Audit finds flaws in Missouri marijuana licensing system – KTTN
Missouri’s rapidly expanding marijuana industry, valued in the billions of dollars, was launched through an application and evaluation framework marred by structural flaws that ultimately imposed millions of dollars in litigation costs on the state, according to a new audit issued by State Auditor Scott Fitzpatrick.
The report assigns Missouri’s marijuana program an overall rating of “fair,” citing significant weaknesses in the design of the application scoring system that compromised the intended blind review process. Auditors determined that inconsistent scoring methods and evaluation decisions generated uncertainty in license outcomes and contributed to costly legal disputes.
Fitzpatrick credited the Department of Health and Senior Services for implementing a program of substantial magnitude within a compressed timeline, describing the undertaking as formidable. However, he stated that deficiencies in the evaluation and scoring of license applications undermined public confidence and resulted in substantial financial consequences for taxpayers.
According to the audit, the Division of Cannabis Regulation allowed applicants to generate their own unique identifiers for use on supporting documentation during the review process. In practice, some applicants structured those identifiers around their business names, potentially revealing their identities to graders familiar with the companies. A review of 67 facility license applications found that 12 applications, or 18 percent, included Unique Application Identifier numbers reasonably suggestive of the applicant’s business name. None were penalized for violating redaction requirements.
While 15 percent of the total applicant pool, 348 of 2,257 applications, ultimately received licenses, 83 percent of the applications containing identifying unique identifiers, 10 of the 12 reviewed, were approved. Auditors concluded that applicants who circumvented anonymity secured licenses at significantly higher rates than those who adhered to the blind submission rules.
The report further details concerns involving Wise Health Solutions, which was contracted by the Division of Cannabis Regulation to conduct grading and evaluation. The company’s training materials advised graders to limit written notes to reduce records subject to disclosure in potential lawsuits, including guidance stating, “Say it and forget it, write it and regret it.”
An examination of 67 applications found that 21 of 45 scorers, or 47 percent, made at least one assessment inconsistent with the division’s minimum evaluation criteria and provided no explanatory annotations. The absence of documentation prevented auditors from determining whether discrepancies stemmed from simple errors, implicit bias, or other factors.
Significant scoring inconsistencies were also identified. Of the 67 applications reviewed, auditors found 32 responses from 18 applicants, representing 27 percent of the sample, that included prohibited identifying information such as personal names, business names, or facility references. Among the 10 approved applications in that group, six would have fallen below the lowest passing score had redaction standards been properly applied.
Auditors documented 59 instances across 14 applications, or 21 percent of the sample, in which identical or nearly identical responses received different scores from graders. In 38 applications, or 57 percent, at least one response meeting minimum criteria was assigned a score of zero. Conversely, 18 instances across 12 applications, or 18 percent, involved positive points awarded to responses that failed to meet minimum standards. In one case, a manufacturing applicant submitted blank responses to two questions yet received scores of 7 and 4.
The audit concludes that perceived and actual deficiencies in the scoring process contributed to extensive legal challenges. From 2020 through 2023, the Division of Cannabis Regulation incurred more than $12.5 million in litigation and administrative appeal costs related to the 2019 licensing cycle. Appeals resulted in 68 additional licenses being granted beyond the original 348 awarded, representing a 19.5 percent increase in total licenses issued.
The report also criticizes what it characterizes as derogatory and inflammatory language used by the Department of Health and Senior Services in its formal response. Although the department disputed certain findings, auditors stated that supporting documentation was not provided. The report describes the response as reflective of uncooperative conduct encountered during the audit process.
Fitzpatrick expressed disappointment with the department’s adversarial posture, emphasizing that audits are designed to improve efficiency and accountability in government operations. He indicated that the findings identify areas where procedural reforms are warranted.
Beyond application scoring, the audit recommends strengthened oversight and monitoring of licensed marijuana facilities and of the broader cannabis marketplace. While noting improvements during the audit period, auditors found that numerous licensees operated without required ongoing inspections. In some cases, passing inspection grades were issued without documentation demonstrating compliance. Inventory inspections aimed at preventing diversion to the illicit market were described as minimal.
Additional concerns involve data privacy and regulatory enforcement. The audit found that dispensaries retain confidential customer information without obtaining consent, despite regulations requiring identification only to verify legal age. Current rules do not mandate retention of customer data, nor do they address storage or security standards for adult-use customer information.
Auditors also determined that the statewide track-and-trace system, Marijuana Enforcement Tracking Reporting & Compliance (Metrc), lacks the capability to identify transactions exceeding constitutional purchase limits in real time. As a result, individuals may acquire quantities beyond legal thresholds, heightening diversion risks and public safety concerns.
Other findings include delays in processing business change requests, inadequate tracking of those requests, and substantial balances of marijuana-related taxes and fees remaining in both the Veteran Health and Care Fund and the Veterans Health and Community Reinvestment Fund rather than being distributed in accordance with the Missouri Constitution. The audit further reports that certain microbusiness licenses were approved despite noncompliance with constitutional and regulatory requirements. In addition, the Division of Cannabis Regulation and the Department of Revenue failed to coordinate data sharing that would allow tax audits of dispensary revenues using Metrc information.
The complete audit can be found at this link.
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