CA Cannabis Advisors – Raising The Bar
CA Cannabis Advisors – Raising The Bar is focused on helping the commercial cannabis industry in California succeed. The fundamental principle that underlies any professional service firm is “THE FIRMS SUCCESS IS DIRECTLY TIED TO THE CLIENT’S SUCCESS”. Please the phrase in quotes and commit it to memory. aBIZinaBOX is a CPA firm. which is licensed in California, and the CPA’s that are employed by the firm are licensed in California [we will come back to why that matters later.]
The underlying concept is the same across every profession, occupation, and trade that support the “touch the leaf” businesses within the commercial cannabis industry in California [equally valid in other jurisdictions, however, we are going to limit the discussion to an environment where we have FIRST-HAND knowledge. Some examples of additional providers that serve the CA cannabis industry with focused skills include:
There are a select number of high-quality professionals that have chosen embrace the industry in California. Unfortunately, there are opportunistic, marginal firms that have pursued the cannabis businesses, due to the early lack of willingness by established firms to take on the risks of an industry that the Federal Government continues to persecute based upon antiquated, and irrational beliefs fostered by what we call Reefer Madness Think. “RMI”
If RMI were recognized for the paranoid mindset that it is, it wouldn’t be nearly so harmful. However, the cannabis industry continues to suffer from severe consequences such as:
- Significant restrictions on the ability to access the Federal banking system – it has been singled out for significant additional requirements by FinCEN
- Significantly enhanced penalties for routing California Dept. of Tax and Fee Administration [“CDTFA”] penalties starting at 50% of the tax versus 10% for every other
- The Internal Revenue Service does not recognize Cannabis Cultivation as “agricultural activity” aka “farming” and there is not corresponding NACIS Industry Code for it. As such, cannabis cultivators in California could be denied significant tax benefits [e.g ability to expense certain single purpose property used in farming such as greenhouses] .which are available to other industries under the recently enacted TCJA of 2018. You can review our analysis of the issue California Cannabis Cultivation as Farming.
Ther are over twenty State of California agencies involved in the regulation of the commercial cannabis industry. You can see an overview of all of them at the California Cannabis Portal site.
California Cannabis Chek
Building Confidence in the California Cannabis Industry
We have undertaken a focused effort to leverage the unique skills that certified public accountants possess to facilitate building confidence in the California cannabis industry as CA Cannabis Advisors. We have developed California Cannabis Chek TM which is comprised of a SaaS software application, technical resources, training, and ultimately a certification process for CPA’s. The process is ground in core attest concepts which have been developed by the CPA profession including:
Agreed-Upon Procedures Reporting – SSAE 18, Attestation Standards: Clarification and Recodification(effective May 1, 2017), principally as AT-C section 215
The standards contain a Maturity Framework for the evaluation of internal accounting controls over cash:
Level 1: Unreliable. The unpredictable environment for which controls have not been designed or implemented.
Level 2: Informal. Controls are present but inadequately documented and largely dependent on manual intervention. There are no formal communications or training programs related to the controls.
Level 3: Standardized. Controls are in place and documented, and employees have received formal communications about them. Undetected deviations from controls may occur.
Level 4: Monitored. Standardized controls are in place and undergo periodic testing to evaluate their design and operation; test results are communicated to management. Limited use of automated tools may support controls.
Level 5: Optimized. An integrated internal controls framework with real-time monitoring by management is in place to implement continuous improvement. Automated processes and tools support the controls and enable the organization to quickly change the controls as necessary.
The complexities of evaluating and reporting on internal controls, privacy, and other Agreed Upon Procedures is an attest function. The performance of attest services is specialized and required significant education and training and is RESTRICTED by the California Board of Accountancy [and every other state and territory in the US to CPA’s]. Enrolled Agents are NOT authorized nor capable of performing such work. If you observe an Enrolled Agent representing that they can provide such services, they should be immediately reported to the State Board of Accountancy, and the Internal Revenue Service Office of Professional Responsibility.
CPA’s and Attorneys with proper, verified eduction such and an LLM or MST in taxation are additionally uniquely qualified to address the tax, accounting, and regulatory compliance needs of Cannabis businesses in California. We have begun the discussion with the California industry regulators, tax authorities, and the profession about leveraging the unique skills of CPA’s to assist the industry. Engaging with FinCEN and other regulators is on our short-term roadmap. Let’s improve the skills for the choice of CA Cannabis Advisors.