- Office of the State Auditor
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Andrew Carden, Director of Operations
Boston — Today, State Auditor Diana DiZoglio’s Office released an audit of the Cannabis Control Commission (CCC), reviewing the period from July 1, 2022, through June 30, 2024.
The CCC is the independent agency responsible for developing and enforcing regulations over the marijuana industry in Massachusetts. Among the audit’s findings is that the CCC’s mismanagement of prorated fees for license extensions resulted in revenue loss, procedural inequity, noncompliance with state regulations, and the appearance of potential favoritism and/or impropriety with respect to some being required to pay fees, while others inexplicably did not need to do so.
CCC management failed to institute procedures to fully quantify and accurately and equitably administer license extensions. These failures, alongside the CCC’s failure to institute procedures to properly supervise licensing staff, contributed to a significant breakdown of the internal controls over requests for and approvals of extensions. As a result, not all fees were appropriately billed. The CCC did not maintain appropriate documentation regarding those instances where fees were not appropriately collected or waived, and did not follow its own stipulated process with respect to fee collection in these instances. Verbal conversations took the place of a documented process in instances where fees were not collected. These procedural inequities contribute to an appearance of potential impropriety, which could erode the public’s trust in the CCC.
The CCC violated state regulations and applicable policies by failing to ensure that fines were assessed and collected within reasonable timeframes and by not designating a hearing officer to oversee related hearings.
The absence of both timely enforcement and a hearing officer allows for unresolved compliance issues at marijuana establishments to persist or potentially worsen. Delays in enforcement undermine regulatory effectiveness by adversely impacting the CCC’s
ability to administer and enforce applicable laws and regulations and may create an inequitable situation, especially for disadvantaged smaller establishments that lack the resources to independently navigate prolonged enforcement processes. Lengthy timeframes, especially around enforcement action, put customers at potential risk either of purchasing and consuming contaminated or expired marijuana products, or being exposed to other public health risks. Additionally, the lack of a hearing officer compromises due process rights for licensees subject to fines and enforcement actions.
Furthermore, the audit found the CCC’s failure to review existing host community agreements (HCAs) allowed agreements that contained unenforceable language and noncompliant provisions to remain in effect despite its authority and obligation to regulate these HCAs under Chapter 180 of the Acts of 2022. Noncompliant HCAs put undue financial burdens on small businesses in a burgeoning industry.
Moreover, the audit found the CCC did not have a documented and transparent process for employee settlement agreements containing non-disclosure, non-disparagement, or similarly restrictive clauses.
If the CCC does not have a documented and transparent process, which would hold itself accountable, to handle employee settlement agreements, especially those containing non-disclosure, non-disparagement, or similarly restrictive clauses, then it cannot ensure that employee settlements are handled in an equitable, ethical, legal, and consistent manner.
Additionally, the audit found that a breakdown of management structure and role consolidation contributed to operational and compliance risks. The CCC failed to implement sufficient controls related to the administration of the marijuana regulation fund (MRF) and its HCA review process and did not have a fully compliant internal control plan as required by the Office of the Comptroller’s Internal Control Guide.
This inadequate internal control environment contributed to several operational and financial risks, including:
- absence of control testing, which resulted in inconsistent practices, a lack of clearly documented procedures, and diminished organizational accountability;
- deficient oversight in licensing, HCA reviews, and management of the MRF, as evidenced by missing documentation of final approvals and unreconciled financial activity, raising concerns about transparency, fairness, and regulatory reliability; and
- the lack of a fully compliant internal control plan leaves the CCC unprepared to address emerging risk posed by an unstable organizational structure.
The audit also found the CCC failed to identify double payments for license fees and did not ensure that revenues were coded and classified. The failure to implement adequate financial controls resulted in several risks and inefficiencies, including financial misstatements and reporting inaccuracies; increased risk of noncompliance and audit
findings; erosion of public and stakeholder trust; operational inefficiencies and resource strain; and potential for financial loss or fraud.
“Our audit identified a number of issues that undermine and negatively impact the Cannabis Control Commission’s mission to equitably and effectively oversee the cannabis industry in Massachusetts,” said Auditor DiZoglio. “Our team appreciates the Commission’s cooperation throughout this audit, which serves to identify areas for needed improvements to better serve the residents of the Commonwealth. We encourage the Cannabis Control Commission to adopt our office’s recommendations for improvement and will be revisiting the Commission’s progress in roughly six months as part of our post-audit review.”
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