The Department of Internal Affairs

The Department of Internal Affairs

Te Tari Taiwhenua

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Resource material › Information We Provide › Gambits - March/April 2013

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Investigation highlights vulnerability of community grants

The ongoing investigation into the alleged manipulation of gaming machine grants has focused attention on the integrity of the gambling sector.

Warrants were executed in February as part of a significant, joint-agency investigation. The scale and focus of the investigation has been subject to much speculation, with recent media reports indicating racing clubs are involved alongside certain societies.

Gambling Compliance Director, Debbie Despard, said the investigation highlights “the importance of end-to-end integrity across the gaming spectrum – starting with gamblers through to venue operators, societies, and eventually grant recipients.”

The high-level investigation also deflects attention from the great outcomes that benefit community groups through gaming machine grants.

The Department wants to see outcomes that provide maximum benefit to communities continue and therefore expects all organisations to be compliant.

“As a regulator we are required to take enforcement action where necessary, but we are also here to help,” Debbie Despard said. “We encourage organisations to engage with us on compliance matters so we can work through them together.

“It is also timely for the Department to pay tribute to the many people in the industry who work with integrity on behalf of communities - from venue and society staff, managers, owners and board members, to local government, health providers, manufacturers and installers. The Department thanks you for your efforts and will continue to recognise the good work that is being conducted in this area.”

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Doing more with less - how DIA prioritises its resources

By General Manager, Regulatory Services, Maarten Quivooy.

Maarten QuivooyThe impact of our major joint agency investigation into pokie grant manipulation has received a good amount of publicity. Although we cannot publish much detail yet because of the on-going nature of this investigation, it none-the-less sends a message that Internal Affairs is serious about tackling significant, deliberate and harmful non-compliance.

I’m confident that this investigation – dubbed Operation Chestnut – will be followed by other significant cases which will be undertaken by our new Regulatory Investigations Unit. This unit has been born out of our recent restructuring and is tasked with focusing on serious, deliberate and harmful non-compliance with the dual aim of holding offenders to account, but also increasing the integrity of the gambling sector.

To achieve these goals, Internal Affairs, like all other enforcement agencies, has to focus and prioritise its limited resources.

Prioritisation starts with being clear about our goals – increasing compliance and the integrity of the gambling sector in order to minimise harm to individuals and maximise benefit to communities.

For the Regulatory Investigations Unit this means that tackling serious, harmful and deliberate non-compliance is at the top of their list. This includes investigating situations where we believe the actions of individuals or groups are undermining the integrity of the gambling sector and where we believe funding, which should go to the community, is being misappropriated – or put another way, where the community is being ripped off.

Increasingly we will join forces with other agencies such as the Serious Fraud Office and the Police in order to maximise the resources and expertise of these agencies to successfully investigate and prosecute serious non-compliance.

As we progress investigations we will be reviewing them continually to assess the evidence we have gathered and whether this evidence is sufficient to enable us to take purposeful action as a result of the investigation. As a consequence we will have to make hard decisions about the priority for some cases, and we will make the call to abandon some investigations if we cannot get them over the line.

To be efficient and effective we will use our discretion to prioritise and to decide the correct approach depending on the circumstances of each situation we come across. This means that while we will take a similar approach in each investigation it does not mean the outcomes of each investigation will be the same or uniform. After assessing the evidence in each case we will consider how best to achieve the goal of increased compliance and sector integrity. In some cases this will mean we prosecute, while in other cases we will seek to cancel operator licences, while in yet other situations we will look for a negotiated outcome that increases compliance and integrity. Each case and set of circumstances is unique and will be handled as such.

This approach is outlined in our Compliance Statement which sets out our approach to compliance & enforcement (available at:

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Questions raised over Facial Recognition Technology

The technology is being proposed to automatically disable a gaming machine when it recognises an excluded gambler attempting to play. There has been significant interest across the gambling sector in FRT’s potential to reduce harm from gambling and several societies and clubs have sought clarity from the Department over its use.

The Department is interested in all efforts to minimise and prevent gambling-related harm, but as a regulator it cannot support or endorse the use of third-party systems.

The Department is also unable to confirm whether the purchase of a facial recognition system (including associated costs) by Class 4 societies will breach the ARN requirements. This is because the need for a harm-minimisation system, and the reasonableness of the associated costs, is likely to differ from one situation to the next.

What the Department can do is remind all societies that the Gambling Act 2003 requires that all costs paid by Class 4 societies must be Actual, Reasonable and Necessary costs incurred in the conduct of gambling or in complying with relevant legislation (ARN costs). In GC10/10 and GC11/10, the Gambling Commission confirmed that “necessary” “is a fairly strong word falling between expedient or desirable on the one hand and essential on the other.”

If a facial recognition system is to be purchased by Class 4 societies, it would be funded by gaming machine proceeds that would otherwise be distributed to authorised purposes. As such, societies must be able to demonstrate that all costs relating to the system are reasonable and necessary expenses.

