The state Department of Health Services has misallocated nearly $1 million meant to operate the Medical Marijuana Program that serves more than 200,000 patients, according to a state audit.
The Auditor General’s Office released that finding in a performance audit on Tuesday, including findings regarding the alleged misallocations and a variety of other areas of basic operation in which the Department of Health Services appears to have struggled.
The department disagreed with the assertion that funds were misspent.
The auditor’s finding was based on an analysis of 65 expenditures from the fund during Fiscal Year 2018 – that’s less than 1 percent of the total expenditures made from the fund that year.
Of the 65 transactions that were reviewed, 30 totaling $962,000 were fully paid for out of monies from the Medical Marijuana Fund even though they were also used on other programs.
Similarly, the audit identified two employees whose salaries totaled about $131,000 that were paid for entirely by the fund though the employees also worked on other programs.
According to the audit, the Arizona Medical Marijuana Act established the fund, and “the use of fund monies must benefit the program.” Beyond that, the department had not developed written policies and procedures regarding the use of the fund, though the report noted DHS claimed it had implemented a department-wide process for approving expenditures as of April.
“The Department believes that monies for the [Medical Marijuana] Fund were spent in an allowable manner, and that payroll costs for the Fund were only charged for work employees performed on the Program,” according to the department’s response included in the auditor’s report. “However, the Department recognizes that more formal processes should be in place.”
A more complete response to specific questions about the audit’s findings was not provided to the Arizona Capitol Times.
When asked to comment on specifics, DHS spokesman Chris Minnick said, “We generally don’t do interviews, on-the-record interviews about the [Medical Marijuana] Program. … Our job is to administer the program, and obviously, we would just be constantly doing interviews over and over about this.”
Minnick did provide a general statement from the department responding to the audit, noting the department does not agree with every finding in the report and will not implement all recommendations included therein.
In particular, the department again disagreed with the auditor’s finding regarding the use of the fund.
“ADHS is confident that all Medical Marijuana funds were spent in an allowable manner, and the report supports this by recognizing that all audited funds were spent on personnel and activities related to the program,” according to the statement from Minnick. “While some expenditures may have benefitted other programs in addition to the Medical Marijuana program, the Department sees this as an advantage that also improves public health capacity for the citizens of Arizona.”
DHS was at odds with some of the auditor’s other findings as well.
According to the audit, the department is not inspecting 36 “infusion kitchens,” which make marijuana edibles, for ongoing food safety compliance despite those facilities being licensed as food establishments.
And the reason given by the department, according to the audit, was “because facilities typically close infusion kitchens on the dates when the Department has announced that it will conduct a medical marijuana inspection.”
The auditor recommended that the department simply conduct unannounced food safety inspections as is the case with other licensed food establishments.
“The Department’s failure to regularly inspect infusion kitchens places qualifying [medical marijuana] patients at risk of purchasing and consuming food products without adequate oversight to prevent foodborne illness,” according to the audit.
But the department disagreed with the audit’s finding and said unannounced inspections will not be implemented.
“Arizona statute requires ‘reasonable notice’ before inspections of dispensaries. … While the food kitchens hold a separate license [from the dispensaries in which they are located], ADHS has received guidance from legal counsel that the Department needs to give notice of these inspections because surveyors must enter through the dispensary and the product being used is regulated by the AMMA,” according to the statement provided by Minnick.
The statement further noted that DHS is not aware of any cases of foodborne illness associated with products containing medical marijuana or extracts.
The Auditor General additionally found that DHS has struggled to consistently perform responsibilities key to running the Medical Marijuana Program effectively. The audit noted that the department has not been timely or consistent with facility inspections, nor with addressing noncompliance. And it has not adequately investigated complaints or formally reviewed the program fees.
The department didn’t meet its own unwritten goal of inspecting facilities at least once a year, leading auditors to conclude: “Long delays between inspections may put the public at risk.”
And even when noncompliance was identified, the audit found that the department was inconsistent in its response, a finding the department agreed with.
The auditor found the department also lacked policies about revoking patients’ registrations cards, and has not conducted a cost analysis of the program to determine whether the fees required to remain in the program are appropriate.
According to DHS’ statement provided by Minnick, “the audit did not identify any missed deadlines or timeframes as required by law.”
DHS was tasked with regulating the state’s Medical Marijuana Program after it was approved by voters in 2010. According to the audit, the program included 116 certified medical marijuana dispensaries operating in Arizona as of December, and 198,000 patients were qualified to participate in the program during 2018.