Audit: W.Va. router buy not cost-effective use of stimulus funds
CHARLESTON, W.Va. -- The state of West Virginia wasted federal stimulus funds and didn't properly track Internet routers that cost $24 million, according to a federal audit released Friday.
The U.S. Commerce Department's Inspector General found that the state could have purchased smaller, less expensive routers for schools, libraries, health clinics, county courthouses and planning agencies.
The Inspector General started reviewing West Virginia's router purchase last summer at the request of two congressional subcommittees.
"While I am pleased that our concerns about this funding were accurate, the fact that money was wasted and routers are unaccounted for is disturbing," said Rep. John Shimkus, R-Ill., who serves as chairman of the House Subcommittee on Environment and the Economy. "This is an unfortunate example of how government does not keep track of how it spends taxpayer money."
State officials disputed parts of the audit Friday, saying West Virginia got a discounted price on the routers and has upgraded its equipment-tracking system. The routers cost $22,600 each.
"We do not believe purchasing routers with enhanced capabilities for our 'community anchor institutions' was a waste of taxpayer resources," said Rob Alsop, chief of staff for Gov. Earl Ray Tomblin's office. "Instead, we view this project as an investment in West Virginia's future."
The router purchase was part of a $126.3 million stimulus-funded project designed to increase high-speed Internet at 1,164 public facilities in West Virginia.
"[The state] has not demonstrated that [stimulus] funds used to purchase routers were spent cost-effectively," according to the Inspector General's report.
"Unfortunately, it is no surprise that a government program the size and scope of the stimulus has resulted in waste and abuse -- one of the many reasons I strongly opposed it," said Rep. Greg Walden, R-Oregon, chairman of the House Subcommittee on Communications and Technology. "The I.G.'s findings are another reason the committee will continue to conduct rigorous oversight of the stimulus to examine what the money has been used for and how we can minimize waste, fraud and abuse."
The auditors found that West Virginia officials made the $24 million router purchase without conducting a study to determine what size routers were needed at public facilities -- called "community anchor institutions" under the federal grant -- across the state.
"[West Virginia] never assessed the data requirements for each community anchor institution," the report says.
Instead, West Virginia officials met with Cisco engineers and sales representatives, who suggested that Cisco 3945 series routers would best meet the project's requirements. Cisco also provided 100 free routers to the state, and the company extended its router warranty from three to five years at no additional cost.
During the audit, Inspector General's Office staff members asked a Cisco representative why the company didn't suggest a smaller router, such as the Cisco 2900 series router. The representative responded that the smaller router didn't have a dual power source that would keep running during "mechanical failures."
"The dual power source is necessary for critical operations, such as those at 911 centers and the state police run," the audit states. "However, uninterrupted service is not critical for schools, libraries and planning and development agencies."
The state has designated 53 of the 1,164 routers to county 911 centers, and another 70 to State Police detachments.
The audit found that the state could have saved $1.2 million by purchasing Cisco 2900 series routers -- a size smaller than the routers purchased -- in 23 West Virginia counties with fewer than 20,000 residents. Those counties received 231 of the 1,164 routers.
Auditors did not calculate cost savings on routers smaller than the 2900 series, nor in West Virginia counties with more than 20,000 people -- where more than 900 routers were assigned.
In a letter sent to the Inspector General's Office, Alsop said the value of the free routers would have exceeded the savings from buying routers a size smaller. The audit says the state would have received 100 free routers even if the smaller routers had been purchased.
"With the discounts we received and the free routers, we do believe West Virginia made an appropriate use of the [stimulus] funds for the router purchase," Alsop said.
The Gazette-Mail previously has reported that the Cisco 3945 series routers are designed to service a minimum of 500 users, or device connections. Yet the state has installed the pricey devices primarily in rural schools and libraries with only a handful of computer terminals.
According to Friday's audit report, West Virginia mismanaged its inventory of 1,164 routers. Some routers weren't at the public facilities where they were assigned, the report states. Other devices were found in storage but not included in the state's inventory.
"As the lack of an effective management system increases the risk of fraud, waste or abuse, it is vital for [West Virginia] to maintain an accurate equipment inventory tracking system, including router inventory," according to the report.
Federal auditors also interviewed administrators at some public facilities in West Virginia.
"The representative of one group stated that three routers currently designated for a smaller location could be better utilized by other, larger sites," the report states. "Another representative stated that the service to operate the new router was cost-prohibitive."
The Gazette-Mail has reported that some public facilities have refused to use the devices because they can't afford faster Internet service. The state is using about $40 million of the $126.3 million in stimulus funds to bring high-speed, fiber-optic cable to the community buildings. The routers connect to the fiber-optics cable.
State officials told federal auditors that they would remove oversized routers from facilities that don't want them and install the devices at places that do.
The Inspector General report also cites the state for failing to have agreements with public facilities to continue to use the routers.
"Without an agreement, the community anchor institution may not understand it cannot dispose of the equipment without first seeking approval," the report states.
Alsop said the state would have the facilities sign agreements.
The auditors directed West Virginia officials to establish an accurate "master list" to track routers and make sure routers are installed and functioning -- not just delivered. The state previously has tracked only deliveries.
"We have concluded that [West Virginia] must strengthen its control over router inventory," the report states.
Alsop said the state tags every router and plans to catalog all 1,164 devices into a new inventory system within 90 days. Also, government employees have started going to every public facility to ensure routers are "in place, tagged and appropriately located."
"We believe the funding provided to West Virginia through the grant will provide tremendous opportunities for West Virginia," Alsop said. "We want to be good stewards of taxpayer dollars, and we used the review process to learn how we can do an even better job managing this project."
The West Virginia Legislative Auditor also is reviewing the router purchase. That report is expected next month.
Reach Eric Eyre at email@example.com or 304-348-4869.