Audit and Finance Committee (AFC) Meeting Transcript – 12/3/2025 Title: ATXN-1 (24hr) Channel: 1 - ATXN-1 Recorded On: 12/3/2025 6:00:00AM Original Air Date: 12/3/2025 Transcript Generated by SnapStream ================================== Please note that the following transcript is for reference purposes and does not constitute the official record of actions taken during the meeting. For the official record of actions of the meeting, please refer to the Approved Minutes. [9:29:29 AM] Good morning everybody. It's 930 in the morning on December 3rd, 2025, and I will call to order the meeting of the audit and finance committee of the Austin city council. We have a quorum of the committee present, and we are meeting in city council chambers, which is located at Austin city hall at 301 west second street in Austin, Texas. We have a full [9:30:31 AM] agenda, so we'll move right into it. Our first item on the agenda is public communication, and we have Julie Oliver. >> Good morning, mayor and council members. Thank you for the opportunity to speak. Two years ago, the city auditor released a comprehensive audit of our municipal animal shelter. That report did not describe minor issues. It documented serious systemic failures, including dogs being kept in three by four foot crates 24 hours a day in a conference room. The audit explicitly called this inhumane. It also found deeply strained and dysfunctional relationships between the shelter, volunteer groups and rescue partners, the very groups that make life saving possible. It also called out technology and data failures. Today, two years later, I'm here to tell you that nothing has changed. If that audit were being released today, it would read the same. The shelter has closed intake. [9:31:33 AM] It's failing to meet the city's own 95% live release goal. Animals are still experiencing inhumane conditions. Volunteers are retaliated against by management and rescues remain alienated. And the interim director, who is now applying to become the permanent director, pushed through a major shelter software conversion despite being advised not to do so. That decision proved disastrous. The public facing adoption website was effectively crippled for six months. Animal bios were erased. Critical behavior information disappeared during a time when we desperately needed to move animals out of the shelter and into homes. The public could no longer even make informed adoption decisions. This was six months. Let me be very clear about something. This crisis is not caused by our no kill commitment. No kill is not the problem. In cities across the country, shelters prove every day that you can uphold no kill values and maintain open intake and provide humane care. The problem here is management [9:32:34 AM] failure. We have now seen back to back shelter directors fail upward without consequence. There's been no real accountability, no meaningful course correction, and no measurable improvement. Despite a damning audit by this city that laid the problems out clearly. And now the interim director who has overseen this continued deterioration is applying to become the permanent director. I want to speak plainly. Someone who presided over sustained failure, closed intake, missed lifesaving goals in ongoing inhumane conditions, is deeply unqualified to lead this shelter forward. The shelter does not need continuity of failure. It needs new leadership, real expertise and the courage to rebuild trust with staff, volunteers, rescues and the public and your voters. Animals are suffering. Staff are burning out the city's own shelter employee survey that was done a couple of months ago. 29% said morale is high. That means 3,071% said morale is not [9:33:35 AM] high. Volunteers are being pushed out. Taxpayers are funding a system that is demonstrably not working. So I am asking you all to treat the auditor's report as a warning sign that it was demand, real oversight and change, and reject the idea that same leadership can push the shelter forward. >> Thank you, miss Oliver. Members that will take us to item number one, which is the approval of the minutes of the audit and finance committee for two meetings, October 15th, 2025 and the special called meeting of October 16th, 2025. Motion is made by councilmember alter. It is seconded by the mayor pro tem. Is there a discussion? Without objection, the minutes of the two meetings are approved. That will now take us to item number two, which is related to the 2026 finance agenda, audit and finance agenda items focusing on finance and possible calendar amendments. And I see Mr. Ed Benigno there. >> Good morning, chair and committee members. My name is Ed Benigno, chief financial [9:34:37 AM] officer for the city of Austin. Item number two is to present a draft work plan for the finance related matters for your 2026 audit and finance meeting calendar agenda. This is a plan I would anticipate, as it did last year. It will evolve somewhat. Some of these dates may get need to get pushed or changed. There may be some items that come up that we want to add, but this is a work plan that we work through with. The chair of the committee wanted to present it to the full group, so you get a sense of the direction that we would have in mind for the audit finance committee, finance related items this year. I won't read through every one of these, but broadly, you'll see items on here, I believe three different, 3 or 4 different items related to the development of 2026 bond and providing you updates on our financial bonding capacity and other financial matters pertaining to the bond program. There's been discussion about trying to create a decision making framework around not just for a 2026 bond, but just in general for bond programs, [9:35:38 AM] the decision making framework similar to what the committee developed and adopted for TRE proposal to help guide decisions not only for the for the bond election in front of us, but on into future bond elections. You'll see items on here related to our cost optimization efforts, both around city's technology, but also all of the shared services. You've seen the memorandums from the city manager about that, and that's an effort that's well underway right now. And we'd be bringing those forward to the committee for updates and feedback. We have our typical audit and finance reports, our mandatorily required presentation of the aquifer and the single audit. We have financial reports and treasury reports sprinkled throughout the calendar. Last year, 2025. I guess this year, for the first time, we really focused on providing the committee with updates on our large projects being run through our public facilities corporation like the northeast service center. Also redevelopment projects such as [9:36:40 AM] colony park, Mueller. And we do want to also bring forward to you updates on some of our major projects in the financing plans associated with those projects. So think things like the airport and the convention center that are large financial commitments we're making over the course of the coming decade. To provide you an update on those projects and the financing plans. And and then again, we continue to have our annual updates on city pensions and information security. So those are the broad areas that we're proposing to the to the committee. Again, this is a plan. I anticipate it will evolve throughout the year, but I think it gives you a good indication of what we would intend to bring forward to the committee. You'll notice two dates on here listed in red. That would be a variance from your current calendar that you've already adopted, that we would propose the committee take action to move those dates by a week. Both of these date changes would better sync up the committee dates with the timing of the 2026 bond [9:37:40 AM] discussions, the timing of when those discussions are going to be hitting council. This syncs up the committee calendar a little bit better, and so that would be to take the January 21st meeting and move it up by a week, and to take the July 15th meeting and move it back by one week. >> All right. Thank you. Members. Yes, mayor pro tem. >> Thank you. And I appreciate the update. You mentioned having having finance provide an update to our committee regarding the the major city projects like the airport and the convention center. Is that would that fall under this? >> It's at the bottom of the first page. August 19th updates on major project financing plans. >> Okay. And would the I 35 cap and stitch program also be categorized within that, or is that update coming sooner? >> It no, it would be categorized in there. >> Is there any timelines that we should be aware of with txdot? Because it seems August seems far. [9:38:41 AM] >> Away for that. I don't have a. >> Committee meeting tomorrow. >> Yeah, Ken was just telling me that there is a discussion at the mobility committee tomorrow on it, which could provide some additional information, but if there's a need or a desire for us to do something with the audit finance committee before August, we'll make sure that happens. >> Just if there's an associated timeline or time frame that we should be aware of. Okay. I can't remember what the commitment was on us having an update on the private sector, the philanthropy coming in to fund a portion of it. Anyone? >> What we'll do. That's a good point. So what we can do is on items like that. If anybody has items like that, let me know. And what I'll do is I'll make sure we get something, even if we don't meet as a full committee. But we may have a full meeting. Make sure that you all are up to date on all the calendar items so that if you want to have it brought up on an agenda, we can do it in advance. Okay. [9:39:41 AM] >> And I should say to you, there will be memorandum, financial related memorandum. Some of the financial reports, I anticipate it will be Kerri Laine coming to the committee directly with presentations and other cases. It may be a memorandum update. And of course, like we've been doing, we will post those memos as back up to the agenda. So if there's questions or discussion about the memos county staff has put out. And so this might be an area to that could just fit into that. If we have an update on the timeline, we send you a memo on that, post it as a backup for a future meeting and then we can discuss it. >> Thank you. >> Let's make make it a routine. Just make it. Part of the routine, I think, is what she's asking. >> Yes. And last question on my end, the social service reset that the