Washington voters legalized recreational use of marijuana in 2012, joining Colorado as one of the first two states to do so. Seven other states have since followed. They hope to learn from our experiences in this new industry.
In Washington, the LCB administers cannabis business licenses, enforces relevant laws, and creates regulations related to the production, processing and sale of cannabis. The state forecasts that excise taxes collected on retail sales will total $740 million in the 2017-19 biennium.
This performance audit examined how LCB could build and automate risk management tools to ensure a tightly regulated cannabis market and the most efficient and effective use of its internal audit and enforcement staff. LCB management welcomed the audit’s analysis, as it informed their decisions in how best to use the industry data it collects to identify areas of risk.
We completed this audit (published in August 2018) amid a number of changing events in the regulatory environment, both at the federal and state level. First, the audit took place during a federal policy reversal about the legalization of marijuana. In January 2018, the U.S. Department of Justice rescinded its previous policies on how it would enforce federal laws in states that had legalized cannabis.
Before the audit, LCB began replacing its existing data tracking system. It did this in part because it wanted greater data analysis capabilities. During the audit, LCB began implementing the new system. LCB faced multiple challenges as it did, including an incident in February 2018 when someone gained unauthorized access to the system. The audit did not address these events other than to recognize their presence.