What the Pokie Grant Findings Mean for Funded Groups

On 11 September 2026 the Department of Internal Affairs released the findings of a multi-year investigation into class 4 gambling operators — the trusts that run pokie machines in pubs and clubs and distribute the proceeds as community grants. The department's director of gambling, Vicki Scott, told RNZ that up to $28 million which should have been available for community grants had instead been used to cover trust expenses, including buying gaming machines. About three-quarters of the country's 32 trusts were non-compliant to some degree, and roughly a third engaged in what she described as deliberate creative accounting.

The department has secured commitments to return $11.5 million to community organisations through grants, suspended one operator's licence for six days, and issued new financial guidance to the sector. Scott said she was hopeful around $20 million could eventually be recovered through repayment plans, and that the investigation was continuing.

For context, Scott put the annual flow of class 4 proceeds to communities at roughly $340 million. Sector representatives pushed back on the framing rather than the facts. Gaming Machine Association chair Peter Dengate Thrush noted the figure was spread across the ten-year period the department reviewed and represented a small proportion of total flow. Pub Charity chief executive Martin Cheer accepted some trusts may have misunderstood the rules but told RNZ that ignorance of the law was no excuse and that the trusts should have done better.

Why This Reaches Funded Organisations

Sports clubs, community halls, rescue services, arts organisations and youth groups across the country are funded in part by these grants. None of them did anything wrong here. But three consequences land on the recipient side regardless.

The first is funding volatility. Scott was explicit that trusts will have to tighten their belts over coming years to return money to communities. Repayment plans have to come from somewhere, and the operating costs of a gaming trust are relatively fixed. Organisations that budget on the assumption that last year's grant will roughly repeat should treat the next two funding rounds as genuinely uncertain.

The second is tighter administration. A regulator that has just published findings about accounting practices and issued new financial guidance will expect operators to demonstrate control over where grant money goes. That expectation flows downhill as more specific grant conditions, more detailed acquittal requirements, and more willingness to seek repayment where funds were applied outside the approved purpose.

The third is reputational. Public confidence in the funding model is now a live question. Hāpai Te Hauora's chief operating officer Jason Alexander said in a statement that giving back money that should never have been misspent is not a penalty but the bare minimum. Organisations that receive gaming grants and want to keep receiving them benefit from being visibly, demonstrably clean about how the money is applied.

Grant Conditions Are a Liability Exposure

Boards tend to treat grant conditions as administrative, and they are not. A grant made for a specific purpose creates an obligation to apply the funds to that purpose. Where the money is spent elsewhere — even for a defensible operational reason, even with good intentions — the funder can seek repayment, and depending on the structure the individuals who authorised the spending can be named in that recovery action.

This is more common than it sounds, and it usually has nothing to do with dishonesty. A grant is approved for a minivan; the vehicle purchase is delayed; the funds sit in the general account and get used for wages during a cashflow squeeze; the intention is to replace them. Six months later the money has not been replaced and the acquittal is due. Nobody stole anything, but the organisation has a repayment obligation it cannot meet and a board that authorised the transfer.

Three controls prevent almost all of this. Restricted grant funds should be tracked separately in the accounts and reported to the board as a distinct line, so the balance is visible every month rather than at year end. Any decision to apply restricted funds to another purpose should require explicit board approval and, where the grant conditions require it, funder consent in writing before the money moves. And the acquittal deadline for every grant should sit on the governance calendar alongside the annual return, not in one staff member's inbox.

Where Insurance Fits, and Where It Does Not

Two covers are relevant here and they are frequently confused.

Fidelity or crime cover responds where money is taken dishonestly — an employee or volunteer diverting funds, falsifying invoices, or manipulating records for personal gain. It reimburses the organisation for the stolen amount, subject to policy terms and proof. This matters in the grant context because organisations handling restricted funds often have thin segregation of duties, with one person raising invoices, approving payments and reconciling the account. Most fidelity policies require some level of internal control as a condition of cover, and a board that has never asked what those requirements are may find them unmet at claim time.

Trustee liability cover, by contrast, responds to claims made against individual board members for governance decisions — including a funder's action to recover misapplied funds, or a Charities Services investigation into how an organisation was run. It funds legal defence costs, which are usually the largest expense in any such matter, and can respond to damages awarded personally against a trustee.

The distinction is worth stating plainly. Fidelity cover addresses money taken dishonestly. Trustee liability addresses claims against the people who govern. Neither policy reimburses a grant that was spent on the wrong thing through ordinary administrative error, because that is not a loss caused by dishonesty and it is not a third-party claim. The only protection against that outcome is the control environment, which is precisely why funders are increasingly interested in it.

What Boards Should Do This Quarter

The immediate task is a stocktake. Identify every current grant, its approved purpose, its acquittal deadline, and the balance of funds still held against it. Reconcile that list to the bank position. Organisations that cannot complete this exercise from existing records have identified their first governance improvement.

The second task is a stress test on the budget. If gaming grant income fell by a quarter over the next two funding rounds, which activities stop, and which fixed costs — insurance, lease, audit, compliance — continue regardless? Answering that in September is considerably more comfortable than answering it in the week a grant application is declined.

The third task fits neatly with a deadline already in the diary. Registered charities must review their governance procedures before 5 October 2026 and at least every three years thereafter under the Charities Amendment Act 2023. Financial delegations, restricted fund handling, grant acquittal responsibility and insurance adequacy all sit within scope of that review. Organisations doing the work anyway should use it to cover the ground this investigation has just made topical.

Getting the Cover Right

Fidelity limits are frequently set at a level chosen years ago and never revisited, and the internal control conditions attached to them are rarely read until a claim is made. charityinsurance.co.nz connects community organisations with Registered Financial Service Providers who place fidelity and trustee liability cover for grant-funded groups and can tell you what your policy actually requires of you. Get a Quote and a specialist will be in touch within one business day.

Sources: Department of Internal Affairs class 4 gambling investigation findings, 11 September 2026; RNZ interview with DIA director of gambling Vicki Scott; Hāpai Te Hauora statement, September 2026; Charities Amendment Act 2023.