UPDATE: Sources within the county have told San Jose Inside that Vinod Sharma will be officially removed from his current position as chief financial officer in two weeks. Sharma will be reassigned to a position in the Valley medical Center Health and Hospitals System while county administrators work to create new accounting positions. During the 2013-14 budget process, the county allocated money to create these new positions but did not establish official titles. The Board of Supervisors is expected to approve these new positions at its first meeting in September. Sources tell San Jose Inside that Sharma’s salary will be “significantly lower.”

Vinod Sharma, head of the finance agency that oversees Santa Clara County’s $4.6 billion budget, is on his way out as chief financial officer, San Jose Inside has learned.

Sources within the county say Sharma, who received sharp criticism for his poor oversight and conflicting statements regarding former county Supervisor George Shirakawa Jr.’s misuse of public funds, will be reassigned to an accounting position with Valley Medical Center’s Health and Hospitals System. The change in position, which is “effective immediately,” according to sources, is seen as a demotion several steps down the county food chain.

Emily Harrison, a deputy county executive, will take over the CFO role in an interim basis as an open recruitment process is started. Harrison was considered a strong candidate for the CFO position before Sharma assumed the job full time in November 2010, but she declined to apply for the job. Sources say she has little interest in assuming control over the county’s budget on a permanent basis.

While the county is expected to spin the finance agency’s change in leadership as simply placing Sharma in a position that more closely meets his skill set, the reassignment is clearly a demotion. Sources tell San Jose Inside that Sharma’s inability to properly explain why Shirakawa was able to misuse his county P-Card for lavish dinners and vacations for several years without detection was only part of the reason for the CFO’s reassignment.

Bill Perrone, a former county auditor, told San Jose Inside/Metro that Sharma instructed him to stop his staff from doing inspections of county P-Cards, because the CFO wanted to impress superiors with more “Harvey Rose-type audits,” alluding to the auditing firm that is credited with producing large cost savings through its findings. Sharma, who repeatedly blamed subordinates for the oversight in a public hearing earlier this year, denied Perrone’s claims.

Sharma’s top assistant, Controller-Treasurer Irene Lui, will retain her role for the time being, but her position could be re-evaluated with Harrison now serving as her boss.