Kawerau, in the Bay of Plenty. Photo / File
A Kawerau youth charity, now in liquidation, suddenly closed when government agencies discovered a man facing a sex charge and a woman facing a gang-related money laundering charge were employees.
An NZME investigation has obtained documents about the Kawerau Youth Care Centre Trust, including a government-commissioned report, showing prima facie evidence of serious wrongdoing.
They also show the charity was insolvent largely due to high salary expenses "during a period of extended financial distress".
The trust's chief executive Kevan McConnell was a former gang member-turned-social services leader whose work had "significant" interest from government, including three ministers.
READ MORE:
• Kawerau district boiling water for next three days at least
• New Zealand Fulvic expansion in Kawerau could create 30 new jobs
• Kawerau water found free of E. coli contamination
• Second Kawerau water test clear of E.Coli - residents asked to keep boiling water
The trust, operating as Manna Services, was put into liquidation last August.
It had provided social support for more than 20 years, including education, parenting, anti-bullying, counselling, and employment services in Kawerau and Whakatāne.
NZME can now reveal government departments severed ties with the trust after learning a staff member had been charged with committing an indecent act on an underage girl.
He was convicted after his employment ended.
Another staff member was charged with money laundering after the Operation Notus raids on Mongrel Mob-related drug dealing in March 2018, and is awaiting trial.
The Ministry of Social Development did not know about the charges until an outside party alerted it on April 10, 2018.
The trust was sent a breach of contract notice for failing to tell the ministry about the "serious" charges.
The trust replied saying the ministry would be notified immediately if any of its nine staff were before the courts in future.
It said police vetting had been up to date for the staff members and there had been no complaints about their behaviour at work.
However, the Ministry of Social Development did not receive a "satisfactory remedial plan" after the breach, "despite extensions".
"The manager is not on top of things," a ministry staff member wrote in an email.
"There appears to be no trustees and governance is providing zero oversight."
The Ministry of Social Development cut the trust's contracts and accreditation, as did the Department of Corrections, the Ministry of Education and Oranga Tamariki, and clients were transferred.
The trust was given one month to wind up operations.
In August 2018, Deloitte auditors wrote a draft 27-page report for the Ministry of Social Development about the trust's demise, calling it Project Norse.
It showed that McConnell's $120,000 salary took up 30 per cent of all money spent on staff wages in 2018.
His salary package also included extra payments from the trust for dental treatment, $400 a week for his rent, use of a $58,000 Ford Ranger, a cell phone and periodic bonus payments.
There was also a $16,000 trust-funded fishing boat, kept at McConnell's house, that was bought to be used by the trust but was not.
The report said McConnell "struggles with understanding financial management and business procedures".
When Deloitte staff visited him he could not answer some questions they asked, or he became "visibly bothered".
The Project Norse report also said the trust "overstated" its accounts while "understating current liabilities".
It identified misappropriation of funds, including $28,000 spent on groceries and $36,000 used as "petty cash" without any receipts or statements explaining the spending.
The trust spent an average of $2600 on groceries per month.
Auditors tried to determine whether the trust spent Oranga Tamariki funding on alcohol at supermarkets but they could not because the receipts and statements were missing from the records.
They found the trust had not been paying its bills for at least eight months, despite multiple letters being sent by creditors such as NZ Post, which subsequently closed the trust's post office box in May 2018.
When the not-for-profit organisation was eventually put into liquidation it had not been abiding by its deed for months, due to a lack of trustees.
Leading up to the trust's demise, the Ministry of Social Development described chief executive McConnell as "a prominent figure in the Kawerau community... used by local police to engage and mediate differences between rival gangs or within gang chapters".
He featured on the front page of the ministry's Rise magazine in November 2014, as part of a story about social services in Kawerau, after 13 young people committed suicide in the district between 2010 and 2012.
It said he was "widely acknowledged in Kawerau for his commitment and success in uniting the community" and he had "a direct line to government ministers and senior officials".
"With a professional background in social services, and as a former gang member, he also has connections to open doors that others can't."
McConnell became chief executive of the trust in 2015.
The trust had "weak" financial control that year, according to an audit at the time.
Copies of contracts and reasons for costs were missing, resulting in more than $21,800 of "miscellaneous disbursements".
Whakatāne firm Kevin C Deal Auditors wrote this was "quite a concern".
Staff resorted to paying for items for the trust with their own money, leading to $13,400 in reimbursements that year.
This was "not a good process" the auditors said.
The first liquidator's report has said the trust owed at least $133,000, in October last year.
The 24 groups listed as being owed money included the Accident Compensation Corporation, 2degrees, Spark and the Inland Revenue Department, and locally Hammer Hardware Kawerau, New World Kawerau and Nova Energy in Whakatāne.
A Charities Service case review recommended noting the trustees' names on an intel system for "enhanced diligence around their involvement with finances" in future.
"Note should indicate there were significant compliance issues concerning these trustees should they attempt to register a new charity or be involved as charity officers," the review said.
The service's general manager Natasha Weight told NZME this week: "Once the trust was deregistered, Internal Affairs' involvement in the matter ceased."
The Ministry of Social Development's contracts general manager, Kelvin Moffatt, said no former clients of Kawerau Youth Care Centre Trust were subject to sexual offending from the male staff member charged.
Kevan McConnell could not be reached for comment.
A family member told NZME McConnell moved to Australia late last year.
Long-term Kawerau Youth Care Centre trustee Matai Bennett declined to comment.
Bryony Edwards has been recognised for her teaching efforts picking up a major NEiTA award