Audit finds systemic weaknesses in Missouri marijuana program administration

Fair. That’s the rating given to the administration of marijuana regulation by State Auditor Scott Fitzpatrick.

In a report released today, Missouri’s Division of Cannabis Regulation was criticized for deficiencies in licensing integrity, inspection practices, tax coordination, constitutional revenue distribution, and microbusiness approvals.

Additionally, Fitzpatrick and his team seemed to encounter some of the same stonewalling and wagon-circling that the Division of Cannabis Regulation has been accused of in the past.

“I was surprised and disappointed by the adversarial tone the department took with our audit team and the repeated attempts agency officials made to undermine the legitimacy of this report,” Fitpatrick said.

The scope of the audit spans from the SMMR (Section for Medical Marijuana Regulation) days through DCR and the enactment of adult use regulations. And while both SMMR and DCR have been roundly applauded for the success of the Missouri marijuana market and the speed with which the program was enacted, there have been several times when the tactics, transparency, and rationality of the decisions made by DCR leadership have been questioned in the past.

“An audit is meant to be a helpful tool to enhance government efficiency and I am confident our report found several areas where the department can and should improve. I sincerely hope they will change their attitude and view this report as the beneficial roadmap it is meant to be,” Fitzpatrick continued.

One of the key criticisms in the audit stems from SMMR’s approval of “an application scoring process with significant design flaws,” and that scorers evaluating applications “were instructed to not document notes to support their scoring decisions.”

In a review of 67 license applications, auditors found that 21 of 45 scorers, or 47 percent, made at least one scoring assessment that contradicted DCR’s minimum evaluation criteria and “failed to provide any supporting annotations to help explain the discrepancies.”

The report also found that redaction rules were not consistently applied, undermining the intended “blind scoring” goals.

Applicants were allowed to create their own unique identifiers for uploaded documents, and the audit found that 12 of the 67 applications reviewed included identifiers “reasonably indicative of the applicant’s business name.”

While only 15 percent of the overall applicant pool received licenses, 83 percent of the identifiable applications reviewed were granted licenses, according to the report.

The report states that “the perceived and actual deficiencies in the application scoring process documented in the audit were a contributing factor to the state being subject to significant legal challenges and costs.”

A total of 849 Administrative Hearing Commission appeals were filed, representing 44 percent of denied applications. From 2020 through 2023, DCR incurred more than $12.5 million in litigation and administrative appeal costs and awarded 68 additional licenses to settle applicant appeals.

Beyond licensing, the audit found that regulators have not processed business change requests in a timely manner. State regulations require ownership transfers to be resolved within 60 days of receiving a complete application, yet auditors found DCR took an average of 165 days to approve or deny business ownership change requests.

For 15 percent of the 307 requests reviewed, the agency took over a year to provide a final decision.

“Untimely change approvals can result in licensees experiencing uncertainty, delayed business decisions, and negative impacts to their operations,” the summary states.

   

The audit also raised concerns about market oversight and enforcement practices.

While noting that DCR has improved processes over the audit period, the report states that “many licensees were allowed to operate without ongoing inspections from the DCR,” and in some instances “passing grades were sometimes given without the licensee proving compliance.”

Auditors further found that DCR performed “minimal inventory inspections to ensure cannabis was not being diverted into the black market.”

Revenue distribution was another focus of the report.

Article XIV, Section 2 of the Missouri Constitution requires transfers of marijuana taxes and fees to the Missouri Veterans Commission, the Department of Health and Senior Services for drug programs, and the public defender system.

“Based on discussions with MVC officials as well as budget process documents, both the MVC and the public defender system have communicated the need for additional resources, but the full amount of the
funds available have not been appropriated in the approved budgets,” the report states.

In addition, auditors determined that DCR and the Department of Revenue have not coordinated to allow DOR to use Metrc data for marijuana tax audits.

An analysis of DOR and Metrc data identified “an estimated $852,000 in under reported sales,” and a previous audit found that DOR had not performed any marijuana tax audits as of January 2025.

Within the context of the areas reviewed, the audit concludes that “the overall performance of this entity was Fair.”

The report clarifies that the ratings “cover only audited areas and do not reflect an opinion on the overall operation of the entity.”

And while Fitzpatrick’s report may not reflect an opinion on the overall operation, the low rating and the uncooperative conduct from Department of Health and Senior Services personnel throughout the audit mentioned by Fitzpatrick in the report and the press release may lead some to draw unflattering conclusions.

Under the auditor’s rating scale:

Excellent: The audit results indicate this entity is very well managed. The report contains no findings. In addition, if applicable, prior recommendations have been implemented.

Good: The audit results indicate this entity is well managed. The report contains few findings, and the entity has indicated most or all recommendations have already been, or will be, implemented. In addition, if applicable, many of the prior recommendations have been implemented.

Fair: The audit results indicate this entity needs to improve operations in several areas. The report contains several findings, or one or more findings that require management’s immediate attention, and/or the entity has indicated several recommendations will not be implemented. In addition, if applicable, several prior recommendations have not been implemented.

Poor: The audit results indicate this entity needs to significantly improve operations. The report contains numerous findings that require management’s immediate attention, and/or the entity has indicated most recommendations will not be implemented. In addition, if applicable, most prior recommendations have not been implemented.

The audit includes recommendations directing DCR to strengthen documentation and oversight in future licensing processes, improve inspection scheduling and inventory review practices, integrate real-time transaction monitoring capabilities into Metrc, revise GIS measurement procedures for microbusiness applications, and coordinate more effectively with the Department of Revenue on tax compliance.

The findings arrive as Missouri’s legal cannabis market continues to attempt to permanently define itself.

For more information, the complete audit can be found here.