For the costs associated with the implementation of the system to be reasonable, they must be in proportion to the size of the operation, and must take into account normal market values or prices for the goods and services provided. For the expenditure to also be necessary, it would need to be additionally shown that:
  • there is a significant problem with the harm minimisation system currently being employed
  • this problem will be mitigated by the proposed facial recognition system and,
  • there are no alternative, more cost effective ways of mitigating the problem.
The Department therefore believes that a high threshold needs to be met before facial recognition technology can be considered an ARN cost.

That there are a range of opinions on facial recognition technology was evident at the March 14 Stakeholder Reference Group meeting for preventing and minimising gambling harm.

Over 20 representatives from the Department, Ministry of Health, the gambling and problem gambling sector participated in a workshop to consider where facial recognition technology may fit in the wider context of harm minimisation.

The CEO of the Problem Gambling Foundation, Graeme Ramsey, set the scene for the workshop with a thought-provoking overview of the fundamental questions that have emerged as the technology has evolved.

Gambling Compliance Director, Debbie Despard, said the workshop was a good opportunity to elicit a range of views and discuss the implications of potentially deploying facial recognition. The workshop aligned with the Department’s wider interest in initiatives that prevent or minimise the harm from gambling.

“Facial recognition technology is one option in that area, and it is critical that the costs, benefits, and unintended consequences are well understood”, Debbie added.

The Department is keeping abreast of developments in the facial recognition field, and will continue to engage with stakeholders about the initiative.

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Roulette rort results in conviction

Allowing late betting at a rapid roulette table game resulted in the conviction of a Hamilton casino employee for cheating. The conviction serves as a reminder that criminals will look to collude with staff to cheat the system.

Bo Du, 33, a dealer at SkyCity Hamilton casino for six years, allowed two associates to place bets after the roulette ball had dropped into the winning number slot. The electronic cut-off for final bets was circumvented by Du deliberately releasing the ball early.

Du was sentenced in January to nine months home detention and reparation of $20,000, to be paid at a minimum rate of $50 per week, to be paid within two years. She had earlier pleaded guilty to obtaining, with two casino patrons, $52,000 by deception and of accepting a gratuity while holding a Certificate of Approval under the Gambling Act. Her two associates have been similarly charged and are being dealt with separately.

The Department was called in after the casino discovered irregularities around its rapid roulette table game. With SkyCity’s assistance, gambling inspectors determined that Du had illegally obtained $52,000 by manipulating the game. They also detected that Du had received a one-off payment of $15,000 from a SkyCity Hamilton patron.

This is prohibited by the Gambling Act 2003.

Internal Affairs’ Casino Compliance Manager, Rob Abbott, said the Department remained vigilant to the potential that gambling offers for illicit activities.

“Du’s sentence underlines the seriousness of the offending. Members of the public should be able to expect that all casino gambling is operated responsibly and with the highest integrity,” Rob Abbott said. “It is our job as the regulator to ensure that SkyCity has systems in place to detect and deal with any criminal behaviour on the part of their employees.”

Du’s conviction means she will not be able to work in casinos again.

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Case quashed

The Blenheim District Court decided that local race horse owner and trainer, Michael Joseph O’Brien, had no case to answer in a prosecution brought by the Department.

Mr O’Brien was charged under section 242(1) (b) of the Crimes Act 1961 with making a false statement with intent to deceive; the Department claimed he made a false statement to a gambling inspector by saying he had nothing to do with Bluegrass Trust. He pleaded not guilty.

Judge Tony Zohrab ruled that the offence created by s242 could not be committed in the way the Department said it had been.

The judge was not required to make any findings on the merits of the substantive case. His decision was on a pure point of interpreting the law.

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Last of the licensed promoters

There are now no licensed promoters for Class 3 gambling, which covers such activities as larger-scale lotteries and instant games.

Ross Ford of Auckland was the last remaining licensed promoter but his licence lapsed after he failed to submit a renewal application.

The Department contacted three societies affected by Mr Ford’s failure to renew and called in the $200,000 bond promoters have to provide. It appointed a bond administrator from Deloitte Ltd of Wellington who paid out almost $25,000 to the one trust which claimed money owed by Mr Ford. The remainder of the bond, less the administrator’s fee, was returned to Mr Ford’s legal representative.

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Community $0.5 million worse off

The actions of two dishonest grant recipients, dealt with recently by the Department, resulted in a shortfall in community funding of half a million dollars.

Lindsay Raki, Financial Controller for Manurewa High School Academy and a former Maori All Black, was described by Judge Emma Aitken as having dishonestly obtained over $300,000 which was intended for South Auckland youth rugby.

Jacob Samson, a promoter of Cook Island culture, pleaded guilty to charges brought by the Department for offences relating to more than $200,000 distributed from grants made from pokie funds.

The two cases highlight the extent to which communities can be deprived of vital funding through the dishonest actions of individuals involved in the grant’s process. The predominant victims of these crimes were the people of South Auckland, an area noted for low socioeconomic communities that suffer significant deprivation.

