KPMG contract allowed recent college graduates to score Illinois dispensary applications

KPMG offices in London. (Flickr/Gideon Benari)

Illinois cannabis regulators promised to pay accounting firm KPMG $2,500 per application reviewed and stipulated that cannabis dispensary application evaluators only needed a bachelor’s degree, according to contract documents provided to Grown In through a Freedom of Information Act request. 

[Download the KPMG-IDFPR contract.]

Executed on February 14, 2020, the contract between the Illinois Department of Financial and Professional Regulation (IDFPR) and KPMG originally estimated only 3,000 applications would be submitted, with two-thirds of those as social equity applicants. Instead, there were 4,518 applications from 937 entities, which quickly blew through the $2.5 million originally budgeted for the contract. So far Illinois has paid over $4.2 million for the contract, with more likely to come since the state recently admitted plans to continue using KPMG for application rescoring.

The contract also stipulates “Qualified evaluator(s) for each of the [application] sections”, with each section requiring specific backgrounds or a “Bachelor’s degree”, essentially permitting KPMG to hire recent college graduates to score applications. For instance, the “Social Equity Applicant Status” section calls for “Bachelor’s degree or 2 years of professional experience in corporate forensics, background research, investigations, or comparable field.”

In comparison, Missouri, which also recently conducted a scoring system for cannabis licenses, required its grading contractor to hire more highly qualified scorers, reporting that, “many scorers had higher education degrees including masters, JDs, and PhDs.” 

Problems with Illinois’ social equity status scoring, as well as for veteran status, for which evaluators had the same requirements, are the focus of two pending lawsuits in Illinois courts with litigants claiming KPMG had a faulty scoring system.

“That is alarming. I’m not surprised they didn’t have people that were actually qualified. You could tell. They are not known for grading or reviewing these types of applications,” said Belicia Royter of S.E.E.N., an organization of Illinois cannabis social equity applicants.

The contract stipulates that KPMG would, “Develop and provide written information and training materials to evaluators prior to beginning any evaluation of applications.” It also promises that KPMG would designate a technical consultant, who would, “provide technical and subject matter expertise to ensure quality control on grading, including expertise on social equity scoring.” Grown In has requested documents detailing those aspects from the state.

According to the statement of work accompanying the contract, while the KPMG partner who signed the contract was based in New York City, a separate set of KPMG staff based in Tallahassee, Florida were designated to manage the work. 

The contract also included specific guidelines for dealing with conflicts, a problem that cropped up with one application group that advanced to the tie breaking lottery, EHR Holdings LLC, which is partially owned by KPMG employee Hamd Kamal

The contract calls for a “Conflicts Management Plan”, which requires KPMG to “perform a conflict check”, “disclose the nature of the relationship”, then “record all of the entities identified by the Scoring Team members” in a spreadsheet to be provided to IDFPR staff. 

It is not clear whether or not KPMG actually provided that document to the state or if Kamal was listed as a potential conflict.

Ultimately however, conflicted entities would not be disqualified, according to the KPMG plan approved by IDFPR, they would instead be reviewed by an approved subcontractor, Indelible Solutions, LLLP, based in Jacksonville, Florida, and paid $700,000 by KPMG as an approved subcontractor for, “Support with application grading.”