A charity that supports his father has been investigated for “gross mismanagement” after he illegally loaned tens of thousands of dollars to a former trustee and failed to disclose the arrangement.
The Kidz Need Dadz website says it provides education and support to help fathers become active participants in their children’s lives.
The Charity Service launched an investigation into Wellington’s Charitable Trust after receiving a conflict of interest complaint regarding a loan in 2020 and this year found evidence of gross misconduct and illegal use of funds.
Investigator Blair Wootton sent a warning notice to Kidz Need Dadz Charitable Trust Wellington in August.
He demanded that the Wellington Trust repay the balance in full and terminate the loan by the end of October. This deadline was met and the loan repaid.
Since 2017, the Wellington Trust has lent about $40,000 to businesses owned by former trustees at below-market rates, Wootton said.
“Lending money to related parties at below-market interest rates has led to the creation and receipt of financial private gains from the use of trust funds,” he said.
“The Charitable Service believes this is an illegal use of the Trust’s funds.”
The study found that former trustees benefited from related-party loans by avoiding bank charges, lower interest rates, and the ability to repay and withdraw as needed, such as revolving lines of credit with favorable interest rates. It turns out that there is
Wellington Kidz Need Dadz’s own rules stipulate that their income and property cannot be used “for personal private financial gain.”
Mr Wootton said the loan constituted a private interest in these individuals and constituted a serious misconduct as defined in the Charities Act 2005.
He said the Wellington Trust had poor financial management and had not properly managed conflicts of interest.
“The Loan Agreement dated 30 October 2017 [the former trustee] including witnesses who were employees of [the former trustee]said Wootton.
“Also, it looks like the trust sent the cash. [the former trustee] Prior to the loan arrangement being proposed and approved by the Board on November 11, 2017 and July 8, 2018. ”
Mr Wootton said there was no record of the loan agreement in the Wellington Trust’s annual financial statements, if required.
“When we inquired about the omission, the Trust stated that the loan balance was zero as of March 31st of each year, and that this treatment was accepted by account creators and reviewers, and the reason for this was community capacity. I advised that it was Citi Accounting and no disclosure was made.”
He said offsetting amounts is not allowed and recording balances only at the end of the year is not sufficient or appropriate.
“We believe this practice prevents users of financial information from identifying loans to related parties and defeats the purpose of transparency.”
Wootton said Wellington Trust also did not disclose the loan as a related party transaction.
“Also note that the Trust had declared in its annual report that it would not lend money in the ordinary course of business, despite the fact that this arrangement had been in place for many years. .”
The former receiver of the loan did not respond to RNZ’s request for comment.
Charitable Services also completed trustee governance training from independent providers for the Wellington Trust Board, provided revised financial statements for the year ended March 2021, and It requires disclosure of all cash movements associated with the transaction.
If Kids Need Dadz Charitable Trust Wellington fails to meet the October 2023 deadline, the charity may be removed from the charity registry.