Minnesota Auditors Call Health Dept.’s Cannabis Control Inadequate

A report from Minnesota’s Office of the Legislative Auditor found that the state Department of Health’s internal controls of the medical cannabis program “were generally not adequate” for protecting financial assets and ensuring compliance with the program’s legal requirements, according to a KSTP summary of the agency’s findings.

The report, which covered the program’s operations from July 1, 2016 through the end of 2018, found that the Health Department failed to comply with some legal requirements but that the agency generally complied with most of the program rules.

Among the shortcomings, the OLA found the MDH failed to:

• Verify the licenses of medical cannabis patients’ healthcare practitioner was active and in good standing.
• Keep valid documentation of the eligibility of parents or legal guardians for the minors enrolled in the cannabis program.
• Ensure that testing laboratories had a formal contract with the state’s two medical cannabis manufacturers.
• Have adequate seed-to-sale and testing protocols, including failure to have adequate controls to prevent or timely detect diversion by cannabis manufacturers.
• Sufficiently reconcile some medical cannabis patient fees or ensure employee separation of duties when handling patients’ medical cannabis payments.
• Charged some patients a lower registration fee than permitted in the state’s medical cannabis law.

Patrick McClellan, a patient in the program who helped get the medical cannabis legislation passed and lobbies on behalf of patients, said the inadequate product testing outlined in the report was “concerning.”

“I want to know the product I buy is safe and that it is tested properly in case I get sick and we need to trace it to where it was tested and see if the lab said it was safe,” he said in the report.

Minnesota Department of Health Commissioner Jan Malcolm told the Minnesota Legislative Audit Commission that while the department “partially” agreed with the findings and recommendations outlined in the report, her agency is already taking steps to ensure testing is done correctly. In her response, published with the report, Malcolm supported a seed-to-sale system that would prevent costly visits to dispensaries by regulators.

“We are tightening those areas up with different software. That will now allow the Office of Medical Cannabis to monitor for activities suspect of diversion, or inversion, or lack of inventory control.” – Malcolm, to the MLAC

Malcolm added that “in a future legislative session,” the department plans to “seek funding either for independent examinations, to avoid the costs being added to the price of medication, or a state-centralized seed-to-sale system, which the program currently does not have.”

According to the OLA report, MDH spent $1.57 million in fiscal year 2019 on the medical cannabis program’s oversight. The report also notes that there are just eight dispensaries in the state serving 17,200 enrolled patients. The OLA indicated that their “work did not include a comprehensive audit of medical cannabis manufacturers and laboratories or their compliance with legal requirements.”