manager is leading in the effort is underway. Would that also be under the shared services optimization effort? >> I would view that as a little bit different. The way the manager laid that out was a kind of four areas. The it cost optimization, the shared services optimization, which [9:40:41 AM] was really human resources capital delivery services, budget and finance, human resources. That's what I was thinking about in terms of the shared services, the the work that's being done on the on the social service contracts and performance metrics and all that is also being done by the office of budget and organizational excellence. But that wasn't what I had in mind necessarily for this item. I do anticipate that will be hitting the committee's. Maybe this is the right committee for it, but it may be that some of the other committees that council has might be the better venue for that one. >> Okay. Happy to continue that conversation offline. And we can also consider it in the public health committee. But just want to make sure that that's factored in here. >> Thank you. Thank you. Mayor pro tem councilmember alter. >> I was wondering excuse me, the the decision TRE item that you touched on a little bit. Is it around the the subject of the bond? I know that there cds [9:41:41 AM] has, you know, their matrix and how they're filtering or is it more of a yes no. We should have a bond Rainey at large. >> I think that's all to be determined. We I think in conversations with the mayor that I really felt that the TRE framework was a helpful way to organize council's thinking around a TRE and the timing of one and the size of one, and what the criteria should be for when we call one. So that's what I kind of was, was thinking, but I think that's still to be determined with feedback from the committee. >> Okay. And feedback from the committee is going to be important on that. Let me start with that. But part of the thought process was, is we're anticipating that we're going to get something that's bigger than what is going to be able to be done. And I think everybody needs to understand that and appreciate that. How we as a council come to a conclusion is going to become important. So the thought process was that this committee, [9:42:42 AM] much like what we did with trees, in terms of being the TRE, in terms of being able to say, here's here's the question we need to be asking, what's the answer to that question? And where does that lead us would be what we would look to so that it goes through a process that probably involves winnowing down how we approach things. How do we how do we set priorities. So so everything you said is probably part of it. And. We're very early into it. So any ideas that anybody has about what those questions ought to be and what a decision TRE might look like, now's the time to help. Think those through. >> All right. We'll put our thinking caps. On the other question. I had. >> To see your thinking cap, too. >> Oh, it's it's not very exciting. >> Nobody's ever seen that thing. And and had it's had a lot of impact on the city. So [9:43:42 AM] we ought to at least get to see it as a matter of transparency. >> I know, council member Ellis had her item about kind of budget process that's supposed to have asked the manager to do something, I think come back in February, but I thought maybe in March that might be a good time to just highlight both what she asked for and any other ideas. >> The idea. >> That we have. >> Thank you. Anything else? All right. Well then, members, I'll entertain a motion which will be to approve the calendar year 2026 finance agenda items and the calendar amendments that are that are included. And it's made by council member vela, seconded by council member duchen. Discussion. Without objection, that item is adopted. Members that will take us to item number three, which is a discussion on establishing an office holder expense policy. [9:44:44 AM] I'll just I'll try to run through this quickly. This is, as you will recall, the a recommendation that was made in a proposal on November 6th. And we have a powerpoint that everybody has in their back up. I want to make sure that everybody's got that if they want it. And let me just walk through this. First of all, I want to say that this today is going to be a high overview of the work done, this work that's been done since November 6th. We have a lot of work to do to get to the dates, and I'll talk about those in just a second. I also want to say thank you to Carrie Rogers and Diana Thomas, who have been very, very helpful in collating, if you will. And you'll see in this presentation, you'll see discussion about what's happening in peer cities and peer places, that sort of thing. And I want to say thank you to them. And if we have questions, they may be the ones that need to answer the questions. But we'll start with the proposal [9:45:44 AM] that was made on November 6th, 2025. And that is to reform city council spending, including, but not limited to, the criteria used for the type, the amount and purpose of expenditures. And it was stated that if we want to assure trust, it is critically important for us to be the model for best practices in a place that sets the highest standards. Council passed a resolution on November 20th to create a policy related to council budgets, and consistent with that proposal, what we've also indicated is that on January 22nd is when we will. That's our goal for taking up the financial policy proposal. And on the 14th of January, which we just voted on, we will bring back to the audit and finance committee a proposed proposal. And that will be what we look at in anticipation of the January 22nd meeting. We also looked at peer practices. And without going into all the detail, [9:46:45 AM] we've done a review that includes not only the state legislature. Good was getting ready to go up there. Good. We've done a review that includes the state legislature, statewide office accounts, and peer cities. And those peer cities are Fort Worth, San Antonio, Houston, Dallas. And we did look at some outside of Texas to to determine whether there was anything particularly useful. But we those are those are primarily the peer cities that we've looked at. If you look at the next slide, it indicates that the Austin and peer cities have various administrative bulletins relating to travel reimbursements and use of procurement cards. I'll say a couple of things about that. As you might expect, there's diversity among the cities and the peer peer entities that we looked at. Austin, I think it's very safe to say this comment this way. Austin has it far [9:47:47 AM] more dispersed than what you see in some other cities. For example, between administrative bulletins, other policies including travel policy, protocol policy manual, procurement manual and Texas statutes, there are about ten policies or regulations governing city spending, so Austin is more dispersed. Dallas is the only one with. It appears to be the only one with a single comprehensive policy. In other words, here is the policy, and it follows a format that makes a lot of sense. And it it keeps it all in one place. There's not really a single policy that that applies to us, but that's part of what we're attempting to do is to is to compile that to to create greater clarity. We if you can go back to the other one, go go back to the previous one. Yeah. [9:48:47 AM] On travel and reimbursements. The reason we made this a part of the slide is because that has received some attention, and it was stated pretty clearly here, but travel must serve a clear public purpose and fall within established per diem limits. That is the case now even in Austin. But again, the documentation, the timely submission all cities require that. So some of the things that we're looking at is perhaps how we can provide clarity to what is a quote, public purpose, close quote. And some places I'll point this out. Now, some places require there to be approval by someone other than the council office, so that you get another set of eyes on it and, and maybe some feedback with regard to that and maybe pushback, which we will need to be considering as well. All all require some mechanism for reporting at some [9:49:48 AM] point in time, quarterly, semiannual, annual, that kind of thing. Although I want to be clear, it varies. So I think we have some decision making that we'll want to do with regard to that next slide please. No, no. Back to the train. There you go. Thank you. The training Austin as you know requires training. Peer cities also require ethics or financial disclosure training for elected officials in addition to the procurement training. When a card is obtained. Obviously that is something that I point out just because we're already doing some we're already doing some of these things, but we need to maybe provide a single place and clarity with regard to that. Also, also on council office accounts, I'm going to I'm going to say two things about that. One that's on the slide and one that's not on the slide. What's not on the slide is there's sometimes confusion. At least it was confusing for me. [9:50:49 AM] So let me say let me put it on me and not everybody else. But instead of referring to our accounts as office holder accounts, which happens. Right? You hear the phrase officeholder accounts, what I've chosen to do in this presentation and what I would suggest we do as we go forward, is we talk about council office accounts or council office budgets. And the reason I suggest that is when I think of an officeholder account, I think of the money that gets raised for a campaign or money that can be raised in some, in some places for an officeholder account that can be used, it's outside money. It's not budgeted by the city, not appropriated by the city that can be utilized. As we know, that is used by some places, particularly at the legislature, where you can raise money. You then have an officeholder account, and that pays for a variety of things that then [9:51:49 AM] don't come out of tax dollars. In Austin, we have a limitation on officeholder accounts and the ability to raise money, and that creates an issue, I think, because there's not as much money to to do things like travel, those sorts of things which might otherwise you might use other money for that. So I just want to point out that as I talk about this, I'm not refer to things and the things you'll see coming from my office with regard to this won't refer to officeholder accounts. It will refer to council office