Orange County staffers failed to inform supervisors in 2008 that a building up for purchase would need renovations that cost more than the price of the property and that the actual revenue source to buy the real estate was a restricted fund account under the Orange County clerk-recorder’s office, according to a recently released internal audit.

The funds to buy the property, which lies in the county’s civic center, came from a source that for years has drawn questions from county government insiders.

The revenue source, known as Fund 12D, is a restricted clerk-recorder’s office account financed by fees levied on document recording, indexing and certified copies of vital records, the audit states.

Withholding such information — key to deciding whether to buy the property — was identified in the audit as “two critical control weaknesses.” The audit also places blames on the clerk-recorder’s office, county Public Works and the county CEO’s office for failing to disclose some of the information.

News of the audit came just as the clerk-recorder’s office became embroiled in another controversy over paying Anaheim City Councilman Jordan Brandman $24,000 for a draft report that two supervisors — Todd Spitzer and John Moorlach — are questioning.

County supervisors are set to interview 11 candidates to replace former Clerk-Recorder Tom Daly, who was elected to the Assembly last year.

Supervisors are not happy about being kept in the dark.

“When you don’t give the whole story to someone who has to make a decision, that’s disconcerting,” said Moorlach.

Meanwhile, Daly wrote on letterhead from his 69th Assembly District office that the conclusions of the audit are completely wrong. Supervisors had “ample opportunities to ask any conceivable question, just as they do on any other matter. They chose not to, for reasons only they can describe,” Daly’s letter reads.

Attempts to blame the miscommunication on county staff “amounts to nothing but a farcical cheap shot, and in my opinion is a sad waste of precious staff time and tax payer dollars,” Daly wrote.

County supervisors approved purchasing the property on Jan. 15, 2008, the audit states. The reason for buying the property was to use it for additional archive space. But the agenda staff report did not explain that Public Works had estimated necessary renovations would cost between $3.56 million and $4.44 million, the report states.

“This information was known by County staff of the Clerk-Recorder Department and RDMD [public works] about 6½ months prior to the Board of Supervisors meeting,” the audit reads. “This is a critical flaw in the [agenda staff report] process itself.”

Not only was information withheld but the staff report supervisors reviewed was misleading.

The audit quotes the staff report as stating that “RDMD staff conducted a physical inspection of the land and improvements, which concluded the property has been reasonably maintained.”

Needed repairs were mentioned but downplayed. The staff report, according to the audit, stated: “A number of minor deficiencies must be corrected to meet County safety standards. The County Clerk-Recorder’s Office will correct these deficiencies prior to occupancy and refurbish the interior to meet their current and future operational requirements after the close of escrow.”

The clerk-recorder’s office did not prepare the staff report, officials from that department told the audit’s authors. That was done by what is now the Public Works, officials from the office told the auditors.

Daly told the auditors that “the former head of Corporate Real Estate and he briefed the Board of Supervisors ‘ … on a number of issues, including renovation costs,’ ” the audit states.

The audit recommends that a standard questionnaire be developed to ensure that in the future such communication gaps are filled.

The other “critical control weakness” identified in the audit was the hidden source of the revenue to buy the property — Fund 12D.

The agenda staff report mentioned only that the source of the revenue would be “Agency 059 — 100%,” which is unrestricted revenue, the audit reads. Yet the true underlying source of the money came from Fund 12D, according to the audit.

An acquisition contract summary attached to the staff report only briefly mentions Fund 12D, “making it unclear and difficult to discern” the true source of the money, the audit declared.

And because Fund 12D is restricted to certain purposes, questions were raised as to whether using the funds to buy the property was even allowed.

The audit states that because of the restricted nature of the revenue, only recorded real property records can be stored in the building. Some records are stored there that don’t qualify, according to the audit.

Whether Fund 12D was an appropriate use of the money was a question that should have been answered before the purchase, the audit concludes.

Only about 21 percent of the building space is being used, the audit states, and county officials should assemble a written plan for the building, the audit recommends.

County supervisors are scheduled to review the audit at the regular board meeting Tuesday morning.

Please contact Adam Elmahrek directly at and follow him on Twitter:

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