A Hawke's Bay gambling organisation has been caught out supplying almost $1 million in grants that should not have been given, and making no attempt to recover the funds.

The Infinity Foundation had to suspend operation of its pokie machines for three days after an investigation by Internal Affairs found 15 legislative breaches in the 2008-09 year. The breaches relate to grants totalling $960,000.

The audit report, completed last year, was released this week.

Infinity was formed in 2006 and operated pokies in 26 venues around the North Island, including 11 in Hawke's Bay and six in Wellington. In the year to July 31, 2008, the pokies made a profit of $17.7 million, with $7.3m distributed in grants.

Several of the grants, totalling about $40,000, went to the NZ Liquor Industry Golf Association and the North Island Liquor Industry Golf Association for tournaments and apparel.

The tournaments were not open to the public at large, and should not have been granted funds.

The Hawke's Bay Wine Country Tourism Association was given a grant of $10,000 in 2008 for an advertising campaign that was commercial and should not have been eligible for funding.

The law bars pokie grants going towards "the promotion of tourism, except where what is being promoted is a public amenity such as a park or museum", and "trade tournaments or sporting events staged primarily for publicity and/or benefit of a selected industry group".

Infinity made 15 individual grants totalling $602,500 to harness racing organisations. The audit found the grants covered the costs of race stakes and enabled trotting and harness clubs to invest in a finance company, when any profit made should have been going back to the racing industry.

The audit concluded that, even when issues were identified and raised with Infinity, it chose to take no action against the grant recipients to recover funding that was inappropriately spent.

"The audit conclusion is that it is likely that a group of people have had instances of inappropriate influence over IFL and the grant funding process," it said.

The trust reached an agreement to suspend its operations for three days. A spokesman said the suspension had already been carried out.

Infinity general manager Gillian Wells and chairman Blair Furlong could not be reached for comment.

- © Fairfax NZ News