accounts or council office budgets. Here we the second thing I'll mention is dedicated council office accounts vary. You'll see some of that here in a minute. And typically the balance does not roll over at the end of the year. For example, the Texas senate caps it or the rollover at $20,000. Although I will tell you that in my experience, [9:52:51 AM] what happens with that is it it doesn't roll over. But then there's a discussion among the senators and about what they want to do. And there's usually some additional rollover. At least that's the way it used to be. We've created a chart for you. The next slide is a chart that I think is very helpful once you understand what's in it. And and that is how peer practices work. So for example, financial disclosure, everybody that we looked at does that. Austin of course does that where you start getting diversity among the peers is things like taxpayer funded council office accounts, state officials. Yes, you have that. But then again, it rolls over and it has a limit on the rollover, at least on paper. Austin you do and the balance tends to roll over with no limitation. Dallas yes, there is a taxpayer funded council [9:53:51 AM] office account, but the balance does not roll over Fort Worth. It doesn't have that. Houston and Houston is always going to have a little bit of jankiness. And I don't mean that in a negative way. It's just different because the form of government is different. And one of the things that they have is they have funding for council districts that are they have to be specific to projects. I want to say a couple of things about that. One is the money is allocated. They call it the council district service fund. But keep in mind they don't have a city manager. So they they they automatically have to come at things differently than we do because we have a council manager form of government as opposed to the former government they have in Houston. And while it's allocated in Houston, it has to support specific types of projects. And by the way, it is one fund that they all work out of. It's not individual funds, it's one fund that they all work out of. And they they go [9:54:52 AM] through a real significant process in order to get that money to be utilized. That's a very public process. San Antonio does not have taxpayer funded council office accounts on council office expense policy. That's where you see some divergency as well. And on Houston, we've got it down here as no. But that's pretty much what I just described on government issued procurement cards. You see you see there where how those are utilized. Travel policy. Yes. We're in line in terms of travel policy and reimbursement. We're in line with regard to that. Although we may want to suggest some changes as the audit and finance committee. So that's kind of a quick rundown. We'll be bringing back more detail, but I promise that we would do this quickly and give everybody the opportunity to see some of this. Next steps are to get [9:55:55 AM] feedback. And so I would love to have members of the committee and members of the council provide feedback on how they see best practices. And again, as I've indicated, we'll bring forward a potential policy. You will see that in well in advance. That is actually what I consider to be. The next step is for us to put together a specific policy. That is a one shot. Here it is. Here's the policy. Get that out to you. And that actually is I hear myself saying, it probably is going to be easier for you to comment on than just an update about the work we've done to get to this point, and so I'll work on getting that to you as quickly as possible, and maybe by the end of the year get you something so that we have plenty of time in January to look at this. The goal still remains to try to do this by the end of January. Again, I get the, the, the, the decision that we want to do this with [9:56:57 AM] and the, the speed that we want to do it, but I want to make sure we get it right. So if we feel pushed, we'll we'll push it a little bit, but we'll get it so that we can get it right. Questions or comments? Yes. Councilmember Laine. >> Thank you so much for the overview. Very helpful. As you know, this has been an area I've been working on. >> Yes, you've been very helpful. Thank you. >> The question that I have is if we're trying to move quickly, I might be hearing that this is not the right moment for feedback. And when and how is that? >> Well, any feedback you've got, I'd be happy to have even now. And in addition to that, like I say, as I heard myself laying this out, one of the things that became clear to me was that it might be better to have give you a target to shoot at, as opposed to a generalized with, I'd like to see these things, but if you have something, I would love to either have you do it now, or [9:57:59 AM] put it on the message board and get the message board actually started in that regard, so that we can then take that feedback and try to put it into what the target ends up being. >> Understanding the process like that is very helpful. Maybe I could just share some bullet points that. >> That's why we're here. So feel free to do that. >> Great. Thank you. So I like the idea of more clarity for example around public purpose. I also think that it would be helpful wherever we're giving such guidance, or we've realized that it is not clear. I've seen it be pretty effective to give the guidance and then give a few examples of yes, this would be what we're targeting. And also no, this is an example of something not targeted. And I found that to be a very helpful approach on some of these policies. And then I just also wanted to raise a couple of categories for consideration. As you're working on the draft. So one is inventory management. And that [9:59:00 AM] is more for the city staff side than for the council side. But somehow making that connection between purchases made and then managing that inventory and including also a process for sign and sign out of process. >> What I'm sorry. >> Process a process for sign in and sign out of badges and keys in addition to inventory. Another I think, you know, travel has come up a lot and it is important to give more clarity to public purpose of it, but also providing just more description of what constitutes an operational necessity for accounts for a council. Offices work with those examples, and then a couple other categories are use of funds for food and refreshments. I mean, there is absolutely a very clear purpose in our council offices for use of, for buying food and refreshments when it will be [10:00:01 AM] accessible to community members and such. But I think that that's another category would be helpful to lay out more specifics. >> Good. That's very helpful. Thank you, councilmember vela. >> We've discussed this. I'm trying to remember my my memory is not 100% clear, but we had a budget amendment. And I think this could be helpful in kind of where right now we're each doing our own reimbursement, you know, travel accounting like each office, you know, has either a staff member, half staff member, whatever the case may be, kind of dedicated to managing the the accounting and the purchasing and whatnot. I feel like there's a place for a council office, a council liaison, you know, someone where, in other words, all of the council, the town council offices and the mayor are leaning on, you know, one, two staff members to help them with the the, you know, [10:01:01 AM] reimbursement, the travel policies, those kinds of things like that, and not only from a from a labor perspective, because that stuff can be can be quite challenging, but also from a, you know, appropriateness and kind of perspective as well. So I just wanted to kind of put that out there that, you know, I think and again, you know, most of us here, I think have had some experience in the Texas legislature, kind of the house admin would be the equivalent where, you know, there's a body that kind of everything runs through, and then that body kind of is, is, is helping us kind of with the scope and the appropriateness. And that. >> Kind of gives us another set of eyes. >> It gives us another set of eyes. >> And that's not inconsistent with what I indicated, you see in other peer cities. >> Yeah, I think that would be helpful because right now it's really just kind of our office and essentially finance staff. And that's it would be helpful to have kind of someone helping us organize. So I would just [10:02:03 AM] throw that out there. And and again, I mean, with regard to, to food, you know, we whenever we have a town hall, we have, you know, food and beverages for, you know, folks, again, just snacks. We're asking people to come out to a meeting at 530 on a Tuesday afternoon or something like that. It's almost only fair to, to to, you know, give them, you know, refreshments and just something so that they're, they're not starving by the time they leave at 7:00. I again I think those are completely appropriate expenditures. I just want to make sure that in kind of any zeal to, you know, to to clip expenses, that we're not just eliminating what I think are very helpful expenses that that enable the public to, you know, engage and to be there. Again, I mean, translation services is another thing that that we will usually pay for, as at our town halls. Those are kind of things. Again, they're expenses, but they improve our outreach. They [10:03:05 AM] improve the constituents experience when they come to a town hall. So I just want to make sure that, you know, we we don't sacrifice the kind of the quality of events because that makes a difference. And that definitely brings people out. >> Good, good. Comments. Thank you. Yes, councilmember. >> Thank you, mayor, and thank you for the way you laid out this information. The research that went behind it. I'm curious. It looks like in the table that you've got there, one of the key differences is how we're approaching the taxpayer funded council accounts and whether they can roll over. And I'm sure you guys have already been thinking about this. My biggest concern is that this is a subset of the council, and that the folks that have been rolling over those accounts, sometimes for many years, that might have accumulated maybe hundreds of thousands of dollars, are not here with us. It might be impacted in a way that they are not part of this conversation. So I'm just want to flag how do we make sure that they might be disproportionately impacted for [10:04:06 AM] the new folks like myself and