Grand jury report highly critical of Auditor-Controller’s Office

In May, the Riverside County Superior Court issued several grand jury reports. Every July, a new grand jury is convened and over the next 12 months, it may investigate and issue several reports. In fiscal year 2020-2021, it issued three reports, one of which was an assessment of the short-term rental ordinance. This year, the grand jury issued six reports.

One of the 2021-2022 reports addressed significant concerns with how the county’s Auditor-Controller’s Office (ACO) conducts its internal audits and how county officials respond to those audits.

The grand jury had 13 recommendations addressing 12 findings. The ACO, the board of supervisors and the county executive are to respond to the grand jury by the end of August.

“The Board, Executive Office, and ACO have known about the issues surrounding internal audits for many years. Now, they have the opportunity to demonstrate their leadership abilities by rectifying issues. The question is,’Will they?’” was how the grand jury summarized its report.

This is not the first grand jury report critical of the ACO. In 2012, a previous grand jury reviewed the internal audit division. Many of the same conclusions were identified in the most recent investigation.

“The Riverside County Civil Grand Jury’s report makes one thing very clear — we need to restore accountability in the Auditor-Controller’s office,” said Ben Benoit, Wildomar mayor and challenger for the ACO position in the November election. “The report lists a dozen issues that stem from failed leadership by the current Auditor-Controller.”

Among the grand jury’s findings were the “Follow-up” and “Change of Department Head” audits to meet the state’s legal requirement for biennial audits of every department.

The grand jury felt the internal audit unit staff “… do not have the combined knowledge, skill and experience to perform their responsibilities as required …” And they lack critical professional certifications and experience to conduct audits in specialized areas. One example was that none of the county internal auditors currently have the qualification as a Certified Fraud Examiner.

Consequently, some high-risk areas have been missed, in the grand jury’s opinion.

However, the county’s incumbent Auditor-Controller Paul Angulo argued in an email to the Town Crier, “It must be also noted that not one of the Grand Jury interviewers were licensed CPAs, nor had any of them ever led a substantive government office with the kind of risk entailed in tracking and reporting on $38 Billion in county cash flows and assets … In short, the Grand Jury acted like a passenger on a commercial aircraft telling the pilot how to fly the jet through a thunderstorm.”

The grand jury also was critical of how the ACO’s completed audits were presented to the board of supervisors and monitored. For example, the completed audits lack a summary of the seriousness of the results, the potential consequences on the county and the time needed to correct problems, the grand jury believes.

The county also lacks the capability to follow up on audits or to oversee the various audit plans.

Also, the grand jury asserts that the other county agencies “… marginalize [the audits] and, in many cases, [they are] just ignored.” The working relationships between the ACO and other departmental leaders are often “dysfunctional,” according to the findings, which obstructs corrections and improvements.

“Many County and department leaders perceive the ACO department as hypocritical … The appearance of the ACO’s hypocrisy results in mistrust of the ACO,” opined the grand jury. This can lead to inadequate departmental responses to audits.

For example, over a 40-month stretch ending in April 2022, county departments totally or partially concurred with 45 ACO recommendations in 35 different audits. During this period, there were 15 follow-up audits and the grand jury found that less than half the agreed-to recommendations were implemented or completed. And follow-up may occur two years or more after the original audit.

Some of the mistrust of the ACO comes from travel expenses, which seem unnecessary, the grand jury noted. For example, nearly $90,000 for professional development courses on the East Coast were viewed as excessive “… when similar professional development opportunities were available locally for far less money,” the report stated.

Benoit said, “For nearly a decade, the current Auditor-Controller has prioritized his own unnecessary expenditures, like trips to New York and Washington D.C., over much-needed training for his employees and hiring qualified staff.”

The grand jury reviewed a Peer Review of the County’s Internal Audit Division, which Santa Cruz County performed in 2019. This review found “results of the previous external quality review were not communicated to senior management and the Board of Supervisors,” which may be contributing to the lack of response to the audits.

Angulo commented on the relationship between his staff and departmental leaders and the grand jury’s specific suggestions to him. “… the Grand Jury wanted me to ‘be more friendly’ and to grade the county’s departments A-F. I declined.

“They could not explain the logic behind this obvious dissonance, that is, wanting me to ‘be more friendly’ with departments heads, and then giving some of them a D grade or F grade,” Angulo continued. “I report on the facts, plain and simple. It is up to the Board and the Executive Office to take it from there … As a professional auditor I must keep an arm’s length to avoid a conflict of interest — evidently a concept that the Grand Jury does not understand.”

The grand jury also noted that Riverside County does not have an audit oversight committee, which adjacent counties have implemented. This, in the grand jury’s opinion, may have resulted in a failure to review certain critical programs such as the Public Guardian and Information Technology.

The Public Guardian Department has been the center of the recent controversy over the county’s treatment of the Turpin children. According to the grand jury, this department was last reviewed in 2014.

Contributing to the sparse number of audits and the skills of the staff is its small number and high turnover, the grand jury argued.

The ACO budget has decreased $130,000 in nine years to the fiscal year 2021-22 level of $1.475 million. During fiscal year 2011-2012, only seven internal auditor positions were filled. The number of internal auditors nearly doubled to 13 the next fiscal year. Since fiscal year 2012-2013, the number of filled positions has fallen to nine.

San Bernardino County has 15 internal auditors, Orange and San Diego counties have 13. This is not a new concern. The grand jury acknowledged that since 1990, eight grand jury reports have identified this problem.

“The Auditor-Controller is the chief accounting and disbursement officer of Riverside County. I find it deeply disturbing and concerning that the current Auditor-Controller is recklessly spending taxpayer dollars and failing to meet the minimum requirements of the office,” Benoit said about the grand jury report.

Basically, the grand jury gave the ACO and the county 18 months, until Jan. 1, 2024, to develop, revise or act upon its recommendations. Examples include establishing an Audit Oversight Committee, procedures to resolve disputed findings and a policy to indicate the seriousness of an identified risk.

The grand jury’s recommendations were not limited to the ACO; the supervisors were advised to include internal audit findings in the review of departmental leaders’ annual performance.

In summarizing his initial opinion of the report, Angulo wrote, “Sadly, the Grand Jury’s report is nothing more than a political hit piece given it was published in May, intentionally a few days before the election when it was due much later on June 30th.”

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