CHARLESTON, W.Va. — The state is sending a check for $4.7 million to the federal government over unallowable reimbursements of federal stimulus funds connected to the expansion of broadband.
The legislature approved SB 1026 Monday that takes the money from state Treasurer John Perdue’s unclaimed property fund and transfers it to state’s general fund. From there it will go to the federal government.
The state received $126.3 million in a 2010 federal stimulus grant to expand broadband and it partnered mainly with Frontier Communications to do so. A federal audit determined not all of the money reimbursed were for items covered by the grant.
Justice administration General Counsel Brian Abraham told MetroNews the $4.7 million in question was one of the first things Gov. Justice was told in early 2017 when he began to transition with the administration of former Gov. Earl Ray Tomblin. Abraham said they’ve appealed the audit’s findings for months but have been unsuccessful.
“We, of course, tried to run every track we could through the administrative appeal process and that’s run to its conclusion and we have no choice but to pay the bill,” Abraham said.
The state recently received a deadline from the federal government. The feds offered a payment plan but Abraham said that wouldn’t work with the state Constitution. So they’ll pay it in one lump sum.
At issue, according to Abraham, is some broadband cable that was delivered to the state in excess of what was needed along with some unallowable charges regarding Frontier’s billing of the state for services rendered. Abraham said the company sought reimbursement for the billing process along with what was owed.
The state thought it had a pretty strong case on appeal, Abraham said.
“Part of our appeal in this was we felt like and there was some email traffic that showed at least the agency on the federal level kind of agreed that these charges were allowable but it was the (federal) auditor that came back and said they were not,” Abraham said.
State Senate Finance Committee Chairman Craig Blair, R-Berkeley, told fellow senators Monday the state was on the hook for the money instead of Frontier.
“Frontier as a sub-recipient is not liable to the federal government for the repayment of these funds,” Blair said. “It may be possible for the state to pursue reimbursement for these funds from Frontier.”
Senator Randy Smith, R-Tucker, said that’s exactly what should be done.
“I believe we ought to call on the attorney general to look into this and file a lawsuit to recover this $4.7 million plus damages,” Smith said.
Abraham said there is an evaluation that’s going to take place with Attorney General Patrick Morrisey and the impacted state agencies to see if there’s a way to recover some of the money from Frontier.
“That’s premature at this point to determine whether we can or not,” Abraham said.
Frontier spokesman Bob Elek told MetroNews Tuesday the company stands by its work on the West Virginia project.
“Frontier is monitoring these developments in the West Virginia legislature. As Frontier has maintained since it became involved in the BTOP project, all of its costs on the project were entirely proper,” Elek said.
Where’s the money coming from?
State Revenue Secretary Dave Hardy contacted state Treasurer Perdue a few days ago to seek permission to take the money from the Unclaimed Property Fund. Perdue’s Communications Director Gina Joynes told MetroNews Perdue agreed to do so. She said it’s not uncommon for transfers from the fund to take place several times a year. She said transfers for this fiscal year were headed toward $7 million not including the $4.7 million that will now come out.
State Senator Greg Boso, R-Nicholas, said he was concerned not paying the federal government could hurt flood recovery money the state has received since the June 2016 flood.
“My fear is that if we do not satisfy this particular obligation we potentially could have those grants that are necessary to provide for our people today as a result of those flooding issues held up,” Boso said. “I think we’re at a point where we are left with no choice but to satisfy this obligation.”
Abraham said the dispute over the stimulus money has stretched for two gubernatorial administrations. The state received word it had been chosen for the funds when U.S. Senator Joe Manchin was governor and the work continued under former Gov. Earl Ray Tomblin. Abraham said, as with the RISE West Virginia long term flood recovery program, Justice wants to make sure federal funds are spent correctly.
“This is now two administrations ago and finally the chickens have come home to roost and somebody has to pay the tab,” Abraham said. “Gov. Justice has been very mindful that he doesn’t want to create that for future administrations and if we locate and determine a problem today then we should do everything we can to fix it now to prevent these kind of situations.”
In a controversial move, the Justice administration held up a consultant’s contract in the RISE program last year causing the state to be put on the slow-spender list by U.S. Housing and Urban Development (HUD) which has given the state $150 million in flood recovery money.
The state’s internet expansion effort with the stimulus money was called the Broadband Technology Opportunity Program (BTOP) and it was under fire for most of its existence. The plan was to bring high-speed access to public facilities like libraries, schools and county courthouses. A few audits, including a look by legislative auditors, were critical of the spending, especially on high-capacity routers that were placed in public locations that needed only a few internet hook-ups.
Sen. Smith, a former House member, said during Monday’s floor remarks he remembers sitting on a House committee six years ago trying to get answers from Jimmy Gianato, the then director of the state Office of Homeland Security and Emergency Management, and Frontier officials about how the expansion project was going.
“We knew we were getting racked across the coals,” Smith said. “Officials in the state knew this was going on and here we are going to have to pay $4.7 million and Frontier is getting off the hook free.”