councilmember Laine will be able to figure out either how they're going to spend those dollars or how they're going to how we're going to approach that solution. >> I don't know the answer, but it's a legitimate question. And and it's this is a this is a frankly, I think this is an interesting issue for us to consider. In part because if you if somebody is you don't want to create a, an unintended motive. Right. And here's what I mean by that. If what you do is you say you can't roll over any money, and let's say in one year a council office has a vacancy and they don't have they. It takes a while to fill that vacancy to find the right person for that job. And so they save money in that way. Should they then be penalized that they save money, or do they need to spend it all? And I will tell you, I saw that at [10:05:06 AM] the capitol where you had members that it was going to roll over. So by the time they got to the end of it, they had spent that money. And. So you don't want to create an unintended consequence to that or a motive. That's not a it's not an inappropriate motive necessarily. But if they can use it later. So this is this is one that we're going to need to put some thought into. Including the issue that you're bringing up is, is how do we how do we appropriately motivate this and make sure that somebody doesn't get penalized for saving money, or somebody doesn't get penalized for being new? >> Yeah. Just to be clear, I don't have the answer. I just know that some of the folks that are potentially much more impacted than myself are not part of afc. And. >> Well, I want to make sure that the council has all of this. We're just using the committee as a means for start getting this process going. I mean, that's why councilmember [10:06:08 AM] Laine is here, is is and I've invited everybody to be part. I've said it over and over again that as we take this up, if we're taking something up at audit and finance and you want to be part of it and you're a member of the council, come on. Because we this is this needs to be a council deal. And that's why we're doing it the way we're doing it. But but bring, bring, bring all ideas. And I want to make sure it's up on the message board with this presentation so that people have the opportunity to fully. >> Know that makes perfect sense. >> Thank you. Sure. Mayor pro tem. >> Thank you. I would just add that, you know, we all submit our monthly expense reports. And I think for me, making that more publicly accessible so that anyone can pull our expenditures would be helpful. It might be too cumbersome to have it monthly, but at least on a quarterly or semiannually semiannual basis, to have that more publicly available. [10:07:08 AM] >> Good. Anything else? >> Yes, I. >> Have more. Yes. >> Councilmember Laine, just circling back on some of the comments that have just come up. I really like this idea of a liaison. I also like the idea that you mentioned mayor of possible review by another level, another set of eyes, and I know that can get tricky, right? Because we answer to our constituents as opposed to whoever would be providing that feedback. And so what I do think could be helpful is a defined process in which that liaison or whoever that person is, that's addressing all the council office is flagging things in writing. And then this the chief of staff or council member can overrule and then it's between them and the voters. But in the absence of any level of audit function and feedback about when we're going outside of the intent, it's very challenging to adapt to what's actually expected. So I think that's a really key part, and I'm glad that you brought it up and wanted to give those [10:08:09 AM] additional thoughts. As far as the account rollovers go, I think that it would be I wonder if the goal for this iteration on this policy could be providing guidance about appropriate uses of unused funds, as opposed to defining what's going to happen. You know, you have to spend them or not, but just simply provide guidance on the uses. And that can happen at any point during the council member's term. But again, with the examples of yes and no. And I think that if we as a body are comfortable with those uses, then we have given ourselves guidance, which is great. And then the other thing that I would mention is I think that wherever I know that work is also being done on the staff side, outside of the mayor and council offices, on policies and processes around these issues and wherever we can, being similar in how we lay out what's appropriate and not so that it becomes easier for the staff who are doing the audit function across to clearly [10:09:10 AM] provide, provide clear and effective guidance without having to look at a lot of different things that are very different from each other. Thank you. >> That's good. Thank you. All right. Anything else? Thank you. Good folks. We'll put up on the we'll put this make sure it's on the message board with the short I'll put up a short message about what what the what it is and what we're doing and the timeline. But these are all great. This is what I was hoping would happen, is we'd get this kind of feedback. So thank you all very much. That will take us to item number four, which is a briefing. And but before I go to the briefing and since she's standing there, let me say thank you to Diana and thank you to Carrie for their continued good help on this. Now, with that, Mr. Benigno, I'll look at you again. >> Thank you. Chair. Item number four on your agenda is staff's annual update on our three city pension funds. As you know, there's been a lot of changes to those funds over the last several years. Legislative [10:10:11 AM] actions occurred. So we want to provide you an update on those changes and and how the systems are performing. We also want to provide you this year update and some background on what is commonly referred to as opeb, which stands for other post-employment benefits, largely the medical benefits. The pensions are about the pension incomes, your retirement salary you get after you leave service with the city of Austin. The post-employment benefits are about the medical benefits that are provided to retirees after service with with the city of Austin, there is a lot of similarities to the challenges we saw with the pensions and the potential solutions to those challenges between opeb and the pensions, and that's why we thought it made sense to talk about them at the same time. So deputy cfo Diana Thomas and myself are going to tag team on this presentation, and she's going to start. >> Good morning. Committee members Diana Thomas, deputy chief financial officer city has three contributory defined [10:11:12 AM] benefit retirement systems. The employees, which covers everyone except police and fire and police and fire have their own separate systems. The employee system also includes ems sworn members. Each one is administered by an independent board of trustees. And there's an annual pension update. This meeting is that that annual pension update to the council's audit and finance committee. All three plans were created by state law, and state law governs the benefits and contributions provisions, and any amendments must be made by the state legislature. From an accounting perspective, the the city follows the governmental accounting standards board, as do the three pension systems. Gasb statement number 67 affects the plans and how they report their financial information and their status. Gasb statement number 68 is the plan sponsors. And then we also follow actuarial standards of practice relative to pensions. These regulations define how the city's systems measure the [10:12:14 AM] assets, liabilities, discount rate and amortization period of the pension systems. And the city and the systems are all compliant with these reporting standards. >> So I wanted to give you a little bit of background. I think you're all aware of the fact that over the last four years, we've made significant reforms to our pension systems in collaboration with the the boards and the executive directors and the staff from the pension systems and the background for the necessity of those reforms is that all three systems are outside the best practice guidelines established by the Texas pension review board. They had funding levels below the recommended levels and the time period, called the amortization period, to pay back those liabilities was outside of of the standards. All three systems were either on the pension review boards mandatory restoration funding plan, restoration list, or they [10:13:14 AM] were on the watch list indicating that that they were anticipated they would trigger it at some point in the near future. As a result of these growing pension liabilities and no plan, no obvious plan for addressing them, Fitch ratings downgraded the city from its triple-a status to aa plus. There's a lot of bullet points in the next four slides, and I'm not going to hit on every one because there's a lot of similarities in the reforms we made between the three systems. The the one I'll start with is the Austin police retirement system during the 87th legislature in 2021, we collaborated with the system on reforms that moved the city contributions from a from a fixed level to an actuarially determined level. That's a fancy way of saying that city contributions increased and that they're also subject to further increases depending upon the the performance of the system. There are caps on that [10:14:15 AM] and limits on that. But largely, the city's funding can now fluctuate depending upon the performance of the system. A lower benefit tier was established for new hires. >> Can can we interrupt just long enough? Councilmember vela has a question. >> Just a quick you a a L what does that stand for there on that last bullet point? >> Yeah, that's the accrued actuarial. >> Unfunded actuarial. >> The unfunded what's the second a for unfunded actuarial accrued liability. >> Okay. Got it. Basically the outstanding the debt for lack of a better word. >> Your home mortgage obligation. >> You got it. >> Yes. >> So this is this would be an item that you could spend money on translation services. >> Yes. And I there are a lot of acronyms in this world. I thought we had got rid of most of them. But you snuck through, so sorry. There you go. A lower benefit tier for new hires. And as we go through this, you'll see that the benefit reductions were similar. Part of this was to make sure that as we were [10:15:15 AM] reforming our pension