The Arizona auditor general issued an update to a 2019 audit last week that says the Arizona Department of Health Services (ADHS) has been slow to enact changes to the state’s medical cannabis fund that were recommended three years ago.

The recommended changes are meant to address the misallocation of funds that were used to pay some department employees’ salaries, according to an Arizona Mirror report.

The 2010 Arizona Medical Marijuana Act (AMMA) legalized medical cannabis in the state, and since it is a voter-approved initiative, money in the medical cannabis fund—generated by medical cannabis certifications, dispensary licensing fees, civil penalties and donations—can only be used for specific purposes outlined in the law, the news outlet reported.

When voters approved Proposition 207 in 2020 to legalize adult-use cannabis in Arizona, $45 million shifted from the medical cannabis fund to various state agencies to implement the adult-use program, according to the Arizona Mirror.

While the fiscal year-end balance in the fund increased each year between 2016 and 2020, it has since decreased from its peak of more than $91.7 million at the end of fiscal year 2020 to an estimated $48.2 million for the most recent fiscal year that ended June 30, the news outlet reported.

Last week’s audit report stated that “a combination of declining revenues; outflows, consisting of expenditures and required transfers to other agencies or funds, exceeding revenues; and recent statutory changes that restrict the use of some Fund monies to specific purposes have led to a decrease in Fund monies available for the (AMMA’s) purposes,” according to the Arizona Mirror.

Auditors also reported that ADHS has failed to adequately examine its fee structure and address funding allocations for the specific uses outlined in the state’s 2010 medical cannabis law, the news outlet reported.

The auditor general determined that, under the leadership of its former director, Cara Christ, the department had not developed sufficient written policies and procedures to “help determine whether an expenditure is allowable and whether it should be allocated to the fund,” according to the Arizona Mirror.

The audit also found that ADHS officials have failed to ensure that department employees documented the time they spent on tasks related to the management of the medical cannabis program, the news outlet reported.

The department has, however, followed most of the auditor general’s other 2019 recommendations, such as addressing the revocation of medical cannabis certifications for patients in violation of Arizona’s medical cannabis law, conducting medical cannabis facility inspections, and addressing complaints and noncompliance issues, the news outlet reported.

The auditor general’s office will follow up on ADHS’ progress in six months, according to the Arizona Mirror.

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