L.A. cannabis licensing audit finds flawed process, no corruption

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(This story had been updated to include the Department of Cannabis Regulation’s response to the audit.)

The marijuana business licensing round in Los Angeles last September was “confusing and prone to human error,” but city regulators did not bungle the process to the point that applicants were disenfranchised, according to an independent audit.

City officials requested the audit last year after an outcry from stakeholders over a flawed rollout.

The launch involved a first-come, first-served application window in September for 100 marijuana retail permits, which were supposed to have been awarded before the end of 2019.

What will happen next in the city’s marijuana licensing plan is unclear.

The L.A. Department of Cannabis Regulation (DCR) has not yet announced a timeline for completing last fall’s licensing round – which was set exclusively for qualified social equity applicants – or for future licensing rounds.

Four licensing rounds remain for hundreds of available storefront and delivery permits.

The audit found that before the latest licensing round opened – at 10 a.m. PT Sept. 3 – 226 applicants were able to sign on early to the Accela-run platform. Of those, only 14 began the licensing application process before 10 a.m.

When DCR officials realized what had happened, the audit reported, they instituted a “normalization process” to ensure every applicant began to file at the same time.

Part of the problem, the audit found, was poor messaging by the DCR, which led applicants to believe they wouldn’t be able to sign on to the system before 10 a.m. Rather, what was not allowed before 10 a.m. was the actual application process.

That might have put those applicants who misunderstood at a disadvantage, according to the audit.

The licensing round “created potential for confusion regarding the starting line,” the audit found, but no “nefarious activities occurred.”

The DCR wrote in an email to Marijuana Business Daily that it “accepts the findings” of the audit.

The department added it is “preparing a series of recommendations” for legislative amendments to retail and delivery application procedures. The recommendations will be “based on insights gained from the audit.”

– John Schroyer