Audit - City and County of Denver

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• Excise and Licenses – reviews application package and processes licenseApplicants are responsible for scheduling these inspections with the various agencies.Department staff reported that these inspections can take a long time to complete andthat applicants have expressed frustration in reaching inspectors at the various agenciesto schedule inspections. Some City MM license applications have been in process for anextended period of time. Our test of a sample of MM business files determined theaverage cycle time from application to licensure was 255 days for applications filedbefore July 1, 2010 (the deadline to apply for aWithout inspection deadlines,an application can remainunprocessed for an extendedperiod of time in the databaseCity MMD license), and also 255 days after thatdate. During this time, MM businesses thatsubmitted an application for licensure couldoperate legally without a City license. The cycletime for the entire sample ranged from 44 daysto 834 days.Our review of a sample of MM application files determined that the average cycle timefrom issuance of the inspection card (IC), allowing an applicant to initiate the inspectionsprocess, to completion of all inspections required by the IC was 151 calendar days forapplications filed before July 1, 2010, and 173 calendar days for applications filed afterthat date. 27 These cycle times are significant and, as shown in Table 3, account for asignificant percentage of the total licensure cycle time. However Table 3 also shows thatinspections are not the only barrier to timely completion of the licensing process.Table 3Percentage of Cycle Time Attributable to InspectionsDate of ApplicationCyle Time -Application toLicenseCycle Time -Issuance toCompletion of ICPercentage of CycleTime for InspectionsBefore July 1, 2010 255 151 59%After July 1, 2010 255 173 68%Most importantly, as long as an MM business has submitted an application to the City bythe state mandated deadline of July 1, 2010, it is allowed to operate indefinitely withouta license; it therefore has no incentive to schedule inspections expediently. This conditionnot only allows applicants to operate without undergoing inspections, it allows them todefer paying the license fees associated with renewing their license. Currently, theDepartment does not follow up on applications that are pending inspections.The lack of deadlines for completing inspections exacerbates the problem of long cycletimes for granting or denying MM licenses and increases the risk that unqualified MMbusinesses are operating in the community.Inspection Reports Lack Clarity and Consistency – The audit team reviewed a sample ofInspection Reports and determined that the purpose of some inspection items on theinspection report template is not clear and that inspectors do not mark their inspection27 Upon completion of each City inspection, the inspector signs and dates a one-page document called an Inspection Card.City and County of DenverP a g e 22
esults consistently. 28 For example, “valid zoning permit,” “valid alarm system permit,” andlicensee in possession/control of (MM) premise” are listed as inspection items, but proofof these items is among the required documents to be submitted with the application.Therefore, inspecting for these items is duplicative of a previous Department activity.Further, we noted that some inspectors marked these items as not applicable or “N/A,”whereas others marked them “yes” or “no.”Additionally, the Inspection Report template was designed for medical marijuanadispensaries, which are now obsolete. Since the three new license types have slightlydifferent requirements, the current template contains items that are no longer required.To ensure that City inspectors are consistently inspecting to current rules, we recommendthat the Department update the Inspection Report template and establish guidelines forcompleting it. A different Inspection Report can be developed for each MM licensetype, or one form that distinguishes between the requirements and includes the licensetype can be used.This is related to an issue we noted in our 2010 audit of the Department of Excise andLicenses for other types of licenses. Specifically, this audit recommended recording andtracking inspection information. For the current audit, we recommend that theDepartment update the Inspection Report to ensure that reviews are consistent betweeninspectors and that inspection results are recorded in a consistent manner. This improvedmethod of tracking will provide the Department with more useful information to supportlicensing decisions.Even if the Inspection Report template is updated and used consistently betweeninspectors, it will not address the absence of Department follow-up on in-processapplications or the lack of licensing deadlines. Both of these issues contribute to lengthycycle times. For example, audit review of 41 sample files determined that for sixapplications (15 percent), the inspection cards issued to the applicants between August2012 and December, 2012, have not yet been returned to the Department. Since theDepartment does not follow up on these applications, it is possible that these businesseshave been operating uninspected and unlicensed for six months.The Purpose of the Local Verification Form is Unclear and May Confuse LicensingDecisions – State Rules require local approval of an MM license application or a locallicense as a condition of granting the state license. 29 However, the form that wasdeveloped to ensure this requirement is met is not used for this purpose.To address the requirement of local license approval prior to issuing a state license, inmid-2012, the state developed a form called a local verification form (LVF). The state’sMedical Marijuana Enforcement Division (MMED) populates an LVF with informationabout the MM business applying for a state license and sends it to the appropriate locallicensing authority. The local licensing authority is to complete the form regardingapproval of the local license application and return it to MMED. Specifically, the sectionof the LVF to be completed by the local licensing authority is titled “Report and Approval28 The Department inspectors complete a one page document called an “Inspection Report” to document their inspection.29 C.R.S. § 12-43.3-305 (2).P a g e 23Office 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 12 and 13: Although another City department is
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 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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