Rebecca Vigil-Giron

P.O. Box 2012

Albuquerque, New Mexico 87103
(505)-345-5051

March 16, 2009

Atkinson & Co.

6501Americas Pkwy, NE
Suite 700
Albuquerque, NM 87110

and

State Auditor
2113 Warner Circle
Santa Fe, New Mexico 87505

Subject: Response to State Auditor Balderas’ release of the Atkinson & Co. 2007
Financial Audit of the Office of the Secretary of State.

To: Henry South, Managing Partner and

State Auditor Hector Balderas

This is a request for remedy and a correction to your Secretary of State 2007
Financial Audit cited above.

I am in receipt of your Audit and the accompanying Press Release that State Auditor Hector
Balderas prepared for the last 6 months of my 8-year Administration and the first 6 months
of the current Secretary of State’s administration, fiscal year 2007.

In your cover letter, on page 3 you state “we were unable to obtain a representation letter
from the former Secretary of State and appropriate staff who held office for the first six
months of the audit year. Generally accepted auditing standards require a representation
letter be obtained from management signed by appropriate officials.” It is correct that no
one from your Company contacted me, and therefore I was denied an opportunity to
respond to your draft audit report before the final report was completed and released 8
months later. Within the more than 15 audits that I was directly involved during my
administration, I never received findings without first meeting with the Auditors to be
afforded the opportunity to respond and clear up any issue that may have been raised. Since
I was not given that same opportunity for this audit, I believe your audit is missing critical
information that would have helped to establish accurate conclusions in the best interest of
all parties concerned, especially the citizens of New Mexico. Because of your inattention to
one of the CPA’s key principles of objectivity this Audit is fatally flawed and should not be
accepted as worthy of your Company’s seal.

Neither the current Secretary of State nor her staff could have or should have answered any
of the findings that you put forth because they had no knowledge of the implementation of
the Help America Vote Act (HAVA) during my administration. By reading some of your
remarks in the audit, it appears that the only information that was provided to you by the
current Secretary of State was the Preliminary Draft for the Federal Audit. Because of the
negative tone of that Preliminary Draft, that should have been a red flag to your Auditors
that you were being set up to assist in destroying my reputation and to cast doubt on the
federal funds that were appropriately expended.

The State Auditor copied some of the findings from a May 2007 Preliminary Draft of the
Election Assistance Commission (EAC) Federal Audit in preparation for this audit. That
EAC document states on the front cover that it is not for distribution and is only a working
draft. I was given the opportunity by the EAC Inspector General to answer the Federal
Preliminary audit findings and they were resolved and therefore not listed in the “EAC
Official Final Report” for New Mexico. If the State Auditor was attempting to prepare an
accurate document in the best interest of finding the truth those preliminary findings should
not have been included in the Final Secretary of State Audit Report because they were
earlier explained and subsequently removed by the EAC IG.

The State Auditor’s Press Release that accompanied the current Secretary of State’s final
Audit was troublesome. The State Auditor went to great lengths to sensationalize the
findings. The timing and necessity of a press release, nearly 8 months after the audit was
completed, is suspicious to say the least. Could this be because he has expressed an
interest in running for a higher office? Despite the fact that half of the findings and material
weaknesses in the audit were cited against the current Secretary of State, the State Auditor
chose not to mention any of those in his press release. I feel that I am being exploited for
political gain by the State Auditor.

I challenge the State Auditor to make it a practice of releasing the audits of all current New
Mexico elected officials and all state agencies. These current audits, not just those
concerning former elected officials, that are guaranteed to give him headlines, and at the
same time managing to destroy their reputations as Public Servants, will serve to
demonstrate to the public that audit findings are much more common.

I was denied the chance to provide responses to the generally accepted auditing standards
of the draft report of the Secretary of State’s audit before the final audit report was released;
I am compelled to address the findings that impact my last 6 months of the audit period,
after the fact and for the record.

07-02 Noncompliance with HAVA – Improper Use of HAVA Funds - Key Finding:
“From July 1, 2006 to December 31, 2006 the former SOS administration inappropriately
used $29,735 in HAVA funds to enhance its own website.”

