FOAC accepts audit that found gaps in Chapter 380 monitoring; schedules follow-up for FY26

The Financial Oversight and Audit Committee accepted an internal audit of the City of El Paso’s Chapter 380 economic‑development agreements on Oct. 9 and directed a follow‑up audit during fiscal year 2026 to confirm management changes.

The audit A2023‑07 reviewed a sample of 3‑80 (Chapter 380) incentive agreements and rebate payments and found that economic development staff did not consistently document financial analysis of applicants, did not report actual job counts or the full dollar value of incentives to City Council, and did not consistently track key dates, deadline extensions or payment timing. The audit also identified four closed agreements that had received payments without completing all contract terms; auditors noted some agreements lacked recapture language and in some cases recapture attempts were limited by contract language.

Liz (Internal Audit) summarized the scope: auditors reviewed seven strategic master agreements from a population of 65 active agreements as of Q3 FY23, analyzed five rebate payments tied to job commitments and examined 115 closed agreements to identify four that received payments without fulfilling terms. The audit reported that council presentations had not included fee waivers and certain tax‑increment reimbursements; in one five‑agreement sample the department reported $5,300,000 in incentives paid, excluding $1,200,000 in fee waivers and a tax‑increment reimbursement — auditors said the total should have been $6,500,000.

The report listed five findings and corresponding management responses. Among the recommendations, auditors asked economic development to: require documented financial analyses for applicants; track and report actual jobs created or retained; report the full dollar amount of all incentives including waived fees; use a monitoring system to track key dates; and require consideration of recapture clauses when negotiating agreements. Management said it would update standard operating procedures, implement tracking through monday.com, provide status reports to council at least annually, and consider recapture clauses in negotiations.

Economic and International Development Director Karina Brescala and Contract Compliance Manager Alejandra Fuentes presented operational changes and said the department had already created 17 standard operating procedures, launched a centralized tracking board in monday.com, updated checklists, and engaged a consultant (Newmark Consulting) to rewrite the incentive policy and benchmark practices. Brescala reminded the committee that Chapter 380 agreements are authorized under the Texas Local Government Code and that the city’s policy is performance‑based: compliance is generally measured before payments are released.

Representative Nino moved to accept the audit and include the management presentation and responses in the record; the committee voted unanimously 4‑0 to accept the report and schedule the follow‑up audit for FY26.