Audit finds frequent missed performance targets in sample of Austin nonprofit contracts, city staff proposes centralizing oversight

A city auditor told the Audit and Finance Committee on July 20 that a review of 25 family and social-service contracts showed frequent missed performance expectations and weaknesses in the city's contract management systems.

"We found that for about 0.75 of the 25 contracts, the nonprofits did not meet one or more of the performance expectations," Henrik Atuma of the City Auditor's Office said in a presentation to the committee. The auditors counted 151 individual performance expectations across the sample and found 67 (about 44%) fell below the expected level, the report says.

Why it matters: the contracts fund services for vulnerable residents. The auditors emphasized the review examined city processes for writing and managing contracts rather than attempting to evaluate the nonprofit sector as a whole. Dr. Rosa Maria Murillo, who testified during public comment as chair of 1 Voice Central Texas and a longtime public-sector manager, said she supported the audit but urged the committee to ensure the findings are not interpreted beyond the audit's intended scope: "My concern is what happens with the audit," she said. "Implement the recommendations that strengthen the city's contract management system, but also protect the integrity of this review by ensuring its findings are interpreted within the scope for which they were intended."

What the audit found: auditors reported the sample included contracts managed by multiple departments and identified recurring problems:

- Of the 151 discrete performance expectations reviewed in the sample, 67 were not met (44%). - The audit classified 52 of the unmet expectations as output measures (for example, counts of unduplicated clients served) and 15 as outcome measures. - For nearly half of the unmet expectations, actual performance was more than 40% below the target. - The city uses a cost-reimbursement model for these agreements, which reimburses expenses whether or not performance targets are met, and auditors found limited enforcement or corrective consequences in practice.

City management response: Carrie Rogers, government relations officer, said management agreed with the findings and recommended a structural change that would separate grant and contract paths and centralize key functions. "The city manager recommends centralizing management of contracts within Austin Financial Services and the procurement division," Rogers told the committee, arguing that centralization would produce consistent processes and better oversight.

James Scarborough of financial services said the proposed implementation timeline in management's response extends to October 2027 but that improvements would be applied incrementally as new or amended agreements are issued. "The timeline contemplated in the management response is kind of a safeguard associated with the full implementation of the new system," Scarborough said. "However, the airplane is always in the air. To the extent that these improvements can be implemented now, we'll be implementing them as we create these contracts."

Committee discussion and council direction: committee members pressed auditors and staff about whether contract targets were realistic or adequately funded, whether providers had opportunities to justify variances, and how sample selection affects inference to the broader portfolio. Auditors said amendment and funding review were generally outside the audit's scope and that variance explanations were inconsistently captured across department reporting systems. Several council members urged both accountability and caution in applying the audit's findings during ongoing budget deliberations.

Next steps: management agreed to an implementation plan with staged steps and to return with more detailed timelines and guidelines; the committee signaled it would continue oversight as those reforms are implemented.

Sources: presentation and Q&A with the City Auditor's Office and the city manager's representatives to the Audit and Finance Committee on July 20, 2026.