Peter Hughes, whose audits impacted several top Orange County government officials, has been pushed out as the county’s internal audit director.

Next Friday, his entire office will be transferred to county Auditor-Controller Eric Woolery, who has been fighting county supervisors for such auditing powers since his election last November.  Woolery plans to replace Hughes with a manager from the auditor-controller’s office.

State Assemblyman Tom Daly (D-Anaheim) – the target of a Hughes audit when Daly was clerk-recorder – crafted legislation that would have forced the transfer.  While supervisors initially balked, they acceded to it last week.

Hughes, who first took over the internal audit department in 1999, had a key role in producing audits that uncovered major fraud and abuse.

His work was central to the referral of the Carlos Bustamante sex scandal to District Attorney investigators, as well as a scandal involving $1 million in contracts at OC Parks under the supervision of Mark Denny, who is now the county’s chief operating officer.

Hughes has been serving as the interim performance audit director since the April firing of Philip Cheng. He’s been privately encouraged to take the open position of performance auditor and was interviewed in closed session by supervisors. To date, no announcement on that posting has come out.

If Hughes becomes the permanent performance audit director, he’ll go from overseeing a staff of 16 auditors to a staff of three.

Longtime county Audit Oversight Committee member Dave Carlson said he heard that Woolery “told [Hughes] there’s no place for him in the Auditor-Controller’s office.”

Woolery, meanwhile, disputed that suggestion, saying he was told that Hughes wanted the performance audit job.

“I was looking to take the department as a turnkey, and so I was expecting him to be there and if not I’m happy to appoint a successor,” Woolery said Monday.

Hughes didn’t return a message seeking comment.

Hughes was brought on as the county’s internal audit director in July 1999 after serving for six years in the same role for NASA’s Jet Propulsion Laboratory.

The internal audit office is tasked with probing some of the most sensitive cases of fraud, waste and abuse at the $5.8 billion county government. Among its functions is investigating the county’s financial accounting processes to minimize the risk that public funds are wasted or stolen.

The office was under the auditor-controller before the 1994 bankruptcy. But afterwards, control was handed to the supervisors when investigators concluded that internal auditors were too close to their colleagues at the Treasurer-Tax Collector’s office and did a poor job of overseeing their questionable investment purchases.

Toni Smart, who is currently the auditor-controller’s accounting and reporting manager, is slated to take over for Hughes.  She has over 20 years of government accounting and auditing experience, according to Woolery.

Smart was a senior auditor for the city of Long Beach, before moving over to the county where she’s been for the last 13 years. At the county, she has worked in the performance audit and auditor-controller’s offices, as well as Child Support Services and Community Resources.

Woolery said he wants to see a more active internal audit department, with auditors getting out in the field, “rolling up their sleeves, doing that day to day interactive work with other folks in the county.”  The goal, he added, is to make sure the county is meeting its internal controls and to make those controls be more effective where possible.

“I want to add value on how we can make processes simpler,” Woolery said.

You can contact Nick Gerda at, and follow him on Twitter: @nicholasgerda.

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