AUSTIN, Texas — A new City of Austin audit found that some nonprofits under contract with the city are not consistently delivering the services they agreed to provide, raising questions about how effectively the city is spending public money.
During the city’s Audit and Finance Committee meeting Monday, officials reviewed 25 contracts totaling about $30 million. Austin Mayor Kirk Watson said the results were concerning.
“And let’s be candid. The findings are troubling,” Watson said.
A report showed the city spent close to $100 million on social services in fiscal year 2025. Watson said the audit is intended to ensure those dollars are helping the people they are meant to serve.
“We want to serve vulnerable Austinites and the best way for us to do that is by way of an audit,” Watson said.
The review found that 19 of the 25 nonprofit contracts sampled failed to meet at least one performance expectation. Watson said some contracts produced performance “substantially lower than what the contract required.”
“Bearing in mind that these services support vulnerable people, this is a significant number of unmet expectations,” said Henry Katumwa, the city’s supervising senior auditor.
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The audit described performance expectations that included increasing the number of unduplicated clients served, tracking the percentage of individuals who achieve healthy outcomes, and the number of individuals receiving services, among other measures.
Katumwa said the city used a cost-reimbursement model for the contracts reviewed.
“In this model, nonprofits are reimbursed for the expenses whether they met the performance expectations or not,” Katumwa said.
Watson questioned City Auditor Jason Hadavi on several topics, including whether contracts were amended when certain goals could not be reached and whether the city created unrealistic expectations. Hadavi said those questions were not addressed in the audit.
“I would say that was beyond the scope of our audit,” Hadavi said. “So we’re looking at, given the contracts and the amounts – whether they were amended or not – that were active during 2025, we looked at how those performance expectations were met or not met and what the city did in response to them.”
Following the findings, the audit recommended the city require departments to evaluate and document the performance of nonprofit contractors and grant recipients, among other steps.
“Caring for our most vulnerable requires us to care about these services,” Watson said.
Hadavi noted that Austin Public Health had the largest group of contracts in the sample reviewed. Austin Public Health was contacted for comment on yesterday’s audit discussion, and we are awaiting a response.
The next Audit and Finance Committee meeting is scheduled for mid-August.