Wellington’s Kidz Need Dadz Asked About Loans To Former Trustee

Since 2017, the Wellington Trust had loaned about $40,000 to a company owned by a former trustee at below-market interest, an investigator found.
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A charity that supports fathers has been investigated for “gross mismanagement” after illegally granting tens of thousands of dollars in loans to a former trustee and continually failing to disclose the arrangement.

The Kidz Need Dadz website says it provides education and support to help fathers take an active role in their children’s lives.

The Charities Service began investigating the Wellington Charitable Trust after receiving a complaint in 2020 about a conflict of interest over a loan and this year found evidence of serious wrongdoing and unlawful use of funds.

Its investigator Blair Wootton sent a warning to Kidz Need Dadz Charitable Trust Wellington in August, one of three trusts from different regions linked to the charity.

He demanded that the Wellington Trust close the loan and that the balance be paid in full by the end of October. This deadline was met and the loan was repaid.

Wootton said that since 2017, the Wellington Trust had lent about $40,000 to a company owned by a former trustee at below-market interest.

“Lending money to a related party below the market interest rate led to receiving a private pecuniary benefit from the use of trust funds,” he said.

“Charities Services considers this to be an illegal use of trust funds.”

His investigation revealed that the former trustee had benefited from the related party loan by avoiding bank charges and having access to a lower interest rate and the ability to repay and draw down as he pleased – such as a revolving credit facility with favorable interest rate.

Wellington Kidz Need Dadz’s own rules state that its earnings and property cannot be used “for the private pecuniary benefit of any individual”.

Wootton said the loans constitute a private benefit to such individuals, which constitutes serious wrongdoing as defined in the Charities Act 2005.

He said the Wellington Trust had poor financial controls and failed to properly manage the conflict of interest.

“We found that the loan agreement dated October 30, 2017 was signed only by related parties of [the former trustee] including the witness who was an employee of [the former trustee]“, Wootton said.

“It also appears that the Trust transferred cash to [the former trustee] before the loan agreement(s) were proposed and accepted by the board on November 11, 2017 and July 8, 2018.”

Wootton said there was no record of the loan arrangement in the Wellington Trust’s annual financial statements, as required.

“When we queried the omission, the Trust advised that the reason for this was that each year as of March 31 the loan balance was zero and this treatment had been acceptable to the preparer and reviewer of accounts, Community Capacity Accounting and that no disclosure was made.”

He stated that netting of amounts was not permitted and that it was neither sufficient nor appropriate to record balances only at the end of the year.

“We consider that this action prevented users of financial information from identifying the related party loan, which is contrary to the objective of transparency.”

Wootton said the Wellington Trust also failed to disclose the loan as a related party transaction – a transfer of money or other resources between the reporting entity and a person or other entity closely associated with it. and has the ability to influence it.

“We also note that the trust stated in its annual filings that it did not lend money in the normal course of business despite the fact that this arrangement has been in place for several years.”

The former trustee who received the loans did not respond to RNZ’s request for comment.

The Charities Service also requires the Wellington Trust board to complete director governance training from an independent provider and provide restated financial statements for the year ending March 2021, disclosing all changes in cash related to the loan and the related party transaction.

If Kids Need Dadz Charitable Trust Wellington fails to meet the October 2023 deadline for these remedies, the charity may be removed from the charity register.

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