diff --git a/app/config.py b/app/config.py
index c437dc1..0b9943d 100644
--- a/app/config.py
+++ b/app/config.py
@@ -1,8 +1,11 @@
+import logging
 import os
 from pathlib import Path
 
 from pydantic_settings import BaseSettings, SettingsConfigDict
 
+logger = logging.getLogger(__name__)
+
 
 def _resolve_db_url(url: str) -> str:
     """Convert relative sqlite path to absolute path for Docker or local dev."""
@@ -28,8 +31,8 @@ class Settings(BaseSettings):
     HOST: str = "0.0.0.0"
     PORT: int = 8000
     LOG_LEVEL: str = "INFO"
-    INITIAL_ADMIN_USERNAME: str = "admin"  # Auto-created admin user
-    INITIAL_ADMIN_PASSWORD: str = "admin123"
+    INITIAL_ADMIN_USERNAME: str  # Required: admin user to auto-create
+    INITIAL_ADMIN_PASSWORD: str  # Required: password for auto-created admin
 
     @property
     def resolved_database_url(self) -> str:
@@ -43,5 +46,17 @@ class Settings(BaseSettings):
 settings = Settings()
 
 # Validate required secrets at startup
+_missing = []
 if not settings.JWT_SECRET_KEY or settings.JWT_SECRET_KEY == "change-me-super-secret-key-min32chars!!":
-    raise ValueError("JWT_SECRET_KEY must be set in environment variables")
+    _missing.append("JWT_SECRET_KEY")
+if not settings.INITIAL_ADMIN_USERNAME:
+    _missing.append("INITIAL_ADMIN_USERNAME")
+if not settings.INITIAL_ADMIN_PASSWORD:
+    _missing.append("INITIAL_ADMIN_PASSWORD")
+
+if _missing:
+    raise ValueError(f"Required environment variables not set: {', '.join(_missing)}")
+
+# Log initial admin credentials (password masked)
+logger.info(f"Initial admin username: {settings.INITIAL_ADMIN_USERNAME}")
+logger.info(f"Initial admin password: {'*' * len(settings.INITIAL_ADMIN_PASSWORD)}")
diff --git a/app/database.py b/app/database.py
index 044c62b..0d5c7b4 100644
--- a/app/database.py
+++ b/app/database.py
@@ -9,33 +9,24 @@ from sqlalchemy.orm import DeclarativeBase, sessionmaker
 
 from app.config import settings
 
-# Async engine for aiosqlite
-DATABASE_URL = settings.resolved_database_url
-
-# Sync engine for migrations and initial setup
-SYNC_DATABASE_URL = DATABASE_URL.replace("sqlite+aiosqlite:///", "sqlite:///")
-
 
 class Base(DeclarativeBase):
     pass
 
 
-# Create data directory at module load time (before any engine connection)
-DATA_DIR = Path("/app/data")
-DATA_DIR.mkdir(parents=True, exist_ok=True)
-
-# Async session factory - URL uses absolute path to /app/data
+# Async session factory - uses DATABASE_URL from settings
 async_engine = create_async_engine(
-    f"sqlite+aiosqlite:///{DATA_DIR}/claudia_docs.db",
+    settings.resolved_database_url,
     echo=False,
     connect_args={"check_same_thread": False}
 )
 AsyncSessionLocal = async_sessionmaker(async_engine, class_=AsyncSession, expire_on_commit=False)
 
 
-# Sync engine for migrations
+# Sync engine for migrations (same database)
+_sync_db_path = settings.resolved_database_url.replace("sqlite+aiosqlite:///", "sqlite:///")
 sync_engine = create_engine(
-    f"sqlite:///{DATA_DIR}/claudia_docs.db",
+    _sync_db_path,
     echo=False,
     connect_args={"check_same_thread": False}
 )
@@ -62,7 +53,9 @@ async def get_db_simple():
 
 async def init_db():
     """Initialize database with all tables, views, FTS5, and triggers."""
-    # Data directory already created at module load time
+    # Ensure data directory exists
+    db_path = settings.resolved_database_url.replace("sqlite+aiosqlite:///", "")
+    Path(db_path).parent.mkdir(parents=True, exist_ok=True)
 
     async with async_engine.begin() as conn:
         # Create all tables via SQL (not ORM) to handle SQLite-specific features
@@ -75,39 +68,56 @@ async def init_db():
 async def _create_initial_admin():
     """Create initial admin user from environment variables if it doesn't exist."""
     import bcrypt
+    import logging
 
-    if not settings.INITIAL_ADMIN_USERNAME or not settings.INITIAL_ADMIN_PASSWORD:
+    logger = logging.getLogger(__name__)
+
+    username = settings.INITIAL_ADMIN_USERNAME
+    password = settings.INITIAL_ADMIN_PASSWORD
+
+    if not username or not password:
+        logger.warning(
+            "_create_initial_admin skipped: INITIAL_ADMIN_USERNAME or "
+            "INITIAL_ADMIN_PASSWORD not set"
+        )
         return
 
+    logger.info(f"_create_initial_admin: creating admin '{username}'")
+
     async with AsyncSessionLocal() as session:
         # Check if username already exists (any role)
         result = await session.execute(
             text("SELECT id, role FROM agents WHERE username = :username"),
-            {"username": settings.INITIAL_ADMIN_USERNAME}
+            {"username": username}
         )
         existing = result.fetchone()
 
         if existing:
-            return  # Username already taken, skip creation
+            logger.info(
+                f"_create_initial_admin: username '{username}' already exists "
+                f"(role={existing.role}), skipping creation"
+            )
+            return
 
         # Create admin user with bcrypt hash
         password_hash = bcrypt.hashpw(
-            settings.INITIAL_ADMIN_PASSWORD.encode("utf-8"),
+            password.encode("utf-8"),
             bcrypt.gensalt()
         ).decode("utf-8")
 
         await session.execute(
             text("""
-                INSERT INTO agents (id, username, password_hash, role, created_at, updated_at)
-                VALUES (:id, :username, :password_hash, 'admin', datetime('now'), datetime('now'))
+                INSERT INTO agents (id, username, password_hash, role, is_deleted, created_at, updated_at)
+                VALUES (:id, :username, :password_hash, 'admin', 0, datetime('now'), datetime('now'))
             """),
             {
                 "id": str(uuid.uuid4()),
-                "username": settings.INITIAL_ADMIN_USERNAME,
+                "username": username,
                 "password_hash": password_hash
             }
         )
         await session.commit()
+        logger.info(f"_create_initial_admin: admin '{username}' created successfully")
 
 
 def _create_schema(sync_conn):
diff --git a/data/claudia_docs.db b/data/claudia_docs.db
index 8d111b5..7d811ef 100644
Binary files a/data/claudia_docs.db and b/data/claudia_docs.db differ