Whanau Ora Minister Tariana Turia says the incident in which a gang member misused $20,000 of funding from her flagship scheme to buy cannabis is an isolated one.
Korrey Teeati Cook was last week jailed for four years on charges of dishonesty and supplying cannabis.
The 36-year-old Dunedin Notorious Mongrel Mob member was recorded by police telling associates the chapter was a model for other branches to get Whanau Ora funding which it used to run the We Against Violence Trust.
Mrs Turia yesterday fronted media about Cook's imprisonment, after saying in May that there was no evidence gang members misused Whanau Ora funding.
She said Cook's was a a very isolated case. "We have not had people taking money and utilising it for the wrong reasons."
Cook's trust had been caught because it had not taken money out for wages, instead transferring a lump sum to a private account to buy cannabis.
"Had they utilised the funding to pay wages to themselves, then there would have been no issue in terms of the use of the money."
The trust had achieved four of the five goals it was working towards, Mrs Turia said.
She defended the accountability of the scheme, saying there were "good processes" to pick up any misuse.
The $34 million-a-year scheme, described as supporting Maori families to achieve their maximum health and wellbeing, has been criticised as being difficult to define.
Its Whanau Integration, Innovation and Engagement Fund hit the headlines this year for funding family reunions and a rugby club.
A review in September found the fund was not ready to be properly evaluated as its processes were "still evolving".
Whanau Ora governance group chairman Sir Mason Durie said there were "one or two incidents" where more clarification on what was a good outcome was needed.
"Knowing about outcomes, particularly in the social area, is new territory. So we are really struggling a little bit in territory which is yet to be fully defined."
Mrs Turia said there were some "incredible stories" about Whanau Ora's success and the media could be "more balanced" in its reporting.
However, the families involved did not want their experiences made public.
Sir Mason said one school was providing a Whanau Ora approach to its educational programme but he could not name the school.
NZ First leader Winston Peters, who labelled Whanau Ora a "bro-ocracy", accused Mrs Turia of "waffling about inanities" when the scheme was "seriously flawed".
- © Fairfax NZ News
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