After a months-long review of Houston’s 22 departments by the city’s senior leadership and Ernst & Young, Mayor John Whitmire called the results “a real opportunity for us to protect Houston’s future.”
The study focused on performance, spending, organization, and forensic accounting.
Across the city, auditors found misuse and abuse, but primarily bloated bureaucracy.
Notably, only seven percent of the city budget’s 606 performance indicators actually measure outcomes, which matter most to taxpayers.
Additionally, employees spend about 30 percent of their time on operational and administrative tasks like answering emails and participating in meetings. Meanwhile, 43 percent of middle managers have only one to three direct reports on their teams, and “gaps in career pathways lead to fake promotions to manager roles without direct reports.”
Reviewers also identified anomalies like payments to “high-end retailers” and prohibited vendors as well as employee use of employee credit cards to split payments that would otherwise have exceeded allowable spending limits.
The report found that during the COVID era, the city spent 80 percent of the American Rescue Plan Act dollars it received on operations. In comparison, Dallas spent 18 percent of its funds on operations, and San Antonio spent 35 percent.
Ernst & Young also interviewed 12,000 city employees who reported spending time on “things that don’t matter.” The mayor said, “There’s just been glaring inefficiencies, … duplications, and lack of accountability for years, but it’s going to end now.”
The audit also led to the creation of a new system for flagging questionable payments, which the mayor’s deputy chief of staff, Steven David, described as “first-of-its-kind.”
“This is the first instance in which the City of Houston has been able to be proactive about potential illicit financial behavior by its employees,” he said. “Other times, we have had to be told an employee was doing something, or the news reported on it.”
The platform will flag questionable transactions, including those just under the $50,000 limit required for city council approval. It’ll provide a real-time analysis, after which a team will review flagged items to determine their legitimacy.
It is unclear how much money the report’s recommendations would save, but the administration estimates a five-to-15 percent reduction in the spending category. Other categories remain to be determined. The recommendations do not assume immediate layoffs, furloughs, or other similar employee changes.
Many of the changes will begin being implemented in the budget for fiscal year 2026, which starts on July 1.
