Orange County Bankruptcy in 1994

It is over 20 years since Orange County, California filed bankruptcy.  What most citizens of Orange County don’t realize is that the municipality is still in bankruptcy.  In fact the County still has a few years left until its original debts of nearly $1.6 billion are paid off.   The case is still open as Orange County continues to crawl out of the hole that then Orange County Treasurer Robert Citron put them in.

Reversing 1994 Orange County Bankruptcy Reforms

Earlier this month, according to mynewsLA.com, Orange County took a step, although somewhat political, towards reversing reforms that were put in place when it first surprised the world by becoming the largest municipality to file bankruptcy.  In 1994 Orange County created the Internal Audit Department to, in essence, audit the county auditor.  The Department also included the County’s fraud hotline that handled reports by whistleblowers of fraud at the county government, misuse of county resources, and major violations of county policy.

Now, the supervisors voted to move the employees from the Internal Audit Department to the elected auditor-controller.  The move will also hand the fraud hotline to the County Counsel’s office.  This move seems to allow the county auditor to audit themselves.  This was the way things were prior to Orange County’s bankruptcy filing.

Possible Backlash

The move seems to be in response to State Assemblyman Tom Daly’s bill to strip the supervisors of their internal auditing oversight.  The bill by Assemblyman Daly is said to be in retaliation for the Departments earlier reports regarding Daly’s tenure as the County’s clerk-recorder.  The report found that the clerk-recorder’s office was badly mismanaged under Daly prior to taking office in the State Assembly.

In any case, although there is backlash against the changes, the supervisors will relinquish their control over the auditing of government agencies.  Therefore, on one hand, it seems as if the auditor will audit themselves.  However, the board of supervisors will appoint the oversight committee to look over the auditor’s shoulders.  Additionally, as stated above, the County Counsel will handle the fraud hotline matters.  This will essentially create a separation of powers.