The racing industry has organised a poker machine takeover, diverting almost $20 million in income from community and sporting groups.
The money can be used for racing stakes, to improve facilities for trainers and jockeys and to maintain racecourses. It is collected through more than 300 gaming machines in TAB venues all over New Zealand.
Many were previously operated by the Trusts Charitable Foundation, which was a major funder of community and sporting groups.
The now-defunct TTCF was forced into a restructuring and re-naming after being criticised in a series of Internal Affairs audits. It holds far fewer machines and is called the Trusts Community Foundation.
The New Zealand Racing Board picked up the machines after being granted a Class 4 gambling licence to operate pokie machines.
The racing board is a public body; half its directors are appointed by Racing Minister Nathan Guy.
Politicians and gambling experts have reacted with concern to the announcement. Maori Party MP Te Ururoa Flavell, who is championing a law to impose tighter regulation on the industry, has asked the Herald to provide information obtained under the Official Information Act spelling out the deal.
Mr Flavell said he would take it up with Internal Affairs Minister Chris Tremain.
"That's out of line with where we should be going," he said.
The documents show the money could all be spent on racing - but the board decided to keep 80 per cent and allow amateur sporting groups to apply for the rest.
Among the information released was an August 2011 email from the board's risk, legal and audit manager Michael Wemyss, who said the first full year of racing's pokie strategy was the 2012-2013 period, when it would have 323 machines in 30 TABs.
He said the racing board expects to collect $18,390,000 next year.
The board also told the Department of Internal Affairs it would make better use of pokie money than gaming societies.
It said the racing board's corporate structure meant it could "leverage off the capability and capacity" and get better "economies of scale".
Accounts released by the department showed the board made $14 million from 287 machines.
It then made $4.8 million available for grants - a return of 34.31 per cent in its first year.
The board's strategic plan for the next three years described pokie machines as one of its "main sources of income".
The use of pokie money by the racing industry has been controversial for years.
Spokesman John Mitchell said there was awareness of "perception issues" and it had decided to stop allowing pokie money to be used for racing stakes.
Mr Mitchell said the spending on race courses was appropriate because they were community facilities and it was only fair and reasonable that the racing industry had access to community funds to help cover their cost.
The board's submission to the commerce select committee, which is investigating Mr Flavell's bill, compared racing to amateur sporting codes, receiving 5.8 per cent of the total $224 million pokie grant money distributed by all gaming societies.
Cricket got 3.2 per cent and rugby 10.6 per cent.
Green Party co-leader Metiria Turei expressed concern over the direct link between pokie machine money being used to fund the racing industry.
"Part of the social contract [in gaming machines] is these proceeds go back to the community."
The 20 per cent figure was too low, she said.
The removal of pokie money from racing stakes was quibbling with words and people would not be fooled.
Problem Gambling Foundation director Graeme Ramsey said he was working closely with the board to reduce gambling harm.
"It is extraordinary to most New Zealanders that we have allowed one form of gambling to subsidise another."
Community Gaming Association executive director Brian Corbett said the weighting of grants towards the racing industry was "not in favour of the community".