Supervisors to Vote on Restructuring Oversight of Internal Auditor

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.

  • Kathleen Tahilramani

    I know for an absolute fact that any report to the County’s Fraud Hotline is provided directly to County Counsel and if they know or figure out the name of the reporting party, the repercussions will be swift and very harmful. I would NEVER use the fraud hotline. Don’t trust it for a second, County Counsel will use it as a avenue to blackball anyone they determine to be the reporting individual. Nothing about the Fraud Hotline is intended to be a vehicle to determine wrongdoing – it is an effective early detection system for the County BOS and County Counsel to identify and quash any person who dares to speak up and reveal information regarding potential fraud or wrongdoing. If you want to keep your County job – the BOS and CC message is: shut-up and do what you are told and make it happen. If you get thrown under the bus for following orders that were improper = too bad, too sad – it’s now on you to be the poster child representing the latest County staffer to get rolled in order to protect the higher up’s. And that is what the County calls “servant leadership”.

  • David Zenger

    A political witch hunt? Really Tom? That audit treated you with kid gloves. And Peter Hughes gave you so much time to not repsond that you were able to skedaddle with no political repercussions.

    Your purchase of the derelict building at 433 W. Civic Center for a OC sports hall of fame using 12D funds should have landed you in Theo Lacy. Tom? Tom?

    Notwithstanding Daly’s petulant payback, it’s time to recognize that the Board itself has turned the Internal Audit function into a instrument that can be used, or misused, either through commission or omission.

    At this point it hardly needs to said that turning over any investigation of fraud or corruption to the Board’s lawyers for whitewash and sanitizing is a really bad idea.