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Colorado medical pot system lacks oversight, plagued by money woes

The agency charged with regulating Colorado's medical marijuana industry has not adequately defined its mission, squandered money, and under-reported tax revenues, state auditors report.

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Peter Bensinger, a former Drug Enforcement Administration chief under Presidents Gerald Ford, Jimmy Carter, and Ronald Reagan, is one of eight former DEA chiefs that say the federal government needs to act now or it might lose the chance to nullify Colorado and Washington's laws legalizing recreational marijuana use.

M. Spencer Green / AP

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The agency charged with regulating Colorado's medical marijuana industry has not adequately defined its mission, squandered money on capital projects and underreported tax revenues, state auditors said in a scathing report released on Tuesday.

The Medical Marijuana Enforcement Division, a division of Colorado's Department of Revenue, failed to follow the framework laid out by the state legislature when lawmakers approved the program in 2010, auditors said in the 96-page report.

"The division has not adequately defined the oversight activities it must perform or determined the resources it needs to implement the regulatory system envisioned by the General Assembly," the report said.

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The Medical Marijuana Enforcement Division did not immediately respond to calls seeking comment on the report. But revenue department officials agreed with its recommendations, the report said.

The report noted that the agency experienced 19 straight months of net losses, including a $2.3 million loss in June 2011 because of "large capital purchases," including furniture, computers and a software program that failed to materialize.

Funding for the division has "fluctuated significantly," since it was established, auditors said, as revenues have declined by 56 percent from $8.6 million to $3.8 million. Expenditures during the same time have increased by 11 percent from $4.7 million to $5.2 million.

The drop in revenue was largely due to a moratorium on new dispensaries from mid-2010 through 2012, which meant the division collected fewer fees.

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