How to Use a Compliance Audit Checklist In Your Cannabis Business

Keeping your cannabis facility in compliance is key to keeping your business operating and profitable. Compliance audits are conducted by many different agencies to ensure that your cannabis business is operating within the regulatory laws of your state and jurisdiction.

Tom Mohan, a former regulator for the Colorado Marijuana Enforcement Division has conducted thousands of inspections of all cannabis facility types, from dispensaries, manufacturing & cultivation facilities, transfer/delivery services, and laboratories.

Tom has shared his knowledge of audits and inspections in our Ask The Regulator podcast episode 5 and also reviewed the free Audit Checklist he generously created for the cannabis community that will help all facilities prepare for an audit.

In this article, we are sharing how Cannabis business owners can use this compliance Audit Checklist to ensure their facility’s readiness for an audit.

How to Prepare for an Audit
Employee Training
Standard Operating Procedures
The Audit Checklist by BuildMySOP
If You Are Not Prepared For An Audit
Violations
Administrative Holds

How to Prepare for an Audit

The best way to prepare for an audit is to prepare for an audit. By practicing the components that are listed on our Audit Checklist, you will be better prepared for the inevitable audit.

Running through the procedures with managers and employees to ensure they are comfortable performing the duties required by inspectors is also crucial to successfully comply to an audit.

Employee Training

In general, employee training is crucial to having a profitable cannabis business. In the case of audits, it is so important that employees and managers know how to perform the probable requests of an inspector during an Audit, so frequent training is necessary.

Operators who conduct regular monthly training to go over these tasks will be prepared for the audit no matter which manager is on duty when the audit is conducted.

For example, auditors might ask for the past 40-days of security video footage and the manager must know how to find that footage, download the file, and any additional requests. Employees need to be properly trained to perform these tasks and practice regularly.

Inspectors also want to see that the tools that are required to be used to help maintain compliance are being used by employees. For instance, the ID Book is a great tool to help employees with verifying IDs to sell legalized marijuana and cannabis products, and the auditors will check to see if these books are being used, if there are notes made by employees, etc.

Have Standard Operating Procedures

Overall, Cannabis business owners should follow the three keys of compliance which are accuracy, consistency, and transparency.

And having Standard Operating Procedures in place will help your facility build and maintain accurate records that comply with the industry’s regulations.

At BuildMySOP.com, we have created logs, forms, and SOP templates that all facilities will need to stay in compliance in their State and jurisdiction. So be sure to visit BuildMySOP.com to find out how you can get your cannabis business prepared for an audit today!

Facilities can prepare for an audit by having a current and thorough Compliance Binder, all required Business Records, and using our compliance Audit Checklist.

The Audit Checklist by BUILDMYSOP

It is recommended that business owners and facility managers and operators go through the compliance audit checklist that BuildMySOP provides and continuously practice gathering the information for the things listed on the checklist. These actions will help you and your employees be prepared for the audits that are sure to come.

Additionally, BuildMySOP supplies Cannabis businesses with SOP templates that can be customized for every state and municipality, and these templates can supply as logs to maintain compliant records for things like Visitor Logs, DVR access, and more. Visit BuildMySOP.com to learn more.

BuildMySOP’s VP of Regulatory Affairs Tom Mohan explained how to use the checklist in our AskTheRegulator podcast episode How To Prepare For An Audit and gave helpful tips and insight for each section of the checklist. You can hear more of his advice by tuning into the episode, but these are some of the important issues business owners need to prepare for when using a checklist to prepare for an audit.

Required Signage

All local and State issued signage must be visible to patrons, and therefore is typically one of the first things Auditors are looking for when they enter a facility is the business licensing.

The signage must be up-to-date and include a displayed tax number. If anything is in the process of renewal, then the notice of the renewal needs to be posted with an expired license until the new document is received.

Emergency Signage

The checklist includes state and local jurisdiction requirements, OSHA, eyewash, and emergency evacuation plans.

Emergency signage should be a clear and color-coded layout of the facility and include things like evacuation plans, spill stations, where are all the doors, etc.

The evacuation plans need to be posted at all points of Ingress/Egress so that Fire Department and law enforcement have an accessible map to know the layout of the facility no matter where they enter. And be sure to indicate where the doors are located.

Plans should be sized 11x17 using bright colors and bold lines. It’s recommended that additional signs be placed at knee level as well so that if there is a situation where people are crawling to escape, they can still read the map. For instance, cultivation facilities can be a maze and look very different below grow tables than above.

Security

The Security checklist includes visitor logs, alarm systems, and security cameras.

Visitor logs - This is often a source of compliance violations for many businesses as they are commonly overlooked which causes violations. Making sure people sign out when they leave the facility is so important. If visitors are not signing out, there is a security risk for the business and the public, so these violations are taken very seriously.

Alarm Systems - Facilities need to know that they work, so testing them often is important. Also, it is important that all emergency and non-emergency numbers are provided and posted where employees have access.

Security Cameras - Inspectors take security camera footage very seriously as it is a public safety issue. It’s important to monitor the cameras and see where any blind spots might be and adjust the camera accordingly. Make sure cameras are working. If the cameras are motion-activated, check frequently to see if a flickering light or movement from anything else is triggering the camera, thus taking all the DVR space.

