Problems Found with Colorado's Regulation of Medical Marijuana

By Susan Graybeal

According to a report recently released by the Colorado State Auditor's office, Colorado's Medical Marijuana Enforcement Division -- which falls under the Department of Revenue -- hasn't been following the law when it comes to regulating the industry in the state, has been underreporting tax revenue and has not been spending its money wisely. Here are the details. 

* The Division was established in July 2010 to license and regulate businesses that grow, cultivate and sell medical marijuana products. As of October, the Division was charged with overseeing about 1,440 medical marijuana businesses, with the majority of its funding coming from medical marijuana business application and licensing fees. 

* According to the auditor's report, the Division took an average of 23 months to issue final licensing decisions by the Aug. 1 effective date of a two-year moratorium on new medical marijuana businesses. 41 percent of the original license applications received by that date were still pending as of October.

* Some of the approved applications revealed potentially disqualifying information about the applicants, the auditor reported.

* Additionally, the Division spent about $1.1 million in the years 2011-12 to develop a marijuana plant tracking system. However, it fell short about $400,000 due to financial difficulties and still has not implemented the system.

* The auditor also found that the Division doesn't use the prescribed statutory process when confiscating marijuana due to disciplinary actions against a medical marijuana business and "has inadequate controls to ensure that seized marijuana is destroyed properly," the report stated.

* According to the report, the Division suffered 19 consecutive months of net losses, including a loss of $2.3 million in June 2011 because of large capital purchases including furniture, computer equipment and software for the marijuana plant tracking program.

* Some of the furniture purchases included $28,000 for seven desk extenders, $16,000 for three cubicles and $4,200 for four office chairs.

* "We reviewed these purchases and found that the Division did not take sufficient steps to ensure that these expenses were reasonable and appropriate," the report stated. "Specifically, the Division did not use a competitive bidding process to outfit its four offices and instead purchased the bulk of its furniture from Colorado Correctional Industries." 

* The auditor's report also revealed that about $760,000 of sales tax revenue generated by 56 dispensaries in 2011-12 was not reported by the state's Department of Revenue.

* Due to financial difficulties, the Division laid off most of its staff in 2012, the report stated, adding that weaknesses in fee-setting, strategic planning and expense controls contributed to those financial problems.

* According to the Denver Post , when presented with the audit on Thursday, the legislative committee in charge of drafting a bill on recreational marijuana regulations began questioning whether the Division could handle the added responsibilities of recreational marijuana.

* "If they couldn't handle the little piece they have now," said Rep. Brian DelGrosso, R-Loveland, "there's no way we can trust them to handle more.