Response: In 2003, the New Mexico HAVA 33-member Advisory Commission,

consisting of county clerks, legislators, disability advocates, groups representing multi-
lingual needs and other stakeholder groups met to discuss how New Mexico could best
draft a plan to implement the provisions of the Help America Vote Act. The results of this
input was the “New Mexico HAVA State Plan,” which was submitted to the Federal
government as part of our request for HAVA funding as required by Public Law 107-252
Help America Vote Act 2002, Section 253 (b). The State Plan repeatedly refers to web
page enhancement. Specifically the State Plan includes:

(Page 4, last paragraph) “The Secretary of State will post instructional materials for all
voting systems on its web page.” Voting information is an allowable cost under Title II
Section 251. Under Title I, Section 101 permissible uses include educating voters on
voting systems.

(Page 7, second paragraph) Refers to the posting of Election Proclamations on the

Secretary of State’s web page. Voting information is an allowable cost under Title II
Section 251.

(Page 9, sixth paragraph) “The Office of the Secretary of State plans to enhance its web
page with the creation of a web based query system with information on polling places,
sample ballots and instructions on the voting system in use at each polling place.
Instructions on provisional balloting will be placed on the web page and signs posted at the
polls. Other web-based enhancements will be additional information provided to military
and overseas voter, instructions for compliance with federal identification requirements for
registration by mail, how to vote absentee, how to obtain a replacement absentee ballot,
how to report suspected fraud, and how to file an administrative complaint.” Costs related
to provisional voting are an allowable expense under Title II Section 251.

Clearly the web page enhancements were part of the approved New Mexico HAVA Plan
and funding request and were paid for with HAVA funds. Furthermore, under HAVA
Title I & Title II Permissible Uses, Section 251, Section 101, and Section 261 all list
“voting information” as an allowable cost.

More importantly, this issue was copied by the State Auditor from the May 2007
Preliminary Draft of the EAC audit that clearly states it is not for distribution and is only a
working draft. This finding was later resolved for the reasons cited above and it was not
listed in the EAC Official Final Report, therefore it should never have been used as a
finding by the State Auditor.

Re: 07-20 Unauthorized use of Voter Registration Oracle Databse Licenses -

Finding: The SOS breached a contract and owed to contractor $219,765 in licensing
fees. The current SOS worked with the State Board of Finance to pay back $182,896 of
that debt but state still owes $36,869.

Response: The Governor asked the Department of Finance and Administration (DFA)
two years ago to look at the same time period of my administration that the State Auditor
reviewed. In their Conclusions and Findings report dated May 10, 2007 they state that,
“The SOS was trying to implement the paper ballot requirements of Section 1-9.71 NMSA
1978, as amended by Laws of 2006, Chapter 43, which was signed into law on March 2,
2006 for the General Election. No funding was provided to the SOS to cover the expenses
related to this effort, which required substantial expenditures relative to the size of the
SOS’s budget.”

The election year of 2006 was an extraordinary year with the passage of the most sweeping
changes in Election Law that New Mexico has ever faced. An all-paper ballot election law
was passed as an unfunded mandate. I attempted to obtain the funds under the 50% budget
rule, Section 6-3-6 NMSA 1978, which would have taken the funds from the second half
of the fiscal year. This has been a practice in the past, but this request was inexplicably
denied that year by the Department of Finance and Administration (DFA). They assured
me that they would support a Supplemental Bill during the 2007 Legislative Session if I
would submit the necessary documents to the Legislative Finance Committee and DFA
before I left office. My Office also requested assistance from the Board of Finance to
cover the election costs but we were not successful. I did in fact request Supplemental
Funding in November 2006 from the Legislature to cover the costs. During the 2007
Legislative Session the current Secretary of State received more than $3 million in a Special
Appropriation to cover all costs relating to the 2006 General Election. The request also
included the State’s matching funds that were erroneously reverted back to the General
Fund in 2006. That match was related to our HAVA federal funds appropriation and was
placed in the State’s Revolving Fund in 2004 and should not have been reverted.

Re: 07-09 Noncompliance with State Procurement Code: Finding: The former
administration of the SOS paid the media contractor $6,271,810 over a period from
August 2004 to October 2006. Item #1: The SOS did not inform the State’s centralized
procurement office of the planned purchase.

Response: The Media Services Contract is considered a Professional Services Contract.

There is no requirement to inform the centralized procurement office. That is not the proper
procedure for purchases of professional services. The centralized procurement office is
also known as the purchasing agent at General Services Department. According to the
State Procurement Code under State Statute NMSA 1978 13-1-99 item A. “Excluded from
the requirement of procurement through the state purchasing but not from the requirements
of the Procurement Code are the following: A. procurement of professional services.”

