Auditor: Md. Cannabis Commission improperly hired Towson U consultants

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Maryland taxpayers may have been over-charged by a Towson University consulting firm hired to review and evaluate applications for licenses under the state’s medical cannabis program.

A report issued by the Office of Legislative Audits Wednesday found that the Maryland Medical Cannabis Commission failed to properly bid out a contract for consulting and review services and instead improperly hired the Regional Economic Studies Institute based at Towson University. The audit determined the commission circumvented procurement law, and avoided a review by the Board of Public Works, when it hired RESI through a series of interagency agreements. Additionally, the audit states that the commission split the overall agreement into four separate agreements in an effort to avoid the scrutiny of the state Department of Budget and Management.

The audit findings are the latest blemish on a program that has struggled to get off the ground since the law was passed in 2013. The commission is also the subject of lawsuits by two growers who were pumped from a list of 15 that were awarded preliminary approval for licenses because of concerns about geographic diversity.

Members of the Legislative Black Caucus are pushing for a special session of the legislature to work on a bill that would create five new licenses to address criticisms that none of the grower licenses were awarded to minority-owned businesses.

The audit noted that the commission paid a separate consultant $22,000 to draft a request for proposal to bid out the contract but later shelved it in favor of the agreement with RESI.

RESI was hired for $544,607 in 2015 to oversee the review and evaluation of licenses for growers, processors and dispensaries. The actual reviews were performed by outside subject matter experts who were not state employees — a violation of the procurement law which requires competitive bids for contracts exceeding $25,000 annually.

The original four agreements were ultimately renegotiated at a cost of $2.4 million, according to the audit.

The audit went on to find that the commission artificially split up one agreement into four to circumvent oversight by the state Department of Budget and Management.

Also, the commission severely underestimated the numbers of applications it would receive. The audit notes that the commission was aware there would be a strong demand for the 94 dispensary licenses allowed in state law but estimated it would receive just 89 applications — far lower than the 275 applications that were filed.

The audit notes that the low estimates were significant.

“The average cost to evaluate each application increased by $960 for growers, $1,335 for processors, and $1,001 for dispensaries,” the audit noted.

That average cost to review applications for a dispensary license jumped from $2,608 under the original agreement to $3,609 under the modified agreement, according to the audit.

In its response, the commission argued that use of a interagency agreement was permissible and that hire RESI “does not reflect any intent to circumvent state law.”

The response, however, went on to agree with four corrective recommendations made by the auditor including a review to ensure other interagency agreements comply with state law as well as recommendations to discontinue splitting contracts and to review overhead costs to ensure they are appropriate.

“The commission does not intend to use (memorandums of understanding) to avoid competitive procurements,” according to the response from the Department of Health and Mental Hygiene. “The commission has renewed its commitment to the competitive procurement process.”