Mr Raki was charged following a Department investigation into the distribution of pokie machine grants intended for the Manurewa High School Rugby Academy (MHSRA) and the Counties Manukau Youth Development Inc (CYMD). A qualified accountant, Mr Raki held a position of trust as the Academy’s financial controller.

The Auckland District Court heard that between 2006 and 2008 both the Rugby Academy and the CMYD applied to a number of gambling societies for grant funding.

The court was told that the money was paid into one or other of Mr Raki’s personal accounts and used by him personally.

Jacob Samson’s charges related to grant applications he made in his capacity as chairman of Drums of the Pacific Trust and the Cook Islands Kia Orana Akapuanga Trust. His offending took place from May 2005 to April 2011.

Samson pleaded guilty to:
  • three charges of obtaining by deception under s 240 Crimes Act
  • 11 charges of altering a document under s 258 Crimes Act
The Department’s investigation revealed that over six years Samson had altered receipts and bank statements for the purpose of obtaining grants from 11 societies.

Both offenders are due to be sentenced on 1 May.

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Pokie payout brings jail and a warning for gamblers

A faulty gaming machine netted a player almost $1000….and jail.

Levi James Newport, 21, of Kaikohe, was sentenced in the Hamilton District Court on 8 March 2013 for stealing $980 from the Waikato Snooker and Eight Ball Club, which operates 18 pokies.

An Internal Affairs gaming inspector told the court that Newport obtained the payment by exploiting a faulty machine. He played continuously with just one two dollar coin, which went straight to the payout tray, racking up a large number of credits in the process.

Although Newport’s activities were opportunistic, they are a reminder to the public that the integrity of gambling is paramount. If a gambler suspects a gaming machine is faulty, they should immediately cease playing and inform venue staff.

The club discovered the fault during their daily reconciliation of gaming machine operations. Newport’s offending was captured on security camera.

Newport received eight months imprisonment on this theft charge. It was imposed concurrently with a term of two years, seven months on unrelated more serious theft matters and attempting to pervert the course of justice.

The Department’s Gaming Technology Manager, Mike Cassidy, said this incident highlights the value of carrying out daily reconciliation of game machines as required by the Class 4 Game Rules.

“The potential losses were limited and the offence discovered very quickly during the daily reconciliation checks,” he said.

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Sanction Decisions

List of decisions relating to sanctions imposed by the Department from 1 July 2012 to 31 December 2012

OperatorLicence TypeVenueProposed SanctionBreach/ReasonDate of Decision or ProposalOutcome/Status
Trillian TrustClass 4 Venue LicenceThe MilfordCancellationThe MilfordKey person suitability issues. Repeated late banking16 July 2012Appealed to the Gambling Commission. Unsuitable key person no longer involved. The Gambling Commission referred the matter back to the Department. Trillian Trust withdrew its appeal.
Infinity Foundation LtdClass 4 Operator’s LicenceSuspensionFailing to distribute Gaming Machine Profits only to authorised purposes.7 September 2012Negotiated agreement to suspend operations for three days.
Four Winds Foundation LimitedClass 4 Operator’s LicenceSuspensionFailure to minimise operating costs.7 September 2012Negotiated agreement to suspend operations for three days.
Lion Foundation 2008Class 4 Venue LicenceMakl’s BarCancellationThe Department decided to cancel the Class 4 venue licence for Makl’s Bar because it could not, after investigation, be satisfied of the suitability of key persons.24 September 2012Appealed to the Gambling Commission. The Department withdrew the decision to cancel the venue licence. Unsuitable key person no longer involved. The Lion Foundation 2008 withdrew its appeal.
Producers Trust IncorporatedClass 4 Operator’s LicenceRefusal to renewFinancial viability issues.16 October 2012Licence surrendered.
That Was Then This Is Now Charitable Trust (TWTTIN)Class 3 LicenceRefusal to grant a class 3 operator’s licence.The Department decided to refuse TWTTIN a Class 3 Operator’s licence (to run a raffle) because it could not, after investigation, be satisfied of the suitability of key persons. 30 October 2012TWTTIN gave notice of an appeal against the Department’s decision on 12 November 2012. See Gambling Commission Appeals table.
Phoenix Charitable Trust LtdClass 4 Operator’s LicenceRefusal to issue class 4 operator’s licence.The Department decided to refuse Phoenix a Class 4 Operator’s licence because it could not, after investigation, be satisfied of the suitability of key persons.23 November 2012Phoenix gave notice of an appeal against the Department’s decision on 13 December 2012. See Gambling Commission Appeals table.
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Gambling Commission appeals

Breakdown of appeals that have been resolved recently

Operator and VenueDepartment DecisionAppeal (Closed)Outcome
Constellation Communities Trust (Constellation)The Department decided to suspend Constellation’s Class 4 operator’s licence for six days. This was on the basis that it failed to distribute 37.12% of its net proceeds for two consecutive years. The Department advised Constellation of its decision on 11 September 2012.On 11 September 2012, Constellation appealed to the Gambling Commission on the grounds that the Department had erred in determining the amount by which Constellation fell short of the distribution requirement and that the suspension was therefore too severe. On 11 September 2012, Constellation appealed to the Gambling Commission on the grounds that the Department had erred in determining the amount by which Constellation fell short of the distribution requirement and that the suspension was therefore too severe.

