For many Michigan attorneys and CPAs advising cannabis businesses, the Annual Financial Statement (AFS) Cursory Review Process is an unfamiliar regulatory hurdle. Unlike the Comprehensive Review, which is outlined in the only publicly available bulletin on the topic, the Cursory Review is an internally developed process that systematically reviews financial reports for perceived incompleteness rather than making substantive determinations about compliance.

While designed to assess whether licensees meet basic financial reporting requirements, it can, in practice, create instances of non-compliance. Practitioners often assume that flagged deficiencies are simple clarification requests. However, even minor issues — whether valid or not — can lead to regulatory scrutiny and penalties.

Understanding the AFS Cursory Review Process

The AFS Cursory Review is a preliminary, systematic review of a licensee’s financial statement that focuses on the appearance of incompleteness rather than substantive financial accuracy. Unlike the well-anticipated Comprehensive Review, which involves a deeper financial examination, the cursory review primarily checks:

  • Whether required sections are completed.
  • Whether responses are satisfactory (even if the report is ultimately timely and compliant).
  • Whether any perceived deficiencies exist — regardless of their materiality.

Although it is not intended to make judgment calls, in practice, the Cursory Review may result in requests for clarification and create findings of non-compliance, even if the report is later deemed acceptable.

A crucial aspect of this process is that different analysts may review the original submission and any resubmissions. This means that one analyst’s interpretation of a perceived deficiency may differ from another’s, leading to inconsistent determinations.

Key Procedural Considerations

The Review Can Result in Requests for Clarification — Even If Your Report Is Timely

  • The Cursory Review comes before the deeper Comprehensive Review, but it can still trigger clarification requests.
  • Even if the licensee submits a timely and complete report, it may still be marked as non-compliant due to formatting, perceived missing information, or subjective determinations.

Response Timeframe: Be Aware of the Seven-Day Rule

  • The AFS Cursory Review Checklist, used by the CRA in 2023 and 2024, included a seven-calendar-day window for responses.
  • Recent testimony from the CRA suggests that this period may be interpreted as seven business days, but this has not been definitively confirmed in writing.
  • There is no set timeline for the CRA to respond to licensees — meaning the agency can take an indefinite amount of time before issuing a determination.

Common Issues That Result in a “Not Accepted” Determination

  • Signature Visibility Issues: The CRA may not see electronic signatures when converting documents to PDF, leading to a rejection even if the document was properly signed.
  • Unclear Formatting Requirements:
    • Licensees must list all licenses held during the reporting period, except closed licenses.
    • It is unclear how licenses acquired after the reporting period but before the report’s due date should be treated.
    • The CRA currently takes no formal position on this issue, leading to inconsistent handling.

Best Practices to Avoid Cursory Review Pitfalls

Verify Submission and Confirm CRA Acknowledgment

  • After submitting the AFS, immediately notify the CRA that the report has been filed.
  • Explicitly reference the seven-day rule in your communication.
  • It may be beneficial for practitioners to make daily follow-up calls or emails to document submission timelines and protect against delays in review beyond the response window.
  • Since there is no mandated response timeframe for the CRA, delayed responses can negatively impact the licensee—even if the issue was created by the review process itself.

Maintain Complete Documentation

  • Keep copies of the submitted AFS, all supporting documentation, and all CRA communications.
  • If issues arise, having a comprehensive record of your submission and communications will help demonstrate compliance efforts.

Address Technical and Formatting Concerns Before Submission

  • Ensure that all required signatures are properly applied and visible in all document formats.
  • Confirm document accessibility — check how the file appears when saved in different formats (PDF, Excel, etc.) to ensure the CRA can access all necessary sections.

Seek Clarification on Unclear Reporting Instructions

  • If guidance is ambiguous, ask the CRA for clarification before submitting the report.
  • If uncertain, include a brief explanatory note outlining any assumptions made in reporting to preempt potential compliance concerns.

Over-Report to Reduce the Risk of Perceived Deficiencies

  • Err on the side of providing too much detail rather than too little.
  • If a requirement is vague, include supporting documentation and explanations to prevent misinterpretation by the CRA.
  • Example: If unsure whether a newly acquired license should be reported, list it and provide a note explaining the timing.

Your Next Steps for Compliance Success

For many Michigan licensees, the AFS Cursory Review Process is an unexpected regulatory hurdle that can manufacture instances of non-compliance rather than simply identifying actual deficiencies. While intended as a procedural check, its evolving nature and potential inconsistencies mean that even a timely, compliant report can be flagged for clarification or revision. For Michigan attorneys and CPAs advising cannabis businesses, understanding the nuances of the AFS Cursory Review is essential for protecting clients and ensuring compliance with evolving regulatory expectations.

If you, your business, or your clients are facing regulatory scrutiny due to the AFS Cursory Review process, the team at Omnus Law is ready to represent you in administrative hearings and compliance matters. Our experienced attorneys understand the complexities of the process and will work to ensure that your business remains compliant while minimizing unnecessary penalties.

Don’t let regulatory uncertainties put your business at risk. Contact Omnus Law today for guidance on protecting your license and ensuring compliance.