the report within the body of 

this letter, in PDF format. Additionally, I have attached documentation to support our response. 

Vermont ecretarv of fate Audit Response: 

Finding No. 1 Indirect Cost Allocation 

(a) We have reviewed the calculation provided by the audit of the maximum indirect costs 

allowable for the period 6-30-2006 thru 6-30-2015. The IDC worksheets we provided to 

the Auditors for FFYl 4 and FFYl 5 were overstated as they included direct capital costs. 

The approved IDC rate for both years did not include direct capital costs, and the 

modified rate from the Agency of Health & Human Services reflected this, and was 

applied correctly in the auditor's worksheets. 

(b)On July 1, 2015, recognizing that the JDC charged to the election fund from SFY06 thru 

SFY2015 were in excess of the allowable amount, we reduced the IDC rate from 17.0 to 

9.32. The JDC of 9.32% has been applied for SFY16 and SPY 17 (see "speedcharts" 

Fund 711/2015 & 711/2015). We will continue to review and revise the IDC rate as 

needed to ensure the elections fund is appropriately charged. 

( c) Procedures have been implemented to ensure indirect costs are charged in accordance 

with the negotiated indirect cost agreement and federal regulations. 

Finding No. 2 - Maintenance of Expenditure 

We have not been able to locate the election division expenditures for SPY 2000 either in 

copy or electronic format. We contacted the Vermont Department of Finance & 

Management (DFM) to determine if the SFY2000 expenditures were available. 

Unfortunately, the oldest fiscal year the DFM has is SFY2001. 

YERMONT 
Finding No. 3 -Inadequate Payroll Documentation 

(a) Although we did not have the proper certification either written or via timesheets for the 

period tested, Elections Administrator Lelonie Adams has worked solely on HA VA EAC 

allowable activities for her entire employment period. We do not believe it is appropriate 

to charge us for not reporting properly when we were following the intent and use of 

HAYA EAC requirements. The Auditors provided us with language for a semi-annual 

certification. Please note the attached semi-annual certifications from November 11, 

2011 (date of employment), thru December 31, 2016. The originals of the semi-annual 

certifications are being retained in the employee's personnel file. 

(b) We have implemented a policy and procedure to ensure employees who expend efforts 

on Federal activities accurately record their time in accordance with Federal Regulations. 

Finding No. 4 -Inadequate Equipment Management 

(a) We have implemented the policies and procedures regarding inventory management and 

do have an annual physical observation of inventory. The State of Vermont uses a 

PeopleSoft financial application referred to as "VISION". Within VISION is a fixed 

asset module where the information noted above is entered annually. 

(b) An inventory has been performed every year in VISION (I am not certain when this was 

initiated as a statewide effort). Since FY2014 we have been fully populating the fixed 

asset module. We will verify and update any missing information relating to Fedei:al 

funds. We will also work with LHS Associates regarding the tabulator inventory and 

missing information to ensure we are in compliance with federal guidelines. 

(c) The annual physical observation inventory is documented in VISION. 

Finding No. 5-Procurement Procedures 

We were unable to locate the files for the purchases of 11/2/2005 (Gateway Companies 

Inc.), 10/24/2008 & 1/20/2009 (LHS Associates). We believe the appropriate 

procurement process was followed, however, we cannot locate documentation to that 

effect. 

Finding No. 6 - Unallowable Cost 

(a) The $12,000 invoice (2009) appeared to be incorrectly coded and we agree to transfer 

this amount to the election fund. The $42,112 (2010) invoice was for a voter education 

post card stating the change in Primary Election date. We consider the $42, 112 cost to 

be voter education, not a "get out the vote promotion", therefore, this was an 

appropriate charge to the election fund. 

(b) We have implemented policies, procedures, and training ensuring allowable, allocable 

and reasonable charges to HA VA. 

Finding No. 7 - Unsupported Costs 

(a) 4 of the 64 (2006-2009) transactions were missing an invoice to provide the detail of 

the costs incurred. Five of the 64 transactions (2006 - 2011) were missing sufficient 

evidence regarding final work product or deliverables that provide the allowability of 

the transaction. Although we believe these transactions were allowable, we are unable 

to locate the supporting documentation. 

(b) We provided the auditors with expenditure detail reports from VISION for the 702,438 

reported matching expenditures from 10/1/2003 thru 9/30/2004 and 10/01/2005 thru 

Page 2 of3 

YERMONT 
9/30/2006. The invoices for these two time periods could not be found as they had 

been purged according to our retention schedule. 

The system detail provides the following funds and program codes: 

• Fund 21160 = state elections (fund# is primary level, then program#). 

Expenses charged to the elections fund by program code in numerical order: 

29005 = indirect cost allocation to elections for administration 

29020 = elections administration 

29025 = elections - campaign finance 

29030 =Presidential Primary 

29940 = primary and general elections 

29960 = lobbyist 

We look forward to discussing the report, our response, and resolution to the findings. Please 

contact me if you have any questions. 

( 

Thank you, ,......., /\ \ _. 

\'(lwJilllfllL . ·b.Qjc\ 

Marlene Betit 

Director of the Administrative Services & 

Corporations/Business Services Division 

Attachment 

cc: Secretary James C. Condos 

Deputy Secretary Chris Winters 

Elections Division Director Will Senning 

Page 3 of3 

YERMONT 
APPENDIX A-2

Response of the 

U.S. Election Assistance Commission

to the Draft Report
June. lS, 2017 

EAC RESPO.NSE TO THE DRAFT·AUDIT: 

OIG Perfarmance At1dit ffepott of1.the Administration of Payments 

Received Under the HelpAtnericaVote Act by the Vetmont 

Secretary ofStateforthe PeriodAPri/10, 2003 through September 

30, 20:1.5 

MEMORANDUM 

To: 

·s:vpjeet: 

Patricia Layfield, ln~pector General 

Brian. Newby, Executive Director ·~ 0 

Draft Performance Audit Report - riAdministration of Payments Received 

under the Help Ametlta Vote Act by the Vermont Secretary ofstate 

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

Vermont Secretary of State. 

The ElectionAssistaoce Commlssio.n {EAC}appredates the audito~s detailed findings 

and recommendations o·utlined in the drc;1ft c:tl,ldit report and will work With the 

Secretary's Offii:;e to ensure appropriate corrective actions are taken in a timely ahd 

cornpl~te manner. 
APPENDIX B

Audit Methodology
19

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 amounts charged as indirect costs by verifying the approved rate and the 

reasonableness of the base.

• Evaluated compliance with the requirements for accumulating financial information 

reported to the Commission on the financial status reports and progress reports, 

accounting for property, purchasing HAVA related goods and services, and accounting 

for salaries.

• Verified the establishment and maintenance of an election fund.

• Verified the State expenditures met the Maintenance of Expenditures requirement

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

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

• Verified that the matching requirement was timely met and matching expenditures met 

the prescribed criteria and allowability requirements of HAVA.

• Verified program income was properly accounted for and not remitted to the State’s 

general fund.
APPENDIX C

Monetary Impact 

as of September 30, 2015
20

Appendix C

MONETARY IMPACT AS OF SEPTEMBER 30, 2015

Description

Questioned 

Costs

Additional 

Funds for 

Program

Indirect Cost Allocation $ 155,802 $ -

Unsupported Payroll Costs 70,346 -

Unallowable Costs 54,112 -

Unsupported Costs 32,299 -

Total $ 312,559 $ -