Breakdown of appeals that are currently in progress

Operator and VenueDepartment DecisionAppeal (Current)Update
Cuesports Foundation Limited (Cuesports)The Department decided to cancel Cuesports’ Class 4 operator’s licence for a number of reasons, including key person issues, financial viability, failure to distribute at least 37.12% of net proceeds and failure to maximise net proceeds and minimise operating costs. The Department advised Cuesports of its decision on 24 April 2012. Cuesports gave notice of an appeal against the Department’s decision on 14 May 2012. It appealed on a number of grounds. Cuesports initially raised a matter of jurisdiction and then applied for disclosure of material about matters concerning other Class 4 operator licence holders. On 14 December 2012, Cuesports’ application for disclosure of material was declined by the Gambling Commission.
In process.
Bluegrass Holding Limited (Bluegrass)The Department decided to cancel Bluegrass’ Class 4 operator’s licence because it could not, after investigation, be satisfied of the suitability of Barluegrass and its key persons to hold a Class 4 operator’s licence. The Department advised Bluegrass of its decision on 3 July 2012. Bluegrass gave notice of an appeal against the Department’s decision on 4 July 2012. It appealed on a number of grounds including that the Department’s decision was wrong in fact and in law, breached due process and was beyond the Department’s powers. Bluegrass filed an application with the Gambling Commission to have certain questions of law heard separately, prior to the hearing of the substantive appeal. The Gambling Commission declined the application on 7 December 2012.
In process.
That Was Then This Is Now Charitable Trust (TWTTIN)The Department decided to refuse TWTTIN a Class 3 operator’s licence (to run a raffle) because it could not, after investigation, be satisfied of the suitability of key persons. The Department advised TWTTIN of its decision on 30 October 2012.TWTTIN gave notice of an appeal against the Department’s decision on 12 November 2012. TWTTIN stated its grounds for challenging the Department’s decision as “right of appeal”.In process.
Phoenix Charitable Trust (Phoenix)The Department decided to refuse Phoenix a Class 4 operator’s licence because it could not, after investigation, be satisfied of the suitability of key persons. The Department advised Phoenix of its decision on 23 November 2012. Phoenix gave notice of an appeal against the Department’s decision on 13 December 2012. Phoenix appealed on a number of grounds including that the Department’s decision was wrong in fact and in law and failed to take into account relevant considerations. The Department is considering further information provided to it by Phoenix.
In process.

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Suspension appeal seeks clarity

The Department has appealed a recent High Court ruling that challenged its ability to suspend gambling operators for “one-off” events of non-compliance. The appeal aims to clarify the Department’s ability to use suspension as a tool for ensuring greater compliance across the gambling sector.

Suspensions as a sanction for breaches of the Gambling Act 2003 have been an effective deterrent; between 2005 and 2012 the percentage of returns to the community has risen from 38 per cent to 41 per cent while gaming revenue has declined

The Department’s appeal follows a judicial review, sought by gaming machine society Pub Charity, which successfully challenged decisions of the Gambling Commission and the Secretary for Internal Affairs. The Secretary suspended Pub Charity for one day, because it had breached the limit on reimbursing venue operating costs by $286,275. The Gambling Commission upheld that decision on appeal.

December’s High Court judgment ([2012] NZHC 3530) found that the power to suspend operators cannot be used to impose a penalty for past, non-continuing breaches. This decision contrasted with a 2011 High Court judgment, and the Department is now appealing the December decision.

Gambling Compliance Director, Debbie Despard, said that this case was concerning on a number of levels.

First, the breach that Pub Charity had committed was something that other societies have previously been sanctioned for by way of suspension, while Pub Charity has, at this point, not received a penalty.

While Pub Charity asserts that the amount overpaid was recovered, the Gambling Commission decision observed: “The fact that Pub Charity was able to ‘recover’ $300,000 in the following year suggests that Pub Charity was previously not truly minimising its costs and instead has been spending up to the full 16 per cent. If Pub Charity had truly been minimising costs, recovery in the following year would have been practically impossible”. The Commission also noted it “does not make this point to be critical of Pub Charity in particular” (see GC06/12 at

Second, the Department believes that non-compliance should be able to attract a range of proportionate penalties. From this perspective the decision is problematic, and clarification needs to be sought. The Department notes that there is sector support of a regime that includes a suspension option. The success of the suspension option is evident, with Class 4 operators reporting that many societies conduct their gambling operations in a more compliant fashion. These sector participants recognise that compliant operators can be undermined by those that would flout the law, and that the industry as a whole can be tainted by those that are non-compliant.

The Department’s overall aims are to encourage operators to minimise harm from gambling and to maximise benefit. New Zealanders can have confidence in the gambling system where they observe high levels of compliance and the public expects that if people act unlawfully they will be held accountable.

