Austin Pushes Forward With Social Service Review as Budget Pressures Persist

The Austin City Council Audit and Finance Committee on Monday considered major changes to how the city awarded and monitored nonprofit agreements after auditors found widespread performance gaps in a sample of social service contracts.

The committee also discussed a possible 2026 bond election, proposed City Charter amendments, public safety employees’ mental health and municipal misconduct investigations during its July 20 meeting.

The committee took no action on the nonprofit audit or potential bond package. City administrators accepted the nonprofit audit’s recommendations and proposed centralizing oversight of contracts and grants.

Nonprofit audit found missed performance targets

Austin spent about $100 million on family and social services during fiscal year 2025, according to the audit presentation.

The city used nonprofit organizations to provide housing assistance, homelessness services, behavioral health care, workforce training and programs for children and families. Several departments administered those agreements.

Auditors reviewed 25 contracts involving 20 nonprofit organizations and eight city departments. The sample included contracts active during at least part of fiscal year 2025.

The audit did not use a statistically representative sample.

Auditors repeatedly cautioned that the results could not be applied to Austin’s entire nonprofit portfolio.

Within the sample, however, auditors found significant performance problems:

• Nineteen of the 25 contracts missed at least one performance expectation.

• Contractors missed 67 of 151 individual expectations, or 44%.

• Of the 67 missed expectations, 52 measured outputs and 15 measured outcomes.

• For almost half of the missed expectations, reported performance fell more than 40% below the contract target.

Output measures included the number of people served. Outcome measures evaluated whether services produced an intended result.

Auditors said the city’s contracts generally contained specific, measurable and time-limited expectations. The central weakness involved the city’s response when providers missed them.

The city largely used a cost-reimbursement model. Nonprofits submitted eligible expenses and received reimbursement regardless of whether they met every performance target.

Auditors said the city lacked consistent incentives, corrective measures or consequences tied to performance. Departments also did not conduct sufficiently detailed evaluations when agreements ended.

Existing closeout reviews often functioned as checklists, auditors said. They could confirm that services were delivered or payments were resolved without determining service quality, value to the city or how effectively a provider corrected deficiencies.

Mayor Kirk Watson called the results troubling. He said missed goals could represent residents who did not receive services the city intended to purchase.

Watson also said responsibility could rest with both the city and individual providers.

Some expectations might have been unrealistic, he said. The city also might have underfunded agreements, failed to manage them properly or overlooked outside factors that affected performance.

“Good fiscal stewardship and strong social services are not competing goals,” Watson said.

Audit did not assess funding sufficiency

The auditors’ conclusions came with significant limitations.

Auditors did not determine whether each contract provided enough funding to meet its stated goals. That question fell outside the audit’s scope.

They also did not independently verify performance records for all 25 contracts. They conducted site visits with five providers and compared reported results with source records. In all five cases, the records matched what the nonprofits had reported to the city.

That finding suggested the performance gaps in those cases did not result from inaccurate reporting.

The audit also did not fully determine why each provider missed a target.

Auditors found that nonprofit organizations cited several contributing factors:

• Staffing shortages.

• Reduced state or federal funding.

• Difficulty finding eligible, unduplicated clients.

• Residents’ concerns about disclosing personal information.

• Fear among some residents about seeking services.

• Economic and legislative changes.

• Unrealistic or outdated performance targets.

• Inconsistent communication among city departments.

Austin Public Health allowed providers to explain variances above 10%, auditors said. Providers used that option inconsistently.

The city could amend contracts when conditions changed, but auditors could not immediately say how often the sampled contracts had been amended.

Nonprofits warned against broad conclusions

Several nonprofit representatives supported stronger oversight but cautioned officials against treating the sample as an evaluation of Austin’s entire nonprofit sector.

Dr. Rosa Maria Murillo, chair of One Voice Central Texas, said the audit examined the city’s contract management system. It did not determine whether the city should increase or reduce social service spending.

Murillo urged officials to distinguish among a failure to provide services, an approved contract modification and a variance caused by operating conditions.

Liz Schoenfeld, CEO of LifeWorks, said organizations that repeatedly failed to perform should not continue receiving city contracts. However, she said the audit also exposed delays, inconsistent communication and weaknesses within the city’s contracting system.

Schoenfeld warned that broad conclusions could damage high-performing organizations as they sought private donations and other revenue.

Mary McGowan of Family Eldercare asked the city to protect programs with measurable outcomes. She said homelessness among older adults in Central Texas increased 70% between 2023 and 2025.

Committee members generally agreed that the city should evaluate individual contracts rather than issue a blanket judgment about nonprofit providers.

Council Member Ryan Alter said one provider could perform well on four contracts and struggle with a fifth. That would require examining the specific agreement, he said, rather than condemning the organization.

Alter also warned that overly rigid enforcement could encourage providers to propose easy targets so they could guarantee success.

City proposed centralized oversight

City management accepted the audit findings and recommendations.

Administrators proposed separating agreements into two clearer categories.

Traditional service contracts would move under Austin Financial Services and its central procurement operation. City-issued grants would move under the city’s government relations operation.

Departments would continue managing program work and service delivery. The centralized offices would help develop solicitations, standardize requirements and conduct compliance reviews.

