A gaming machine operator has been ordered to turn off its pokies after an audit revealed it had not handed out enough of it profits to charity.

The Department of Internal Affairs has ordered Grassroots Trust, which operates in 21 pubs across the Bay of Plenty, Waikato and Auckland, to shut down its machines for 16 days after it failed to distribute more than half a million dollars to charity.

Internal Affairs gambling compliance director Debbie Despard said Grassroots was sanctioned for breaches from the financial year ending March 2010.

Those were failing to distribute a minimum of 37.12 per cent of gaming machine proceeds to "authorised purposes" - a shortfall of $561,482, and overpaying venue expenses by $79,359.

It is the harshest penalty ever placed on a gambling trust, but Internal Affairs said it could have been worse.

The Department initially decided to cancel Grassroots’ licence altogether in December 2011 after the compliance breaches were uncovered.

But Grassroots sought a judicial review in the High Court, which allowed the trust to carry on operating while it appealed the decision to the Gambling Commission.
 
In negotiations outside of court Grassroots agreed to adhere to higher standards of compliance expectations and giving more money to the community.

The trust has agreed to licence conditions that require it to distribute a minimum of 40 per cent of gaming machine profit to the community and to limit the expenses it pays to its venues in a year to 14.5 per cent of gross margin profit, rather than the statutory cap of 16 per cent.

Internal Affairs has agreed to withdraw it licence cancellation if Grassroots withdraws its High Court judicial review and appeal to the Gambling Commission.

Despard said the community would benefit because Grassroots now had to provide more funds for grant distribution.

She said venue operators should also be aware that under the Gambling Act", they could not receive any benefit from "class 4 operators", other than reimbursement that is actual, reasonable and necessary.

 "We are satisfied that Grassroots has taken an appropriate response to the compliance issues.  High expectations for the future have been set, and the trust has already shown signs of improving its performance. 

"The successful end to negotiations shows the Department is prepared to be flexible in order to maximise benefits for the community."

In its latest Annual Report, Grassroots has detailed each organisation which received funding from the trust in the 2011/12 financial year and how much they received, but no other financial information was provided.

A notification of suspension had been placed on the website along with a statement saying that In the year ending March 2012, Grassroots had retuned more than $6.2m to local communities and had "exceeded the minimum return to community by $648,000".

- © Fairfax NZ News