California’s $100 Million Cannabis Grant Left $35.7 Million Idle

California converted thousands of cannabis businesses off provisional licenses, then left at least $35.7 million of a $100 million grant unspent or disallowed. The Department of Cannabis Control still had four local closeouts open as of May 2026 and had not posted the public spending ledger it promised for winter 2026.

The Local Jurisdiction Assistance Grant Program was supposed to buy speed. What the third state audit found is a finished license cleanup sitting next to a pile of leftover cash.

More Than a Third of the Grant Never Got Spent

The Budget Act of 2021 set aside $100 million in local assistance grants so 17 cities and counties could help cannabis firms move from provisional state licenses to annual ones. Up to $5 million of that total was for DCC to run the program. The other $95 million was for the locals.

State Auditor Grant Parks told the governor and legislative leaders on November 20, 2025, that the 17 governments had at least $35.7 million unspent or disallowed. That is 38 percent of the $95 million the act sent their way. DCC’s own closeout sheets show they actually awarded $84,013,000, spent $59,323,000, and left $24,690,000 sitting on the awards they did send out. The gap between $95 million and $84,013,000 is money that never went out the door.

THE LEFTOVER PILE

• Appropriated to locals: $95 million under the 2021 Budget Act, on top of $5 million for DCC administration.
• Actually awarded: $84,013,000 across the 17 grant agreements, rounded to the nearest thousand.
• Spent by June 30, 2025: $59,323,000, which is the figure DCC was still verifying for 11 of the 17.
• Returned by that date: $4.1 million from the six governments whose books DCC had already closed.

Parks wrote that DCC and the 17 locals “largely achieved the program’s goal of transitioning businesses to annual licenses,” then added that it remains unclear how much of that work the grant itself bought. Adelanto and Commerce spent none of their actual awards and still moved firms through. Sacramento spent $691,000 of a $4,629,000 award and left $3,938,000 unused.

Seventeen Awards and a Pile of Unused Cash

DCC’s June 30, 2025 closeout table, rounded to the nearest thousand, is the cleanest picture of who drew down the money and who sent it back. Los Angeles nearly emptied its account. Several smaller cities barely touched theirs.

GRANT AWARDS, SPENDING, AND LEFTOVERS AS OF JUNE 30, 2025

The six finished closeouts as of that date were Adelanto, Commerce, Desert Hot Springs, Lake County, San Diego, and Santa Rosa. Those six produced the $4.1 million already back in the General Fund. Humboldt, Long Beach, Los Angeles, Mendocino, Monterey, Nevada, Oakland, Sacramento, San Francisco, Sonoma, and Trinity were still in process, so their spent columns were self-reported and subject to DCC’s allowability review.

Los Angeles had been appropriated $22.3 million in state law and took $17,850,000 in the actual award. Mendocino was appropriated about $18.1 million and signed for $17,586,000. The auditor’s table is the award that went onto the books, not the larger figure in the Budget Act.

Humboldt Paid Farms That Already Held Annual Licenses

Auditors pulled 20 Humboldt transactions and flagged 14 of them, totaling $628,000, as subgrants to cannabis businesses that already held annual state licenses. Those firms had been annual for more than a month to more than two years before the county money arrived. The grant’s stated purpose was to move provisional holders onto annual licenses, not to bankroll farms that had already made the jump.

Although the Grant Program’s purpose is to help businesses meet the requirements needed to attain annual state licensure, DCC approved Humboldt County’s use of Grant Program funds to provide subgrants to cannabis businesses that already held annual state licenses.

Grant Parks, California State Auditor, November 20, 2025 report letter

Humboldt used the money for water conservation and renewable energy work, which the county treated as environmental compliance. DCC signed off on a grant agreement that let both provisional and annual licensees apply. Parks wrote that this did not align with the program’s purpose and that he disagreed with DCC’s reading.

Humboldt County staff had already been told, in 2024, to stop releasing remaining funds to applicants who held annual licenses at the time they applied. Planning and Building Director John Ford told supervisors in June 2025 that 44 DCC grant awardees still owed Measure S cultivation taxes and that those accounts were suspended. Farms that are suspended are not cultivating, which means some of the water and energy money was tied to properties that were not in production while the clock on the grant ran down.

Oakland was the other of the three locals Parks’ team sampled for the 2025 report, alongside Los Angeles. The city made a $2,000 computer purchase that did not match its grant agreement. In the prior year’s sample, auditors had already tagged $35,000 of Oakland spending, including help with a website and rent, as unallowable because those bills were not required to convert a license. DCC had also denied some Oakland and Sonoma disbursement requests on the grounds that the spending sat outside the program.

An 80% Advance With No Measuring Stick

The leftover pile did not appear in 2025 out of nowhere. DCC sent 80% of awarded funds to the 17 governments in 2022, when the program started, and withheld the rest. Parks’ first full audit, Report 2023-048, issued August 29, 2024, found that DCC approved grant agreements without measurable benchmarks, advanced that 80% without verifying need, and failed to process amendment requests on time.