systems, that we were kind of doing it in a fair and equitable manner. So in the case of the police retirement system, that new benefit tier had a six percentage point reduction, essentially in the cost of the benefit, they call it the normal cost of the benefit. And that was lowered by six percentage point, which is roughly the same level that it was lowered by for the other two systems as well. So new hires into the system after January 1st, 2022 received this lower benefit level. So it brought the cost of the benefit down. City contributions went up, and then employee contributions also increased by two percentage points from 13% to 15%. There was a variety of governance changes made, including a removal of the board's authority to unilaterally grant benefit enhancements and cost of living adjustments. And then there also is a change to the board composition that gave the city more representation on the board of trustees of the police retirement system. You can see [10:16:16 AM] at the bottom line, the amortization period for that system was infinite, which is about as bad as it sounds. That was an indication that the outflow of money was exceeding the inflow of money at a pace where the fund would eventually run out. The amortization period for the system with these reforms is now down to 27.4 years. The the pension review board standard is for that amortization period to be less than 30. We are less than 30, and we are on a path to have those liabilities fully paid off in 27 years, much like a home mortgage. These systems take a while. You know, there's a long glide path to getting these systems back to full funding level for the employees retirement system was kind of a two step process way back in 2011. Similar to police, a lower benefit tier was established for new hires of the civilian system, which also includes emergency medical services, sworn personnel, our paramedics. So we put into place that lower benefit tier in 2011 and then also in 2011, [10:17:18 AM] it wasn't statutorily required, but the city council approved voluntary increases in contributions to the civilian pension system to keep it in better funding status. Those reforms were helpful. They didn't get us everywhere the full way there. And so in 2023, we again collaborated with the coast system to make the further changes, right along the same lines as what we did for the police retirement system. We moved to an actuarially determined contribution funding model. City contributions increased as a result of that, member contributions increased from 8 to 10%. We also made the similar governance changes of removing board authority for benefit enhancements and cost of living adjustments, and also making a change in board composition, which gave again gave the city additional representation on the board. Similarly, but not as dramatic, the actuarial impact. After that legislation passed, we [10:18:19 AM] moved from a 34 year amortization period to today's 29 year period, again within the prb guidelines and again on a glide path to get the full funding within the next 30 years. And then most recently in 2025, the legislature approved very similar changes to the Austin firefighters retirement fund, a lower benefit tier for new hires and actuarially determined contribution model, which resulted in increased city funding and then governance changes. In this case, the the approval authority for Colas remains with the board, but there are very substantial financial guardrails in place that restrict and limit when those Colas can can be granted. And they're they're pretty solid and high guardrails in place. And again, we had a board composition change, which resulted in the city council having an additional appointee to the board. Those reforms were just enacted. So we're at 30 years. That's that's the [10:19:20 AM] agreement that we had was to make these reforms to get us to a 30 year amortization period. But that's down, you know, nearly 50% or actually a little bit more compared to the 48.6 years that we had been at. In this case, we did not increase member contributions for two reasons. One member contributions were already at 18.7% of pay, which is quite high and high relative to our other two systems. And the system was in substantially better funded status than the other two systems with a funding level above 80%. So for both of those reasons, it just wasn't necessary for there to be a commensurate increase in employee contributions in funding. The results of all this. You know, the bottom line really, is that these unfunded liabilities you see here on the second bullet point are all on schedule to be paid off within a 30 year period, which is the [10:20:20 AM] pension review board guidelines. And you'll notice, they say, to be paid off. It's not an estimate. It's not a maybe they will be paid off on those timelines. This is a fixed mortgage situation where we know what the existing legacy liabilities are. They are on a payment schedule that will get the liabilities paid off by these dates. The bottom line the takeaway from all this is that Fitch ratings, after all these reforms were in place, even though we still had the liabilities, we now had a a sound plan for addressing the liabilities and getting the systems back to full funding. Fitch ratings restored the city's triple a bond rating earlier this year. >> Great. Thank you for that and thanks for all the work on it. Particularly. I'm aware of 11 and I'm aware I'm very aware of 2011 and I'm very aware of last session. And I really appreciate all the great work that the financial staff and our iger office did. With regard to that. Members, you got questions or thoughts? Yes. [10:21:22 AM] Councilmember alder. >> We do have a little bit more, but. >> I'm. >> Sorry a place to pause if you sorry. Go ahead. >> So next we just have an update on some of the details about the pensions themselves. First just talking about pension membership. You know Cohrs has 24,000 members. April's a little over 3000 and fire a little over 2000 members. And that includes members who are currently receiving benefits, inactive members who are not contributing but have not yet started receiving benefits. And then active members. Under the retirement eligibility provisions. I'm not going to read all the details on this chart, but I wanted to make sure that you knew kind of what those retirement eligibility criteria are, especially with fire and the new group B that we created with the most recent legislation and that and that we created a group B that can retire at ten years of service [10:22:22 AM] at age 50, 25 years of service at any age with no early retirement. And that's the one key change between group a and group B is the no early retirement option. And then the Colas are different for group a and group B under the new legislation group a, there's financial stability tests that check to make sure that we can afford to pay to make a cola, and it is capped at 1.5%. And then for group B, they're performance based Colas. So it looks at how is the system performing. And can a can of cola be awarded based on. Are we bringing in extra revenue over what we expected to bring in on our investments that would allow us to grant a cola? Each year? We have actuarial evaluations done on each pension system. They they are the ones who actually contract for that. An actuarial evaluation assesses the status of the fund and calculates a recommended contribution. It is a snapshot as a moment in time. [10:23:24 AM] On this chart. It lists the normal cost, the actuarial value of assets in the actuarial accrued liability. Those are calculations done by a licensed actuary to look at following actuarial standards that look at how do we value the assets that the funds hold, how do we value the liabilities that we owe based on what has been accrued for members to date? And then the unfunded portion is kind of the difference between those two and that unfunded actuarial accrued liability, as Ed described, most of that is being paid off over time. We list also the funded ratios that range from 58% for police to 77% for fire, and the amortization periods that we've already covered, in addition to the actuarial evaluations that are conducted by the system, the city also conducts an actuarial audit of all three systems every five years, and the last audit was conducted in 2024. And we brought that audit [10:24:25 AM] as a presentation to the audit and finance committee. When you look at city contributions over the last five years, in 2022, the city contributed $185 million toward pension covering pension costs in 2026, that grew to 283 million. And a large portion of that is those legacy liability payments that are being built in now to our budgets, as we know that that's that's on our payment plan and on our payment schedule. And we're making every effort to move that. But it shows the city's investment of over $100 million, increase between 2022 and 2026. In our contributions. This next chart represents the number of years it would take to pay off the unfunded liabilities. If contributions remained consistent. It kind of shows you where how the systems were performing over time, and it also shows you with the stars where the legislation for each system took effect and had a significant impact on those [10:25:27 AM] amortization periods. And then lastly, with regard to governance, I just wanted to provide a summary of the board composition. Cohrs and April's both have 11 member boards, and the fire system will have a seven member board. After we implement in January the legislation that was recently passed. And those boards are typically a combination of active and retired members who are elected by the body of membership. Then there are board board appointed citizen citizens in Cohrs and April's and then citizen council appointed citizens in Cohrs April's and now and in Austin fire. And we just recently brought those appointments to the to the council and to this committee. And then we have city appointed members in each of the in each of the three systems. >> So just two, just two more slides. We'll be out of here real quick here just to talk [10:26:28 AM] about other post-employment benefits. As I mentioned earlier, when someone retires from the city of Austin, not only do they receive a pension income through one of the three pension systems, but they also receive other post-employment benefits, which is to mean medical benefits, that the benefit level depends upon how long the the employee has been with the city. And there are a lot of