That rule is in place due to the fact that purchases for physical goods are processed by the
purchasing agent at the General Services Department, but purchases of professional
services are processed by a completely different department, known as the Department of
Finance and Administration (DFA). That department was informed of the purchase and
along with the Office of the Attorney General did in fact approve the contract and
amendments. This was a mistake that the EAC auditor made in his audit since he is lacking
a basis in our State Procurement Laws, but I am surprised that the State Auditor repeated
this mistake. This process is the standard legal method of purchases for professional
services in State government. For these reasons I disagree with this finding.

Item #2: Appeared to pay the vendor at a rate higher than the rate negotiated in the
amended contract.

Response: Prior to negotiating the contract, when we sought proposals from prospective
vendors one of the questions on the Request for Proposals asked, “What is the average
hourly rate for these services,” which was a standard question. Each of the vendors
responded with the same dollar figure, and the RFP made it clear that in the actual contract
to be negotiated, we would negotiate the fee. The selection process was not based on an
hourly rate; the selection committee was to choose a vendor based on experience and their
ability to reach out to minority language voters in the state. After a vendor was chosen by
the selection committee, we prepared a contract and I agreed by written instrument to
compensate the vendor at 17%, a flat Full Service fee. In a review of various media
services agreements by advertising firms contracted to other state agencies, the rate charge
for media services in state contracts is always a percentage rate that varies per vendor from
as low as 15% to as high as 45%. The vendor we utilized also worked for other state
agencies including the Transportation Department and the Office of the Attorney General at
a similar rate. Over the three years the contract was in place it was amended twice and
approved for an increase by the Office of the Attorney General and the Department of
Finance and Administration since the inception of the first contract and the question was
never raised at that time about the Flat Fee contract agreement nor the rate of payment. For
these reasons I disagree with this finding.

Item #3: Appeared to pay the vendor twice for producing a single video in the amount of
$186,000.

Response: The vendor had originally agreed to produce the poll worker training video
under the budget for Amendment No. 1. Before the actual production work could be done,
my Office requested that the production halt until we completed compiling information
incorporating new election laws and procedures for the election. I instructed the vendor to
reallocate the money that had already been paid to him and move it to the public education
campaign within the original contract. The vendor did so. The vendor moved the
appropriation into the media buys for the public education campaign under my direction
using Amendment No. 1 funds.

When my Office was prepared to begin the production of the poll worker training video,
we submitted Amendment No. 2 with the same language that was used in Amendment No.
1. The poll worker training video was produced and the invoice was approved by DFA.
For these reasons I disagree with this finding.

Item #4: Paid the vendor in excess of the maximum amount allowed under the contract by
$323,060.

Response: The confusion over this amount is derived from a standard provision in the
original contract and amendments approved and signed by myself, the vendor, and
approved by the Department of Finance and Administration and the Office of the Attorney
General. The contract addresses this in item 2.A. “Payment Provision”, which lists the
contract fee, followed by, “plus New Mexico gross receipts tax.” The so-called “excess”
amount is the amount of the New Mexico gross receipts tax. For these reasons I disagree
with this finding.

Item #5: Contract amounts were paid under a Letter of Understanding that was not
incorporated into the contract and which was different than the basis upon which the
contract was awarded.

Response: This is allowable under the original contract language under Item 16, which
states, “This agreement shall not be altered, changed, or amended except by instrument in
writing executed by the parties hereto.” The Letter of Understanding was in fact an
instrument in writing and executed by the parties.

Furthermore, according to the State Procurement Code in State Statute NMSA 1978
13-1-42, under the definition of contract modification, it states “Contract modification,”
means any written alteration in the provision of a contract accomplished by mutual action of
the parties to the contract.” Again, the so-called letter of understanding was in fact in
writing and by mutual action of the parties.

Also the Procurement Code under State Statute NMSA 1978 13-1-171 states that
“Adjustments in price shall be computed in one or more of the following ways as specified
in the contract: E. in such other manner as the contracting parties mutually agree.” Again,
the contracting parties agreed in writing to the items in the Letter of Understanding. For
these reasons I disagree with this finding.
Item #6: The contract arrangement which appears to be the bases for the contract appears
prohibited by the procurement code.