It is also advisable to have a DVR access list and log where only employees given permission to access the DVR are listed and they log their access with a reason for their entry. This helps protects the business, employees, and public.

Fire Safety

The Fire Safety checklist includes everything that your facility needs to have in case there is a fire. It is important that all equipment is thorough, not expired, and the correct equipment.

First Aid Kit - must be completed and have no expired products.

Exit Signs - make sure batteries are checked and that they are working.

Extinguishers - note what they are used for, and ensure that they are the proper type for your facility and the hazardous materials you have.

Spill Kit - must be maintained and thoroughly equipped, and depend on the size of the facility and amount of hazardous materials. Oftentimes, facilities use kitty litter but since it is a clay-based material, it can be incredibly heavy depending on the amount your facility requires. Sand might be a better alternative.

Health & Safety

The Health & Safety checklist contains information pertaining to general safety and health requirements in relation to edibles that facilities either create or sell in any form. Making sure that everything is labeled properly is very important.

Data sheets - containing pertinent information must be accessible at all Ingress/Egress points.

Expired Consumables - Maintain a list of the expiration date of consumables. Many retail stores will discount these products to try to get rid of them before they expire.

Records

Records are intended to maintain the transparency of the business. In most states, owners must keep the most current 6- months of records on-site, and can usually house older documents off-site.

Records can be paper files or digital as nothing in the audit says they have to be one or the other. Managers should have access to everything, including digital files, but if you need more time to obtain the information, the inspector will usually give the facility 72 hours to hand over all of the required information.

Business records - should be in the Compliance Binder on the manager’s desk.

Courier records - manifest records should have signatures and have the last 90-days updated on Metric system that can be handed over to the inspector immediately.

Employee Records

Employee records include training records, ID, occupational badge, background checks, and certifications. They must be kept up-to-date.

Again, these records can be digital or handwritten, and some inspectors prefer handwritten as there tend to be fewer discrepancies.

Inspectors want to see the employee records for anyone who sold to an underage customer. By having an SOP stating their duties and procedures to perform tasks that employees can sign, you can protect your business and hold everyone accountable.

Inventory

Scales must be certified by a state agency and in many states, it’s the Department of Agriculture. The specific agency will specify how to obtain certified scales, but oftentimes, the agencies are backlogged so if you track the expiration of your scale calibration certification, you can plan ahead to get the appointment well in advance and avoid certification issues.

Some private companies are certified to calibrate scales and temporarily certify the device until the State can get there to certify.

Scale Inventory List - The scale type and certifier must be listed, and this information depends on who performs the product weights and measures.

If You Are Not Prepared for an Audit

If your facility is not prepared for an audit, you will receive violations that can come in the form of a verbal warning, written warning, fines, or revocation of licenses. Most likely, the inspections will occur more frequently if you are not prepared, so it’s important to do everything possible to be prepared in order to avoid expensive fines or even business closure.

The faster you can show compliance to the inspector, the better, but even if you are not prepared, it is always beneficial to be kind, respectful, professional, and honest. You can often avoid violations simply by being cooperative.

Avoid making up information or falsifying any documents or paperwork as this will get you in more trouble than simply being honest and letting the Inspector know that you don’t have the information.

Oftentimes, the inspectors will give you time to gather the information they are requesting and will schedule a time to return.

Violations

Violations are made to educate business owners and might simply come as a verbal warning depending on the situation and the number of violations that the facility has. Violations can come in more severe forms like a written warning, fines, and suspension or revocation of the operating license.

Violations will often add up if the facility is not prepared. Many times, when the inspector is conducting an audit, they request something from the facility manager and if the manager is not prepared and is taking time to try to retrieve the requested documents or video footage, the inspector then has more time to audit additional compliance issues and can find more violations.

If the facility is prepared, these types of violations can be avoided. Oftentimes, the most common violations can be avoided if employees are simply doing their daily tasks efficiently and diligently reviewing tasks and documents at the end of their shift.

Administrative Holds

In addition to the violation itself, depending on the situation, there may be an ‘administrative hold’ placed on a product that is subject to investigation. This means that the product needs to be maintained but cannot be sold.

For instance, if OSHA is investigating a product and its pesticides or if there was a complaint about a moldy marijuana product, then an ‘administrative hold’ is placed on the product throughout the duration of the investigation. The product or plant cannot be sold, but the cultivation facility must continue to grow it.

These holds not only affect the cultivation facility but also the retail businesses as the hold is placed on the product no matter its location, also called a ‘downstream hold’. These holds can last years, and often times the business owner can enter into an agreement to destroy the product, halting the need to maintain it.

It’s important you maintain your seed-to-sale tracking records for this reason, and check your Metric account where you will receive the information of the hold.

Next Steps

To get you and your employees prepared for an audit, first download the free compliance Audit Checklist and use the checklist as your guideline.

Invest in Standard Operating Procedures for your business, and schedule your free introduction to the BuildMySOP platform to see our library of logs and forms that are designed to keep your business in compliance and profitable.

To learn more about compliance Audits in any cannabis facility, check out the podcast or read more in the article “3 Ways to Prepare For An Audit”.

For additional product and pricing information, visit our website.

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