Audit - City and County of Denver

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Although another City department is involved in the collection of fee payments, thissegregation of duties is so limited that auditors cannot reasonably say that sufficientcontrols are in place to ensure proper fee collection and reconciliation. This controlweakness also significantly increases the risk for fraud and places the employeeperforming these activities in a very untenable and unfair position.The medical marijuana licensure fee was established arbitrarily – The City did notestablish any justifiable criteria to set the license fee. Rather, the license fee wasestablished solely based on which type of City liquor license had the highest fee. At thetime, that fee was for a cabaret license, which was $3,000. No analysis was done todetermine how much it would cost administratively to license medical marijuanabusinesses and the Department has not undertaken such analysis since then.As a result, the Department does not know the extent to which the MM license feescover the costs of administering the MM licensing function. Effectively, the license feecould either be too high or too low. As with other types of business licenses issued by theDepartment, the fee should reflect a reasonable balance between the costs to the cityfor administering the program and the needs of the business community from an equityand economic development perspective.Key information has not been kept up to date as medical marijuana policies haveevolved – Medical marijuana business applicants and licensees may experiencedifficulty finding up-to-date information about the licensure process in the City. We foundconflicting information on the City’s website regarding which documents are required foran application. Further, there is a form available for download off the website for abusiness license type that became invalid in 2012. Internally, not all forms are up-to-dateeither. For example, the template used as the inspection report of medical marijuanabusiness premises was designed for dispensaries, which are now obsolete. Since the threenew license types have slightly different requirements, the current template containsitems that are no longer required.Outdated, inaccurate information reduces the efficiency with which the City can servelicense applicants, both initially and during the process. Further, the lack of clear,consistent and accurate information can negatively impact the city’s public perceptionfrom a customer service perspective.Implications Looking ForwardAs evidenced by these substantive issue areas, the Department’s current lack of followupon license applications, and in conjunction with State law, have allowed somemedical marijuana businesses to operate in the City without a valid City license. The Citydoes not know how many medical marijuana establishments are operating in Denver.Compounding the seriousness of these is the fact that Colorado voters recently adoptedAmendment 64, legalizing the use of recreational marijuana in the state. It is thereforecritical that the City develop and implement a robust system for regulating marijuanarelatedbusinesses before the current problems are exacerbated by a new surge oflicense applications for recreational use.City and County of DenverP a g e 4
INTRODUCTION& BACKGROUNOUNDThe Department of Excise and LicensesThe City and County of Denver Charter establishes the Department of Excise andLicenses (Department). 1 The Department issues all licenses in accordance with Cityordinances except for sales tax, motor vehicle, and building development licenses. 2 Theobjective of the Department is to evaluate the qualifications of all applicants anddetermine which licenses should be issued, renewed, or suspended according to theapplicable law. The Department also collects license fees, conducts hearings to decidewhether municipal codes have been violated, and serves as the City’s licensing authorityfor:• Business Licenses• Cab Driver Licenses• Liquor Licenses• Medical Marijuana Licenses• Merchant Guard Licenses• Restaurant LicensesThe following briefly describes the major operating units within the Department:Administration – Within the Department, Administration carries out key activities such aspolicy development and direction, establishment of Department goals and objectives,purchasing, contract management, public education and media relations, and financialmanagement, including budgeting and accounting. Administration also reviewsviolations and disputes related to business and liquor licenses and issues final decisions onall licensing matters.Licensing Program – The goal of the Department’s Licensing Program is to process andperform final action on all pertinent applications, licenses, and renewals. It also handlesthe processing of all applications for liquor, special events, and cabaret licenses. Allpublic hearings relative to the Department are scheduled and assigned hearing officersthrough the Licensing Program.Code Enforcement Program – The Department’s Code Enforcement Program inspectsbusinesses to ensure compliance with City ordinances, investigates complaints, andadministers ordinances related to commercial and residential security alarms. The CodeEnforcement Program also issues fines and administrative citations to individuals andbusinesses that are not in compliance with City ordinances.1 Denver Charter, Subtitle B, Article II, Part 7.2 Sales tax licenses are administered by the Treasury Division; motor vehicle licensing is processed by the Office of the Clerk andRecorder; and building development licensure is administered by Community Planning and Development.P a g e 5Office of the Auditor
Page 1 and 2: Medical Marijuana LicensingPerforma
Page 3 and 4: City and County of Denver201 West C
Page 5 and 6: City and County of DenverDennis J.
Page 7: TABLE OF CONTENTSEXECUTIVE SUMMARY
Page 10 and 11: Significant Issues Identified with
Page 14 and 15: Colorado’s Medical Marijuana Regu
Page 16 and 17: their inspection activities electro
Page 18 and 19: Internal Control Framework as a Met
Page 20 and 21: process include applicants submitti
Page 22 and 23: Without clear, consistent, and up-t
Page 24 and 25: econciliation activities but they i
Page 26 and 27: Personnel from the City’s Technol
Page 28 and 29: • We noted that a check in the am
Page 30 and 31: • Excise and Licenses - reviews a
Page 32 and 33: of Local Licensing Authority.” Ho
Page 34 and 35: Audit review of 41 sample files sho
Page 36 and 37: • When street address and busines
Page 38 and 39: are even more important to consider
Page 40 and 41: 9. PeopleSoft Reconciliation - The
Page 42 and 43: AGENCY RESPONSECity and County of D
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Audit - City and County of Denver

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