Response: The Procurement Code specifically exempts advertising contracts according to

State Statute NMSA 13-1-98 (V) of the “purchases of advertising in all media, including
radio, television, print and electronic” are specifically exempted from the Procurement
Code. Additionally, the contract was approved and signed by the Department of Finance
and Administration, as well as the Office of the Attorney General.

Under HAVA the Chief State Election Official was tasked with the authorization and
obligation to provide voting rights education. The media advertising program was initiated
due to the permissible uses in HAVA Title I, Section 101 listing “Educating voters
concerning voting procedures, voting rights, and voting technology.” A report from the
EAC to the U.S. Congress available on their web site dated July 2007, item 23 reiterates
that HAVA funds may be used to educate voters concerning voting procedures, voting
rights and voting technology.

While State Law 13-1-98 (V) NMSA 1978 specifically exempts the purchase of
advertising from the Procurement Code and my office could have just selected a vendor and
initiated a contract, I chose to utilize the Request for Proposals (RFP) process and accept
bids for the 3-year contract. In order to create the RFP my office reviewed sample
contracts from other agencies for advertising services. Due to requirements in HAVA and
the State Constitution my office added new provisions for multi-lingual advertising
experience and capabilities. Multi-lingual legal requirements include:

Section 203 of the Voting Rights Act of 1965 requires voting systems to provide
alternative language accessibility.

Under New Mexico Election Law NMSA 1978 1-1-3, requires that all information related
to the electoral process shall be in English and in Spanish.

HAVA Public Law 107-252—October 29, 2002 116STAT. 1705 Section 301 (4) requires
that the voting system shall provide alternative language accessibility.

Under the New Mexico State HAVA Plan, page 5, “Alternative Language Accessibility”
includes requirements for Spanish, English and Native American languages. It also refers
to these requirements on page 9, “Voter Education”.

Under the Catalog of Federal Domestic Assistance Uses and Restrictions of HAVA funds
Subtitle Section 101, requires providing assistance to Native Americans and to individuals
with limited proficiency in the English language.

The final product drew the praise of the Albuquerque Journal on November 1, 2004 whose
editorial noted, “A heavy dose of television and radio spots in English, Spanish and Navajo
on issues ranging from registration to early voting should help ensure voter turnout.”
During the 2004 and 2006 elections we increased voter registration and voter participation
by over 12%.

The RFP was advertised in the newspaper for the required time period. A selection
committee was appointed to review the proposals, and they recommended the contractor
that was selected. My office created a contract based on standard templates in use at other
state agencies, and the Office of the Attorney General and the Department of Finance and
Administration approved the contract.

After an inquiry letter (November 23, 2004) from then U.S. Senator Pete Domenici (D-
NM), “requesting the EAC review the use of federal funds” by then Secretary of State, the
EAC responded in a letter dated February 16, 2005, “Expenses for publicity are not
allowable when the primary focus of the expense is publicity. However, the ads that were
produced by the Secretary of State of New Mexico had a definite educational component.
After reviewing the advertisements and the Secretary’s response to our questions, we
believe that New Mexico has not violated the HAVA in the use of Title I funds for
purposes of developing and running the advertising campaign in question.”

In conclusion, you are known as a reputable CPA firm, one that in my former official
capacities, I used throughout the years. Your auditors were not given the necessary
documentation that would have provided you with factual information, i.e., New Mexico
HAVA State Plan, HAVA Financial Status Reports and any other reports that I left in my
office when my term ended in December 2006. Your auditors did not speak to the
individuals from my own administration with the knowledge of HAVA, individuals who
did not have hidden agendas, who could have answered any of your questions before
producing a Final Audit Report, and more importantly your auditors did not speak to me
about the findings.

I acknowledge that you performed this work under contract and that contract is probably
closed. In the interest of accuracy and objectivity (in that you did not seek me out to
validate your findings), I request that you recall your Audit, correct it to show the facts as
presented, and reissue this Audit and thus help me restore my good name in this State. I
am available to meet with your Auditors anytime. My phone number is 505-345-5051.

I hope that this information and request does not fall on deaf ears and that my Detractors
cease in their conspiracy to destroy me and all the good service that I have given to the state
of New Mexico.

Sincerely,
(original signed by RVG – March 16, 2009)

Rebecca Vigil-Giron
Former Secretary of State

cc: Attorney General Gary King

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