Audit Exposes Mismanagement in Medical Marijuana Enforcement Division

March 28, 2013

BURNED: The audit included a long list of controversial expenditures by the agency

DENVER – The Medical Marijuana Enforcement Division under the Department of Revenue has mismanaged the $14.4 million in revenue generated by the industry since 2011, according to the findings of a recent state audit.

“Overall, we found that the Division has not managed its resources effectively to meet its objectives,” stated the report issued by the Colorado Auditor Dianne E. Ray.

“Since the Division’s inception its funding has fluctuated significantly. From Fiscal Years 2011 and 2012, revenue declined by 56 percent from $8.6 million to $3.8 million, respectively. At the same time, expenditures increased by 11 percent from $4.7 million to $5.2 million,” summarized the audit.

The 89-page audit report was reviewed Tuesday and Wednesday by the Legislative Audit Committee.

“It seems to me that we have a dysfunctional system,” said state Sen. Steve King (R-Grand Junction), a member of the committee.

According to the report, the monthly net loss of about $2.3 million in June 2011 was caused by the “Division making many large capital purchases, such as furniture, computer equipment, and software for a marijuana plant tracking system.”

Those purchases included:

$4,200 for four office chairs;

$1,800 for patio furniture;

$10,000 a year for 22 unused Blackberry cell phones;

Purchasing a 5-day car rental for staff attending a two-day conference;

$31,000 for 21 tablet computers for 19 field inspectors, nine of whom have since been laid off;

A fleet of 33 vehicles, including 21 SUVs, 11 sedans and a truck, when there were only 37 employees;

$1.1 million for the “seed-to-sale” marijuana plant tracking system which has never been implemented because the Division could not make the final $400,000 payment;

Revenue shortfalls and fund shortages in FY 2012 forced the Division to lay off the majority of its staff.

The Division derives its funds from fees charged for applications and licensing of medical marijuana facilities. The division wasn’t able to justify the level of fees charged for services.  Application fees range from $1,250 to $18,000; licenses cost between $2,750 to $14,000. According to the audit, the fees are significantly higher than those estimated in the fiscal note of House Bill 1284 in 2010, which authorized the Division.

Colorado voters approved legalized medicinal marijuana in 2000, and the division was created in 2010 to license and regulate businesses that grow, cultivate and sell the products.

“I have major concerns,” said state Rep. Dan Nordberg (R-Colorado Springs) who serves on the audit committee as well as the Amendment 64 task force to legalize recreational marijuana.

“This whole department is screaming for more accountability,” said Nordberg.

The committee will review the Division’s progress in implementing the recommendations in the audit report.

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