California’s Department of Cannabis Control (DCC) is facing scrutiny after a state audit revealed significant mismanagement of a $100 million grant program intended to streamline cannabis business licensing across 17 jurisdictions. Launched in 2021, the program aimed to assist cannabis companies in transitioning from temporary provisional licenses to permanent annual licenses. However, the process has proven complex and slow-moving, raising concerns about the program’s effectiveness.
The audit, conducted by State Auditor Grant Parks and released in August 2023, highlighted numerous deficiencies in the program’s oversight. By January 2023, nearly a year after the state disbursed the initial $100 million, many cities and counties had mismanaged the funds. This mismanagement potentially hindered thousands of cannabis businesses from obtaining their full annual licenses, a crucial step required by January 2026. According to the audit, only 535 businesses out of the thousands awaiting licensing had successfully secured their annual permits by 2022, despite the DCC distributing approximately $80 million to the participating jurisdictions.
The issue stems from the nature of provisional licenses, which were designed as a temporary solution to assist cannabis businesses in navigating California’s complex regulatory environment. However, the process has become cumbersome and inconsistent across different regions, with local governments having initial authority over permitting marijuana. The $100 million grant program was intended to alleviate these delays, but the audit shows that by January 2023, the program had made minimal progress. The audit found that if the current pace continues, “more than half of the provisional license holders in the grantees’ jurisdictions will still not have obtained an annual state license by 2026.”
The audit revealed several alarming issues, including the misuse of grant funds by some of the cities and counties involved. Four jurisdictions failed to track their use of the grant money, while others spent funds on unrelated expenditures. This misuse has raised concerns about the program’s ability to achieve its intended outcomes. The DCC may even demand the return of improperly used money.
Adding to the problem was the DCC’s own understaffing and inexperience in managing large grant programs. Initially, just two part-time staff members were responsible for overseeing the $100 million program. Although the DCC has since increased staff to four, the audit pointed out that the department’s lack of experience played a significant role in the program’s early failures.
In response to the audit’s findings, the DCC has acknowledged the concerns and stated that it has already begun addressing many of them. They have implemented changes including hiring dedicated grant management staff, consolidating licensing systems, and adopting best practices for administering similar grant programs.
While the audit paints a challenging picture, there has been progress. As of September 3, 2024, the DCC’s licensing database shows that the number of provisional licenses statewide has decreased to 2,594, with 6,201 full annual licenses now active, bringing the total number of active business permits to 8,800. Despite this progress, the DCC faces significant challenges in ensuring the success of the grant program and fulfilling its goals of streamlining cannabis business licensing in California.