Comments from Class 4 sector representatives indicate support for the Department’s decision to appeal the High Court ruling. Societies have indicated they want a regime where the integrity of the gambling framework is upheld, with entities being held accountable for non-compliant activities.

At a time of financial hardship for many community groups, the Department is dedicated to ensuring that they are receiving the funding that they are entitled to from gambling. Suspending for non-compliance helps the Department in that aim. In the meantime the Department will look closely at other options for imposing consequences for non-compliance. Other administrative sanction options include cancellation and non-renewal of gambling licences.

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Unreasonable Meter Increment limits to change

Changes are afoot to significantly reduce the number of electronic gaming machines (EGMs) that become disabled due to Unreasonable Meter Increments (UMI).

It is intended to implement changes to the EMS Global Default limit values (defaults that are relevant to the EGM accounting meters) for some of these meters.

Changes to EMS Global Default values will also cause EGMs to reset their Hopper and Cancelled Credit values back to the Global Default value of $200. For the majority of venues that use these default values this will not be an issue. However, where a venue uses a different refill hopper value, it will be necessary to call a technician to reconfigure the EGM.

EGM accounting meters change when game play occurs on a gaming machine or for some attendant actions such as recording Hopper Refills. The EGM communicates all meter changes to the Electronic Monitoring System (EMS) Site Controller, which checks that they are consistent with expected play. If any changed meter value is greater than the EMS Global Default limit value, the Site Controller will not accept the updated meter value and the EGM will be disabled with a UMI.

The EGM will show a QCOM: Invalid Meter message on screen.

Once a UMI has occurred, the EGM will remain disabled and the UMI event will be escalated to the Department. The Department will investigate, often checking with the venue before authorising the EGM to be enabled (in some situations such as meter values becoming corrupted or incorrect, the EGM must be Ram Cleared and a technician called out before it can be enabled). It can take anywhere from a few hours to a few days before an EGM is re-enabled.

Service technicians working on gaming machines as part of normal maintenance or making software changes, can also cause UMIs by not following required INTRALOT Service Desk procedures. A venue manager, under Game Rule 114, has specific responsibilities with respect to gambling equipment installation, servicing, repair and removal.

As such, Service Technicians must always contact the INTRALOT Service Desk when working on a gaming machine. INTRALOT will now ask the technician to answer certain questions about work that has been performed before the EGM is re-enabled.

The changes to the EMS Global Default values will be implemented effective from May 1 2013.

Proposed new values

Label and DescriptionQCOM Group Meter IDNEW Default Meter Increment Value
Total EGM Hopper Refills
Total amount of Hopper Refills recorded by an attendant.
Total Rejected Enabled Notes
‘Rejected’ means that the Banknote Acceptor tried to validate a note against its current note set and no acceptable match was found.
Counted only while acceptor was enabled. New to QCOMV1.6.
Total EGM Coins/Tokens Cleared
Total Value of all coins cleared from the EGM’s Cash Box since the last RAM Clear of the EGM. This field is a cumulative field updated by the amount cleared each time a Cash Box clearance is recorded by an attendant. Optional new to QCOMV1.6.
Total EGM Notes Cleared
Total Value of all notes cleared from the EGM’s Cash Box since the last RAM Clear of the EGM. This field is a cumulative field updated by the amount cleared each time a Note Stacker clearance is recorded by an attendant. Optional new to QCOMV1.6.

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Multi-Venue Exclusion rolled out in Te Arawa rohe

Te Kahui Hauora Trust, the Problem Gambling Foundation and the Department of Internal Affairs are working with gambling societies, clubs and gaming venues in the Rotorua, Kawerau, Whakatane and Taupo Districts to offer Multi-Venue Exclusion (MVE) as a problem gambling treatment option.

The MVE programme allows problem gamblers to register for exclusion at one venue and select other venues to be notified of their decisions.

The Department called a hui in Rotorua in January to discuss the programme and offer support to venues, societies and clubs. About 30 representatives from the area attended and their feedback was positive and encouraging. The MVE programme was rolled out in February.

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Spot prize draws consultation

The Department, on behalf of the Minister of Internal Affairs, Chris Tremain, has sought views on possible regulations to exempt spot prize draws from the definition of gambling under the Gambling Act 2003.

A consultation document on the Department’s website invited comments about this proposal.

The possible exemption would mean that events where spot prize draws are held would no longer be subject to the current gambling licensing and administrative requirements.

“When spot prizes are used at events, such as fishing competitions and fun runs, they can be classed as gambling under the Gambling Act – which means organisers have to comply with a raft of rules. In some cases those rules can be overly rigorous and I want to cut the red tape,” Mr Tremain said.

“Organisers say that because the primary purpose of their event isn’t gambling and the potential for harm is minimal the requirements imposed are too harsh,” says Mr Tremain.

“The Department of Internal Affairs has been working with organisations to help them comply and there have been no prosecutions. It’s a confusing and difficult space and it’s time the regime imposed on spot prizes was changed.”

Submissions to the Department of Internal Affairs were requested by 4 April 2013.

