A recent audit found recurring issues with a sample of Austin's recent third-party general service contracts. (Ben Thompson/Community Impact)
A new city audit revealed issues with Austin's frequent use of third-party contractors, including unclear justifications and reporting on work that recently cost nearly $300 million in less than three years.
“The city may not be able to show why consultant services were needed or how they were used," Audit Manager Keith Salas said.
The overview
Contracting with consultants is common in Austin, with Salas noting that "virtually all" city departments are spending on third-party support. The practice grew increasingly expensive in the less than three-year period covered by the March audit, which looked at data from fiscal year 2022-23 through late FY 2024-25.
Annual citywide consulting costs rose by more than $20 million, or about 25%, in that span. Annual consulting expenses surpassed $100 million for the first time with two months still remaining in FY 2024-25.
Austin Energy and the economic development department each made up more than 20% of Austin's overall third-party spending on general services in the audited period. Those two departments alone spent nearly $125 million of the $279.3 million total used for consultants over that time.
The audit, based on a sample of more than two dozen recent contracts, found:
City departments typically didn't evaluate whether they could internally complete work that was later contracted out, and around one-third of contracts weren't based on a formal needs assessment.
About 16% of contract deliverables weren't measurable, documentation of those requirements is often unavailable or disorganized, and city staff were sometimes unable to answer "basic questions" about contracts.
About two-thirds of contracts never had a formal performance evaluation after work was completed, city staff sometimes weren't aware of whether one had taken place, and poorly performing contractors were sometimes rehired for further work.
In cases where evaluations were completed, follow-up information reported to the city was sometimes inaccurate or incomplete.
Some evaluations of completed contracts contained inaccurate reports. (Courtesy city of Austin)
The approach
Salas said auditors determined the city's financial services office should set clearer guidance for departments to conduct needs assessments before seeking third-party help. They also proposed requiring performance evaluations for all contracts and better maintaining relevant documentation.
James Scarboro, chief procurement officer with Austin Financial Services, said his department agreed with the findings and recognized the need for fixes.
"We do provide guidance to the departments in regards to reviewing their need for professional services, consulting services specifically, and to document those needs. But to the extent that they’re documenting them in a consistent way and that they are maintained in a file, and that somebody ... is checking them in the file, we think we can do a little bit better there," he said.
Scarboro also said performance evaluations have taken place for a subset of city contracts for years, although that practice hasn't expanded to cover the majority of Austin's external support.
The finance department plans to update its processes in line with new recommendations by October, according to the audit. Financial Services Director Kim Olivares said the adjustments tie in well with other citywide efficiency updates, including a new audit program.
Also of note
The new review of citywide consulting practices was released months after a separate audit found widespread documentation issues—and lacking improvements—with contracting at Austin Aviation.
More than 90% of airport department contracts were found to have at least one documentation error, producing a "significant amount of incorrect information" related to that work. Austin Aviation has been a top user of third-party contracting; it spent more than $18 million from FY 2022-23 into FY 2024-25, or roughly 6.5% of the citywide total in that time.
