“Commission staff met with the Auditor’s team for nearly a year and spent hundreds of hours reviewing procedures with the investigators.”
Amidst a mess of ugly headlines that already called the whole Mass cannabis experiment into serious question last week, Auditor of the Commonwealth Diana DiZoglio released an extensive review of the agency mostly covering July 1, 2022 through June 30, 2024.
“The purpose of [the] audit was to determine whether [the Massachusetts Cannabis Control Commission] administered the calculation, collection, and accounting for fees and fines collected in the marijuana regulation fund (MRF) in accordance with [Massachusetts law].”
DiZoglio noted in a media release accompanying the 68-page report: “Among the audit’s findings is that the CCC’s mismanagement of prorated fees for license extensions resulted in revenue loss, procedural inequity, noncompliance with state regulations, and the appearance of potential favoritism and/or impropriety with respect to some being required to pay fees, while others inexplicably did not need to do so.”
In addition to other warts, the audit also found: “Lengthy timeframes, especially around enforcement action, put customers at potential risk either of purchasing and consuming contaminated or expired marijuana products, or being exposed to other public health risks. Additionally, the lack of a hearing officer compromises due process rights for licensees subject to fines and enforcement actions.”
As has happened previously in the wake of criticism from other Mass offices and agencies, the CCC issued a detailed response to these latest noted problems. An agency press release put out the day after DiZoglio dropped her bomb read: “Commission staff met with the Auditor’s team for nearly a year and spent hundreds of hours reviewing procedures with the investigators, then provided formal responses to initial findings. Over the next six months, the Commission looks forward to its continued work with the Auditor’s team to address any outstanding recommendations and provide any updates.”
In the meantime, the CCC released an FAQ addressing the points in the auditor’s report. We reprinted it below for stakeholders and constituents to peruse …
Why was the Cannabis Control Commission (Commission) audited?
The Office of the State Auditor (Auditor) is authorized to conduct periodic performance audits of public entities. In addition to ensuring tax dollars are spent wisely, audits, reports, and investigations also focus on improving state government performance. The Commission welcomes ongoing collaboration with the Auditor’s team and looks forward to providing updates over the next six months.
For more information about the Auditor, see https://www.mass.gov/orgs/office-of-the-state-auditor.
What did the audit cover?
The Auditor chose to audit the Commission during the following timeframes:
- July 1, 2022-June 30, 2024, to examine the calculation, collecting, and accounting for fees and fines collected in the Marijuana Regulation Fund (MRF);
- July 1, 2019-December 31, 2024, to examine agency employee settlement agreements.
Additionally, the Auditor reviewed processes and procedures relative to host community agreements (HCAs), which are the required contracts between licensees and the cities and towns in which they operate, as well as related community impact fees (CIFs).
Commission staff met with the Auditor’s team for nearly a year and spent hundreds of hours reviewing procedures with the investigators, then provided formal responses to initial findings.
What is the MRF?
The MRF consists of monies generated through licensing fees, fines, and adult-use cannabis tax revenue, and is appropriated by the Legislature, not the Commission.
Regulated cannabis products sold by Marijuana Establishments in Massachusetts are subject to a 6.25% state sales tax and a 10.75% state excise tax. The Commission does not collect tax revenue from sales tax or direct the spending of revenue; the revenue goes into the MRF. For estimates on how the Legislature allocates MRF funds, see page 16 of the Commission’s State of Cannabis 2025 report which was presented to lawmakers in April.
According to the state Department of Revenue, cannabis sales and excise taxes had generated more than $289 million in fiscal year 2025 through the end of June, which is approximately $17 million more than the same point in 2024.
How has the Commission strengthened its organizational structure and addressed the use of non-disclosure agreements?
Since the conclusion of the relevant audit period in June 2024, the Commission has hired key leaders, including the Executive Director and General Counsel, as well as welcomed hires or promotions within the Legal, Enforcement, Finance, and Human Resources departments, among others. In August 2025, the Governor, the State Treasurer and Receiver General, and the Attorney General also reappointed Acting Chair Bruce Stebbins to serve another five-year term in the agency’s regulated industry seat.
These developments have allowed the agency to continue its transition from a start-up to a more mature and established organization and to strengthen inter-departmental collaboration. The Commission also adopted a governance charter to establish and clarify responsibilities of Commissioners, the Executive Director, and the entire agency team.
Beyond making progress with personnel and organizational structure, Commission staff have reviewed and amended existing Standard Operating Procedures (SOPs) during and since the audit period relating to many of the issues raised. The Commission has an Internal Control Plan that is certified annually. The plan has been reviewed by the Statewide Risk Management Team of the Office of the Comptroller (the Comptroller) and was found to comply with their policies and regulations. The Commission is committed to an annual review of policies and procedures to continue to bolster internal controls and mitigate risk.
On January 27, 2025, following the audit period, the Governor issued a directive which formalized the prohibition of the use of non-disclosure language in settlement agreements in Massachusetts. Despite being an independent state agency, the Commission has adjusted its procedures to follow this directive. The agency is in the process of formalizing a policy for employee settlement agreements in accordance with the Comptroller’s revised guidance and intends to provide it to the Auditor within 60 days.