similarities between pensions and other post-employment benefits. First off, similar to pension systems, there are accounting standards and actuarial standards of practice that that need to be followed in regards to the accounting, reporting and valuation of the liabilities for the system. There are different standards, but there are still standards in place, and all those standards are followed by the city. Another similarity to the pension systems is that there is a liability involved. Currently, our liability for post-employment benefits is [10:27:29 AM] $1.3 billion, which puts it a little bit below where our liability is, but higher than the police and fire pension liabilities. And that does put pressure on the city's credit rating. So it's always been our plan. After we were able to get through the extensive reforms to the pension systems, to turn our attention and start focusing on our post-employment benefit liabilities. One big difference from the pension system is that the pension systems have a trust involved with them. There is a pre-funding plan for the pension system. So as somebody works for the city and their retirement pension guarantee increases, the funding is being set aside to pay off those benefits over time. In the case of post-employment benefits, the city, like most other cities, have followed a pay as you go process for retirement benefits. So people that are retired today, the funding to pay their medical benefits in retirement is coming out of the current year's budget. There is no trust that's been set aside [10:28:30 AM] to pay those benefits. And the reason for that has largely been because unlike pension benefits, post- employment medical benefits are not constitutionally guaranteed. And that's made clear to all employees when they sign up to work with the city, that post-employment benefits currently are in place. And here's how how they work. But it's not a guaranteed benefit. They could be removed at any time. Accounting standards have changed, and those liabilities are now required to show on our financial statements. And again, it does put pressure on our credit. But that is a huge difference from how the pension systems have been set up. So essentially we're starting a process now with our human resources department and some outside consultants to look at options for trying to get a handle on the liabilities associated with our post-employment benefits. And it's largely the same solution, opportunities or options that [10:29:30 AM] exist for pensions to create a lower benefit tier for new hires and or to create a pre-funded trust that would be set aside in advance and invested. So we're going to be looking at those options over the course of the next year to see what strategies might be available to us. We've already taken some strong steps. You see that huge reduction in the liability from 2023 to 2024 reduced by more than half from 3.2 billion to 1.3 billion. And that largely had to do with making medicare eligible individuals participate in medicare advantage, which was a it maintained the benefit levels of the employees. In some cases, it may be improved the benefit levels, but it came at a much lower cost. So making it mandatory reduced our liabilities substantially. So there are things we can do to bring these liabilities down and improve our financial position. So that's our presentation. I just want to leave you with it. You know, [10:30:31 AM] these are obviously huge financial commitments that the city council is making to our employees to be paid out in retirement. We're talking about billions of dollars here. The systems are very complex, involving lots and lots and lots of technical terms and and acronyms. We're talking long range horizons. Most of us won't be here. You know, when these when these liabilities are still being paid off and managed. And they really necessitate a very high degree of oversight and that we as a city are doing that. I sit on the board. I've been on the police retirement board before. Diana is currently on the cause and police boards. The mayor's on the fire board. Council member Laine is on the board. So we have a lot of city staff, council members. We have citizen appointees to these boards. So we have a lot of individuals who are doing a great job providing oversight to the systems. We hire outside actuaries to go in and audit all of the systems actuarial [10:31:31 AM] assumptions, and to let us know that everything is being done correctly and to standards. Of course, we have our financial auditors and the systems themselves are required to do an outside review of their investment portfolios and their investment strategies to to make sure that they're following best practices in regards to their investment guidelines. So that's really to me, the key takeaway is a lot of oversight is necessary, and a lot of oversight is occurring on all of these liabilities that the city has. I'm happy to answer any questions. >> Thank you, sir. And for the record, I was on the fire retirement fund board. And now councilmember alter is because in the last session of the legislature, it was mandatory that the mayor served on the retirement fund board until the last session of the legislature. And it's now it can be an appointee and council member. Alter has agreed to do that. So he's picking that up and I'll recognize him for a question. >> Thank you very much. I wanted to start with slide 16, [10:32:31 AM] which was that showing of how dramatically the city contributions have increased over just four years, $100 million, and get an understanding just within the budget, where where would the public find these? Are these in a the other category, or is the contribution to police retirement in the police budget, the retirement of the fire, but fire and the fire budget, I guess. And then cause I don't know where. >> Yeah. >> Well, the police contributions are in the police budget, fires and fire. The contributions are across all of our funds, and it's by far the largest of the of the three systems. So when you look at the increase, just keep in mind this wasn't an increase just in the general fund. It was an increase in general fund. Austin energy, Austin water, aviation, all of the funds had increases to the to the different retirement systems. In accordance with the changes in state law that were [10:33:31 AM] negotiated between the legislatures, the city and the and the systems. And we have within the personnel budgets of every department, we have a separate line item that accounts for the cost of the pension contributions. >> And I assume same story for opeb costs. >> Yes, we do have a we yes, we have a a contribution that we make to an employee benefit fund. So if you look in our budget document, you'll see an employee benefit fund where the contributions from the different departments flow into that fund. And then that's how we administer the benefits out of that fund. A little bit different for the pension systems because those are separate. Those those are not funds managed by the city. They're statutorily separate systems from the city. We provide contributions to them. But got it. Yeah. >> And when looking at the so the number you have the 1.3 billion in opeb liability I assume that's the actuarial liability. So over the entirety not obviously we're not paying [10:34:32 AM] that in an individual year. >> It's that's exactly right. That is the actuarial liability. That would be if you put a current day present value on all of the liabilities that we currently would be paying out over the next 30 plus years in order to honor the benefits that have been promised to those employees, we would need 1.3 billion set aside in a trust in order to be able to pay for all those benefits, essentially. And and we don't have that currently. Again, we've been doing it on a pay as you go basis. >> Right. I was also wondering if the new federal, you know, the tax reconciliation bill, which has within it my understanding a provision requiring participation in social security for even entities that have not that have opted out of social security. I was wondering if that's something that has come up on your end or not. >> No, I have not seen that yet. [10:35:35 AM] >> Okay. I, I just I read a news report and you know, who knows how accurate the granularity is of that. But I was curious if that's something that we have to look out for in terms of, you know, entities that were not contributing to social security that now will have to in the future at some point, and how that would impact our, our pension requirements. >> Yeah, we certainly need to look into that. And of course, we have folks up at in Washington that monitor all that stuff for us. So I'll follow up with Garry Rogers about that and see if we can get an update on that bill. >> Very good. All right. Thank you so much. >> Thank you. Other questions. Yes, councilmember vela. >> Just a question. The legacy liability, the one that you set aside and put on a set payment plan, is that group a, you know, in other words, like are we distinguishing kind of saying that group a is legacy and group B is kind of current or how does that break down. >> For April's and fire? It is essentially a group a liability. [10:36:37 AM] But for cause, because we created group B back in 2011, that unfunded liability actually includes both group a and group B. >> Okay. Got it. That was my only question. >> Thank you councilmember. Anything else? Great. Thank you all very much. Members. We'll go to item number five. This is related to the aviation contract and vendor management. >> Hi. My name is Christina kern and I was the auditor in charge for this project. The objective of this project was to determine if aviation contracts were administered and monitored effectively. This audit was conducted after our office completed an aviation risk assessment in 2024. In the risk assessment, our office [10:37:38 AM] identified contract and vendor management as a top risk area. Since the risk assessment, aviation staff has taken steps to address risks and improve their contract administration and monitoring processes. However, there are still issues. Our audit had one finding. We found that Austin aviation's contract management process does not ensure that documentation is accurate, leading to a significant amount of incorrect information and making it difficult for Austin aviation to ensure contract documentation requirements are met. Our office looked at two teams in the aviation department, the aviation purchasing and contract management team