State Marijuana Audit Highlights Need for Enforcement Improvements

The Colorado Marijuana Enforcement Division needs to improve its enforcement, according to a state audit calling for changes in how — and how often — it does dispensary inspections and then takes disciplinary action against bad actors.

Armed with over 100 staffers and nearly $17 million in funding for the current fiscal year, the MED is tasked with licensing and regulating Colorado's marijuana industry and retail operations. This mission includes inspections of growing and processing facilities, crafting industry rules, investigating shady business practices and conducting ID compliance checks at dispensaries.

Colorado marijuana dispensaries have passed underage sales checks at a rate of 95 percent or higher since 2019, with an average of around 99 percent since July 2022, according to the MED — but it's not the pass/fail rate that concerns the Office of the State Auditor. According to an audit released August 7, the problem involves how many compliance checks are actually taking place.

After combing through MED enforcement actions dating back to July 2019, auditors found that Colorado marijuana regulators had failed to conduct ID compliance checks at 36 percent of the dispensaries that have opened within the last four years. The audit also discovered that marijuana stores in some counties haven't undergone any underage compliance checks in four years, and that some dispensaries that had failed ID checks weren't cited by state investigators.

The audit report references two samples covering 45 complaints regarding recreational marijuana stores from 2020 to 2022. After assessing how the complaints were handled, auditors found seven stores that were eventually cited for selling marijuana to underage state operatives, but "only six were also cited for failing to verify the operative’s age, five were cited for allowing the operative into a restricted access area where marijuana is sold, and three were cited for transferring marijuana to a customer without a valid ID."

"Typically, underage marijuana sales should be a violation of each of these regulatory requirements," the report notes, adding that the MED "did not pursue any disciplinary action" against stores for over half of the marijuana public safety violations in the samples. The audit did not identify the stores responsible for the violations.

The samples are "nonstatistical" and "cannot be projected to the population," according to the audit report, but it adds that the results are "valid for confirming inconsistencies in the Division’s enforcement process."

The MED was inconsistent in its underage compliance inspections depending on the county, the audit determined. For example, investigators did not perform underage compliance checks at any dispensary in Chaffee County for four years, but the MED did hold those inspections at every store in Larimer County. The MED also failed to inspect 32 percent of the 567 stores that had never been inspected or not been inspected within the last two years, according to the auditor's office. During that same four-year span, one dispensary was inspected nineteen times, auditors note.

In a public response to the report, the MED says that it "appreciates" the audit and "looks forward to implementing" its recommendations. However, the MED also notes that the COVID-19 pandemic affected its ability to conduct in-store compliance actions, and that other inspections were conducted at dispensaries even if underage sales checks were not.

According to the MED, underage inspections are "not reflective of all the measures" it takes, citing investigations into advertising and packaging that may target children and teenagers as well as probes into black-market diversion as "resources focused on its top priorities of preventing youth access." Product and consumer safety are also top priorities, the division says.

This isn't the first time the MED has come under fire for inadequate and inconsistent underage sales checks. Last year, the Colorado Legislature considered a bill that would have created new reporting requirements for marijuana business violations, while also forcing a state audit of the MED. The measure, sponsored by senators Chris Hansen and Kevin Priola, was pulled after pot industry pushback and the MED's agreement to increase compliance checks and undergo the just-concluded audit.

“We appreciate Senators Chris Hansen and Kevin Priola formally requesting that the state audit the Marijuana Enforcement Division to address concerns about sales to those under 21 at licensed dispensaries,” Henny Lasley, executive director at One Chance to Grow Up, an anti-marijuana commercialization group, says in a statement regarding the audit report.

One Chance to Grow Up publicly lobbied for Hansen and Priola's bill. The organization focuses most of its energy on marijuana legalization guardrails to restrict youth access to dispensary products.

“We are pleased that the MED has identified and acknowledged these troubling gaps and agree with the recommendations. We urge the state to take immediate action to increase compliance so that Colorado youth can be better protected going forward," Lasley adds.

In a statement to Westword, Colorado dispensary owner and Marijuana Industry Group boardmember Tom Scudder says that marijuana business owners are committed and willing to "working with the MED" to streamline the inspection process.

"The number-one priority for Colorado cannabis small business owners, many of whom are parents themselves, is youth prevention and keeping our communities safe," he says. "We believe this is reflected in our 99 percent compliance rate, which is much higher than other industries. Colorado also has some of the strictest regulations on the books — many of which cannabis business owners helped craft — and we are proud of that because we want a well-regulated industry. As a cannabis business owner myself, I can say that we are committed to ensuring safe, legal sales, and we look forward to working with MED on streamlined and improved processes moving forward if necessary."

According to the audit, the MED has conducted 723 underage compliance inspections so far in 2023, compared to 573 in 2021 and 2022 combined. In 2019, the department conducted 1,031 such visits.