PORTLAND, Ore. (KOIN) – In a new report, the Oregon Department of Justice determined the independence of an Oregon Liquor and Cannabis Commission audit, performed under former Secretary of State Shemia Fagan’s office, was threatened amid ethical concerns surrounding Fagan’s paid consulting role for an Oregon cannabis company.
The review comes after Gov. Tina Kotek asked the DOJ to examine the audit — which is titled “Oregon Needs to Modernize Cannabis Laws to Help Grow the State’s Economy and to Ensure Equitable Opportunities and Benefits for all Communities” — after Fagan recused herself from the audit because of her position with Veriede Holding, LLC, an affiliate of La Mota.
Amid the conflict of interest concerns, Fagan resigned as Secretary of State in May days after her voluntary recusal.
The DOJ worked with California-based Sjoberg Evashenk Consulting to determine if the audit met Generally Accepted Government Auditing Standards.
The review found that the Secretary of State’s Division of Audits did not take necessary steps to mitigate potential threats of an independent audit when issues became evident, the DOJ said. The report found that the office should have implemented safeguards – such as adding more reviewers to conduct the audit.
Amid ethical concerns surrounding the audit given Fagan’s consulting job, the DOJ found no evidence that she had undue influence on the audit. The report furthers that the independence of the OLCC audit team was not impaired, and the planning and reporting of the audit did not deviate from the Audit Division’s typical standards.
While the DOJ found Fagan had no undue influence over the audit, the DOJ recommends that given the threat of independence, current Secretary of State LaVonne Griffin-Valade should pull the audit from the agency’s publicly available website and to reassess its issuance.
During its review, the DOJ said they interviewed key staff members from the Secretary of State’s office, the OLCC, and Business Oregon. The agency also reviewed correspondence between Fagan’s office and stakeholders.
The DOJ noted they also reviewed the state’s annual audit plan, which prioritized the OLCC audit.
In response to the DOJ’s findings, current Secretary of State Valade agreed that the independence of the audit was compromised and said she will re-evaluate the evidence.
“The report reaffirms what we all know to be true: former Secretary Shemia Fagan’s actions compromised public trust in the audit. In auditing we call this a ‘threat to independence in appearance.’ As a result, the report concludes that auditors should have gone further to reduce that risk by pausing their work and seeking stronger evidence for their conclusions. I agree with the risk that the DOJ report identifies.”
She continued, “in response, I will personally oversee a reevaluation of the evidence presented in the OLCC audit. With 16 years of experience as a government auditor, including serving on the Association of Local Government Auditors’ peer review team, I am well equipped to ensure that every action is taken to restore the public trust in this report. Depending on the results of that examination, I may take additional action and will inform the public as appropriate.”
As the DOJ recommended the audit be taken down from the website, Valade’s office told KOIN 6 News that she will not be taking further action until she reviews the evidence.
In a statement, Gov. Kotek added, “Oregon’s public servants look to performance audits conducted by the Secretary of State’s Office to understand how best to do the people’s business. Audits ensure that public resources are being well managed and that our government is held accountable for providing the best possible customer service. I called for an independent, external review of the OLCC audit because Oregonians needed to have a fuller understanding of the troubling events that shook the public’s trust in that office. Secretary Griffin-Valade has years of experience as a widely respected auditor, and I expect that this report will inform her ongoing efforts to make certain that Oregon’s audits are objective, independent, and meet professional standards.”