A major reform stemming from Orange County’s bankruptcy appears to be on the verge of reversal, with county supervisors set to vote Tuesday on whether to relinquish their oversight of the county’s internal audit office and hand that authority over to the elected auditor-controller.

The proposal, by supervisors’ Chairman Todd Spitzer and county CEO Frank Kim, would also move the management of the county’s fraud hotline from the internal audit office to the County Counsel’s office. 

The auditor-controller would be consulted on the hotline calls, which handles reports by whistleblowers of fraud at the county government, misuse of county resources, and major violations of county policy.

Both changes are slated for a vote by county supervisors at their regular meeting Tuesday.

The internal audit office is tasked with probing some of the most politically sensitive cases of fraud, waste and abuse at the $5.8 billion county government.

The division, which now has 16 employees, was originally housed under the county’s Auditor-Controller, as is the case in most California counties.

However, after the 1994 bankruptcy, Orange County District Attorney’s office investigators concluded that internal auditors were too close to their colleagues at the Treasurer-Tax Collectors’ office and did a poor job of overseeing their questionable investment purchases.  And county supervisors took on oversight of the office.

The move to shift things back to the way they were before the bankruptcy comes amid an ongoing effort by Assemblyman Tom Daly (D-Anaheim) to strip the supervisors of their internal auditing oversight.  Last year, he introduced a budget trailer bill that took away that authority.

Many say Daly’s bill represents political payback for an internal audit report in 2013 that found that a restricted fund at the county’s clerk-recorder’s office was badly mismanaged under Daly’s tenure before he took office in the Assembly.

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.

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

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

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