DENVER (AP) – Colorado’s medical marijuana regulations are badly enforced and in need of dramatic overhaul, state auditors concluded in a blistering 89-page report released Tuesday.

The audit detailed a seemingly directionless pot regulation scheme that hasn’t delivered the kind of oversight promised three years ago when the Medical Marijuana Enforcement Division, or MMED, was created.

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Among the failures outlined in the report:

– Colorado’s vaunted seed-to-sale tracking of marijuana plants never materialized because the regulators ran out of money to implement it. The regulators envisioned a heavily regulated system to track medical marijuana from cultivation to packaging and sale. But after spending about $1.1 million on the system, including video surveillance, the division fell $400,000 short of implementing the system. The seed-to-sale model, auditors concluded, “does not currently exist.”

– Funding problems have led to painfully slow issuance of licenses. Final licensing decisions for Colorado’s 1,440 marijuana-related businesses took an average of 23 months. Of the original licenses submitted in the summer of 2010, 41 percent were still pending by October 2012.

– After an initial rush of money from marijuana licenses, more than $8 million in the first two months, the MMED has racked up 19 straight months of operational losses. Auditors said the division spent money too quickly, running into a deficit a year later in part because of “large capital purchases, such as furniture, computer equipment and software for a marijuana plant tracking system.”

– Some licenses were awarded improperly. Auditors checked 35 new business application files and found that 10 were issued licenses despite problems such as failing or incomplete background checks.

– Sales taxes were underreported. Auditors identified about $760,000 in underreported sales taxes from 56 dispensaries in fiscal years 2011 and 2012.

Overall, auditors concluded that the MMED “has not adequately defined the oversight activities it must perform or determined the resources it needs to implement the regulatory system envisioned” to “oversee Colorado’s emerging medical marijuana industry.”

Marijuana regulators conceded deep problems plaguing medical pot enforcement. They pointed out that Colorado was in uncharted waters when it set about regulating marijuana, still illegal under federal law, and that the agency has learned powerful lessons and is ready to do a better job regulating recreational pot.

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“We can’t move forward unless we have a baseline. We have a baseline now,” said Barbara Brohl, head of the Department of Revenue, which oversees the MMED. She assured lawmakers hearing the audit, “When we come back here in one year, this will be significantly different.”

Brohl pointed out significant staff turnover in the MMED, which has to lay off a majority of its staff because of budget shortfalls. Her argument got a sharp response from Sen. Lois Tochtrop, D-Thornton.

“It’s not an excuse,” Tochtrop said. “You have guidelines, by statute and by rule, and they should be followed.”

The marijuana enforcers disagreed with auditors’ suggestion to move away from seed-to-sale micro-tracking of every marijuana plant.

Ron Kammerzell, senior director of the MMED, told lawmakers that the agency believes the tracking is too important and shouldn’t be abandoned.

“It’s really a critical component” of overall marijuana regulation, he said.

The auditors plan to release a separate report in June on the Health Department, which issues “red cards” to medical marijuana patients and oversees the doctors who recommend pot.

LINK: Read The Audit

– By Kristen Wyatt, AP Writer

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