THREE AUDITS OF THE SAME $100 MILLION

1. July 2023: A management letter to DCC’s director warns that the department approved questionable spending plans, advanced funds to recipients who were not ready, and had not scrutinized grantee expenditures.
2. August 29, 2024: Report 2023-048 finds about 530 conversions in the first year, more than 4,600 provisional licenses still waiting as of January 1, 2023, $26,000 in costs two grantees could not substantiate, and $350,000 spent of DCC’s $5 million administrative pot.
3. February 20, 2025: Report 2024-048 finds about 1,200 conversions from January 1, 2023, through June 30, 2024, unallowable spending still on the books, and nine of 17 locals expecting to hit program goals without spending all of their awards.
4. November 20, 2025: Report 2025-048 records the conversion drop to fewer than 300 provisionals and the $35.7 million unspent or disallowed.
5. May 2026: DCC’s six-month response says it has recovered $13,105,397.54 from 13 jurisdictions, with four still under review and a December 31, 2026 internal deadline to close the rest.

The first audit also found that two grantees did not adequately track $729,000 in staff costs charged to the grant, and that average license processing ran longer than two years. DCC had not built the data to say whether delays sat with applicants, with cities and counties, or with its own queue. San Diego repaid $6,000 in misspent funds identified in that review. Commerce and Humboldt did not submit responses to the 2024 report.

DCC disagreed at the time with a recommendation to move its March 31, 2025 internal spending deadline to the June 30, 2025 date in state law, arguing a looser deadline would slow closeout. It later told the auditor that remaining participants did not need an extension. Grantees had to expend or encumber funds before June 30, 2025.

How Many Provisional Licenses Converted by 2026?

In the 17 grant cities and counties, provisional licenses fell from more than 4,600 in January 2023 to 294 as of June 30, 2025, which Parks described as fewer than 300. DCC’s director told auditors the department did not expect major barriers to finishing the remaining transitions by the statutory deadline, though some firms still faced local process, CEQA, or their own business choices. Four of five locals the auditors interviewed said they expected to finish transitions for businesses that kept participating by the end of 2025.

State law set January 1, 2026, as the last day for any provisional license to stay in effect, with a narrow exception for locally verified equity retailers, who can remain on a provisional path into 2031. DCC Director Clint Kellum and Deputy Director of Licensing Michael Cheng said in an April 6, 2026 joint statement that January 2026 closed the provisional program for everyone else.

“This is a huge moment in time and reflects real evidence of our market maturing,” Kellum and Cheng said. “We now have almost 8,000 annual licenses, representing thousands of businesses statewide, that have completed all licensing requirements and can fully access the administrative due process available through the Department of Cannabis Control (DCC).”

They said 6,419 provisional licenses had moved to annual licenses since DCC’s creation, including 977 equity retail licenses and 3,614 cultivation licenses. That statewide tally is larger than the 17-jurisdiction grant map, and it includes work DCC did as lead CEQA agency in Mendocino County. The auditor’s caution still sits on the grant slice of that story: the licenses moved, and the funding trail does not prove the $95 million is what moved them.

DCC Recovered $13.1 Million and Has Not Posted the Books

Closeout is where the irony turns into a balance sheet. As of January 2026, DCC said it had taken back $6,033,057.21 from nine locals and still had eight files open. By May 2026 it had recovered grant funds from 13 jurisdictions totaling $13,105,397.54, with four still under analysis. It set an internal deadline of December 31, 2026, to close the remaining agreements and said it would start publishing final awarded, used, disallowed, recaptured, and returned amounts in winter 2026.

As of May 2026 the auditor still scored that public-reporting recommendation as not fully implemented. DCC’s grants manager had already told auditors in October 2025 that he could not give a clear date for full recapture of disallowed spending, because each local’s mix of bills and eligibility fights was different. Controller records cited in the 2025 report say DCC should return the money to the General Fund by June 30, 2027.

WHAT WE KNOW

• The conversion: Provisional licenses in the 17 grant areas dropped to 294 by June 30, 2025, and DCC said the statewide provisional program closed in January 2026 except for equity retailers.
• The clawback: DCC had recovered $13,105,397.54 from 13 of 17 governments as of May 2026.
• The subgrant rule: DCC updated its Grant Administration Manual in April 2026 so future subgrants need an approved scope, budget, and deliverables, with advances limited to immediate cash need.

WHAT IS UNCONFIRMED

• The last four: DCC has not named the four jurisdictions still in expenditure review as of May 2026.
• The public ledger: Final awarded, spent, disallowed, and returned amounts had not been posted as of the May 2026 response, with a winter 2026 target still ahead.
• The Legislature: Parks asked lawmakers to have the Department of General Services, or another capable agency, publish statewide grant-administration guidance. As of January 19, 2026, the Legislature had taken no action on that recommendation.

The first audit warned that DCC could not measure whether the 17 governments were on track, because the agreements lacked clear goals. The third audit found the licenses mostly converted anyway, and that more than a third of the local money never got used. DCC is now taking the unused dollars back on a calendar that runs into 2027, while the public still does not have a jurisdiction-by-jurisdiction ledger of what was spent, what was rejected, and what went home.