Missouri State Auditor Scott Fitzpatrick released an audit earlier this week, which examined the state’s medical marijuana licensing process from 2019. The nearly three-year investigation uncovered substantial deficiencies in how licenses were awarded, leading to over $12.5 million in litigation costs and raising questions about the fairness and transparency of the program’s launch.
The audit reviewed the Division of Cannabis Regulation’s (DCR) handling of more than 2,000 applications submitted in 2019, when the state initially granted 348 licenses across four facility types: dispensary, manufacturing, cultivation, and testing facilities.
The Blind Scoring System That Wasn’t So Blind
One of the audit’s most significant findings centered on the “blind scoring” process, which was designed to evaluate applications without revealing applicant identities. However, the system contained a critical flaw that potentially compromised its integrity.
The DCR allowed applicants to create their own unique identifier numbers to label supporting documents. Some applicants used identifiers that closely matched their business names, undermining the anonymity of the process.
Of the 67 applications reviewed by auditors, 12 included identifiers that could reasonably reveal the applicant’s identity to graders familiar with the business. Notably, 83 percent of these applicants received licenses, compared to just 15 percent of the overall applicant pool.
This means applicants with potentially recognizable identifiers were nearly six times more likely to receive licenses than those who maintained complete anonymity.
Fitzpatrick stated that while it’s impossible to prove scorers used this information improperly, the system created significant risk. “We also can’t say that they didn’t, and that’s, I think, the concern that should be taken from that,” he told The Missouri Independent.
Inconsistent Scoring Raised Questions
The audit identified multiple instances where identical or nearly identical application responses received vastly different scores from the same grader. Auditors found 59 cases where two applicants submitted substantially similar answers to the same question, yet received different scores.
In one example, two applicants provided word-for-word identical responses to a question about sourcing non-marijuana products and equipment. One received a score of 4 while the other received a 7.
Additionally, the review uncovered 38 applications where responses meeting minimum criteria received scores of zero. In contrast, 18 instances showed responses failing to meet basic requirements still received positive points. One manufacturing facility applicant even submitted blank answer sheets for two questions but received scores of 7 and 4.
The contracted scoring company, Nevada-based Wise Health Solutions (WHS), instructed graders to take limited notes during the evaluation process. The training manual included guidance such as “Say it and forget it, write it and regret it,” apparently to reduce documentation that could become available during potential lawsuits.
This lack of documentation made it impossible for auditors to determine whether scoring inconsistencies resulted from errors or bias.
Redaction Rules Applied Unevenly
State regulations required applicants to redact identifying information from their submissions. However, the audit found these rules were not consistently enforced. Among the 67 applications reviewed, 32 responses from 18 applicants contained unredacted personal or facility-identifying information.
Some applications with redaction violations still received high scores and ultimately won licenses. When auditors recalculated scores assuming redaction violations received zero points as required, six of ten approved applications with such violations would have fallen below the minimum score needed for licensure.
Costly Legal Consequences
The perceived and actual deficiencies in the scoring process contributed to extensive legal challenges. Nearly 850 applicants—44 percent of those denied licenses—filed appeals with the Missouri Administrative Hearing Commission.
From 2020 through 2023, the DCR spent over $12.5 million defending against litigation and administrative appeals related to the 2019 licensing process.
These appeals led to the state awarding 68 additional licenses beyond the original 348, an increase of 19.5 percent. These additional licenses created market entry timing disparities that may have disadvantaged certain businesses.
Additional Oversight Concerns
Beyond the licensing process, the audit identified several other areas requiring improvement:
Insufficient Facility Inspections: Many licensees operated without the required annual inspections during the audit period. In 2021, only 5 of 43 operational facilities received annual inspections. While the DCR has since increased its compliance staff from 12 to 35 officers and now conducts quarterly inspections, state regulations no longer require annual inspections.
Limited Inventory Verification: The DCR performed minimal physical inventory inspections to ensure cannabis products weren’t diverted to illegal markets. In 2020 and 2021, no inventory inspections occurred. Even in 2024, 84 percent of licensees did not receive inventory inspections.
Customer Privacy Gaps: Dispensaries retain confidential customer information without obtaining explicit consent. State regulations require age verification but don’t mandate data retention or address security standards for adult-use customer information.
Purchase Limit Monitoring: The statewide tracking system, Metrc, cannot identify purchases exceeding legal limits in real time. During the audit review, examiners found at least two instances where dispensaries sold more than the constitutional limit of 3 ounces per transaction.
Delayed Business Changes: The DCR took an average of 165 days to approve or deny ownership change requests, despite regulations requiring decisions within 60 to 150 days. For 15 percent of requests, the decision took over a year.
Funding Distribution Issues
The audit found that the state has accumulated significant marijuana tax revenue in its funds instead of distributing it as required by the Missouri Constitution.
Combined ending balances in the Veteran Health and Care Fund and the Veterans, Health, and Community Reinvestment Fund totaled $82.4 million in fiscal year 2024 and $89.2 million in fiscal year 2025.
For fiscal year 2025, while the Missouri Veterans Commission and the Department of Health and Senior Services each received $20.8 million in transfers, the Public Defender System received only $9.1 million—approximately $11.7 million less than the constitutionally required equal distribution.
Tension Between Auditor and Agency
The audit report received a notably combative response from the Department of Health and Senior Services (DHSS). The agency disputed many findings, calling them “baseless” and “flawed,” and argued that auditors reviewed only 3 percent of applications—too small a sample to draw broad conclusions.
Amy Moore, the Division of Cannabis Regulation director, said the division completed 160 information requests and dedicated thousands of staff hours to assist with the audit. Characterizations of the department as uncooperative surprised her. She stated, “We were not aware at any point that this level of cooperation was considered insufficient.”
The DHSS response also noted that fewer than 1 percent of licensing challenges succeeded through appeals, and cited expert analysis finding 98 percent average consistency in scoring. The agency argued that appeal-related costs were normal, anticipated, and represent compliance with constitutional due process requirements rather than inefficiency.
Fitzpatrick expressed disappointment with the department’s response, stating, “An audit is meant to be a helpful tool to enhance government efficiency and I am confident our report found several areas where the department can and should improve.”
Program Rating and Recommendations
The audit assigned the marijuana program a “fair” rating, acknowledging the enormous scope and tight constitutional deadlines the department faced when launching the program. Fitzpatrick credited DHSS for standing up a multi-billion dollar industry in a short timeframe but maintained that significant process issues undermined confidence in the licensing system.
The report recommends the DCR improve documentation and oversight procedures for future licensing rounds, ensure adequate facility inspections and inventory verification, establish clear customer privacy standards, implement real-time purchase limit monitoring, and process business change requests more efficiently.
