County audit finds governance, funding and inflation risks in MSTIP; nine recommendations issued

The Washington County auditor presented an audit of the Major Streets Transportation Improvement Program (MSTIP) during the board meeting of Jan. 21, 2025, finding the program is not authorized in county code, lacks board-adopted policies and faces significant inflation, contingency and funding risks.

The audit, public-released Dec. 20 and summarized by County Auditor Christine Adams Swanberg, examined MSTIP’s objectives, risk profile and past funding cycles. Swanberg said the report identified seven audit findings and nine recommendations aimed at improving governance, cost estimating, equity treatment, contingency practices and design approval authority.

Auditor’s nut graf: why the audit matters The MSTIP 3 fund — the most recent program cycle reviewed — had a modified expenditure budget of about $301,000,000 in the current fiscal year, and auditors concluded that the program’s legal and administrative footing, plus past estimating practices, leave it vulnerable to inflation, project delays and uneven treatment of projects across the county.

What the audit examined and found Senior management auditor Fiona Howell Earl described the audit’s methods: interviews with elected officials and staff, a stakeholder survey (65% response rate) and reviews of county charter, code and MSTIP administrative procedures. The audit identified 17 perceived risks and condensed its findings into seven audit findings. Key findings included: - MSTIP is not codified in county code and lacks board-adopted administrative policies defining purpose, governance and funding direction. The report recommends drafting county code language and administrative policy for board adoption. - Unclear application of equity metrics versus equality-by-district funding. The audit recommended clarifying how the county will reconcile the 2020 equity resolution with the board’s practice of allocating approximately equal funding by commissioner district for MSTIP cycles. - Departures from budget policy 04/2004 in recent years when general-fund transfers to MSTIP were adjusted; the audit recommended complying with policy or formally revising it. - Prior noncompliance with contingency requirements and concerns about a planned reserve treatment that could limit access to contingency funds when needed. - Historical cost estimating practices that omitted cumulative, multi-year inflation assumptions, contributing to an estimated $90,000,000 underestimate for prior MSTIP cycles; auditors recommended improved, multiyear inflation forecasting for project pipelines. - Uneven protection from inflation tied to earlier bonding/cost-sharing subprograms that advantaged projects in certain high-growth areas; the auditors recommended policy clarifications to ensure program-wide fairness between pay-as-you-go and debt-funded models. - A 2017 bicycle facilities policy requiring board design approval conflicts with county code delegating design approval to the Department of Land Use and Transportation (LUT); auditors recommended revising design standards and documenting exception processes and, if necessary, revoking the 2017 policy after updated standards are adopted.

Management response and next steps County Administrator Angie (presenting management’s response) said management agreed with some findings, partially agreed with others and disagreed with a few. Management recommended a MSTIP program guide to be adopted by resolution rather than prescriptive code that might limit future flexibility. Angie said the county will update financial policies and administrative procedures, continue improving cost forecasting and consider program-wide bonding for future debt financing to avoid inequities.

Commissioner reactions Commissioner Snyder praised the auditor’s work and county staff for advancing the conversation. Commissioner Willie questioned the value of retrospective critique of contingency levels given unprecedented cost escalations and emphasized balancing MSTIP protections with overall county budget constraints. Commissioner Fai expressed support for the auditor’s role and staff responses. Vice Chair Therese highlighted countywide budget limits as an overriding constraint on MSTIP choices.

What the audit recommends next The audit’s recommendations ask the county administrator and department directors to: - Draft county code language authorizing and defining MSTIP and adopt administrative policies (recommendations 1.1 and 1.2). - Clarify how equity objectives and district-equality funding interact in policy. - Comply with or formally revise budget policy 04/2004. - Revisit contingency and reserve treatments in administrative policy 04/405 to ensure funds available when needed. - Improve multiyear inflation assumptions and cost forecasting for all MSTIP projects. - Define fair treatment between pay-as-you-go and bonding funding models and consider program-wide bonding to avoid geographic imbalance. - Update road design standards and document a technical exceptions process for bicycle facility designs; if adopted, repeal the conflicting 2017 bicycle facilities policy.

What the board will do next The board and management agreed to continue refining policies and administrative procedures. Management indicated staff will present recommended code language, administrative policies and cost-forecasting improvements for board review and potential adoption.

Ending The audit places MSTIP governance, funding strategy and cost estimating on the board’s near-term agenda. Auditors and staff framed the recommendations as steps to strengthen internal controls and better align MSTIP practice with county priorities and fiscal constraints.