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Over the past three years, the Metro Council has become a ballot measure powerhouse, passing a $653 million housing bond in 2018, a $475 million parks bond last year, and a $250 million-a-year homeless services measure in May.
With the agency's growing profile comes the responsibility of making sure that money, much of which will be passed on to local partners in the tri-county region, is well spent.
Metro Auditor Brian Evans raised a red flag on the housing bond in a management letter to the Metro Council slated for release Aug. 26 but obtained by WW today.
In his letter, Evans, who is independently elected, explained that his office hadn't yet finished its audit of the housing bond but had found issues that warranted immediate notice.
"Generally accepted government auditing standards require auditors to communicate in writing when they detect deficiencies in internal control that are not significant to the audit objectives, but warrant the attention of those charged with governance," he wrote.
The concerns focused on whether the agency was using money meant for capital projects on proper administrative expenses, and whether bond oversight committee members had adequately disclosed potential conflicts of interest.
"We found Metro's guidance for managing regional administrative costs was not specific enough to determine which costs were bond-eligible," Evans wrote. "This made it difficult to consistently manage them over time. We also found some contracts with Metro could reduce the oversight committee's independence."
Evans' auditors have experienced difficulty matching some expenditures to the bond capital plan—although the examples provided amounted to only about $10,000.
"Metro did not provide sufficient guidance for staff to determine which regional administrative costs were bond-eligible," he wrote. "The bond work plan—released in January 2019—listed several categories of administrative costs, such as program development and administration, financial administration, and monitoring and oversight. It did not provide specific guidance for staff to follow."
He noted that administrative spending may also be proceeding faster than the underlying construction projects.
"At the end of March 2020, Metro reported it had already spent 21% of its $13 million regional administrative cost allocation, which underscored the need to carefully monitor those costs moving forward," Evans wrote. "While the bond was initially projected to be complete in five to seven years, as of July 1, 2020, two jurisdictions did not yet have signed intergovernmental agreements, which may delay construction."
As for the oversight committee, which is supposed to keep a more regular eye on spending and meets four times a year, Evans determined that members had not properly documented contractual relationships with Metro itself.
"We found at least four contracts with Metro that should have been disclosed to improve transparency," Evans wrote. "These contracts could inappropriately influence a committee member's judgment or behavior, regardless of when payments were received."
The document does not name the companies or individuals involved or anything about the size of the contracts.
"These contracts indicated controls over disclosures were not working as intended," Evans wrote.
In a brief response, the Metro Council indicated it agreed with Evans' findings and would make his recommended changes.
In a more detailed response, Metro senior managers acknowledged Evans' findings and pledged to do better but suggested he was overstating the severity of the issues he highlighted. The managers viewed the potential conflicts of interest as benign and said of the administrative expenses he flagged, for example, "we strongly disagree that they are questionable."
Metro Council President Lynn Peterson, who, since her election in 2018, has moved aggressively to put her agency at the center of important regional conversations about the environment, housing and transportation, said Evans' findings should inspire confidence.
"This is why the public trusts Metro—because we commit to strong public oversight and review by oversight committees and our independent auditor," Peterson said in a statement. "In this case, the auditor found minor, but important, improvements that can help make our spending more transparent and efficient. We will continue to work to improve, thanks in part to the input by Auditor Evans."
Peterson and her colleagues last month referred to voters Metro's most ambitious undertaking yet, a $4 billion regional transportation measure. Should it pass, that measure would require high levels of management and oversight.
Evans underlined a challenge Metro faces in his letter to the council about the housing bond.
"Without stronger controls, voters' trust in the bond may be weakened," he said. "As a result, voters may be less likely to support future ballot measures."