New Zealand’s Department of Internal Affairs has secured commitments to return NZ$11.5 million to community organisations following a wide-ranging review that identified accounting and compliance problems across the country’s Class 4 gambling sector.
The investigation examined how operators commonly known as pokie trusts accounted for and distributed money generated through gaming machines. Officials found cases where funds that should have been available for community grants were instead used to meet society expenses, including the purchase of gaming machines.
The wider amount requiring scrutiny could reach NZ$28 million. Around three-quarters of the 32 trusts examined failed to comply with the rules to some degree, according to Vicki Scott, Director of Gambling at the Department of Internal Affairs. She said the regulator had been investigating the sector for two to three years.
More than NZ$1 billion is generated by pokie machines in New Zealand each year. Under the Gambling Act, the regulator oversees how proceeds are handled and works to ensure communities receive the funding intended for them.
Trusts Work to Address Historical Spending Issues
Pub Charity chief executive Martin Cheer said misunderstandings over regulatory requirements may have contributed to some of the problems identified during the review. He also acknowledged that trusts remained responsible for meeting their obligations.
“There’s an element of hand in glove really; the industry is regulated and we need guidance from the regulator.”
“But also these are sovereign entities with governance structures and management. They should have done better.”
The sector has started working through the historical issues, with NZ$11.5 million secured for return through community grants so far. Officials continue to work with other operators, meaning additional funding could still be recovered.
Scott said some organisations had spent beyond their means and placed their own expansion ahead of the amount available for community purposes.
“We’ve been investigating for two to three years now.
“Many were essentially prioritising their own growth and their own competitive advantage over the interests of the community.
“They were spending beyond their means on things like gaming machines.”
The Department believes around NZ$20 million of the money identified during the review could ultimately be recovered. Officials have agreed repayment plans with some trusts as the process continues.
“Our role isn’t to put a significant section of the industry out of business but we are really firm that the money needs to be back in the community’s hands in a reasonable period of time.”
Regulator Suspends One Foundation Licence
The investigation has also resulted in formal enforcement action against One Foundation, a Class 4 gambling society established to distribute grant funding generated from licensed gaming machines.
The Department imposed a six-day suspension on One Foundation’s operator licence after finding accounting failures involving gambling proceeds. The regulator also found that the organisation failed to surrender a licence for one of its pokie venues when required by law.
Gaming Machine Association chair Peter Dengate Thrush said the NZ$28 million figure covered a long period and should be considered in the context of the overall amount passing through the sector.
“If the total figure that the department is now saying needs accounting for is $28m, while that’s a lot of money, spread out over the 10 years that the department has now gone back … it’s only a very small proportion of the total flow.”
Dengate Thrush said most trusts attempted to follow the rules, worked with officials and operated transparently. However, he supported consequences where organisations had deliberately breached requirements.
“There will be some societies who are in deep trouble, for which this is not just an accounting readjustment.
“The department occasionally finds some people breaking the law. If there are any at that end of the scale, then they should be prosecuted.”
New Financial Guidance Issued for Pokie Operators
Alongside the recovery work and enforcement action, the Department has released new financial guidance for Class 4 operators. The material sets out accounting requirements and uses practical examples to explain how gambling societies should meet their obligations.
The regulator said the guidance aims to create greater consistency across the sector and reduce the risk of similar accounting problems occurring again.
“This work has focused on ensuring gambling proceeds are used in the way Parliament intended and that communities receive the benefit they are entitled to.
“The investigation has produced significant results. We’ve secured commitments that will return $11.5 million to community organisations, taken enforcement action where it was needed, and provided operators with clearer guidance about their obligations.
“Most operators have worked constructively with us to address historical issues and improve their practices.
“While we’ve made substantial progress, our work is not finished. We’ll continue working with operators to recover funding for communities, improve compliance and maintain public confidence in the integrity of class 4 gambling.”
The investigation remains active as officials continue working with operators over historical accounting issues and the return of gambling proceeds to community organisations.