As Austin leaders weigh millions of dollars in potential cuts to social services, some local nonprofits are pushing back against a new city audit that found more than three-quarters of sampled social services contracts failed to meet one or more performance expectations outlined in their contracts.
The nonprofits involved say the audit’s methods are flawed and warn its conclusions could unfairly undermine public trust in their work. The findings also raise new questions about how Austin oversees millions of dollars in funding for the organizations that serve some of the city’s most vulnerable residents.
The report examined 25 contracts across 20 nonprofit agencies. Auditors found 67 of 151 performance expectations reviewed, or 44%, fell below their targets. Of those unmet expectations, 52 involved output measures, such as the number of clients served, while 15 involved outcome measures, such as improvements in behavior or living conditions.
The report lands as nonprofits sit at the center of Austin’s 2027 budget debate. In the wake of Proposition Q’s failure, city financial staff proposed roughly $17 million in cuts to the city’s social service contracts, a blow to Central Texas nonprofits already grappling with financial pressure. Following months of feedback from providers and community members, the city manager instead proposed phasing in those reductions over two years to soften the impact.
The City Auditor’s Office report could further shape how City Council approaches those funding decisions. As council members weigh a budget strained by property tax caps, slowing sales tax revenue and the expiration of COVID-era federal aid, city leaders and government watchdogs have called the audit’s findings concerning. Nonprofit leaders, meanwhile, argue the report lacked critical context, relies on unrealistic performance metrics and portrayed organizations in the “worst possible light,” potentially influencing funding decisions with an incomplete picture.
The audit’s stated objective was to determine whether the city is effectively managing and monitoring its social services contracts. At a Monday meeting, Mayor Kirk Watson said the review was not intended to be “an attack on nonprofit organizations or any specific nonprofit.”
But he added: “Let’s be candid, the findings are troubling.”
“In many instances, performance was substantially below what the contracts required. Those numbers don’t just represent boxes that were left unchecked on a report. They likely represent vulnerable Austinites who didn’t receive services,” Watson said.
Watson said the audit stemmed from a City Council special request in Spring 2025, when council members asked the City Auditor’s Office to assess whether Austin’s social service contracts were effective at delivering services to vulnerable residents.
The discussion earlier this week did not result in calls for deeper reductions to reducing social service contracts. Instead, council members discussed recommendations to improve contract oversight, including centralizing contract management, standardizing performance metrics, conducting stronger post-contract evaluations and improving ongoing monitoring.
“Progressive government should be accountable government. We can’t and shouldn’t measure compassion by how much money we appropriate and spend,” Watson said. “We should measure it by whether we’re doing what’s necessary to assure people receive the help the money was intended to provide.”
The nonprofits included in the audit say those conclusions tell only part of the story. They argue the report relied on incomplete data, applied performance measures that did not fit every type of service and failed to account for broader challenges affecting their work. Some also worry the findings could make it harder to secure funding from both the city and private donors
“When you start making inferences that nonprofits are not meeting expectations, that’s going to cause all nonprofits more difficulty in raising money from private funds, raising money from individuals, getting other contracts from other government entities,” said Andy Miller, the executive director of Austin Child Guidance Center, one of the audited nonprofits.
“It could create a huge chilling effect around how the community supports nonprofits.”
Miller said the guidance center, which has helped lower-income families and children access mental health care for decades, has three contracts with the city and received about $400,000 in the previous budget. Miller said the 10% reduction in city funding from the FY 2025 to FY 2026 was already challenging and warned additional cuts would leave the organization “serving fewer people.”
When one of the organization’s contracts was selected for the audit, Miller said his team received less than 24 hours’ notice to prepare. He said city staff assured him the audit was intended to evaluate how the city monitors its contracts, not his nonprofit’s performance, and that he believed the data would not be made public.
“We were told that this was them monitoring themselves, not them monitoring us,” Miller said.
Among the measures auditors evaluated was the number of “unduplicated,” or unique, clients the organization served, a benchmark Miller argues does not accurately reflect how behavioral health services are delivered.
An unduplicated client means “you see a client for a service, and you can count them, and then you cannot count them again that fiscal year. Well, we don’t (often) see people on a one-off basis,” Miller said. “We typically see them on a regular basis, mostly weekly, for a full course of mental health treatment.”
He called the metric “unrealistic,” arguing that service hours and measures of a client’s progress toward treatment goals would better reflect a program’s success.
The audit report “feels fairly targeted,” Miller said. “It does call into question: Is this an effort to provide the city a rationale for making these cuts?”
Clash over contract funding intensifies
The budget debate continued Wednesday, when dozens of Austinites filled the City Council chamber to urge leaders to preserve funding for social service contracts.
Rosamaria Murillo, chair of the nonprofit coalition One Voice Central Texas and CEO of El Buen Samaritano, was among those speakers, urging council members to interpret the audit’s findings cautiously because of its limited sample size.
Murillo questioned whether reviewing 25 nonprofit contracts out of the hundreds the city oversees is “an appropriate sample to (conclude) that all nonprofits are non-performing,” she said. “It’s disrespectful to the nonprofits.”
Murillo told Austin Current the audit lacked important context, arguing federal funding cuts and fewer people seeking services because of fears surrounding immigration enforcement may have contributed to some organizations falling short of performance targets.
“There are a lot of reasons outside of the control of the nonprofit for them to have such a blanketed statement that (nonprofits) are not meeting their goals with a very small sample,” she said.
