Grand Jury Calls Humboldt’s Cannabis Program “a Growing Concern”

The Humboldt County Civil Grand Jury has recommended a series of changes to the county’s Cannabis Planning program to make government interactions with the industry more transparent and efficient.

Four years after California first legalized recreational cannabis, in-depth reporting of revenues and expenditures is insufficient, the Grand Jury said in its report, titled “A Growing Concern.” This means the public can’t properly gauge the effectiveness and efficiency of the program.

The accounting of the Trust Fund is not transparent. Concern remains that, once that account is exhausted, additional costs may be incurred in the course of the Cannabis Planning Division’s operations. Those overages would need to be paid for through the General Fund. Having an industry that costs a local government more money to regulate than it generates in revenues would be disastrous in the wealthiest of counties. Humboldt County is one of the poorest.

In addition, the Code Enforcement division incurs substantial costs arising from enforcing cannabis abatements. Fines and penalties on the cannabis Industry generate revenue, but these are not accounted for separately, they are deposited directly to the General Fund. The Civil Grand Jury understands this is due to concerns over potential incentive for regulators to assess excessive fines in order to better fund their department.

There is a notable lack of detailed reporting of revenues and expenditures that would accurately show the citizens of Humboldt County the effectiveness and the operational and fiscal efficiency of the Cannabis Planning program. Obtaining a simple accounting document from the Planning and Building Department proved very frustrating despite several direct requests by the Civil Grand Jury. Given the huge amounts of cash moving through its office and its substantial annual budget, the Planning and Building Department’s accounting system appears problematic. The coordination of financial records between the Planning and Building Department and the Auditor-Controller's office is not sufficient to the task (e.g., cash receipts and documentation). In addition, the appearance of the potential for bribery, fraud, and other financial malfeasance warrant adequate scrutiny.

The industry’s heavy reliance on cash makes a transparent system all the more important. Currently, the Planning and Building Department is open to accusations of fraud. The Grand Jury also said the permitting process is too cumbersome, “defeating the purpose of legalization,” and that permit applicants are disadvantaged by a website that is difficult to navigate.

The Grand Jury recommended overhauling the website. It also recommended an audit of the Planning and Building Department. The agency should hire a new accountant, and cash payments to the Humboldt County Planning and Building Department should be remitted through the Treasurer-Tax Collector’s office.

The North Coast Journal has a copy of the report here


Comments

Finance

Monday, July 27, 2020 - 15:51

COVID-19 has made it difficult to estimate even the near-term revenue shortfalls for your jurisdiction, but there are opportunities to identify specific revenue streams that will help offset the de