and the commercial management team. These two teams manage over 700 contracts. Our team sampled 49 contracts between the two teams and identified that 45 out of the 49 contracts sampled had documentation errors. The most common issues were missing documentation and expired insurance documentation. One challenge that teams have is [10:38:39 AM] most of these processes require manually entering requirements for contract documents. However, staff may forget to upload documentation or may make errors. Some of these errors we found during our sampling included not having the executed contract uploaded, not having up to date insurance on file, and missing requirements. For instance, there was a contract that with a living wage requirement and it was not documented correctly. If someone were to go up and look up that contract in the system, they might not know that the contract requires that living wage and then wouldn't know that they should be monitoring or checking that component of the contract. It's important to have documentation organized, accurate, and complete so that aviation can be monitoring these contracts effectively. Staff try to mitigate errors by creating manual reminders of important contract dates, such as when a contract's insurance expires. However, staff's reliance on memory can become increasingly challenging when managing multiple contracts. We surveyed staff and received a 100% response rate. We learned [10:39:40 AM] that there are not consistent practices occurring. Five of ten staff reported that no one else reviews their contract documentation, and also five of ten reported not having received training in over a year. Staff shared that more extensive training and annual training would help them improve their contract administration and monitoring skills. Our audit issued three recommendations. The first recommendation states that the Austin aviation chief executive officer should strengthen contract administration and monitoring practices by working with Austin financial services and implementing processes to ensure documentation is reviewed by another person, maintain records of contract management timely, and ensure contracts have up to date insurance documentation. The second recommendation states that the Austin aviation CEO should work with staff to develop and hold regular trainings on how to document and monitor the contracts. And finally, the third recommendation states that the Austin aviation CEO should explore available technology to [10:40:41 AM] improve current aviation contract management. Systems management agreed with these recommendations. We'd like to thank the aviation department for their time on this audit. We appreciate the hard work and their continued efforts to improve their processes. This concludes my presentation. Thank you for listening. And at this time, I can answer any questions. >> Before we go to questions, let me ask if the aviation wants to say anything and then we'll open it up for questions. >> Good morning, chair and committee members. Ghizlane badawi, chief executive officer for aviation. First, I want to thank the auditors. I appreciate all the hard work. I appreciate the risk assessment last year, and I appreciate the work on this audit. Since the risk assessment, we took a lot of steps. We we did add staffing last year and this year to strengthen the contract management and appreciate the audits, identifying the [10:41:41 AM] organization and the documentation. Appreciate the auditors reviewing the documentation in the system. We'll be working with us and financial services to ensure that the documents are uploaded. We'll work also on the training and explore opportunities for the system. We currently have different types of contracts that we manage at the airports. I know the the scope did not include the construction contracts, but if I may just provide some information about that process, one of the best practices that auditors mentioned during the audit is having one single system. So for the management of the construction contract contracts, we did procure one single system. It's an industry specialized system to manage all the contracts. And thank you to council members for their support last year. And this year, we did procure a program controls contractor and consultants that provide oversight of all the construction contracts. And the staffing includes auditors, on [10:42:41 AM] site contracts, managers, cost estimators, schedulers and and costs management and change management staff. This team is providing the oversight over all the construction contracts. Additionally, our finance staff, they do provide review of of every single invoice. And we procured contractors that have extensive experience managing multi-billion projects at other airports. And they providing us the project managers, the construction managers, the inspectors and safety professionals that have experience delivering such programs at other airports. And as the auditors mentioned, we have the commercial management contracts. Those are managed and supervised by us and aviation staff. We do have one system that's an aviation system used by other airports to manage the commercial contracts. The same system is used by our financial staff to manage all the billing. We did [10:43:44 AM] hire recently a commercial management staff, so will ensure there is additional oversight and additional review and training of those contracts. And as far as the last category, that's the vendor management contracts. We collaborate and work closely with us and financial services staff, once the contract is executed, is uploaded to the system by us and financial staff, and they update the insurance requirements, the living wage and it's collaborative approach, and we'll work with them to address the all the areas that needs improvements. Thank you. >> Thank you. Members. You have questions or comments? Yes, mayor pro tem, thank councilmember duchen. >> Thank you. Thank you to our auditor's office for this information. I am curious. It seems that we're talking about hundreds of contracts that are managed through our aviation department. And you mentioned that one of the findings indicated that staff were not uploading documentation. In some cases, insurance verification. You know, since [10:44:46 AM] the city is entering in this era of optimization, what did we consider or did you all consider a recommendation that instead of having it manually entered by staff, having the vendor ensure that they are uploading the documentation, like many processes across various industries, requires, the onus is on the company and the firm to provide that documentation and then staff personnel provide that verification that, you know, those checks on whether or not they're in compliance. Yes. >> Yes. And that's why we had that third recommendation so that the aviation department could explore technology and hopefully find opportunities to automate those processes. So that and that kind of speaks to that manual entry risk that's been occurring. >> Thank you. Director. Any additional context that you'd like to add, just given the high volume of contracts that go through our aviation department? >> No thank you, mayor pro tem, [10:45:47 AM] I just want to add that the procore system that we use to manage the construction contract, that's provides that ability. So all the construction companies and the designers that we work with today, they do submit all the documentation directly through procore. So it is a centralized system where all the documentation is, is stored and will be working closely with us in financial services to explore any opportunities to enhance the qadri systems. Does the city system that we use for the vendor contracts and explore opportunities to that will allow for that transfer of the insurance, because specifically to the insurance certificates, the vendors are are have insurance, they are sending the certificates. They're just sent via email. If there's a way to automate that, that will address the findings of this audit. >> You know, you bring up a good point in that the compliance is managed within the Austin financial services department, so that that is the [10:46:48 AM] staff that is doing the manual upload. Is that correct? >> I defer to James Scarborough, but that's my understanding. >> Good morning. >> There we go. Good morning. Members of the committee and mayor pro tem Fuentes James Scarborough Austin financial services. That is correct. Certificates of insurance are submitted to financial services. And that's principally because we often will have multiple contracts with a single company. So a single company, if they have ten contracts, we have to take that certificate and apply it to ten different systems. And as those certificates expire, they have to be we have to receive the new certificate and then apply it to however many contracts are in place at that time. We are absolutely looking at the opportunity to automate how we receive and how we manage certificates of insurance that is a part of a [10:47:50 AM] larger financial management system project that we are currently involved in, been working on for the last year or so, and it involves a review of multiple financial systems, including the city's procurement system and one function, one one portion of that system function will include the management of certificates of insurance. So we we appreciate the review that was done by our colleagues at, at office of city auditing and as as well as our colleagues at aviation. This is a good highlight of some of the challenges that we've been experiencing with our multiple systems, and hope to overcome with the selection and the implementation of the new city procurement system in the coming year. >> Very good, because I know the the recommendations are very focused on the aviation department, but technically the responsibilities are fall under your department. Any other additional thoughts that you'd like to add? >> No. You hit the nail on the head. We we work with all [10:48:51 AM] departments when it comes to their their monitoring of city contracts. And so there's a there's a, there's a relationship between the administration the creation and the, the, the availability of the contract, the authorization of the contract that we were responsible for, and the day to day monitoring of the relationship with the contractor and the documentation to show performance of the contract as used by the customer departments. And together that creates the contract file, that contract file, that