More than 1-in-3 new retail marijuana stores, or 40 out of 112, were not inspected within a year of being licensed, an audit of the state’s Marijuana Enforcement Division found.
It also did not inspect about a third of the stores targeted for inspections, or 182 out of 567, either because they were new or had not been inspected for two years or more.
The audit looked at the division’s activities between fiscal years 2019 and 2022. Statistics cited in the audit show a precipitous drop in targeted inspections and underage compliance in the fiscal year beginning in July 2020 — when the pandemic was upending day-to-day society — and that they haven’t quite recovered to pre-pandemic levels.
“I’m glad that (auditors) pointed the finger at the department in that they dropped the ball,” state Sen. Kevin Priola, a Henderson Democrat who asked for the audit, said, adding that the department “didn’t deliver what the voters expected when they legalized marijuana.”
The audit also found that the division was not checking every store it prioritized for inspection of underage sales, though it did check most of them. About 88% of the stores prioritized were inspected, leaving 75 shops that were not. A retail store was prioritized to check for compliance with underage sales laws if it had never had a check, had not had a compliance check in a timeframe set by internal targets, or failed a previous compliance check.
The audit also found inconsistent citations for stores found to violate underage sales laws. In a review of seven incidents where an underage operative was able to gain access to prohibited areas or buy marijuana, six stores were cited for failing to verify age, five for allowing access to a restricted area, and three for dispensing marijuana to a person without a valid ID. Auditors expected each to face underage sales violations, as well.
The division, which falls under the Colorado Department of Revenue, accepted the auditor’s criticisms and recommendations. In an industry bulletin about the audit, the division noted how it was scrambling to adjust to the public health crisis and limit the spread of the disease. Some of those efforts, such as off-site data analysis and using remote video, weren’t reflected in the audit, according to the division. The division started returning to more of its pre-pandemic methods in 2022.
The division noted that since May 2022, it has conducted more than 600 checks for underage sales and found a 99% compliance rate among retail marijuana stores. A spokesperson for the marijuana enforcement division deferred to the bulletin for its response to the audit.
During a legislative hearing about the audit, former Colorado Department of Revenue Executive Director Mark Ferrandino told lawmakers “there is definitely room for improvement.” Ferrandino led the agency during most of the period covered by the audit. Gov. Jared Polis recently appointed him to lead the Office of State Planning and Budget.
“These are all things we need to improve in terms of what our data sets are, what are policies and procedures are so our staff and the public have a clear understanding,” Ferrandino said.
He also noted that the division is in the process of transitioning to a new data system. The agency also follows a general philosophy of education before discipline, Ferradino said.
Priola said he’d consider legislation next year to clarify the department’s mandate to inspect retail marijuana shops and emphasize how to keep marijuana out of kids’ hands and clamp down on the gray market. State Sen. Chris Hansen, a Denver Democrat who also asked for the audit, likewise said he looks forward to working with the division on improving its operations and implementing recommendations in the audit.
A group that advocates for stricter regulation of the marijuana industry, One Chance to Grow Up, warned that the findings show “troubling gaps” in enforcement.
“(Monday’s) audit findings make clear that parents and trusted adults should be aware that ID checks are not always enforced,” Henny Lasley, executive director of One Chance To Grow Up, said in a statement. “The audit highlights deeply concerning deficiencies in enforcement when it comes to preventing kids from buying marijuana directly from dispensaries across the state. ”
An industry group, however, highlighted the 99% compliance rate with protocols to prevent underage sales found more recently.
“The number one priority for Colorado cannabis small business owners, many of whom are parents themselves, is youth prevention and keeping our communities safe,” Tom Scudder, a board member of the Marijuana Industry Group, said in a statement. “We believe this is reflected in our 99% 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 (the division) on streamlined and improved processes moving forward if necessary.”
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