The Government has confirmed that the Palmerston North Maori women's refuge is under investigation for financial mismanagement, following revelations in Parliament that it suffered a $109,000 loss last year.

Associate Minister for Social Development Tariana Turia said the beleaguered Palmerston North Te Roopu Whakaruruhau o Nga Wahine, which had its funding frozen six months ago, had been mismanaged financially.

"I have been assured by the department that we are not dealing with an issue of fraud, however there are issues of mismanagement that are being addressed by the organisation in co-operation with the department," she said. "As soon as the ministry was made aware of these issues, funding was stopped."

An audit report tabled by NZ First leader Winston Peters in Parliament yesterday revealed the refuge had made unauthorised transactions, including payments of bonuses and annual leave above entitlement, and payments of personal costs such as fines. It had also been paying its GST in arrears after several years of non-payment, racking up bills of $75,000 in taxes to Inland Revenue.

Mr Peters slammed the Government for providing about $80,000 in Whanau Ora funding to the refuge, providing a report as proof that the Government had approved the grant. He said it should have seen the red flags and withheld funding.

"There is an audit report with the sub-heading of `fraud', and an email sent to the prime minister in February alerting him to the serious mismanagement at the refuge. Then there is the documentation that shows the refuge will receive funding until 2015. The damning paper trail is there for all to see."

Mrs Turia challenged claims that the money had come from the taxpayer-funded Whanau Ora.

Social Development Ministry family and community services head Murray Edridge said all funding for the refuge was halted when the national collective notified the ministry of the audit in December 2011.

Mr Edridge said the auditors did not conclude that any of the transactions were fraudulent, but encouraged action on the missing funds. One final payment of $54,000 was made in October last year from the ministry before concerns came to light, and the planned funding for the coming financial year that Mr Peters had highlighted had only been allocated "in principle".

Managers at Te Roopu Whakaruruhau o Nga Wahine refuge referred the Manawatu Standard to the Hamilton Maori women's refuge service for comment.

Hamilton manager Ruahine Albert said the political spat that had ensued since the issue came to light had nearly "toppled" the two women running the service without funding. "Those women have been looking after that refuge alone, and we are a little bit concerned about them," Ms Albert said. "I think it has been hyped up. I am aware that there has been accusations of [fraud] but I'm clear that it isn't fraud."

National Collective of Independent Women's Refuges chief executive Heather Henare said the collective was disappointed with the Government's handling of the issue.

"As part of our complaints process, we offered support and help to this organisation to address the auditor's report. However, this offer was rejected," she said.

"We reacted immediately. We instigated due process and ensured no funds under our control were released to this agency."

- © Fairfax NZ News