documentation is usually there. It might be in different places, it might be in different dates associated with where it was saved and who it was received by. That coordination is made more straightforward in a more contemporary modern procurement system, which is what we hope to accomplish by the current project. >> Very good. >> Thank you. Thanks. Councilmember duchen. >> Thank you. Mayor. I have a couple of questions. One is just to build on mayor pro tem question for director badawi to [10:49:52 AM] help me understand or clarify the roles and responsibilities between. Since it sounds like you've got an afs team embedded in your department, you've got an external afs team doing other work, including the work that Mr. Scarborough just mentioned. And then you've got your own team. Can you clarify those different responsibilities and roles that are occurring between those three teams? >> Thank you for the question. Last year we worked collaboratively with us on financial services and I appreciate their support. We embedded a team to help us procure all the design and construction contracts. So the main function of the embedded team has been focused on construction and design, and they've been helping us with the procurement of other vendor contracts. So the financial services team does help us during the procurement of the contract all the way to the execution phase of the contract. They do upload the certificate of insurance, upload the contracts into the city system. [10:50:53 AM] And my team does handle the management and the oversight of the deliverables. So my team, they do have weekly meetings, monthly meetings where they do review the deliverables of each contractor. Are they meeting the service level that we expect them to deliver at the airport? And those meetings are happening, and the auditors attended some of the meetings. And so the oversight that's provided on the on the commercial management team, as an aviation team, manage those contracts. And from beginning of the negotiation all the way to the execution and the continuous management, and we use an airport system to manage those contracts and for the construction contracts, we do work with us on financial services to provide the management and oversight. But as I mentioned earlier, in addition to that, we hired the program controls consultants with extensive experience [10:51:54 AM] delivering multibillion dollar programs at other airports to provide that overall structure, that overall controls and review of those contracts and the systems. >> Thank you for helping me understand that. The last question I've got is regarding the technology systems. It looked like from the auditor report, there are there's the system, there's the advantage system. And then we were supplementing that with excel and sharepoint. And then I assume that's further complicated by having these sort of three buckets of different contracts with different processes, with the different contracts and different people involved in, in uploading different information and managing them. I know Mr. Scarborough just touched on a new procurement system. Does that help address this challenge, and is that going to address that challenge in those three different contract spaces? >> Yes, councilmember, that that is the that is the the general intention is to is to [10:52:57 AM] limit the number of systems, to limit the number of processes and tools used to manage the contracts. Oftentimes, we will use additional tools like echo that was that was actually developed by city staff years ago. And over the years it has grown into a more complete representation of a lot of of our business processes. But but maintaining your own application can be kind of a full time activity. And and at the same time, the the market is is evolving and the products are evolving in the market. And so our move to a commercial product is more to get out of the kind of the maintaining of our own tools and creating additional supplemental tools that the aviation department, as an example of sharepoint sites and excel spreadsheets used to kind of connect the dots that are not fully connected in the in the in the primary system, our hope is to get as much of that done in a, [10:53:59 AM] in a central procurement system as possible, to the extent that there will be some supplemental functions done by systems. That's that's still a possibility. But but the intention is that the documents and that was really what the this review was focusing on is where are the documents, how are they organized and are they accessible and accurate. And we really want to have that to the extent possible in one location. So we that is very much the underlying kind of driver for the current financial management system review. >> Okay. And I appreciate your work on that. It sounds like there'll be an update next year regarding the status of that project. And then the the just last question regarding that is my concern, when I visited with the audit team two days ago was that if we did a similar kind of analysis in a different department, we might uncover potentially the exact same challenge, which is we've got multiple systems that may or may not have great integration being used to manage documentation in this capacity. So I didn't have a sense of [10:55:01 AM] whether how universal this particular challenges across different departments outside of the airport and outside of the scope of the audit is the sense that this procurement system is going to address that challenge. >> Council member. We believe that it's going to greatly address it to the extent that it will address all the the the kind of the individual needs of the various departments. Their missions are diverse. So we believe that it will address a large proportion of them with the intention of, of of minimizing the need to rely on external tools, because that's really where the data disconnects occurs when we have these external sources of preserving contract document data, you allow for duplication, triplication of data entry. The the the data entered can become dated, it can become inaccurate, there can be omissions and errors. And so to the extent that we can get all the contract document and the contract data in one location, if we have supplemental systems or integrations with other [10:56:01 AM] systems, at least we know that there's one, one source of truth and that and that would be where we would look first and last to find, you know, the accurate contents of of each of the city contracts. We would see some version of, of these types of, of challenges in, in the management of, of contracts and other departments, to a greater or lesser extent, not not all departments consume contract services or products the same. So we'll see it to a greater or lesser extent. But these are all known challenges that have been on our radar for some time and have been driving us in this current review of the systems. We're very excited by the the upcoming decision and implementation. So we see this as very much a a confirming and a constructive review of our current procurement system environment. >> No, I appreciate that answer. I look forward to the updates next year, and I'm encouraged by the work you're doing to try and address this problem systemically. Thank you. >> Thank you, councilmember. Thank you all very much. We'll [10:57:03 AM] go to item number six. And while we're changing staff for item number six, I want to take just a minute. And on behalf of the committee, I want to recognize that this is our city auditor, Corey stokes last audit and finance committee meeting forever, which I just can't imagine how that must feel, that you never get to come back to an audit. Yeah, I'll tell you what. We'll invite you back. We'll invite you back. Yeah. Oh, yeah, you can do that. Please do that. We hope we see you there. But everybody knows Corey. And if you don't, I don't know how you missed her. I mean, she's been here since 1999 and has served as our city auditor in with great distinction and has been such a big help to all of us. And since this is she retires at the end of this year, we have already selected her deputy to be the new auditor. [10:58:03 AM] Jason will be. We're all looking forward to that as well, but it just seems appropriate that we pause for a second and say thank you. We wish you the best of luck and great, great happiness in your retirement. So thank you very much. And we will cut you off at three minutes. If you show up at citizen communication. Very good. Now we deeply appreciate you. Thank you. And we look forward to working with Jason. So with that I'll turn it over. We're now members. We're now on item number six. >> Good morning. My name is Zach brown. I'm acting division chief of the open government ethics and compliance division of the city attorney's office. And I'm here today on behalf of the city attorney to submit our annual report related to compliance and enforcement of chapter four eight of the city code, which regulates city lobbyists. We provided the same [10:59:04 AM] presentation last December, and since then have provided quarterly reports, which are included as backup to this item. Today's report covers the entire calendar year during 2025, eight notices of lobbyist violations were provided by the city clerk to the ethics review commission for failure to file quarterly activity reports required by section 486 of city code. The ethics review commission has discretion to act on these and based on the outcome of any complaint proceedings, the irc may refer it to the city attorney's office for prosecution, and more updates will be provided on the status of these referrals in your quarterly reports. Any questions? >> Any questions? Anybody? All right. Thank you. Thank you. All right members, we are now. The finance committee will now go into closed session to take [11:00:05 AM] up two items pursuant to sections 551076 and 551089 of the government code. The committee will discuss security audit matters related to audit of badge management, management and access control systems as item number seven and item number eight. An update related to information security in the city. Is there any objection to going into executive session on the items announced hearing none. The committee will now go into executive session. [11:55:30 AM] All right. We are out of closed session. In closed session, we discussed security audit matters related to item seven and eight. That concludes the work of the audit and finance committee. So at 1155 we will stand adjourned.