Supervisors Relinquish Control Over Internal Audit Office

Orange County supervisors this week reversed a major reform from the county’s 1994 bankruptcy, relinquishing their oversight of the county’s internal audit office and handing that authority back to the elected auditor-controller.

The unanimous vote Tuesday also moves management of the county’s fraud hotline from the internal audit office to the County Counsel’s office, keeping it under the purview of an official who reports to the supervisors.

Under the new model, the auditor-controller would also be consulted on the hotline calls, which handle reports by whistleblowers of fraud at the county government, misuse of county resources, and major violations of county policy.

Supervisors’ Chairman Todd Spitzer said the change was in reaction to a state bill by Assemblyman Tom Daly (D-Anaheim) that, if passed, would mandate the shift in auditing authority.

But to longtime county Audit Oversight Committee member Dave Carlson, the move is a dangerous one, because 75 percent of the internal audits are of the auditor-controller’s operations.

“Auditors cannot audit themselves,” said Carlson, who has served as a public member of the committee since 1997 and has been chair or vice-chair for 12 of those years.

This “returns the county to a structure that is dangerously close to the structure” that had a lack of controls that resulted in the bankruptcy in first place, he added.

Spitzer then turned to the issue of Daly’s legislation, which is proceeding through the state Legislature. “You think we five members” of the Board of Supervisors can stop Daly’s bill? Spitzer asked.

Carlson said he does not have the expertise to comment on the likelihood of Daly’s bill passing, but that it “would just be absolutely wrong” for the state to change Orange County’s structure absent some kind of clear problem with it.

Auditor-Controller Eric Woolery, meanwhile, contended that with the new model, “we will actually have a stronger auditor oversight” than other counties. That’s because in other areas like San Bernardino County, the Auditor-Controller appoints members of Audit Oversight Committee, which isn’t the case in Orange County.

Under the new model, Woolery would be demoted to a non-voting member of the committee, and suggested that all five supervisors serve on the panel.

Supervisor Do said he supported that suggestion, and agreed to address the next committee meeting about it.

The latest changes go into effect on Aug. 21.

The internal audit office, which now has 16 employees, 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.

It changed to its current form after the 1994 bankruptcy when Orange County District Attorney’s office 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.  And county supervisors took on oversight of the office.

But the model has faced significant opposition from Daly, who had been the subject of a critical internal audit report regarding his past oversight of the county clerk-recorder’s office.

Many say Daly’s bills represent political payback for the 2013 that found that a restricted fund was badly mismanaged under Daly’s tenure.

The audit centered on Fund 12D, which is financed by document recording fees and under state law can only be used for specific expenses, such as modernizing birth, death and marriage record systems.

Under Daly’s term as clerk-recorder, accounting of the fund was so bad that a record trail couldn’t be generated to legally justify nearly $7 million in spending over a two-year period, the audit found.

Last year, Daly introduced a budget trailer bill that took away the internal audit authority from supervisors.  And a follow-up bill this year to strip the supervisors’ authority made its way out of committee.

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

  • Kathleen Tahilramani

    My crime was to follow the merit and selection rules and refuse to violate state law. As an HR manager that was my job…

  • David Zenger

    They are never going to reform themselves. The “ethics” referendum needs to include the establishment of a legitimately independent inspector general’s office that would also handle the “fraud” hotline.

    A little spotlight on Building 10 would pay for itself in no time.

    • Debby Bodkin

      If the OC District Attorney used the $1 million in public corruption monies granted by the OC Board of Supes to honestly investigate reported crimes in the OC, none of this independent review stuff would even be necessary. Instead, even DA Rackauckas now publicly attempts to appoint an independent commission to review his own procedures and policies that have already been ruled by several Orange County Superior Court judicial officers to be illegal.

      Only in the OC! Where are the feds?

      • David Zenger

        The feds are here. And, really, they don’t care.