Officials said the structure would provide separation between program management and financial compliance. It also would give the city a broader view of agreements issued by different departments.

Under the existing system, a department could solicit, execute, manage and review an agreement without central procurement involvement. That could create different reporting requirements for nonprofits that performed similar work for multiple departments.

Central procurement also might not know when several departments sought the same type of service, such as eviction assistance.

The distinction between grants and service contracts could affect how the city selected providers. Management said some agreements labeled as social service contracts operated more like grants. Those agreements could be exempt from the city’s anti-lobbying ordinance and normal competitive bidding process.

The initial implementation schedule extended to October 2027. Watson pressed administrators to move faster.

Procurement officials said they would begin applying improvements to new agreements before the entire system was complete.

The audit recommended that the city establish a lead department and create a consistent process for evaluating provider performance. That process would include escalation procedures, corrective measures and potential consequences.

Charter proposals advanced for further debate

The committee voted to send previously approved charter proposals and a certified petition amendment into the next stage of public consideration.

The vote did not place the amendments on the November ballot. It advanced them for additional hearings and council review.

Alter withdrew a separate proposal he had been considering. He said too many questions remained and wanted more discussion.

Watson outlined the anticipated schedule:

• July 28: The council was scheduled to hold a general public hearing on proposed charter amendments.

• July 30: The council was scheduled to consider individual proposals and receive testimony on each one.

• Aug. 6: The council was expected to consider ordinances ordering the general election, a charter amendment election and a bond election, if necessary.

Among the previously approved proposals were changes involving petition election dates, recall petition requirements and council appointment of the city attorney.

The meeting transcript contained a confusing exchange over which board and commission bylaw changes received final approval. The committee discussed changes affecting several bodies, including the African American Resource Advisory Commission, Downtown Commission, Parks and Recreation Board, Urban Transportation Commission and the advisory body for the Austin Community Court.

Staff advised delaying at least one proposal connected to the still-unapproved Central City Plan. The final motion went through several verbal corrections, making its precise scope unclear from the transcript alone.

Staff continued to recommend waiting on bond election

The committee did not vote on a possible $390 million bond package.

City financial staff continued to recommend waiting until 2028. Staff said the full $390 million scenario would not comply with every part of the council’s adopted bond decision framework.

Watson said he remained opposed to a 2026 bond election. He cited the proposed city budget and its potential effect on taxpayers.

Staff estimated that the $390 million package would eventually cost the average taxpayer about $81.13 annually:

• $56.73 for debt service after all bonds were issued.

• $24.40 for annual operating and maintenance expenses after projects opened.

Staff also was developing an interim financing option of about $150 million. Preliminary amounts included:

• About $75 million for parks.

• Between $32 million and $34 million for transportation and public works.

• Between $41 million and $43 million for watershed protection.

Council members remained divided.

The mayor pro tem strongly supported placing a parks bond before voters in November. The mayor pro tem said Austin should not wait 10 years between major parks investments and suggested reducing the proposed $50 million for parkland acquisition.

Alter said he supported community investments, particularly parks, but wanted to weigh those benefits against the proposed budget’s effect on household costs.

Council Member Krista Laine opposed the package in its current form. She said it would provide less than $7 million in district-specific projects for District 6 despite longstanding infrastructure needs.

Laine questioned whether any money would reach the Williamson County portion of the district. Staff agreed to provide a geographic breakdown.

She also challenged the inclusion of $50 million for parkland acquisition. Laine argued that falling land values could make it more financially responsible to wait until 2028 while using other financing for urgent purchases.

No committee member offered a motion on the bond proposal.

Public safety workers expressed distrust of mental health services

A separate audit found that Austin provided mental health services for more than 3,000 sworn public safety employees, but many workers remained reluctant to use them.

Auditors surveyed more than 750 employees from the Austin Police Department, Austin Fire Department and Austin-Travis County Emergency Medical Services.

About half said they had used available mental health resources. Between 40% and 45% said they were satisfied with their departments’ support.

The results changed sharply when auditors asked about leadership.

Only 20% to 25% of respondents believed department leaders cared about their mental health and well-being. By comparison, between 78% and 95% believed their peers cared.

Employees cited concerns about confidentiality, retaliation and possible effects on their careers. Some did not trust the city to keep mental health information separate from employment decisions.

Workers also said wellness programs did not address the underlying causes of their stress. They identified staffing shortages, heavy workloads, traumatic incidents, accumulated stress and insufficient sleep.

Many respondents said schedule changes would improve their mental health more than existing wellness programs.

More than half said they rarely or never received a check-in after a major incident.

The audit also found different levels of support across departments. Firefighters could receive proactive mental health screenings, but comparable screenings were not routinely provided to all public safety employees.

Peer support training and ongoing mental health education also varied by department.

Auditors issued five recommendations:

• Strengthen privacy and confidentiality protections.

• Improve follow-up after major incidents.

• Provide regular training for fire and EMS peer support teams.

• Consider periodic mental health assessments for all employees.

• Continue mental health education throughout employees’ careers.

The city planned to place a new public safety wellness center at the new public safety headquarters near MoPac. Auditors said the existing facility was outdated, difficult for some employees to access and raised privacy concerns.

The committee adjourned at 12:03 p.m.

//Bingham Group