The state board may review, as it deems necessary, the programs and expenditures by each district receiving a subvention under this chapter to ascertain that the funds budgeted from nonstate sources are in fact being expended substantially in accordance with the budget on which the subvention was based. Where the state board finds that the funds are not being so expended, the state board may, after a public hearing held pursuant to Section 39806.5 do any of the following:
(a) Cease any further payments under the subvention.
(b) Withhold future subventions.
(c) Bring an action against the district, or the counties or cities supporting the district, to recover the subvention paid that fiscal year.
(d) Assume the powers of the district after it has held a public hearing upon a 45-day written notice given to the basinwide air pollution control council, if there is such a council, and to the affected districts.