Orange County Board of Supervisors

The Orange County Board of Supervisors. (Nick Gerda / Voice of OC)

Posted: Wednesday, December 3, 2014 6:00 am | Updated: 10:06 am, Wed Dec 3, 2014.

As the 20th anniversary of Orange County’s municipal bankruptcy approaches, county supervisors are on the verge of reversing the centerpiece reform that emerged from the $1.5-billion financial disaster.

The county’s Internal Audit Division – which uncovers some of the most politically sensitive cases of fraud, waste and abuse – was originally housed under the county Auditor-Controller, as in most California counties.

But 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.

As a result of a task force, numerous revisions were suggested to avoid the conditions that triggered Orange County’s financial meltdown. Yet the only one adopted was to move Internal Audit under the supervision of county supervisors along with the establishment of an audit oversight committee.

The idea was simple: having the five supervisors as bosses could ensure that internal auditors would be politically liberated to conduct tough audits.

Yet today, following a series of scathing audits that have uncovered fraud and waste at the highest levels, internal auditors are under heavy political fire and it looks like county supervisors are considering turning back the clock on Internal Audit.

After internal auditors dived into the accounts of then-Clerk Recorder Tom Daly, who is now a state assemblyman, they produced an audit concluding Daly had used reserve accounts as a slush fund of sorts. They battled with Daly over the audit of account 12D, and he was able to delay the final audit until well after his election to the state assembly in 2012.

After being elected, Daly secured legislation targeting the Internal Audit division and slated it to be moved back to the Auditor-Controller – arguing that internal auditors had become a tool of Republican supervisors bent on targeting a Democrat.

When Daly’s legislation was first passed, supervisors blasted it and declared they would ignore it.

Yet after internal auditors completed a recent critical audit that found more than $1 million in questionable parks contracts involving high-ranking county executives, and human resources auditors looked into a senior aide working for Supervisor Pat Bates, the move to transfer auditors seemed to be back on track.

Last month, in a public showdown, two supervisors – John Moorlach and Todd Spitzer – openly questioned the move.

Bates said she made the motion to transfer the department based on her extensive discussions with Interim Auditor Controller Jan Grimes and incoming Auditor Controller Eric Woolery, who assumes office next month.

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