      • Jacki Livingston

        I’ll tell you. They are sitting back, doing nothing. I personally had an audience with investigators from the FBI and Health and Human Services, over embezzlement and fraud I found in my job at SSA. They told me to my face that the amount of money I personally found was not enough for the feds to bother with. That amount was a quarter of a million dollars, with the potential for much, much more. I testified before the grand jury, wrote letters to the BoS, exchanged emails with both Spitzer and Nelson’s chiefs of staff and spent six years banging my head against a brick wall, before they forced me out. These people are all rotten to the core, and they wash each others’ backs. The feds will do nothing, the BoS does nothing, the DA does nothing. It is a shocking reality that crime and fraud are rampant, in this county, and they do nothing.

  • OCservant_Leader

    Since the Board of Supes are all entwined with Band of Brothers organized crime operations employees must be realistic and know there is no safe place to turn.

    Unless you are an appointee – and enjoy crime- the OC government is a horrible place to make a living.

    • Jacki Livingston

      Tell me about it. I just left after six years of harassment, after I witnessed fraud and embezzlement from comatose and paralyzed patients in nursing homes. I became so sick, I had to file worker’s comp, the harassment was so bad. My WC case? Assigned by Spitzer’s wife to a judge that Spitzer represented when she was a victim of a crime. Since then, the county has ensured that I will never be hired by anyone, with negative references that are a direct violation of our court agreement. My 13 plus year career with the County is over, because I did my job and was honest with integrity. This County is a rotten sewer of corruption, and Nelson, Spitzer and the others are all corrupt.

      • OCservant_Leader

        I know –I can tell by your story – that you are telling the truth. I applaud you for telling your tale. The average person can’t wrap their head around this kind of corruption. It’s disturbing.

        • Jacki Livingston

          This kind of corruption would make the mafia jealous. Spitzer and the gang of five think they are Sopranos or something.

  • Debby Bodkin

    I am not an attorney but do know that fraud is usually not covered by liability insurance. So let County Counsel answer the fraud hotline — and if anything goes wrong, the incompetent fraud investigation, legal advice, inaction, retaliation by County Counsel, can always fall under the County’s legal malpractice insurance. However, cannot think of any sane person who would file a lawsuit against Counsel Counsel in the OC…… unless the USDOJ and/or feds clean up the filth before then.

  • Diego Vega

    John, you are so right. Leon Page has been the county’s Retailiator-in-Chief for many years, destroying the careers and lives of countless whistleblowers. Going through the county’s whistleblower investigation process is like a rape trial where the victim is put on trial while the attacker just smiles.

    The BOS keeps putting more and more investigation responsibility under County Counsel or uses outside legal counsel so crime investigations are cloaked under attorney-client privilege.

    • Kathleen Tahilramani

      Believe me Page has used the Fraud Hotline to dismantle reporters. I know this for a fact. Page is a real treat – he has no scruples and his goal is to quash anyone who dares report wrongdoing, whistle-blower’s beware – based on my experience any county employee who trusts the county EEO, HR, Fraud Hotline process is asking for and will get burned. Nice and tidy little Page retaliation program. He is a credit to all lawyers who use their knowledge and skill to protect the dark side. I guess it works well for the dark side – honest staff not so much.

      • Jacki Livingston

        I am their latest victim. Destroyed career, unable to get a job anywhere, marked and ruined for life. All for refusing to look the other way when nursing homes and the County embezzled millions of dollars from comatose patients on life support, and from taxpayers. They made agreements, broke every one. Best part? The judge on the worker’s comp case was represented by Spitzer when she was a victim of a crime, and she was assigned the case by Spitzer’s wife. Now they have sandbagged me from ever being hired, anywhere. They are the axis of evil…and no one can stop them.

        • Kathleen Tahilramani

          So very sad. This is how they destroy people.

          • Jacki Livingston

            Yeah, and my crime was getting back money embezzled from people in nursing homes. Nice, huh?

  • John Claxton

    So let me get this straight. You are putting the fraud hotline under the control of county counsel Leon Page. This man stops at nothing to discourage someone to take a stand against the counties corruption. Now he gets the phone calls first to cut the complaintant off at the knees before any legitimate investigation takes place. Great move Board of Dupes.