Austin kills million dollar McKinsey & Company audit of homelessness contracts, programs

The city of Austin is pulling out of an audit of its contracts, programs and strategies related to homelessness with the international consulting firm McKinsey & Company.

The review, which was approved by the City Council in January at $2 million, was set to be a joint assessment of several agencies that provide homelessness services including Central Health, Travis County and Integral Care. Each were set to contribute to the contract, with the city paying half of the total bill.

But not all the agencies were on the same page about the review and who was conducting it. Travis County commissioners voted against contributing to this fund, saying they wanted to do a review but didn't want to work with McKinsey. Both Integral Care and Central Health approved funding for the review, according to a February memo from interim City Manager Jesús Garza.

Austin has a homelessness crisis. Now, city will vote on $2M contract to review strategies

"Given the changes in participation among the partners, I have concluded that the conditions for the assessment have changed such that we cannot achieve the community-wide impact originally envisioned," Garza wrote in a memo to the City Council and Mayor Kirk Watson on Thursday. "As a result, it has become difficult to define a successful scope, so we will not be proceeding with the contract."

Garza said he still supports doing a comprehensive review with the same agencies.

Watson told the American-Statesman the ending of the contract is a disappointment, saying he thinks the review is important when the city is "spending the level of money that we're spending."

The city has spent hundreds of millions of dollars over the past decade to address the issue. This past budget cycle, the City Council approved a record $80.9 million earmarked for homelessness services.

"We have at least four jurisdictions that are overlapping," Watson told the American-Statesman. "We ought to be willing to look at how we work together on that, so that we provide better service, and we provide a better and more appropriate use of those tax dollars."

Watson said he thinks the city is doing a better job of coordinating its services related to homelessness, but that there is still a need for a review.

"No one should be afraid of findings that may not be ideal," Watson said. "In fact, that ought to be something that we welcome because that's the reason you want to do performance reviews."

There was some pushback from community members and activists, as well as some concern from City Council members about doing a $2 million review with McKinsey — the firm has a long history of controversy, including its involvement in the opioid epidemic.

"I'm pleased the Interim City Manager heard our concerns and recognized that we currently lack the broad support necessary for this effort to be successful," Council Member Ryan Alter said in a statement shared on X, formerly Twitter.

Alter hopes the city can continue working with these same agencies to "accomplish the original goal of identifying gaps and overlaps in our efforts."

Council Member Zohaib "Zo" Qadri said on X, "I'm glad to see the McKinsey contract dead. There's a lot more productive places to use $2 million in ARPA funds."

Why do the review of homeless contracts in the first place?

Integral Care, a public entity that provides mental health care, faced a critical budget issue in 2023, which prompted the mayor and key leaders to intervene or else risk cuts to jobs and services.

According to Watson, Integral Care's financial crisis spurred the idea to review contracts and strategies and to attempt to measure just how effective each provider is in improving the homelessness problem in Austin, the Statesman reported in January.

District 6 Council Member Mackenzie Kelly had also called for an audit of spending related to homelessness.

"There was agreement with regard to the process for making sure that everybody could work together, so this is a disappointment," Watson said. "We're losing an opportunity."

This article originally appeared on Austin American-Statesman: Austin ends McKinsey & Company review of homelessness