News and Best Practices

Assessments, Software Can Help Dispensaries Avoid Major Headaches

August 2, 2016

Your dispensary risks paying a steep price if you fall out of compliance with state law. You can be locked in months-long administrative holds, your products and bank accounts can be seized, and you can be fined hundreds of thousands of dollars.

And still, many dispensaries fall short of compliance requirements. According to Justin Pentelute, the CEO of a prominent Denver-based compliance assessment company, every dispensary they’ve audited has been out of compliance and would have faced an administrative hold had they not acted.

Pentelute’s firm, EvolutionZ Consulting, uses its own software platform to conduct compliance assessments for dispensaries. The company’s clients are initially confident that they are completely compliant with the law, he said. But they quickly learn that’s not the case.

Still, he added, staying in compliance with entities like Colorado’s Marijuana Enforcement Division isn’t complicated. An objective assessment from a third party, coupled with innovative software, can help dispensary owners stay within the law and, in the process, operate a better business.

Verifying, documenting compliance is a key to success

Compliance assessments evaluate a dispensary based on its compliance with all applicable state statutes. The assessment is designed to identify areas of noncompliance, create corrective action plans and recommend best practices. The assessment produces a report documenting the client’s level of compliance, which can be circulated to banks, insurers, owners and other stakeholders.

Practices that ensure strong compliance – such as implementing certain standard operating procedures – are also elements of good business, Pentelute said. So, because strong compliance procedures and healthy business practices go hand-in-hand, EvolutionZ’s compliance assessment also acts as a business assessment.

So how would a dispensary owner know if their operation needed an assessment? To Pentelute, the answer boils down to documentation. “If they don’t have any sort of internal reporting that verifies their compliance and itemizes their compliance, they need us to help them out,” he said.

A third-party agency is more objective than an in-house compliance officer, he added. For that reason, he recommends hiring an outside firm to conduct a compliance assessment rather than performing an assessment in-house.

Software solutions

In the still-developing field of legal cannabis regulation, state regulators tend to rely heavily on their own discretion when conducting investigations. But technology advancements could quickly make the process less subjective and more exacting.

“It’s only a matter of time before the MED has a software just like what I have created,” Pentelute said. In that case, regulators’ discretionary approach would be replaced by a more methodical one, making inspections more rigorous.

This development “would turn the industry on its head,” he said. “If [regulators] were doing that today, I would guess that 80 percent of the industry would be shut down.”

The other side of the coin, however, is that compliance software gives an advantage to firms like EvolutionZ Consulting, which could be good news for the clients they serve.

In addition to yielding a valuable reporting document that can be distributed to investors, banks and insurers, Pentelute’s compliance software has “helped us really make it an efficient and painless process to do the compliance assessments and then make sure that they’re complete and comprehensive,” he said.

By Bridget Manley
Dispensary Management Today articles are for informational purposes only and should not be considered legal guidance or advice on dispensary operations. You should contact an attorney or a qualified cannabis consultant for specific compliance and dispensary/retailing advice.
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