Maryland’s medical marijuana regulating agency skirted state contracting rules and may have overcharged taxpayers when it hired an outside group to review applications to open cannabis businesses, a legislative audit found.
It’s the latest black eye for a state agency that has been criticized by state lawmakers, businesses and medical marijuana advocates for struggling to get the program off the ground.
Last year, the Maryland Medical Cannabis Commission gave preliminary authorization to 15 companies to grow medical marijuana, 15 companies to process the drug into medicinal products and 102 to open dispensaries. The businesses may open as early as this summer.
To choose these companies, the commission contracted with the Regional Economic Studies Institute at Towson University to oversee the review and scoring of business applications with the help of outside experts.
But the Office of Legislative Audits found numerous problems with this arrangement.
For starters, it was not subject to competitive bidding meant to ensure that taxpayers are getting the best deal for services.
Auditors determined that the arrangement was “artificially split” into different agreements for the separate types of cannabis licenses, shielding it from additional scrutiny from other state agencies and the Board of Public Works, which typically approves significant state spending.
Also, commission officials underestimated the cost of reviewing the applications, which ballooned from an initial estimate of $545,000 to $2.4 million, as The Washington Post reported last year.
Agency officials blamed the spike in costs on an unexpected flood of applications. But auditors said the commission failed to ensure that the increased costs and overhead were documented and reasonable.
“The use and structure of the interagency agreements resulted in a circumvention of control agency approvals and a lack of assurance that these services were obtained at the most advantageous cost to the State,” the audit says.
In a written response to the audit, the commission said its arrangement with Towson “does not reflect any intent to circumvent state law.” It agreed with auditor recommendations to change how it handles future contracts.
“The Commission is committed to the competitive procurement process,” executive director Patrick Jameson said in a statement to The Post.
Jameson was hired after the consulting arrangement with Towson was made.
Hannah Byron, the commission’s former executive director, defended her handling of the deal with Towson, saying that she followed proper channels and that it was a better alternative than waiting as long as a year to find a private company to oversee the review of applications.
“There had been enormous pressure to get this program off the ground, and there were a lot of hiccups along the way,” Byron said in an interview. “We felt that this was the most expedient way of doing that.”
Commission officials told auditors they wanted to award the first batch of licenses by December 2015.
The commission ended up awarding preliminary licenses for growers and processors in August and dispensaries in December 2016.
Several companies are suing the state over the process for awarding licenses, and Maryland state lawmakers are weighing whether to reconvene to take up legislation overhauling the state’s medical marijuana program.
Black lawmakers have insisted on authorizing new cultivation licenses for minority-owned companies to ensure racial equity in the profits of a new state-created industry. Legislation that would have done so failed in the final seconds of the General Assembly session that ended in April.
That bill would have also restructured the cannabis commission, which lawmakers of both parties have accused of bungling the program’s rollout.