Basic accounting of a restricted fund for the Orange County clerk-recorder's office has been so inadequate that county officials have struggled to “reconstruct” the financial paper trail for the multimillion dollar account, Internal Auditor Peter Hughes acknowledged Tuesday at the regular Board of Supervisors meeting.
The revelation came after Supervisor John Moorlach asked Hughes why it had taken so long for auditors to review the special account, known as Fund 12D. Apparently Moorlach had requested a review of the fund a year ago.
But according to Hughes, auditors haven't been able to finish the accounting because of shoddy record keeping at the clerk-recorder's office. “We had a great deal of difficulty in accounting for funds, revenues and expenditures for the 12D fund,” Hughes told the board.
The clerk-recorder's office has fallen under increasing scrutiny lately as Voice of OC revealed in recent days that Anaheim City Councilman Jordan Brandman, a former clerk-recorder staffer, was paid $24,000 for a draft report. It has been heavily criticized for, among other reasons, containing an entire section largely plagiarized from the Wikipedia entry on Orange County, errors included.
If that wasn't enough for supervisors this week, an internal audit of a building purchase found that officials in the clerk-recorder's office and other county staff failed to inform supervisors that needed renovations of the property would cost more than the building and that the true source of the money to buy the site was Fund 12D.
Both the building purchase and the contract to pay Brandman happened while Tom Daly headed the department. He was elected clerk-recorder in 2002 and held the office until elected to the Assembly in 2012.
In the meantime, questions have focused on interim Clerk-Recorder Renee Ramirez. Supervisors have said that Ramirez oversaw Brandman's contract and authorized payments to the councilman, decisions that don't bode well for her bid to land the permanent position. Ramirez and 10 other candidates are competing for the appointment.
With the questionable payments to Brandman, the audit of the building purchase and the revelation that the clerk-recorder's office failed to account for spending under a legally restricted fund, Moorlach found it difficult not to become upset during the board meeting.
“This report is extremely disturbing. I am not calm on this at all,” Moorlach said of the audit.
The money in the restricted fund comes from document recording and certified copy fees, about $3 million to $4 million a year. Under state law it can be used only for specific purposes, such as document retention. Yet the clerk-recorder's office has only had an “informal” approach in justifying the fund's expenses, Hughes said.
“From an auditor's perspective, what you look for is a methodology for allocating costs for restricted funds,” Hughes said. The fund was “difficult to actually readily audit. And their documentation of the relationship of the expenditures to the source of revenue was, um, lacking,” he said.
The lack of documentation to justify expenditures under a restricted fund also violates a county auditor-controller policy that mandates each department keep such records, Hughes said.
Although he wouldn't name the former clerk-recorder, Moorlach made it clear that he blamed Daly for a mess that is just beginning to surface. And he questioned whether Daly had stonewalled auditors so they wouldn't release their report on the clerk-recorder until after his Assembly election victory.
“One thing I did not expect when I came here as a supervisor was to get half-truths. Someone tells me half the story, not the whole story, and then says in a response, 'You should have asked me more questions.' That is just unbelievable,” Moorlach said. His reference was to Daly's official response to the audit regarding the building purchase.
Hughes said that internal auditors are still coordinating with the clerk-recorder's office to finish reconstructing the documentation for Fund 12D. He said that a report on the truth about the fund should be ready by spring.
Moorlach noted that candidates for the clerk-recorder slot should know that piecing together the fund's incomplete financial puzzle will be an important responsibility.
“Yes, that is true; they should have a heads-up on that,” Hughes replied. The next clerk-recorder probably should have “a CPA maybe, to lead the charge on that.”