Medical Marijuana Enforcement Division gets awful grade in auditor's report

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The Medical Marijuana Enforcement Division, which is charged with overseeing dispensaries and other MMJ-related enterprises, has been among the state's most beleaguered institutions for years. Note the big staff cuts last April and the September announcement that no appointments would be available until February. Even so, the damning nature of a new report from the state auditor about Colorado's marijuana regulatory system is still surprising (read it below), as is the blunt title of a release about it: "State Oversight of Colorado's Medical Marijuana Industry Ineffective."

Tomorrow morning, the Legislative Audit Committee will continue going through the audit report during a 7 a.m.-to-8:45 a.m. meeting tomorrow in the Audit Hearing Room of the Legislative Services Building, and given the dismal review of the performance by the Department of Revenue, the Medical Marijuana Enforcement Division's direct overseer, there should be plenty to discuss.

As pointed out by the release, from the office of auditor Dianne Rey, officials "envisioned a heavily regulated system that would track medical marijuana from the time the seed for a marijuana plant goes into the ground to the time medical marijuana is cultivated, packaged, and stored." But a true seed-to-sale methodology has yet to be implemented.

Why not? The MMED spent $1.1 million during fiscal years 2011 and 2012, according to the auditor's figures, to get such a system online, but the inability to pay a contractor an additional $400,000 for actual implementation means it still doesn't work. (The reason for the shortfall: "financial difficulties.") The MMED hopes to finally get things going by the end of this year, but there are no guarantees.

A related total fail: The MMED requires businesses to submit a dozen different tracking forms, including travel manifests that show when plants or products are transported from their facilities -- but at present, division personnel don't actually review them.

That's the equivalent of doing your homework and then watching the teacher toss it directly into a trashcan.

The MMED's ineptitude when it comes to strategic planning is also cited by the auditor. For instance, the division received $8.1 million in revenue during the months of July and August 2010 alone due to a mandate that businesses apply for a state license by August 1 if they wanted to keep their doors open. But this windfall didn't last, with the division experiencing nineteen consecutive months of net losses during fiscal years 2011 and 2012 -- a catastrophe displayed in this graphic.

Continue for more about the report, including the complete document. The speed -- if that's the right word -- of licensing also comes in for criticism from the auditor. In the couple of years immediately following the onslaught of applications received by August 1, 2010, when a two-year moratorium against new businesses was put in place, the MMED only managed to deal with just over half of them, leaving a staggering 41 percent still pending as of October 2012.

The average time it took the division to issue final licensing decisions for 480 applications received before the moratorium went into effect was 23 months, or a whisper under two years.

The result of these delays was troubling for the auditors, who are said to have "found evidence of businesses located within 1,000 feet of schools, which state law prohibits; documentation about tax delinquencies that could have disqualified the applicants; and evidence that applicants may not have been suitable for licensure under a statutory requirement that licensees and those who finance them be 'of good moral character'" -- likely a reference to problems when it comes to criminal history.

As you can see, the report is labeled as part one of two, with the second, focusing on the CDPHE, expected this summer. In the meantime, the Medical Marijuana Industry Group has issued a pair of statements in regard to the auditor's slaps at the MMED, and they're quite mild, suggesting that the business group doesn't want to get crosswise with the folks regulating them.

The comments from MMIG executive director Mike Elliott read:

The Medical Marijuana Industry Group calls upon the state to properly fund the enforcement division responsible for oversight of the medical marijuana industry. The responsible business owners who are members of MMIG are doing their part to make sure the system works. Our members follow the law and expect state officials to give the Medical Marijuana Enforcement Division the budget it needs to ensure proper enforcement. We want more inspectors and oversight of the industry.

The regulatory structure is sound, but the state needs to fund it properly. Though the state may be lacking in oversight, the vast majority of business owners are staying in strict compliance with state law. These are serious business owners with serious investments. Their freedom is dependent on staying in unambiguous compliance with state law.

Adds MMIG chairman Kevin Fisher, "We understand as responsible producers and retailers that a robust regulatory agency is the keystone to our continued success in limiting the diversion of cannabis."

Here's part one of the report.

Medical Marijuana Regulatory System Auditor's Report

More from our Marijuana archive circa April 2012: "Medical Marijuana Enforcement Division staff cuts big but likely temporary."

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