Records and Regulations are a Given — Fines Don’t Have to Be
October 10, 2019
October 10, 2019
Guest Blog from Kathryn Awada, CEO & Founder of Azara
Business records are a necessity. They are required for any business regardless of the city, county, or state in which you form and operate your company. With cannabis, the regulatory burden makes business records even more critical – protecting you from big fines – or even losing your license.
In the cannabis industry, regulations are established to ensure the safety of the public. And, most regulatory bodies that enforce cannabis regulations make their money by issuing licenses, badging employees, and, you guessed it — issuing fines.
Just How High are the Fines?
In Colorado, birthplace of Azara, the first year of regulated adult use cannabis market grossed $413,500 in fines. Again, that was only the first year — which we can assume included some level of grace period for licensees getting acclimated and considering the rapidly changing regulations. There are three types of violations; license infraction, license violation, and most severe — a violation against public safety (see CCR 12-2 R 1307 A).
In Colorado, a violation involving your business records is considered a violation against public safety (see 1 CCR 12-2 R 901 C). The regulations read, “The range of penalties for this category of violation may include license suspension, a fine per individual violation, a fine in lieu of suspension of up to $100,000, and/or license revocation depending on the mitigating and aggravating circumstances.”
In Massachusetts earlier this year, regulators closed one medical dispensary for numerous violations found in surprise inspections and fined another $75,000 over labeling and inventory tracking violations that were found during an unannounced inspection.
Navigating Regulations is Complex
All states have their own regulatory stipulations, and most are unique. There are some differences in verbiage, but all states require that business maintain records of transactions and operations.
The focus for most regulatory agencies is protecting the public — especially our youth — and ensuring that all licensed businesses are complying with all state and local health and safety practices, tax codes, building and excise standards, and fire codes.
For cannabis businesses, there is an extra layer of regulation and record keeping. This means keeping current logs for any waste produced, business licenses and employee badge expiration, the demographic of every audience you target with advertising, and detailed security logs — just to name a few. Additionally, when you are audited by any of the regulatory agencies, you are expected to have access to these documents and past records for 3 years back, including the calendar year and in states like California it can even be up to 7 years.
While the basic operations of running a cannabis business feel the same across areas, what we see is widely varying regulation and nomenclature — even across cities and towns in one state. For companies operating in multiple markets, navigating this tangle of regulations can be difficult due to this patchwork of regulations that exists because of federal prohibition.
Mitigate Risk of Fines and Protect Your License with Systems and Accountability
Beyond simply keeping up with requirements, there is the element of educating and holding your staff accountable to maintaining these standards in their day-to-day. Without careful attention to detail and consistent execution by your frontlines, your risk for compliance fees is high.
When considering a compliance solution, be sure that your system covers all areas of cannabis operations — not just one or two. If your point of sale is covered, but your waste or inventory is not — you’re exposed. If you don’t keep track of badge expiration and employees work with expired badges — you’re exposed. If you can’t produce visitor logs or transport manifests — you’re exposed.
Azara mitigates fines by providing a consolidated, searchable platform that documents information that is required to be maintained for inventory, advertising, security, facility, and employee compliance.
Additionally, any headaches related to keeping up with the ever-changing regulations is covered by our in-house team of consultants who are on the ready 24/7 to answer any questions that may arise or prove to be difficult to interpret in terms of the laws.
Our platform puts the responsibility on the department that is required to maintain and creates accountability within your team on a day-to-day basis.
Not IF, but WHEN You’re Audited
When you are audited, having all compliance documentation in one system reduces the amount of time you take searching for items and limits the amount of problem areas and stress associated with dealing with state agents.
A clean audit starts with understanding the regulations and having systems in place to implement, track, and record all relevant data.