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IGP update: changes coming soon

Final testing and preparation for the introduction of Phase 1 of the Integrated Gambling Platform (IGP) are well under way and continue into April.

May will be the first time any changes will be noticed by people outside the Department.

New licence application forms, required for all applications, will be released to the sector before the go-live date. In the transition between Licence Track and IGP later in May, the Department will be unable to process applications, including venue transfers, for about a week.

We will advise societies and clubs of the exact date of this switch-over process closer to the time.

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Depreciation as an expense

The Gambling Commission made comments on depreciation in its decision on an appeal by the Constellation Communities Trust (GC35/12).

This included its view that the definition of net proceeds does not allow for the use of depreciation as it is a notional, rather than actual, cost at the time the calculation is made. The Commission acknowledged that it had not heard argument on this issue, so there has been no binding decision on the use of depreciation.

The Department considers that depreciation is an allocation of the actual cost of an asset over its estimated useful life in circumstances when the economic benefits derived from that asset are expected to span greater than one year. The Department continues to hold the position that Class 4 societies should include depreciation as an expense in their calculation of net proceeds.

Section 108 of the Gambling Act 2003 requires societies to provide the Secretary for Internal Affairs with an annual report that includes financial statements prepared in accordance with generally accepted accounting principles. Treating the purchase price of an asset as a capital acquisition and depreciation as an expense is entirely consistent with those generally accepted accounting principles.

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Financial viability

The Department has begun a review of the financial viability guidance paper – Financial Viability What is it? – released in March 2009 to assist Class 4 societies.

Until the review is completed the Department will be assessing Class 4 societies’ financial viability based on the 2009 paper. The Department aims to release the revised financial viability guidance by mid-2013.

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Review of gambling fees

The Department is commencing a review of costs and fees in order to update the Gambling Fees Regulations (2007), and will consult with interested and affected parties as required by the Gambling Act.

The planned timetable is:
  • March to July 2013 - work on internal cost drivers, fees options and broad policy issues, including informal discussions with a small number of people from the sector
  • July to November 2013 - Cabinet paper, followed by a formal consultation document to the sector, including a recommended timeline for implementation of any fee changes.
The Department cannot anticipate the outcomes of the review, but there will be no changes to fees before the consultation, or before 2014.

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Reminder: demise of Class 4 non-downloadable jackpots

Class 4 non-downloadable jackpots must cease operation by 1 December 2015, as detailed in the December 2010 edition of Gambits.

A new version of the Minimum Technical Requirements for Class 4 Linked Jackpot Systems was notified in the NZ Gazette and took effect from 2 December 2010, requiring all new jackpots to be downloadable and allowing existing, licensed non-downloadable jackpots to operate for a further five years.

The Department suggests that, if you intend to replace your current non-downloadable jackpot with a downloadable jackpot, you give some thought to planning the changeover.

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Pokie spend dropped in 2012

Gaming machine expenditure in the year ended 31 December 2012 declined by 3.1 per cent or $27.1 million from $866.8 million to $839.7 million.

Annual non-casino gaming machine expenditure calendar year

Annual non-casino gaming machine expenditure calendar year
Gaming machine spend ($ million): 2008 $912.5m; 2009 $865.5m; 2010 $840.7m; 2011 $866.8m; 2012 $839.7m.

The spending is captured through the Electronic Monitoring System (EMS) of non-casino gaming machines, which became fully operational in March 2007, enabling the Department to track and monitor operations, ensure the integrity of games and the accurate accounting of money.

Non-casino gaming machine spending by society type (October-September 2012)

Society TypeTotal GMP Quarter% of Total
Sports Clubs3,859,567.671.8%
Chartered Clubs16,649,926.628.2%
TOTAL CLUB27,911,006.6813.0%
TOTAL ALL214,607,391.67100.0%

Expenditure of $212.9 million in the third quarter of 2012 was $8.5 million less or 3.8 per cent on the same period of 2011 but $4.4 million or 2 per cent up on the second quarter of this year.

Quarterly non-casino gaming machine expenditure (June 2007 - December 2012)

Quarterly non-casino gaming machine expenditure (June 2007 - December 2012)
Gaming machine spend ($ million): June 2007 - 237m; September 2007 - 243.5m; December 2007 - 245.3; March 2008 - 218.5m; June 2008 - 231m; September 2008 - 232.3m; December 2008 - 230.7m; March 2009 - 208.7m; June 2009 - 217.3m; September 2009 - 217.3m; September 2009 - 220.7m; December 2009 - 218.8m; March 2010 - 199.9m; June 2010 - 209.8m; September 2010 - 215.2m; December 2010 - 215.8m; March 2011 - 205.1m; June 2011 - 219.9m; September 2011 - 221.4m; December 2011 - 220.4m; March 2012 - 203.7m; June 2012 - 208.5m; September 2012 - 212.9m; December 2012 - 214.6m.

The number of gaming machines in the country’s 1381 pubs and clubs decreased by 463 or just over 2.5 per cent from 18,133 to 17,670 in 2012. There were 29 fewer gaming machine venues compared with a year earlier.

