Navigating AFS Reporting for Cannabis Businesses
In the Spring 2025 issue of MICIA magazine, Michael Rolka, CPA, CGFM, Principal at Yeo & Yeo CPAs & Advisors, is featured in the “Ask the Professionals” section. His insights into Annual Financial Statement (AFS) preparation for cannabis businesses highlight the importance of compliance and strategic financial management. Below are key points from his interview:
5 Questions with Michael Rolka, CPA, CGFM
1. How do cannabis businesses determine if they must submit an AFS report?
Cannabis businesses can verify their next AFS due date through the Accela Citizens Access Portal (ACA). The Cannabis Regulatory Agency (CRA) sends email reminders from CRA-AFS@michigan.gov six months before the report is due, specifying the due date, reporting period, and licenses to be included. Generally, medical marijuana and adult-use licensees must file a financial statement every three years, or a shorter time-period as determined by the CRA.
2. What are the key requirements for preparing an AFS report, and how can Yeo & Yeo help?
The AFS report must be conducted by an independent CPA licensed in Michigan, performed according to attestation engagement standards, and submitted as an Excel document using the official CRA form. The CPA and CPA firm must be actively licensed and registered in Peer Review before completing the AFS Report. Yeo & Yeo meets all CRA requirements for performing AFS reports, making them an ideal partner for navigating the complexities of AFS reporting and ensuring full compliance.
3. What are the penalties for non-compliance with AFS reporting requirements?
The CRA Disciplinary Guidelines (updated August 2, 2024) outline a $10,000 penalty for violations under rules 20 and 27701 concerning the failure to transmit financial statements to the agency. However, the guidelines emphasize that the CRA makes each determination on a case-by-case basis and that the final resolution “may deviate from that referenced in the guidelines,” potentially involving measures beyond fines such as “the suspension, revocation, restriction, or refusal to renew a license; and/or other terms to address the violation.”
4. How can a well-prepared AFS report benefit my business beyond CRA compliance?
A well-prepared AFS offers benefits beyond compliance. It may give the company confidence that its recordkeeping and policies are appropriate. This information serves as a foundation for strategic planning, allowing you to identify areas for cost reduction, revenue growth opportunities, and operational efficiencies. Alternatively, the process of preparing for an AFS can also uncover operational inefficiencies, leading to better overall business management. This can help reduce the risk of fraud and identify potential financial irregularities early on.
5. How can I get additional value from my required AFS report by leveraging it for investor and lender relations?
A comprehensive AFS report, while required for compliance, can be a powerful tool for enhancing investor and lender relations. By sharing this detailed financial statement, you demonstrate transparency and professionalism, which are crucial when seeking investment or loans. The AFS provides potential investors or lenders with a clear, CRA-compliant picture of your business’s financial position, potentially improving your access to capital. You can use the AFS report to showcase your commitment to regulatory compliance and financial best practices, building trust with stakeholders. During negotiations with potential investors or lenders, you can reference specific data points from your AFS report to support your business case, growth projections, and financial stability. This can strengthen your position and potentially lead to more favorable terms or increased funding opportunities.
At Yeo & Yeo, we pride ourselves on being more than just accountants; we are our clients’ partners in success. We build customized, right-sized relationships that help our cannabis clients remain compliant, organized, and growing. Whether your goals involve vertical integration, preparing for mergers and acquisitions, adding licenses, or opening a new location, Yeo & Yeo ensures you have the information to make data-driven decisions.
If you need assistance with AFS reporting, strategic planning, or accessing capital, Yeo & Yeo’s team is dedicated to helping you succeed. Contact us to meet with one of our experienced cannabis advisors. Yeo & Yeo is here to support you every step of the way.