Columbus – The Ohio Department of Commerce exceeded its legal authority when it awarded two additional licenses to cultivators in the state’s fledgling medical marijuana program, according to the results of an audit released today by Auditor of State Dave Yost’s office.

The Ohio Administrative Code, which implements state law, limited the Department to issuing up to 12 large-scale (Level I) and small-scale (Level II) provisional cultivator licenses prior to Sept. 8, 2018. Despite these limitations, the Department created an additional 13th provisional license for both levels in an attempt to correct errors it made during its process. 

That was the most significant of the dozens of errors and inconsistencies auditors found in their review of the process used by the Commerce Department to evaluate, score and award provisional licenses. 

“The Department didn’t do a very good job launching this program,” Auditor Yost said. “It did not exercise due diligence to make sure Ohioans could have complete confidence in the process. The Department’s work was sloppy. Ohioans deserved better.”

Auditors found weaknesses throughout the process, including in the way the Department protected passwords, system folders and summary scoring sheets. Though auditors found no evidence of intentional manipulation, the totality of identified weaknesses indicates that the opportunity to manipulate scores did exist.

For example, auditors uncovered errors the Department made in final score calculations affecting 13 applicants and in reviewer score sheets affecting 15 applications – errors which could have disqualified two small-scale (Level II) provisional applications. 

A number of the issues auditors found during their review of the program were shared with the Department during the course of the audit was complete so Commerce officials could correct and not repeat them in the awarding of subsequent licenses.

During the auditors’ review, they asked the Department for additional information regarding final score calculations. At that time, the Department more closely reviewed the information it was providing and later acknowledged scoring errors were made in the large-scale (Level I) cultivator final score calculation. These particular errors were not disclosed or acted upon by the Department until the auditor’s office requested and compared master score sheets. But for the auditor’s investigation, these errors might never have come to light.

 “The Department should have conducted this additional and more-thorough review before it awarded any licenses,” Auditor Yost said. “In an attempt to make up for the initial errors, the Department compounded the problem by awarding additional licenses outside the bounds of its authority.”

The Department maintains that it acted legally in awarding additional Level I and Level II provisional licenses, citing a May 18, 2018 Franklin County Common Pleas Court ruling on a temporary order. However, the judge in the case wrote, “nothing in this Opinion should be taken as binding.”

Auditors also found that although the Department intended personal identifying information about applicants to be redacted from scoring materials, identifying information remained available to evaluators in five of 11 applications reviewed – or nearly 50 percent of those tested.

In addition, auditors found the Department applied inconsistent standards in determining if cultivators met zoning requirements. In effect, this set a higher or lower bar for some applicants. This had the material effect of awarding a license to an applicant who could have otherwise been disqualified, auditors said.

“For some applicants, the Department accepted letters from local zoning officials as sufficient evidence that the applicants met the standard for compliance. But for others, who had the same type of letters, the Department did not,” Auditor Yost said. “There was no rhyme or reason for the disparate treatment.”

The Department commissioned Ernst & Young to review the process it used to evaluate, score and award provisional licenses. Ernst & Young was to produce two reports, one for Level I licenses and the other for Level II. Additionally, auditors were told Ernst & Young would make attempts to completely rescore sheets by reassembling the teams that initially produced scores. To date, the Department said it has never seen the Level II report. 

Auditors did not attempt to rescore the applications as they did not have the specialized expertise in marijuana cultivation that the Department said was necessary for scoring. The Department hired consultants and used specialized state employees to conduct the scoring. 

A full copy of the report is available online.

###

The Auditor of State’s office, one of five independently elected statewide offices in Ohio, is responsible for auditing more than 6,000 state and local government agencies.  Under the direction of Auditor Dave Yost, the office also provides financial services to local governments, investigates and prevents fraud in public agencies and promotes transparency in government.

Contact:
Beth Gianforcaro
Press Secretary
614-644-1111