Licensed gambling operations in pubs and clubs

DateLicensed HoldersVenuesGaming Machines
31 December 2012357138117,670
30 September 2012361139017,827
30 June 2012361140017,943
31 March 2012359140318,001
31 Dec 2011360141018,133
30 Sept 2011360140918,167
30 June 2011364142118,309
31 March 2011365143018,484
31 Dec 2010367144318,681
30 Sept 2010369143818,601
30 June 2010370145518,944
31 March 2010374147019,115
31 Dec 2009378149119,359
30 Sept 2009377148619,296
30 June 2009384150119,479
31 March 2009394152719,739
31 Dec 2008399153719,879
30 Sept 2008405155120,025
30 June 2008415155219,856
31 March 2008421156920,018
31 Dec 2007428158520,182
30 Sept 2007435159320,163
30 June 2007439159820,120

Further information, including numbers of venues, machines and expenditure by territorial authority and changes in the quarter, is available from the Department’s Gaming Statistics web page at: The figures are based on territorial authority boundaries that existed prior to the new Auckland super city.

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GM societies' contacts

The Department’s gambling compliance and licensing inspectors each have responsibilities for liaising with gaming machine societies. If societies have issues to discuss, they may contact these inspectors first by phoning the Department’s toll free number 0800 257 887.

ApplicantCompliance InspectorLicensing Inspector
AHAURA/GREY VALLEY LIONS CLUB INCORPORATEDDave Macdonald ext 3152Janet Wong ext 5505
AIR RESCUE SERVICES LIMITEDDave Macdonald ext 3152Niall Miller ext 5485
BLUE WATERS COMMUNITY TRUSTArtie McClelland ext 7915Jeremy Belcher ext 7961
BLUEGRASS TRUSTDave Macdonald ext 3152Niall Miller ext 5485
BLUESKY COMMUNITY TRUST LIMITEDStephen Balmer ext 7923Jeremy Belcher ext 7961
CONSTELLATION COMMUNITIES TRUST INCORPORATEDArtie McClelland ext 7915Jeremy Belcher ext 7961
CUESPORTS FOUNDATION LIMITEDJohn Hennebry ext 7939Niall Miller ext 5485
DRAGON COMMUNITY TRUST LIMITEDStephen Balmer ext 7923Craig Holmes ext 5486
ENDEAVOUR COMMUNITY FOUNDATION LIMITEDGarth Cherrington ext 5520Janet Wong ext 5505
FIRST LIGHT COMMUNITY FOUNDATION LIMITEDGarth Cherrington ext 5520Janet Wong ext 5505
FIRST SOVEREIGN TRUSTDavid Batenburg ext 7922Rochell Goodwin-Kanara ext 5350
FIRST SOVEREIGN TRUST LIMITEDDavid Batenburg ext 7922Rochell Goodwin-Kanara ext 5350
FOUR WINDS FOUNDATION LIMITEDDavid Batenburg ext 7922Brent Addison ext 5345
GRASSROOTS TRUSTClark McMichael ext 7267Janet Wong ext 5505
GRASSROOTS TRUST LIMITEDClark McMichael ext 7267Janet Wong ext 5505
ILT FOUNDATIONIain Ballantyne 03 409 2158Janet Wong ext 5505
INFINITY FOUNDATION LIMITEDRick Mead ext 5667Brent Addison ext 5345
KAIWAKA SPORTS ASSOCIATION INCORPORATEDCliff Simpson ext 7937Rochell Goodwin-Kanara ext 5350
LIONS CLUB OF OHAI-NIGHTCAPS INCORPORATEDIain Ballantyne 03 409 2158Craig Holmes ext 5486
MAINLAND FOUNDATION LIMITEDDuane Calvert ext 6609Janet Wong ext 5505
MANA COMMUNITY GRANTS FOUNDATIONAnn Maxwell ext 5258Janet Wong ext 5505
MT WELLINGTON FOUNDATION LIMITEDDavid Batenburg ext 7922Poni Lealofi ext 5380
NAUTILUS FOUNDATION Stephen Balmer ext 7923Jeremy Belcher ext 7961
NEW ZEALAND COMMUNITY TRUSTGarth Cherrington ext 5520Rochell Goodwin-Kanara ext 5350
NEW ZEALAND RACING BOARDGarth Cherrington ext 5520Niall Miller ext 5485
OXFORD SPORTS TRUST INCORPORATEDCliff Simpson ext 7937Jeremy Belcher ext 7961
PELORUS TRUSTAnn Maxwell ext 5258Niall Miller ext 5485
PRIME COMMUNITY TRUSTAnn Maxwell ext 5258Niall Miller ext 5485
PRODUCERS TRUST INCORPORATEDArtie McClelland ext 7915Jeremy Belcher ext 7961
PUB CHARITYRick Mead ext 5667Niall Miller ext 5485
REDWOOD TRUST INCORPORATEDDave Macdonald ext 3152Janet Wong ext 5505
THE AKARANA COMMUNITY TRUST LIMITEDArtie McClelland ext 7915Janet Wong ext 5505
THE BENDIGO VALLEY SPORTS & CHARITY FOUNDATIONDuane Calvert ext 6609Janet Wong ext 5505
THE BRUNNER RUGBY LEAGUE CLUB INCORPORATEDIain Ballantyne 03 409 2158Brent Addison ext 5345
THE LION FOUNDATION (2008) John Hennebry ext 7939Craig Holmes ext 5486
THE NORTH & SOUTH TRUST LIMITEDArtie McClelland ext 7915Jeremy Belcher ext 7961
THE PODIUM SPORTS FOUNDATION LIMITEDStephen Balmer ext 7923Niall Miller ext 5485
THE RUNANGA COMMUNITY SWIMMING POOL TRUST Ron Grob ext 6603Poni Lealofi ext 5380
THE SOUTHERN TRUSTRon Grob ext 6603Poni Lealofi ext 5380
THE TRUSTS COMMUNITY FOUNDATION LIMITEDTony Climo 03 409 2158Brent Addison ext 5345
TRILLIAN TRUSTStephen Balmer ext 7923Poni Lealofi ext 5380
TRUST AORAKI LIMITEDRon Grob ext 6603Janet Wong ext 5505
TRUST HOUSE FOUNDATIONAnn Maxwell ext 5258Brent Addison ext 5345
WATER SAFETY EDUCATION FOUNDATIONGarth Cherrington ext 5520Janet Wong ext 5505
WHITEHOUSE TAVERN TRUSTDavid Batenburg ext 7922Jeremy Belcher ext 7961
YOUTHTOWN INCORPORATEDLance Daly ext 7921Brent Addison ext 5345

