Orange County supervisors are outraged that the county’s internal auditor has been targeted by State Assemblyman Tom Daly after producing a critical audit of how the Democrat managed internal funds when he was the county’s elected Clerk Recorder.

This month, Daly inserted last minute language into a state budget trailer bill that repealed an audit delegating power granted specifically to county supervisors.

“Over my experience, Mr. Daly felt as if he needed to get even,” said Supervisor John Moorlach. “It was kind of a nice sneak attack. Mr Daly can feel good about himself, but I would say it was rather petty.”

The dust up goes back to when Daly was the county clerk-recorder, and Moorlach requested through a board subcommittee an audit of the restricted clerk-recorder fund known as 12D, which draws revenue from fees levied on document recordings, indexing and certified copy orders of vital records.

County internal auditor Peter Hughes released a scathing assessment late last year.

Accounting of the fund was so bad that clerk-recorder staff for several months attempted but failed to reconstruct a record trail that could legally justify the spending of $6.79 million over two fiscal years, the audit found.

At the time, Daly condemned the audit as a political witch-hunt.

Another audit earlier that year found staffers had 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 fund 12D.

Now, with Daly having run successfully for state assembly in 2012, he has taken aim at supervisors’ authority to oversee such audits.

SB 854 repeals a government code section allowing supervisors to delegate auditor-controller required audits to another employee or officer.

The language was apparently introduced last minute by Daly – the bill was amended June 12 and signed by Gov. Jerry Brown June 20 – and without input from county supervisors.

That drew a sharp rebuke from board Chairman Shawn Nelson.

“The decision to insert this language without consultation with the County did a disservice to the Board of Supervisors and to our relationship with your office,” Nelson wrote in a June 12 letter to Daly. “We would have preferred working with you on the policy implications of repealing this Government Code section before it was dropped upon us without notice.”

Daly wrote in a response to Nelson that the repealed code section was an outdated remnant of the 1994 county bankruptcy – during which supervisors lost faith in the oversight of county offices like the auditor-controller — and was only meant to be temporary.

Daly also noted that no other county in the state can “completely bypass an elected County Auditor-Controller.”

Although not stated outright, Daly’s response indicates that audits demanded by supervisors are at risk of being politically compromised.

“In my view, it’s clearly preferable for any necessary audits to be conducted by the independent directly-elected County Auditor-Controller, rather than a county employee who reports directly to the Board of Supervisors,” Daly wrote in his June 13 response letter. “My proposed language supports transparency, good governance and proven checks and balances for our county government.”

Incoming Auditor-Controller Eric Woolery, who takes office in January, the same time the bill takes effect, agrees.

He says the code section repeal means Woolery can fold the internal audit department back into the office of the auditor-controller.

Moorlach said he isn’t necessarily opposed to that shift. He points out he actually proposed the same action a few years back. 

The board can still request the auditor-controller’s office to conduct a specific audit, so in effects not a whole lot changes. Under Woolery’s plan, the key thing is the internal auditor would no longer be accountable to the Board of Supervisors.

“I plan on bringing it back because I think it strengthens the audit process for the whole county,” Woolery said. “But of course, I would want the board’s input through the audit committee as well.” 

Woolery also said eliminating that code section accomplishes at least one other thing.  

“It kind of puts the bankruptcy behind us,” Woolery said.

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