Who Can You Rely On During An Investigative Audit?
Have you heard of regulators hitting cannabis companies with insanely expensive fines as the result of audits? We’ve seen regulators increase the frequency and meticulousness of audits as the cannabis industry grows. Regulators increasingly rely on data analysts to scrutinize track and trace systems as their source of truth in virtual audits, especially during a pandemic. We see regulators honing their skills in virtual auditing which they can carry out more often, with less man-power, and while maintaining federal compliance with social distancing measures.
Now, more than ever, it is worth investing in critical safeguards to ensure you’re ready should a regulatory agent inspect your track-and-trace records or facility. The rate of these drop-ins and virtual audits will continue to ramp up as federal legalization draws nearer. Federal regulators will then have the resources and personnel to investigate cannabis operators en masse, something we have yet to see in our industry.
“What do you envision when it comes to an audit? A local regulator who cares about the industry or a team of IRS auditors intent on finding the smallest of miscalculations or mistakes to cash in on? The latter is a very scary, but real possibility that is going to take place sooner than you may think. ”
In an article published by Marijuana Business Daily in April 2020, the IRS hinted at more audits coming down soon due to gross miscalculations of tax obligations by cannabis businesses. There was an estimated $48.5 million left under-reported by cannabis companies across just three legal states in the 2016 tax year. This is a huge sum that the IRS would prefer to collect, amounting to over $242.6 million in unpaid taxes when projected out five years.
Are you entirely sure your track-and-trace system, your supply-chain record retention, and your tax calculations are all 100% correct?
If not, it’s time to start looking for an external, third-party auditor who can identify and help correct these issues for you without the threat of fines.
There are a host of compliance companies that claim to do audit preparedness assessments, METRC clean ups, on-site checklists, and inspection support. There are several questions you should pose to these companies before granting them access to your facility:
How long has the company worked in the cannabis industry?
How many investigations or audits has the company assisted with?
What were the outcomes of those situations?
Do they feel comfortable testifying on their audit results incase of an investigation?
If your chosen compliance consultant cannot answer these questions confidently, you should think twice before doing business with them. As a company with over 30 years of combined legal cannabis industry experience and with countless audits and investigations under our belts, we can tell you this knowledge does not come quickly. RMCC’s hard-earned expertise is the result of repetitive exposure to the systems utilized by industry members and regulators and the understanding of the nuances of the regulatory text. We know exactly what regulators’ expectations are for compliance.
If you are dealing with a company that has never worked with cannabis, only with investigators in other sectors, and they expect similar outcomes from their past experiences, they will be sorely mistaken. Our founder, Brie Ramsay, has been a part of investigations where the data entry errors may have never been found by someone from outside the industry. Someone without previous cannabis knowledge would not have noticed the unusual yield reporting for the company’s concentrate output.
To have a team of industry experts who have actually done this type of work and know exactly how to find inconsistencies is invaluable. We are frequently hired to clean up the mess made by previous compliance companies who were misinterpreting regulations or were baffled at how track-and-trace systems actually work. Despite paying an unqualified compliance company and RMCC to clean-up their mess, these operators still paid less in consulting fees than they would have in a regulatory investigation with compounding infractions. It pays to save the money upfront and hire experts from the start.
RMCC has assisted operators around the country with investigations, audits, and litigation regarding multi-state operator licensing deals. Listen to the episode of our podcast, TBD with RMCC, where our CEO, BriAnne Ramsay, discusses a few audits she was a part of and how difficult they were to navigate. From small “mom and pop” companies to some of the most prominent players in the industry, we use our previous experience and knowledge to identify potential problems and help put a plan in place to correct them.. This gives our clients the peace of mind that their operation is in order in the event of an inspection.
RMCC provides on-going support throughout investigations and audits. If you have already been slapped with infractions or warnings, don’t hesitate to reach out to info@rmcc.io for more information on how we can help you through it. We can assist with communication with the investigator, collection of data or records, explanation of discrepancies, and more, saving you time and headaches in the long run. We make sure you always have a plan in place in case of emergencies.
Having experts on your side means you can breathe easier knowing you have a compliance team to support you through any situation. We want to lend our knowledge and unique insight into these inspections in order to create more sustainable canna-businesses. Our hope is that more operators will continue earning profits rather than giving their money to the State for fines that could easily have been avoided.
If you want to expand on your compliance knowledge, we have over 40 hours of self-lead learning on our online training platform training.rmcc.io. You can learn how to manage your track-and-trace system, how to organize your records for ease of access during audits, and what documentation needs to be maintained per the regulations.
Once you master these basics, you can engage in a virtual retainer with RMCC. A virtual retainer allows you to call us, text us, email us, or screen share with the RMCC team to get the answers to any and all compliance questions that may arise. This keeps you covered and up-to-date. Plus, you can use those hours in the case of an investigation, and RMCC will help you sort it all out.
We are here to provide as many resources and learning opportunities as possible to keep cannabis operators safe and successful.