Cannabis Audits Questioned

Licensed grower conducts nearly half of all producers' annual audits

Is it OK for a person who holds a state license to grow cannabis to also perform audits of other cannabis producers and to get paid for the work in pot?

Acting on a tip phoned in to a hotline earlier this year, investigators at the Office of the State Auditor are asking the New Mexico Health Department to answer that question about a certified public accountant who performed nearly half of the required audits for the Medical Cannabis program in 2014. Yet Vivian Moore claims there's nothing wrong with her "side business."

Two letters obtained by SFR show that on April 18, Kevin Sourisseau, the director of special investigations for State Auditor Tim Keller,

to then-Deputy Health Secretary Lynn Gallagher, suggesting that Moore “may not be independent” and questioning the exchange of cannabis product with her Mother Earth Organics dispensary in Las Cruces.

“If the allegations are true, there are likely material independence issues if Ms. Moore conducts audits for any of the medical cannabis producers,” writes Sourisseau.

Kenny Vigil, a spokesman for the health department, confirmed last week that Moore has been doing audit work for cannabis producers since 2013. In 2014, according to regulators, Moore completed 10 of the 23 audits, or nearly 45 percent of all audits submitted to the department by growers.

Sourisseau contends there may also be tax consequences for the exchange of cannabis with Moore’s dispensary, Mother Earth Organics in Las Cruces, and expressed concerns about the in-kind payments, because they are “inherently difficult to value monetarily and thus create tax liability ambiguity.”

After initial fact-finding determined

, Sourisseau also referred the “potential independence issues” to Jeannette Contreras, the executive director of the Public Accountancy Board, to review.

Meanwhile, Gallagher, who Gov. Susana Martinez

to replace Retta Ward as health secretary last week, is still reviewing Sourisseau’s letter and hasn’t publicly commented on the issue.

But Moore tells SFR there is no conflict of interest, “or I wouldn’t have been allowed to perform them in the first place.”

“Just because someone thinks there is one doesn’t make it so,” Moore writes in a text message while she's traveling out of state. She claims that she completes at least four hours of ethics training every two years and has safeguards in place “to ensure there is no impairment in my independence.”

According to Moore, the transfer of cannabis doesn’t mean the audits themselves are not independent. She says she doesn’t provide her clients managerial advice and disputes the idea other growers or nonprofit managers have influence over the audit outcomes. 

“My professional license is too important to me for a $5,000 fee,” she writes in an email to SFR. “I would resign from an engagement before I would succumb to undo influence or pressure.”

Moore also claims all the cannabis transfers have been documented with the health department and that she has paid all of her taxes.

Moore, who also serves as the treasurer of the Cannabis Producers of New Mexico, says as an “industry insider” she is uniquely qualified to do the required audit work, which other CPAs have been reluctant to do in the past.

For example, in 2010, when the New Mexico Department of Health originally mandated the grower audits, the accountancy board, aware of conflicts with federal drug laws, declined to issue a letter permitting CPAs to conduct them. Instead, the board recommended auditors seek independent legal advice and that the Department of Health remove the audit requirement until “such time that federal and state laws regarding medical cannabis do not conflict with one another.”

Since then, producers who don’t use Moore say they’ve found some CPAs willing to do the audits and that her total fees are similar to what other auditors are charging. Still, some producers say they don’t believe Moore should be doing the audits.

“I think a reasonable person would say there is at least an appearance of a conflict of interest,” says one new producer, who didn’t want to be identified. “When we finish our first year in business, we’ll definitely contract with someone who isn’t also licensed to grow cannabis. There should be at least an arm's length distance with these audits.”

SFR has requested to review all the audits submitted to the health department by Moore and other CPAs but did not receive them in time for this story.

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