How has the Commission improved upon fee collection processes over the past year?
In July 2024, the agency self-identified that a number of administrative extensions had been requested by and granted to Massachusetts licensees without requiring payment of the applicable prorated fees. Once the failure to collect fees was discovered, the Commission began billing for uncollected fees that were identified. To date, the agency has collected more than two-thirds of identified fees and continues to pursue collection of the remaining balance through the State Comptroller Billing and Receivable System.
The Commission also updated its licensing software in July 2024 to accept pro-rated extension applications and fees. Fees are now paid prior to the Commission’s granting of an extension, eliminating the need to bill licensees.
It is critically important to note that neither the Auditor nor the Office of the Inspector General, which completed a similar review in March, identified any evidence of fraud by Commission employees in their reports. The Commission’s April 17 response to the Inspector General is available here.
Both offices did highlight the Commission’s need to review Information Technology systems and internal controls, as well as perform a self-audit of pro-rated fees and provisional fees. That work has already begun.
The Commission has ended the practice of granting informal extensions and updated existing SOPs for the collection of pro-rated fees, including but not limited to:
- Automated payment reporting that allows for additional monthly reconciliation to funds transferred to the MRF;
- Expanded use of individual revenue reporting codes for different fee types that provide for increased revenue analysis and reconciliation of payment records;
- The creation of an extension application in the Massachusetts Cannabis Industry Portal (MassCIP), the agency’s licensing and agent registration platform; and
- The release of several informational bulletins regarding pro-rated fees, including this one from November 2024: https://masscannabiscontrol.com/2024/11/bulletin-extension-application-in-masscip-november-18-2024/.
Massachusetts’ regulated cannabis industry has grown since 2018. The Commission processes 35,000 payments through its IT platforms annually, generating $20 million in annual revenue for the MRF through licensing and agent fees as well as fines. Existing technology needs to be updated to grow with the industry. To that end, in both Fiscal Year 2025 and 2026 state budget requests, the Commission sought funds to update or replace MassCIP and the Medical Use of Marijuana Program Online System (MMJOS). Although those requests were not met, Commissioners and staff continue to work with the executive branch and legislators in order to secure the funding that will enable necessary upgrades and improvements. Ultimately, any investment in updated infrastructure will require a public procurement process, which has already begun, despite existing budget shortfalls.
Finally, the Commission has contracted with the firm of Clifton Larson Allen which has begun to audit the agency’s accounts receivable and collection activity to ensure that procedures are consistent with policies and regulations of the State Comptroller.
Does the Commission review HCAs?
Yes. The audit included an 18-month period (July 1, 2022-March 1, 2024) before the Commission had the statutory and regulatory authority to begin reviewing HCAs between host communities and license applicants or licensees.
Following the August 2022 passage of Chapter 180 of the Acts of 2022 (Chapter 180), the state’s cannabis equity reform law, the Commission assumed oversight of HCAs and incorporated new regulations and processes to ensure compliance with statute starting in 2023. The Commission reviews HCAs on a rolling basis during either annual renewal or during the initial licensing phase.
To date, staff have reviewed more than 1,000 HCA contracts from 156 cities and towns and determined 873 are compliant. However, numerous municipalities have challenged the Commission’s authority to review and approve HCAs that pre-date Chapter 180. As a result, the Commission, in consultation with the Attorney General’s Office, has begun to intervene in lawsuits between municipalities and licensees which present challenges to the agency’s authority to review HCAs and enforce Chapter 180 with the goal of bringing more agreements into compliance.
In Chapter 180, significant changes were made to what constitutes a CIF and the manner in which these fees may be collected. A CIF is a fee charged by a municipality that includes all payments and obligations between the parties. The law imposed new requirements on municipalities for charging this fee and the Commission with reviewing and enforcing the fees. The Commission began enforcement of CIFs as of May 1, 2025.
How will the Commission move forward from here?
State audits review past results to make recommendations for an agency’s future and include a six-month follow-up with the subject. Throughout its yearlong collaboration with the Auditor’s team, the Commission is proud to have already made significant progress through self-assessment, new hires, and efforts to update internal controls and IT infrastructure.
The Commission agrees with the Auditor’s goal of assessing performance to ensure government continues to improve. There is no question that the organizational structure and operations of the agency have done just that as it has grown and matured since inception in 2017—and over the course of significant transitions in leadership in recent years— alongside the expansion of the now-$8 billion regulated industry.
Will the Commission be audited again?
Over the next six months, the Commission looks forward to its continued work with the Auditor’s team to address any outstanding recommendations and provide any updates.
Every public agency in Massachusetts is periodically audited and the Auditor may choose to audit the Commission again at any time. Following the Commission’s September 1, 2017 inception, the agency underwent an audit between January 1, 2019 through December 31, 2020 and the Auditor issued relevant recommendations on September 26, 2023. The Inspector General also conducted a limited review of the Commission in June 2024 and followed up with a more in-depth report published in March 2025. Information about previous audits is available at MassCannabisControl.com.
