State’s cannabis tracking system falls short of long-sought goals, audit finds

More than a decade after voters approved legalizing recreational marijuana in Washington, the state still lacks a system able to track cannabis from production through processing to retail sale, according to a follow-up performance audit released today by the Office of the Washington State Auditor.

In 2018, a performance audit found the state Liquor and Cannabis Board (LCB) was implementing a computerized tracking system sophisticated enough to highlight risk areas for further investigation by enforcement officers. For example, such a system could flag for review excessive donations to medical cannabis providers or patients.

Today, several other states operate such full service, “seed-to-sale” tracking systems to help them identify risks of illegal or unsafe practices. However, when auditors followed up on earlier recommendations to LCB, they found its project had failed. Among other challenges, the tracking system project was overseen by three different sponsors and three different deputy directors in three years. By 2021, agency executives decided to cancel the project altogether and instead repurposed an existing data backup system for tracking purposes.

The Cannabis Central Reporting System now in place allows LCB to produce reports on key data from cannabis business licensees, but it has significant limitations. For example, it cannot provide enforcement officers with real-time tracking information.

Auditors also found the current system is vulnerable to errors, such as misplaced decimals in the reported sales price of individual products. These contributed to the system reporting annual sales of almost $8 billion in 2022. The Department of Revenue estimated sales for the same period to be about $1.3 billion. In another example, the system will alert licensed cannabis businesses if there is an error in uploading their data. However, licensees cannot view their data in the system and must ask LCB for a copy to confirm they have submitted the correct information.

LCB is focused on replacing other aging information technology systems, and management does not expect to be able to launch a more robust tracking system until 2031.

“A ‘seed-to-sale’ tracking system has been under development for 12 years but has yet to be fully realized,” said State Auditor Pat McCarthy. “This report is an important update for state leaders, who can now engage with the Liquor and Cannabis Board to establish clear goals for ensuring accountability in our modern recreational cannabis system.”

The full performance audit report, including recommendations to LCB to improve the use of its existing system, can be found on the State Auditor’s Office website here: Evaluating Oversight of the Cannabis Industry: Follow-up issues.

Media questions: Assistant Director of Communications Adam Wilson, Adam.Wilson@sao.wa.gov, 564-999-0799