CHARLESTON, W.Va. -- The state of West Virginia improperly purchased hundreds of oversized routers, wasting at least $7.9 million in federal stimulus funds that could have been spent to expand high-speed Internet, according to an audit released Sunday.
The West Virginia Legislative Auditor's report found that Cisco sales representatives and engineers who recommended that the state buy the oversized Internet routers showed "wanton indifference to the interests of the public." The audit called on the state Purchasing Division to investigate whether the Cisco sales representatives and engineers should be barred from doing business with state government.
The auditor's report singled out state officials, including Homeland Security Director Jimmy Gianato, for failing to survey public facilities across the state to determine if they needed new routers.
The auditors concluded that the state could have bought smaller, less-expensive routers for hundreds of schools, libraries and State Police detachments.
"The decision to spend the federal funds on oversized routers resulted in millions of dollars in federal funds not being spent on expanding the state's fiber-optic broadband network," auditors concluded.
By buying smaller routers, the auditors said the state could have built more than 100 miles of high-speed fiber that provides faster Internet connections.
"It's disappointing, as keepers of the taxpayer funds, a purchase of such expense was done without proper reasoning and proper authorization," said Sen. Clark Barnes, R-Randolph. "We need to make sure something like that does not happen again."
Delegate Gary Howell, R-Mineral, said state officials should have brought fiber to public facilities first, then asked what type of routers they wanted.
"It's like the state bought Ferraris and all we built was a dirt road," Howell said. "We did it like the Soviet Union used to do it: top down, instead of bottom up."
Rob Alsop, Gov. Earl Ray Tomblin's chief of staff, defended the $24 million router purchase, saying Cisco also gave the state a discount for buying routers of the same size -- a savings greater than the state would have received by purchasing devices of different sizes.
Alsop said state officials wanted to buy routers for public facilities' "future needs." He said state officials at the time -- Alsop didn't work in state government when the routers were purchased -- made a "judgment call."
"They weren't looking at current needs," Alsop said. "They were trying to foster broadband development and capacity five, eight, 10 years from now."
State lawmakers didn't seem to buy Alsop's explanation.
"Both sides were presented, and the prevailing side clearly showed there was a waste of taxpayer money," said Larry Faircloth, R-Berkeley.
Auditors found that the state spent an additional $6.6 million for router "add-on" features that state agencies never requested and weren't always necessary.
"In our view, not everyone needed all of these features," Legislative Auditor Aaron Allred told two House-Senate oversight committees that received the report Sunday. "The state could have saved millions of dollars if they had been selective."
The audit spotlights specific cases of waste: The state installed a $22,600 router at the Marmet Public Library, which has a single Internet connection. The router cost more than the trailer that houses the Marmet Library, according to Kanawha County Commission staff.
"Marmet may have needed a better library, but they didn't need a $22,600 router," Allred told state lawmakers.
Meanwhile, Clay County received seven oversized routers -- all installed at facilities within a half-mile radius in the town of Clay. In Pendleton County, the city of Franklin received six routers for sites located within three-quarters of a mile of each other.
"I believe every West Virginian deserves the same broadband access," Allred said. "But having the same access doesn't mean you buy the same number of buses for the Pendleton County school system that you buy for the Kanawha County school system."
Routers purchased using Internet telephone contract
In 2010, the state of West Virginia received a $126.3 million federal stimulus grant to expand high-speed broadband. The money was designed to bring fiber-optic cable to 1,164 "community anchor institutions" -- schools, libraries, health-care clinics, county courthouses, State Police detachments, state agencies, 911 centers, planning offices and other public facilities.
The state used $24 million from the grant to buy routers for each site. The routers, which funnel data from one computer network to another, cost $22,600 each.
Auditors also determined that state officials purchased the oversized routers using a 2007 contract for Internet telephone service. The contract makes no mention of routers.
Those same officials, the audit found, circumvented state purchasing laws and used a "secondary bid" process that wasn't allowed at the time.
The 2007 contract specified "Cisco or equal" equipment. But someone changed the wording to "Cisco only" when the state Office of Technology solicited bids on its online "bulletin board," the audit says. The change shut out Cisco competitors, such as Alcatel-Lucent and Hewlett Packard.
The state Purchasing Division was never notified about the $24 million router purchase.
The state Office of Technology, which oversees state agency technology purchases, also was shut out. The audit says former state Chief Technology Officer Kyle Shafer tried to halt the $24 million router buy, but his objections came too late.
"The Office of Technology did not participate in any of the meetings that led up to this decision," Shafer told auditors. "The first I saw of this purchase order was when it was sent to [us] for approval."
State officials, Cisco give conflicting stories on reasons for large routers
West Virginia Chief Information Officer Gale Given justified the $24 million router purchase, saying the government facilities could save money on phone bills by using the devices for telephone service, according to the audit.
But auditors noted that Cisco recommends its 3945 series routers for sites with 700 to 1,200 phones. None of the public facilities that received routers have 700 phones - or anywhere close to that number.
For instance, 91 of the 172 libraries that received routers have three phones or fewer. The Cabell County Library -- the largest library that got a router -- has 15 phone lines.