The public servant charged with regulating the gambling industry has described his department's capacity and capability as not being fully up to the mark.
In an email to an informant, Maarten Quivooy of the Department of Internal Affairs also wrote that "our practice isn't always as sharp as we would want it to be".
The comments were made in letters to former Otago Sport chairman Russell Garbutt, who spent years raising concerns about grants from a gaming trust which took money from pokie machines in the North Island and paid it out in the South Island.
The complaints appeared to go nowhere until eight weeks ago when the department said it shared his concerns but had run out of time to do anything about it.
In a string of emails, Mr Quivooy, the department's regulatory and compliance manager, criticised the gambling laws his staff enforce and offered tips on lobbying Internal Affairs Minister Chris Tremain.
Mr Tremain, who has been briefed on the investigation, refused to comment. He has previously pointed out the National Party's commitment to review the pokie trust sector.
Maori Party MP Te Ururoa Flavell has a private member's bill seeking to have the rules overhauled.
Mr Garbutt first raised concerns in 2008 about grants from The Trusts Charitable Foundation to a Dunedin-based organisation called the Centre of Excellence for Amateur Sport.
In May, Mr Quivooy wrote to Mr Garbutt to say the department had significant concerns.
"I believe it is important to acknowledge that the circumstances surrounding the grants to the Centre of Excellence raise, on its face, significant questions as to their probity if not legality."
Mr Quivooy said there was a two-year statute of limitations in the Gambling Act which meant "the department would be unable to bring a prosecution".
He also said Crown lawyers did not believe there was enough evidence for prosecution. The company had been struck off and the pokie trust existed in a different legal form.
Mr Garbutt was flown to Wellington at the DIA's expense to discuss the case. After the meeting, Mr Garbutt wrote a complaint to Mr Tremain and sent it to Mr Quivooy.
In reply, Mr Quivooy said those writing to ministers needed to balance being "critical of the regulator and constructive in terms of the current debate". He also asked if it was necessary to describe the department's actions as a disgrace.
Mr Quivooy said a law change would address the current lack of incentives for compliance in the system. He said improving the performance of his team "may not be sufficient to ensure an effective system in which funding is returned appropriately to the communities from which it is raised".
He said sometimes "our capacity and capability may not be fully up to the mark" and the DIA was a small regulator that was geographically patchy.
On June 21, Mr Quivooy emailed to say new inquiries had led to money being recovered. He said the comments were written with the benefit of hindsight and the department had reviewed its inquiry and was satisfied with the steps it took.By David Fisher @@DFisherJourno Email David