What does cost recovery mean for handovers?

The Consumer Cannabis Act (Konsumcannabisgesetz, KCanG) does not define cost recovery as a term. Its express cost rule is § 25 KCanG: a cultivation association that passes on propagation material to other cultivation associations or to certain non-members must demand reimbursement of the costs incurred in obtaining that material. This is the core point every association should keep in view before it passes on seeds or cuttings.

What § 25 KCanG regulates

The provision is short. For the handover of propagation material to other cultivation associations under § 20 para. 1 sentence 1 no. 3 KCanG, or to the persons named in § 20 para. 1 sentence 1 no. 2 KCanG, cultivation associations must demand reimbursement of the costs from the respective recipient. What is meant are the costs incurred in obtaining the propagation material that is passed on.

No. 2 of § 20 para. 1 concerns non-members who have turned 18 and have a residence or habitual abode in Germany. No. 3 concerns other cultivation associations. The association should therefore check, at every handover, to whom it is passing material on and which case applies.

How cost coverage fits the non-commercial purpose

Reimbursement of costs is a different thing from a price with a margin. The principle fits the legal form. Under § 1 no. 13 KCanG, cultivation associations are registered non-commercial associations or registered cooperatives. Their purpose must consist exclusively of shared non-commercial home cultivation, passing on to members, passing on of propagation material and information on addiction prevention (§ 1 no. 13 KCanG). If this is missing from the articles, the permit must be refused (§ 12 para. 1 no. 5 KCanG). For cooperatives, the articles must also provide that profit is allocated to reserves and not distributed to members (§ 12 para. 1 no. 5 letter e KCanG).

Contributions come into play as well. If they are associations, cultivation associations must set their membership contributions and, if they are cooperatives, the ongoing contributions of their members in the articles, for fulfilling the exclusive purpose named in § 1 no. 13 (§ 24 KCanG). Contributions are therefore a matter for the articles of association, not for the individual handover of cannabis.

The difference from contributions and prices

A common confusion arises here. Membership contributions are the consideration for membership, and the articles of association govern them. Cost recovery concerns the handover of propagation material to certain recipients. Both should be recorded separately, so that it stays traceable what was paid for what.

This article does not name concrete amounts. Anyone who wants to know which costs to apply calculates them from the actual expenses and agrees the method with the responsible authority. Prices on a website are sensitive in this context, because advertising is prohibited under § 6 KCanG.

What costs can be

Obtaining propagation material causes effort. § 25 KCanG does not list which cost items count. Candidates are material, energy and care of the plants. Whether members' time and administration belong in the calculation is open and should be clarified with the authority. A clean cost calculation separates what serves directly to obtain the material from what concerns the association in general. Whether and how members' own contributions in kind are included should be settled by the association in its articles or in its concept.

And for the cannabis itself?

§ 25 KCanG concerns only propagation material. For the handover of cannabis to members, § 24 merely states that the contributions are set in the articles and serve the exclusive purpose. Neither § 24 nor § 25 contains a separate price or cost formula for cannabis. How an association shapes its contributions therefore belongs in its articles and, where in doubt, in consultation with the responsible authority.

Typical mistakes

• Profit margin: A charge above the actual costs does not match the cost reimbursement that § 25 KCanG provides for.
• Mixing: Anyone who books membership contributions and reimbursement for propagation material as one sum loses track.
• Wrong recipient group: The reimbursement rule refers to certain recipients. Anyone who does not check these groups may treat the case incorrectly.
• No receipts: Without a traceable cost statement, the reimbursement cannot be justified.

Documenting costs

Anyone who receives reimbursement of costs should be able to document them. This includes invoices for material and consumables, costs of energy and water insofar as they can be attributed to cultivation, and a record of working hours if the association counts them. Which items the association takes into account should be justified in writing and, in case of doubt, agreed with the authority.

The receipts should be sorted by recipient and date. In this way they fit the documentation under § 26 KCanG, which must in any case be kept on an ongoing basis. A receipt that shows only a total, without any link to the handover, is of little help in an inspection.

Separating reimbursement and contributions

Reimbursement under § 25 KCanG concerns handovers to certain recipients. Membership contributions follow the articles of association and serve the exclusive purpose of the association (§ 24 KCanG). Mixing the two leads to unclear bookings and to questions during an inspection. The association should therefore keep two separate accounts or two separate bookkeeping areas, if that is practical for it.

What you can do now

1. Check whether the articles name the exclusive purpose under § 1 no. 13 KCanG and regulate contributions under § 24 KCanG.
2. Decide which costs belong to obtaining propagation material, and document them.
3. Separate membership contributions and reimbursements in the bookkeeping.
4. Clarify with the authority how you determine costs before making the first handover.
5. Pass on propagation material only to recipients who meet § 20 para. 1 KCanG.

The rules on passing on seeds and cuttings are explained in May clubs pass on seeds and cuttings? For the bookkeeping of a club, read How is a club's bookkeeping kept?