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Regulatory Services

Gambling compliance issues are covered by Regulatory Services which sits within the Department's Policy, Regulatory and Ethnic Affairs branch under Deputy Chief Executive, Paul James.

The branch encompasses all the roles where the Department is, in effect, the regulator of a sector of the economy.

In addition to gambling, this includes community safety (censorship and anti-spam compliance), fire service policy, identity services policy, local government, community and voluntary sector policy, civil defence and emergency management policy and crown entity monitoring functions, and Office of Ethnic Affairs. For the sake of simplicity, functions outside of the gambling sector are not included here.

Chart of positions in the Department's Regulatory Services business group

Regulatory Services

Responsible for all regulation and compliance operations (and operational policy) including anti-spam, censorship, gambling, racing, anti-money laundering and countering financing of terrorism.

Operations Support

Provides support and assistance to operational compliance functions across the group and wider Department.

Regulatory Investigations

Undertakes significant (complex, cross group, lengthy and sensitive) investigation projects involving criminal, legal an d financial issues related to the governance and operation of gaming sector people and organisations. Provides expertise and support to investigations and audits across the group.

Financial Integrity

Under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, monitors casinos, non-deposit-taking lenders, money changers and reporting entities not covered by the other supervisors, The Reserve Bank and the Securities Commission.

Gambling Compliance

Responsible for the Inspectors and other staff working with the gambling sector to bring about compliance with the law. Works closely with Policy so that there is a constant flow of information between the staff involved in applying the law and those who develop the law.

Gaming Technology

This position oversees the technical integrity of gaming issues across casino and all other classes of gambling.

Operational Policy

Provides support and advice to the Inspectors and other staff working in the sector. Develops standards, game rules and other “deemed regulations”. In broad terms, develops Department policies for how the law will be turned into the work done in the field.

Casino Compliance

Responsible for working with the casino sector to bring about compliance with the law.

Licensing Compliance

Responsible for Class 4 Licensing, championing a new electronic licensing regime and management oversight of the Electronic Monitoring System (EMS) contract with Intralot.

Sector Initiatives

Responsible for developing new and innovative approaches to promoting and securing increased compliance across the gambling sector.

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Gambling issues key contacts

All gambling compliance staff can be contacted by phoning the Department's toll free number: 0800 257 887



Postal address and fax numbers:

Casino Compliance

PO Box 805, Wellington

Fax: (04) 494 0624

Gambling Licensing

PO Box 10-095, Wellington 6140

Fax: (04) 494 0656

Gambling Compliance

PO Box 2220, Auckland 1140
Fax: (09) 362 7945

PO Box 10-095, Wellington 6140
Fax: (04) 495 7214

PO Box 1308, Christchurch 8140

Gambits' editor

If you have any questions about articles in Gambits, would like further information or have comments about what information we could provide to make Gambits more useful to you, please contact:

Trevor Henry
Phone: (04) 495 7211 or 0275 843 679

Gambits is produced quarterly. Copies are distributed in March, June, September and December.

Gambits provides information about the Department's recent work and significant issues in the gambling sector.

It is intended for sector organisations and the community in general, to increase understanding of and compliance with the law.

Mailing list

Do you want to receive Departmental media releases and Gambits?

If you would like to have your organisation added to the Department's distribution list for media releases about gambling issues, or want to receive Gambits but are not currently on the mailing list, please email or telephone (04) 495 7211 or fax (04) 495 7224.

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