I spent about 15 mins to figure this out and gave up. I asked a bat man (not the cool dark knight, but bat man for our scrum team). It was simply because UserAdmin.dll.config was read-only.
I created a new business project and added to TFS. Unfortunately, TFS added bin and obj folder which had dlls and dll.configs. I just removed those folders from TFS and now the error message disappeared.
I moved to TFS from SourceSafe about 4 months ago, and still find TFS is a bit error-prone. Maybe I am too used to SourceSafe. Well. I had used it for nearly 8 years.
Hope this helps. When I had the error "PolicyConfig ..., " I googled it but found no helpful articile. It may be too dumb mistake and people don't bother to post their experience.