Cannabis Business Licensing

CALIFORNIA STATE AUDITOR 9 August 2024 | Report 2023-048 Table 1 DCC Did Not Follow Certain Grant Management Best Practices IMPLEMENTED WHAT DCC BEST PRACTICE WHAT DCC DID EFFECT BY DCC? COULD HAVE DONE Announce funding Posted information about the availability of funds and Grantees were alerted to their eligibility to opportunities provided guidelines and instructions for applying for them. apply for the grant funds and how to do so. publicly and describe application requirements. Provide recipients Provide specific criteria that Did not require grantees to Of the 51 grantee‑established goals, there with clear it could use to determine establish timelines for the were only 13 instances in which grantees performance goals, whether the grantee has action items associated with identified a timeline for completing one indicators, targets, made measurable progress, their goals. or more of the associated action items.* and baseline data. such as by creating target Consequently, DCC cannot determine dates for certain percentages whether grantees’ progress is appropriate or of provisional licenses to be aligns with their plans. Such determinations transitioned or by requiring will be necessary for DCC’s decisions about grantees to provide metrics when and how to allocate remaining funds, for each of the goals they whether grantees should revise their use of established, such as timelines funds, or whether DCC needs to recapture for completing environmental any funds from the grantees. compliance‑related reviews. Did not initially define the Without clear performance metrics, it may criteria it would use to have been challenging for grantees to determine whether grantees effectively plan for their use of funds or take would receive the remaining corrective actions. 20 percent of the funds. Evaluate applicants’ Review recent audited Did not perform risk Two grantees received adverse opinions on financial stability, financial statements and assessments or determine portions of their recent financial statements, management internal control reports for whether grantees had and there were material weaknesses systems, and relevant findings and provide sufficient internal controls in identified in their internal control reports. standards. technical assistance and site place to properly account for An adverse opinion indicates that an entity’s visits for those identified to the grant funds. financial statements do not fairly present its be at higher risk of financial financial position, and material weaknesses in mismanagement. internal controls may indicate an increased risk of noncompliance with grant terms. Limit advance Disburse funds on a Disbursed 80 percent of Most grantees reported that they spent payments to the reimbursement basis or funds immediately without little to no funds in the program’s first minimum amounts determine the amounts verifying recipients’ year, and several are not earning interest needed and time recipients need immediately immediate need for funds on the unspent funds in their accounts. In those payments and limit disbursements to or the minimum amounts addition, one grantee conveyed that the to the actual, those amounts. needed. grants it received in the past were paid on a immediate cash reimbursement basis, and the way that Grant requirements. Program funds were distributed caused problems because its systems and processes were not set up to process grants in this way. Maintain a process Request accounting records Did not request any DCC did not identify problems with grantees’ to ensure that costs to verify the expenditures supporting documentation expenditures that our review identified, charged to grants reported by grantees in their for the expenditures including two grantees that were not are allowable, biannual reports and confirm reported by grantees tracking staff time dedicated to the Grant necessary, and selected expenditures by and relied solely on the Program, one grantee that spent funds on reasonable. reviewing invoices, staff information in the biannual items unrelated to the Grant Program, and timekeeping reports, and reports, some of which was one grantee that may have used the grant other documentation. inconsistent and inaccurate. funds to supplant other funds. Source: State law; the Code of Federal Regulations, Title 2, Part 200; GFOA’s best practices for grants administration; grant agreements; interviews with DCC staff; the Public Company Accounting Oversight Board’s auditing standards; and auditor analysis. * Four grantees did not complete the “Goals” section of their grant applications and only completed the “Action Items” section. We considered those grantees to have established only one goal, but we did not consider these action items to be individual goals.