A new city audit has found that Austin isn't always checking whether its contractors are paying workers the wage the city requires. Auditors randomly sampled 59 contracts, confirmed pay information for 285 employees, and found that 15 of them were underpaid.
The findings, detailed by the Austin American-Statesman, center on the city's Living Wage Program, which requires contractors on certain nonconstruction city contracts to pay their employees a living wage. The sampled contracts were executed during fiscal years 2023 through 2025, and auditors said they were able to obtain pay information for employees working on 36 of the 59 contracts examined, turning up underpayment in four of them. Importantly, the Statesman's report notes auditors cautioned that the sample was not designed to estimate compliance across all city contracts, and that the results should not be projected onto the full population of city agreements.
Paperwork Problems and Unverified Pay
Much of the breakdown traced back to documentation. Contract managers collected required paperwork inconsistently and conducted randomized spot checks inconsistently as well, according to the newspaper's reporting. Auditors found that managers did not collect certification forms for 46% of employees listed on contractor certification forms within the sample, and wrote that the forms that did exist relied largely on attestations from contractors and employees rather than any independent verification of actual pay.
In one instance, an employee certification form listed a living wage rate of $11 per hour instead of the correct $21.63, the report notes. Auditors also found that some staff responsible for managing contracts were simply unaware of the program's requirements, and that monitoring tended to focus on workers already earning well above the living wage rather than those closer to the threshold — the report states that 65% of employees with confirmed pay in the sample earned more than $25 an hour. Contract managers told auditors that monitoring workers near the living wage felt unnecessary and inefficient, according to the same report.
City's Response and Planned Fixes
Austin Financial Services staff presented the audit to the city council's Audit and Finance Committee on Wednesday. The department, which administers the Living Wage Program and shares compliance monitoring duties with the city departments that issue contracts, said it investigated the 15 cases referred by auditors and found one instance of actual noncompliance, which staff said was corrected with backpay, per the Statesman's account.
City management, in its official response, agreed that training and guidance for staff monitoring living-wage contracts can be improved, while also noting that the audit did not account for existing contract management training or required kickoff meetings already in place. Management characterized overall compliance more favorably, saying as much as 95% of contracts appeared to meet the living wage requirement. Auditors, for their part, recommended that the Financial Services director strengthen training and guidance for staff who monitor contractor compliance, attributing inconsistent monitoring partly to limited training and guidance available to that staff.
What Changes Are Coming
The city laid out a multi-part fix. Contract managers should collect employee certification forms with a contractor's first invoice and annually thereafter, and will be required to collect documentation supporting evaluations for contracts carrying living wage requirements. Management also plans to expand performance evaluations to all city contracts in early 2027, with living wage compliance built in as a specific evaluation criterion, and to launch a new procurement system that year meant to improve tracking of requirements including living wage compliance.
A broader overhaul of the training program itself is planned for late fiscal year 2027, according to the audit findings. That revised program will include a contract monitoring certification requirement for all staff who monitor contracts, plus mandatory annual refresher training specifically for those overseeing contracts with living wage requirements.
Part of a Wider Pattern of Austin Contract Reviews
This isn't the only recent audit to flag gaps in how Austin manages its contracts. A separate nonprofit-contract review completed in July found that 19 of 25 reviewed nonprofits missed at least one performance target yet continued receiving full city funding, and an earlier audit of consultant contracts in March found major gaps in how city departments justified and managed those agreements, the Statesman reported.
The living-wage findings also arrive as Austin undertakes a broader reset of its social-services spending, which totals more than $101 million for homeless response, public health, housing and related programs in the year ahead, according to Community Impact. That outlet reports the reset is expected to lead to the re-solicitation of many current contracts and possible funding shifts in fiscal year 2027-28, with working groups evaluating service gaps and the monitoring structure in a project due to wrap up before January. City officials are also weighing an accountability framework for contractors, Community Impact notes, with departments able to use compliance plans, stop payments or outright contract cancellations when vendors fall short of city goals.
Austin's living wage rate itself has climbed sharply in recent years, rising from $15 per hour to $22.05 per hour since fiscal year 2021-22, according to the audit findings cited by the Statesman. The city council revises and adopts the rate annually during the budget process. Separately, Austin's procurement office lists the current living wage amount at $22.15 per hour for contracts executed during the city's 2027 fiscal year, which runs from Oct. 1, 2026, through Sept. 30, 2027, according to Austin Financial Services.
